[Senate Hearing 106-919]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 106-919

                SUCCESSFUL STATE ENVIRONMENTAL PROGRAMS

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                                   ON

  OVERSIGHT OF PROGRAMS DELEGATED BY THE EPA TO STATE DEPARTMENTS OF 
                        ENVIRONMENTAL PROTECTION

                               __________

                              MAY 2, 2000

                               __________

  Printed for the use of the Committee on Environment and Public Works


                    U.S. GOVERNMENT PRINTING OFFICE
68-419 cc                   WASHINGTON : 2001
_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402




               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

               one hundred sixth congress, second session
                   BOB SMITH, New Hampshire, Chairman
JOHN W. WARNER, Virginia             MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma            DANIEL PATRICK MOYNIHAN, New York
CRAIG THOMAS, Wyoming                FRANK R. LAUTENBERG, New Jersey
CHRISTOPHER S. BOND, Missouri        HARRY REID, Nevada
GEORGE V. VOINOVICH, Ohio            BOB GRAHAM, Florida
MICHAEL D. CRAPO, Idaho              JOSEPH I. LIEBERMAN, Connecticut
ROBERT F. BENNETT, Utah              BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas          RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island
                      Dave Conover, Staff Director
                  Tom Sliter, Minority Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page

                              MAY 2, 2000
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........     5
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................     8
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....     1
    Article, There's Smog in the Air, But It Isn't All Pollution.     4
Thomas, Hon. Craig, U.S. Senator from the State of Wyoming.......     7

                               WITNESSES

Bradford, Brent C., Deputy Director, Utah Department of 
  Environmental Quality..........................................    30
    Prepared statement...........................................   124
    Report, EPA Vision and Operating Principles for Environmental 
      Management.................................................   126
    Resolution, Utah Legislature.................................   135
    Responses to additional questions from:
        Senator Chafee...........................................   134
        Senator Lautenberg.......................................   132
        Senator Smith............................................   127
Grumet, Jason S., executive director, Northeast States for 
  Coordinated Air Use Management.................................    43
    Article, Heavy-Duty Diesel Emission Reduction Project........   157
    Prepared statement...........................................   152
    Responses to additional questions from Senator Lautenberg....   159
Guerrero, Peter F., Director, Environmental Protection Issues, 
  General Accounting Office......................................    11
    Prepared statement...........................................    61
    Report, Collaborative EPA-State Efforts Needed to Improve New 
      Performance Participation System...........................68-100
    Responses to additional questions from:
        Senator Chafee...........................................    67
        Senator Smith............................................    66
McCabe, W. Michael, Acting Deputy Administrator, U.S. 
  Environmental Protection Agency................................     9
    Prepared statement...........................................    50
    Responses to additional questions from:
        Senator Chafee...........................................    57
        Senator Lautenberg.......................................    58
        Senator Smith............................................    54
Olson, Erik D., senior attorney, Natural Resources Defense 
  Council........................................................    42
    Prepared statement...........................................   147
Scarlett, Lynn, executive director, Reason Public Policy 
  Institute......................................................    39
    Article, Moving to a New Environmentalism....................   144
    Prepared statement...........................................   136
    Responses to additional questions from Senator Smith.........   141
Seif, James, Secretary, Pennsylvania Department of Environmental 
  Protection.....................................................    28
    Letter, supplement to testimony..............................   122
    Prepared statement...........................................   119
    Responses to additional questions from:
        Senator Chafee...........................................   124
        Senator Smith............................................   122
Shaw, R. Lewis, Deputy Commissioner, Environmental Quality 
  Control, South Carolina Department of Health and Environmental 
  Control, and President, Environmental Council of the States....    19
    Article, Role of State Governments in Environmental 
      Protection Has Increaseed..................................   102
    Prepared statement...........................................   100
    Report, State Air Pollution Control Program Survey, 1999.....   104
    Responses to additional questions from:
        Senator Chafee...........................................   110
        Senator Lautenberg.......................................   111
        Senator Smith............................................   106
        Senator Voinovich........................................   110
Varney, Robert W., Commissioner, New Hampshire Department of 
  Environmental Services.........................................    26
    Prepared statement...........................................   112
    Responses to additional questions from:
        Senator Chafee...........................................   117
        Senator Smith............................................   113

                          ADDITIONAL MATERIAL

Letter, Georgia Department of Natural Resources..................   167
Statement, Texas Natural Resource Conservation Commission........   165


 
                SUCCESSFUL STATE ENVIRONMENTAL PROGRAMS

                              ----------                              


                          TUESDAY, MAY 2, 2000


                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m. in 
room 406, Senate Dirksen Building, Hon. Bob Smith (chairman of 
the committee) presiding.
    Present: Senators Smith, Baucus, Lautenberg, Thomas, and 
Chafee.

             OPENING STATEMENT OF HON. BOB SMITH, 
          U.S. SENATOR FROM THE STATE OF NEW HAMPSHIRE

    Senator Smith. The Environment and Public Works Committee 
hearing will come to order.
    I'd like to say good morning, everyone. I'd like to welcome 
everyone to today's hearing on successful State environmental 
programs, and particularly thank the witnesses for some very 
enlightening written testimony. The materials we've received I 
think reflect the importance of this issue, as well as the 
passion and the innovative spirit that the States are bringing 
out to environmental protection.
    This is the second in what will be a series of general 
oversight hearings that we plan to conduct at the full 
committee level.
    As I mentioned when the committee held its first oversight 
hearing on EPA's proposed budget for 2001, I wanted to step 
back a bit and take a look at the big picture of environmental 
protection. We will learn about programs that work. We might 
hear some about others that don't. But I hope we'll get many 
suggestions for some new approaches to some old problems, and 
perhaps in so doing not create more in the future.
    I hope that we're going to hear about opportunities to 
improve environmental protection, providing the States the 
flexibility to identify their own priorities and to develop 
their own programs, and I believe that's very essential to 
improving environmental protection.
    It has been said before, but it is worth repeating, that 
one size does not fit all. There's no way that we could look at 
any agency in Washington and draft an environmental law that 
says it applies to every single town, every single community, 
every single environmental problem in America. My goal over the 
long term will be to develop an EPA authorization bill that can 
incorporate some of the concepts that are discussed in these 
hearings. Today's hearing is the first step in that very long 
process.
    Over the past 30 years, Congress and the EPA have taken 
what has been called a ``stovepipe approach'' to environmental 
protection--one law to address air, one law to address water, 
one law to address endangered species, another to address toxic 
wastes in the ground, and so forth. The problem is that these 
laws often don't connect. There's no connection between the 
stovepipes.
    That approach, when we first began with environmental 
protection, was necessary. We were desperate. We had problems, 
and we needed to address them, and we needed to address them in 
a hurry. The question is: do we still need to stay with that 
kind of focus, or should we do something that connects and 
prioritizes these various stove pipes that we talk about.
    In the 1970's, we were faced with rivers that were catching 
fire, raw sewage being discharged directly into our rivers and 
streams, and smokestacks billowing untreated fumes and toxic 
wastes, threatening our neighborhoods, so we did have an end-
of-pipe solution, but the environmental problems we face today 
have evolved and they are more complex--problems that often 
can't be solved by the old approach.
    The Clean Air Act amendments of 1990, for example, imposed 
a mandatory oxygenate requirement for gasoline. To meet that 
mandate, the refiners put MTBE in the gasoline supply. That 
same MTBE is now causing serious groundwater contamination 
throughout our country in tens of thousands of wells, not to 
mention lakes and streams, all over America.
    The remedy addressed one problem--air pollution--but it 
created another one even greater, contamination of the 
groundwater.
    The old approach to environmental protection has been 
equally ineffective in targeting limited resources on the most 
significant environmental problems. Under current law, for 
example, a company may be required to spend tens of millions of 
dollars on a pump-and-treat system to try to clean up an 
aquifer contaminated with DNAPLs--dense, nonaqueous-phase 
liquids--just what I always thought I'd be talking about when I 
became a U.S. Senator--even though the regulators know that the 
cleanup effort will almost certainly not be successful, because 
DNAPLs cling to the rocks and cannot be removed usually by 
pump-and-treat, as many in the audience know.
    But if the laws were more flexible, then those same 
resources might be spent on other priorities and we could 
contain, if that aquifer could be contained, and we could use 
the money somewhere else. It might be better spent, for the 
time being, to clean up another problem. So we need to look at 
a holistic approach, moving from pipe to pipe.
    This point was made very well in a recent article in the 
``Washington Post'' just this past Sunday. Let me read a quote 
from that. The piece was entitled, ``There's Smog in the Air, 
but it isn't all Pollution.'' Jonathan Rauch cited a 1998 
``Resources for the Future Assessment of U.S. Environmental 
Policy'' that concluded the following: ``Nine major laws and 
hundreds of minor ones govern environmental policymaking. The 
resulting policies are fragmented, complex, disjointed, beset 
by rigidity and lack of coherence. Worse, priorities have 
changed little since the EPA was founded in 1970, with a main 
focus on water, air, and traditional toxins, even though other 
problems, such as radon, are now more pressing.''
    Mr. Rauch went on to note in that article that, 
``Environmental policy is obsessed with cleanliness and 
chemicals, chasing smaller and smaller quantities of less and 
less dangerous substances, and that is still what the law is 
doing, and in many of the same ways. It is fighting the old war 
with the old tactics, but the world has changed.''
    I would ask unanimous consent to include a copy of that 
article in the hearing.
    The point is right now we need new, innovative, flexible, 
and more-effective weapons to deal with the environmental 
problems. We have to solve the environmental problems we have 
today, but we don't want to create more for tomorrow. I think 
that's the essence of what we are about here.
    The States will be the key to expanding the toolbox and 
successfully solving the environmental issues of the 21st 
century.
    In the ``Almanac of American Politics 2000,'' Michael 
Barrone wrote, ``The initiative in shaping public policy is 
leaching out of Washington to the States, the localities, and 
the private sector.'' I wish it had been flowing out a little 
faster than leaching out.
    We will hear today from many people that States are taking 
the first steps to implement innovative new approaches to 
environmental problems. They are setting priorities. They are 
developing partnerships with EPA and the private sector. And 
they are achieving real results on the ground. They are taking 
a holistic approach to the environment. They're making 
decisions based on good science, on risk assessment, and other 
tools in the box to maximize environmental benefits with 
limited resources, and I think not only should we listen to the 
States, we ought to encourage and promote these successful 
State programs.
    Two weeks ago I was in a symposium in New Hampshire 
sponsored by the University of New Hampshire on environmental 
issues. It brought together some of the best, most creative 
minds in the State of New Hampshire, and some even from outside 
of the State of New Hampshire. I heard a lot of ideas about how 
we in Congress can improve our environmental laws to make them 
more effective and achieve better results. It is amazing what 
you learn when you listen to people on the job every day out 
there on the forefront who are doing the environmental cleanup.
    One of the most consistent themes of that conference was 
flexibility. ``Give us the flexibility. Give us the 
responsibility. Federal funding, yes, where needed. Help us out 
with resources when we need it, but let us do the job. Let us 
do the job. We'll get it done and we'll do it right.'' And I 
believe that the States have a good story to tell in this 
regard, and I think it is time we start learning and it is time 
we start listening--not just listening with testimony, but 
reacting to that testimony and helping them.
    So I look forward today to hearing from all the witnesses, 
and especially from my friend from New Hampshire, Bob Varney, 
on the performance partnership system, which is working so well 
in New Hampshire, where New Hampshire has negotiated a 
performance partnership agreement with the EPA that allows it, 
the State, to identify priorities, and, within certain 
parameters, tailor its limited resources to address its own 
unique environmental problems and priorities.
    So I believe that we should encourage and build upon these 
kinds of cooperative agreements that give States flexibility, 
while still holding them accountable.
    I look forward to hearing about the performance partnership 
act agreements, as well as other information and testimony from 
the witnesses.
    Senator Smith. At this time, I would yield to my colleague, 
the ranking member, Senator Max Baucus.
    [The article referenced in Senator Smith's statement 
follows:]
               [From the Washington Post, April 30, 2000]
          There's Smog in the Air, But It Isn't All Pollution
                          (By Jonathan Rauch)
    Thirty years ago, President Nixon, who was soon to announce that he 
would seek the creation of an Environmental Protection Agency, left 
little doubt about what he wanted to protect. ``The 1970's absolutely 
must be the years when America pays its debt to the past by reclaiming 
the purity of its air, its waters, and our living environment,'' he 
said as he signed the National Environmental Policy Act.
    Purity; clean air; clean water. Nixon's words aptly framed the 
1970's environmental agenda. The good news today is that the country 
has succeeded with that agenda beyond most expectations. The bad news 
is that most people in the country don't know it. The public's 
ignorance is not at all good for the environmental movement.
    While activists came together last weekend to celebrate Earth Day 
2000, the public celebrated Earth Day 1970 for the 31st time.
    American environmentalists have one of the great American success 
stories to tell, if only they would tell it. For example, in June 1969 
the Cuyahoga River in Cleveland caught fire (not for the first time); 
that river burns no longer, and the EPA estimates that the proportion 
of major U.S. lakes, rivers and streams that are safe for fishing and 
swimming has doubled since 1970, to about 70 percent. Today, the most 
toxic thing about the once-foul Potomac River is the view of Rosslyn in 
Northern Virginia.
    The record on air pollution is more striking still. Since 1970, the 
population has grown by almost a third, and both the gross domestic 
product and the number of miles we rack up while driving have more than 
doubled. The sulfur dioxide and carbon monoxide levels are down by two-
thirds, nitrogen oxide by almost 40 percent, ozone by 30 percent; lead 
has effectively been banished from the air. In the cities, unhealthy 
air days are down by more than half, just since 1988. All told, the 
volume of toxic substances released into the atmosphere has dropped 42 
percent since then. ``Pollution in all categories has declined, and 
pollution has declined even relative to domestic manufacturing 
output,'' says Gregg Easterbrook, whose 1995 book, ``A Moment on the 
Earth: The Coming Age of Environmental Optimism,'' was denounced by 
some environmental activists as inexcusably cheery.
    But here's the really odd thing: Much of the public doesn't believe 
it. In March, Environmental Defense (formerly the Environmental Defense 
Fund) commissioned an Earth Day poll. A clear majority of the 1,000 
adults surveyed, 57 percent, said that U.S. environmental conditions 
are worse today than 30 years ago; 67 percent agreed that ``Despite the 
Clean Air Act and Clean Water Act, air and water pollution seem to 
continue to get worse.'' Young people were even gloomier than older 
people.
    ''We were surprised,'' says Steve Cochran Environmental Defense's 
spokesman. ``It's clear that people haven't taken much heart in the 
progress that's been made.'' Other surveys confirm the public's gloomy 
outlook: A Newsweek poll conducted this month by Princeton Research 
Associates found 52 percent saying the country has made only ``minor 
progress'' toward solving environmental problems since the first Earth 
Day, and 23 percent saying ``no progress'' or that the problems had 
gotten worse. Plainly, where the environment is concerned, the public 
and reality have parted ways.
    Why is the public so unaware of the good news? In part, because 
journalists are so reluctant to report it. In a series of studies, the 
Washington-based Center for Media and Public Affairs has found that 
``the news makes environmental problems look worse than the scientific 
experts believe,'' according to Robert Richter, the nonprofit center's 
president. Critical stories on governments' and businesses' handling of 
environmental problems vastly outnumber positive ones, the center 
finds, and stories about impending crises are incessant.
    Fueling that tendency are environmentalists themselves. The radical 
ones have spent the past 30 years gleefully forecasting one apocalypse 
after another. Mainstream groups are calmer, but they don't spend much 
time talking about how much cleaner your air is. The environmental 
community, notes Environmental Defense's Cochran, has always seen its 
main job as pointing out problems.
    Fair enough, up to a point; you can't convince people to change the 
world by telling them that everything is just fine. But decades of 
alarmism have extracted a price. In a roundabout way, 
environmentalists' gloom has hobbled environmentalism.
    In 1998, Resources for the Future, an environmental think tank, 
published an assessment of U.S. environmental policy. The verdict was 
quietly scathing Nine major laws and hundreds of minor ones govern 
environmental policymaking, the think tank noted; the resulting 
policies are ``fragmented,'' ``complex,'' ``disjointed,'' beset by 
``rigidity and lack of coherence.'' Worse, priorities had changed 
little since the EPA was founded in 1970, with the main focus on water, 
air and traditional toxins, even though other problems, such as radon, 
are now more pressing. ``The system is not all that different from the 
way it was in 1970,'' says Terry Davies of Resources for the Future, 
who was an author of the study.
    Twentieth-century environmentalism began, under Theodore Roosevelt, 
as a brawny conservationism. But its rebirth in the 1960's sprang from 
worries about pesticides and carcinogens and smoggy air and burning 
rivers. So Congress and the EPA dedicated themselves to eliminating 
incremental nanograms of pollutants: ``microenvironmentalism,'' to 
borrow a term from Peter Huber of the Manhattan Institute. 
Environmental policy became obsessed with cleanliness and chemicals, 
chasing smaller and smaller quantities of less and less dangerous 
substances.
    That is still what the law is doing, and in many of the same ways. 
It is fighting the old war with mostly the old tactics. But the world 
has changed. ``The threats to health and safety from air and water are 
negligible,'' says Robert W. Crandall, an economist at the Brookings 
Institution. The environmental movement, unlike the environmental 
policy, has evolved in step with that reality. What primarily worries 
serious environmentalists these days is not the microcosm but the 
macrocosm: big, global issues such as extinction and biodiversity, 
depleted stratospheric ozone, urban sprawl, rain forest destruction 
and, above all, global warming.
    But the public yawns. It stands squarely behind the agenda of the 
first Earth Day. In a poll earlier this month, the Gallop Organization 
found that the public frets a lot about air and water pollution, 
worries much less about ozone depletion, rain forests and habitat loss, 
and cares hardly a fig for extinction and urban sprawl. At the bottom 
of the list? You guessed it: global warming. The Environmental Defense 
poll turned up similar results, with global warming ranked second to 
last, ahead of only urban sprawl.
    In other words, the public's priorities almost perfectly invert the 
environmental movement's priorities. Perversely, the aspirations of 
Gore-era environmentalism are now blocked by the public's commitment to 
Nixon-era environmentalism.
    And who can blame the public? Americans' capacity for worry is 
limited, and environmentalists are asking them to worry about 
everything at once. Air and water are still dangerous, they tell us, 
but global warming is even more dangerous--super-dangerous! Perhaps 
inevitably, their message drowns itself out. If, as environmentalists 
and the media and the movie ``Erin Brockovich'' remind us, the air and 
water are still full of poisons, then the 1970's agenda is as urgent as 
ever. And if we're still one breath or sip away from bowel cancer, 
global warming will have to wait.
    So gloom has propelled environmentalism forward, but at the steep 
price of leaving its followers behind. The movement has proved expert 
at giving alarm; now, against its every instinct, it needs to learn to 
give hope. To get beyond 1970, it must at long last swallow its pride 
and concede victory.

             OPENING STATEMENT OF HON. MAX BAUCUS, 
             U.S. SENATOR FROM THE STATE OF MONTANA

    Senator Baucus. Thank you very much, Mr. Chairman. I 
commend you for holding these hearings. It is always good to 
take perspective of where we are and how well these statutes 
work. Actually the subject of this hearing does cut to the 
heart of one environmental protection. The relationship between 
Federal and State environmental programs is the main question. 
What do we do about all of this?
    The history on this subject, as you know, Mr. Chairman, is 
long. The first Federal environmental laws, like the Water 
Pollution Control Act of 1956 and the Air Quality Act of 1967, 
left the States with the primary responsibility for pollution 
control. The Federal Government at that time conducted research 
and provided technical assistance, but that was pretty much it.
    In the 1970's, under the leadership of this committee, 
Congress concluded that those early laws had fallen short, and 
a national approach was needed. Bipartisan laws, such as the 
Clean Air Act of 1970 and the Clean Water Act of 1972, were 
enacted by Congress and signed by President Nixon. They shifted 
primary authority for the formulation and enforcement of 
environmental standards to the EPA, but also authorized EPA to 
delegate that authority to qualified States.
    Subsequent environmental laws, like the Safe Drinking Water 
Act and RCRA, followed the same model.
    This system of Federal standards and State delegation has 
had mixed results. On the one hand, it has helped make 
environmental protection one of the great success stories of 
the post-cold-war era. Since 1970's, our population has 
increased by 70 million people, but our air and our water are 
definitely cleaner, by a good measure. Clearly, a system of 
strong national environmental laws has been a key to this 
success.
    On the other hand, many people, including many capable and 
committed State environmental officials, believe that the 
Federal/State relationship is not working as well as it should. 
They want more flexibility. They want to be equal partners, not 
junior partners.
    These are not new issues. We have been wrestling with them 
for some time. In fact, in 1993, when I became chairman of the 
committee, one of our first hearings was on this very same 
subject.
    As I said then, I'm prepared to explore reforms in the 
Federal/State relationship. I don't believe that the Federal 
Government always knows best. But we should explore these 
reforms carefully. The current system of national environmental 
laws has been, for all of its imperfections, a great success. 
We should not make major changes to the current regulatory 
system without careful consideration of its implications.
    To my mind, there are three issues. First, how does EPA set 
the basic criteria to determine whether a State is qualified to 
assume primary responsibility for implementing a national 
environmental law? In the case of some environmental laws, this 
may be no longer a big issue because most States already have 
been delegated the necessary authority. In some other cases, 
however, it is an issue. For example, as we consider reforms to 
Superfund, the Endangered Species Act, and the remediation 
waste program, we need to consider appropriate criteria for 
increased State roles.
    The second issue is the appropriate level of Federal 
oversight. We don't want the EPA to micromanage the States. We 
don't want people to focus on bean counting rather than on real 
environmental performance. However, even in a reformed system, 
the Federal Government does have an important role.
    A former chairman of this committee, John Chafee--who was 
the father of one of our eminent colleagues on this committee--
made this point during a 1993 committee hearing. He noted that 
States sometimes need a threat of Federal enforcement in order 
to persuade their own legislatures to take necessary action.
    Senator John Chafee said, ``I don't know how in Rhode 
Island or Montana or any place else we could maintain strong 
environmental programs without the assurance that other States 
were at least having a minimal environmental protection 
standard likewise. We have tremendous competitive pressures 
saying, ``You're forcing us to do things that they're not doing 
next door.'' I think it is a point well worth remembering.
    Which brings me to the third issue, resources. If we move 
to a system that is more flexible and that looks at 
environmental performance rather than more static measures, we 
should understand that the new system will require more 
resources than the current one--it will require more people and 
more money.
    If we are going to allow flexible permits that allow 
tradeoffs between, for example, air emissions and water 
discharges, they will take time to measure the tradeoffs and 
consult with people in the affected community. Then it will 
take careful monitoring to assure that the system is delivering 
the promised benefits.
    Don't get me wrong. I'm all for more-integrated and 
flexible approaches. I have proposed multimedia systems of my 
own. But I agree with Jason Grumet of NSCAUM who says in his 
prepared testimony that ``without increased resources, well-
intentioned efforts toward flexibility will ultimately be 
undermined by a small minority of interests who will seek to 
exploit this flexibility for private gain.''
    With that, Mr. Chairman, I thank you again for taking 
another look at this issue. It is one that we should look at, 
but it is one that does not have easy answers.
    Thank you.
    Senator Smith. Thank you, Senator Baucus.
    Senator Thomas?

            OPENING STATEMENT OF HON. CRAIG THOMAS, 
             U.S. SENATOR FROM THE STATE OF WYOMING

    Senator Thomas. Mr. Chairman, I will just file a short 
statement, please.
    I am glad, too, that you are holding this hearing. This is 
a subject that we all deal with. I've really come to the 
conclusion that much of it is a mentality, a culture of sorts. 
It is like contracting. If you are going to contract to 
someone, then you must have the supervisory capacity to act, or 
you should get out of the contract business.
    I think a lot of the local people in the agencies do seek 
to really have partnerships, but often from the top down they 
are not allowed to do that.
    There are a lot of successes. Wyoming, for instance, had 
some real successes on underground storage tanks, and they did 
pretty much themselves.
    So I hope that, as we go about talking about partnerships, 
that we commit to finding the technique, culture, or mentality 
to let that happen. I believe that's what holds us much of the 
time.
    Thank you, sir.
    Senator Smith. Thank you, Senator Thomas.
    Senator Lautenberg?

        OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, 
           U.S. SENATOR FROM THE STATE OF NEW JERSEY

    Senator Lautenberg. Thank you, Senator Smith, for holding 
this hearing.
    I've listened carefully to what you had to say, and I agree 
that there has to be more cooperation. That seems to be a theme 
upon which we can all agree. How do you put that into place 
without discriminating against some people who live in States 
that aren't performing quite up to the standards that might be 
best for their health? Are we to stand by and say, ``There is a 
pollution discharge from industrial States of the Midwest and 
the air floats over New Jersey, New York, Connecticut, and 
Rhode Island. That's that Midwestern State's decision.'' Well, 
it's not, because it's not just their air; it is our air, too. 
When it comes to rivers and streams, it's not their streams; it 
is our streams, too. When it is the Hudson River that separates 
New Jersey from New York, it is a jointly owned resource. It 
also carries joint responsibility.
    So, Mr. Chairman, I think it is a very important subject to 
review, but too often there have been differences on how you 
get this cooperation done.
    I think that to suggest that States should be left out 
would be entirely wrong. On the other hand, I think to say the 
Federal Government ought to be left out, in my view, would be 
entirely wrong.
    I think Senator Baucus pointed out that in many cases the 
States and the communities were responsible for developing 
environmental law that ultimately became Federal law, because 
they were working directly with the problem.
    My own State of New Jersey is laboring to clean up hundreds 
of toxic dump sites. We had an industrial past, and it created 
a grim present, and perhaps even a grimmer outlook for the 
future when you see that pollution of water and air might be 
the result of the pollution.
    In Southern California, climate and dependence on 
automobiles made it susceptible to smog. It still leads the 
Nation in air pollution. Again, an example of what some had to 
do in order to clean the air.
    The first models for the acclaimed ``right to know'' laws 
actually came from cities--Philadelphia and Cleveland, to name 
a couple. These States and municipalities could not wait for 
the Federal Government to act. They had pollution problems that 
needed to be solved, and solved then.
    We have always looked to State and local agencies for that 
kind of leadership and information and innovation.
    At the same time, we've got to maintain a level playing 
field nationwide. There is a critical role for the Federal 
Government to play in setting minimum standards for 
environmental protection. Water pollution--water bodies don't 
recognize State boundaries. The beaches legislation that this 
committee recently reported out, Mr. Chairman, also deals with 
the issue of consistency among States.
    So without the Federal Government serving to set a baseline 
for what is clean, the public can't be assured that the beaches 
will be tested the same way no matter what State they visit. 
One could be cavalier about that and say, ``Listen, you've got 
to know the State that you're going to. Do they care about the 
parasites in the water as much as States A, B, and C?'' Well, I 
think the public has really the right to know that.
    Even in the international arena, the key to ratifying the 
Kyoto Protocol on climate change will be hammered out as a 
workable arrangement under which developing countries reduce 
their greenhouse gases. It affects all of us.
    I remember when some of us were in Brazil, at the first 
summit. I talked to an interior minister from Brazil and 
complained bitterly about the burning of the Amazon. His 
response to me was that, ``Well, one of our farmers burning an 
acre of land does substantially less damage to the environment 
than one of your chemical workers producing material that works 
itself into the air and invades our air and other people's air, 
as well.''
    So, once again, you are drawn into a cooperative 
environment that I think also has to be considered as we write 
law and as we hold these hearings.
    So, Mr. Chairman, I think you are doing the right thing, 
and I hope that we'll have a chance to hear from the witnesses 
in full as to what they think about it.
    Senator Smith. Thank you, Senator Lautenberg.
    Senator Chafee, so you have any opening comments?
    Senator Chafee. I thank the chairman for calling the 
hearing and look forward to hearing the successful State 
stories from the panelists today.
    Thank you.
    Senator Smith. I'd like to welcome Mr. McCabe and Mr. 
Guerrero. Michael McCabe is the Acting Deputy Administrator of 
the U.S. EPA, and Mr. Guerrero is the Director of Environmental 
Protection Issues at the General Accounting Office.
    Gentlemen, as you know, your statements will be made part 
of the record. I would appreciate it if you could summarize in 
about 5 minutes, because we have two other panels, as well. In 
order to get the questions in, we're going to need to kind of 
tighten up the time, if we can.
    Mr. McCabe, we'll start with you.

 STATEMENT OF W. MICHAEL McCABE, ACTING DEPUTY ADMINISTRATOR, 
              U.S. ENVIRONMENTAL PROTECTION AGENCY

    Mr. McCabe. Good morning, Chairman Smith, Senator Baucus, 
members of the committee.
    I'd like to thank you for the opportunity to speak here 
today, to represent the Agency, talk about this important work 
that we are, in fact, doing with our partners, the States, to 
protect public health and the environment.
    As a former Regional Administrator of the mid-Atlantic 
States, I saw day-to-day the strengths and frustrations of the 
EPA/States partnerships. I am pleased to say that the strengths 
far outweighed the frustrations. You will be hearing from some 
of my colleagues in the next panel about their perception of 
this partnership.
    As we approach the 30th anniversary of the creation of the 
Environmental Protection Agency in December, Americans have 
much to be proud of. As you mentioned, Mr. Chairman, we have 
come a long way in our journey as world pioneers in 
environmental protection.
    The highlights of our 30-year history confirm that the 
Nation's environment is safer and the public health is more 
secure than it was when EPA began.
    At various times, vested interests have sought to derail 
and roll back these significant advances. The foundation of 
public support built over the years, however, has proven 
immovable, and the rallying cry of opponents to strong 
protection that environmental protection is incompatible with 
economic expansion has been debunked and discredited in the 
wake of the strongest economic performance in our Nation's 
history.
    Under the Nation's environmental laws, EPA and the States 
each have important duties. We are coequal and interdependent. 
A longstanding division of labor defines our roles. Broadly 
speaking, EPA is charged with developing standards that provide 
basic protection for all citizens. States are the primary 
delivery agents, working directly with businesses, communities, 
and concerned citizens.
    A number of Federal laws call for EPA to delegate to the 
States the primary responsibility for program implementation, 
and States have, in fact, now assumed responsibility for 
approximately 70 percent of the programs eligible for 
delegation. Over nearly three decades, States, localities, and 
tribes have developed a strong environmental management 
capacity. A number of States have increased their investment in 
environmental programs and have adopted environmental standards 
that exceed Federal requirements.
    During this Administration, we have built on this progress. 
We have advanced these partnerships.
    Under the unprecedented continuity of leadership provided 
by EPA Administrator Carol Browner and senior EPA leadership 
with strong State background and experience, new ways of 
thinking are reshaping the Agency and transforming the 
organizational culture that marked our first two decades.
    Nontraditional thinking has strengthened our relationship 
with State and local governments, as well as the American 
public, as a whole. We are forging a culture of collaboration 
rooted in mutual respect, mutual trust, and a shared sense of 
obligation to future generations.
    State governments have become far more than conduits for 
Federal policy. Together, EPA and the States are now developing 
new, more-effective, and less-costly ways of achieving 
environmental goals. Together, we are testing and retesting 
those ideas. Together, we are providing the American people 
with the information they need to better understand their local 
environment and act to protect it.
    In brief, Mr. Chairman, we have laid to rest the ``us 
versus them'' approach that characterized EPA's first 20 years.
    Five years ago, in recognition of the critical role States 
have come to play, EPA joined with our State partners to 
establish the National Environmental Performance Partnerships 
System, NEPPS. NEPPS is built on our shared commitment to the 
continuous improvement of environmental programs. It provides 
the foundation for flexible partnerships with the capacity to 
adapt to changing priorities. NEPPS focuses us on performance 
rather than process, on environmental results rather than 
procedural details. In doing so, it frees the States to work 
with EPA to target their highest environmental priorities. An 
underlying theme of NEPPS is the importance of earning public 
trust by achieving measurable environmental results.
    I know that you will be talking about some of the 
innovations and accomplishments under NEPPS. I won't go into 
that in my testimony, but it is in my written statement.
    Our progress has been substantial, but more needs to be 
done. As the Environmental Protection Agency nears its 30th 
anniversary, we are an organization in transition. New ways of 
thinking permeate the EPA culture, even as we aggressively meet 
our traditional responsibilities.
    Innovative ways of protecting the environment are 
flourishing at EPA, States, towns, cities, and in businesses 
throughout the Nation. So, too, is the spirit of partnership. 
These two forces--innovation and collaboration--as you 
mentioned, Mr. Chairman, are converging to prepare EPA, in 
concert with our State partners, to respond more effectively to 
the environmental challenges of this new century. Together, I 
am confident we are poised to continue a remarkable record of 
remarkable progress.
    Thank you.
    Senator Smith. Thank you very much, Mr. McCabe.
    Mr. Guerrero?

    STATEMENT OF PETER F. GUERRERO, DIRECTOR, ENVIRONMENTAL 
          PROTECTION ISSUES, GENERAL ACCOUNTING OFFICE

    Mr. Guerrero. Thank you, Mr. Chairman.
    I'm pleased to be here to discuss our recent assessment of 
the national environmental performance partnership system, or 
NEPPS. NEPPS, as you heard, was established 5 years ago this 
month as a framework for improving the EPA/State relationship 
and for improving the effectiveness of State environmental 
programs.
    NEPPS was intended to address longstanding issues affecting 
the EPA/State relationship. Among these issues were concerns 
that EPA had been inconsistent in its oversight of State 
programs, that it had micromanaged State programs, that it had 
provided insufficient technical support, and that it had 
inadequately consulted the States before making key decisions 
affecting them.
    One key element of NEPPS is EPA's commitment to give States 
with strong environmental performance greater flexibility and 
autonomy in running their environmental programs.
    A second key element is the agreement among EPA and the 
States to develop core performance measures that could be used 
to identify whether State programs are achieving their intended 
results.
    Given the expectation among participants that NEPPS could 
deal with many of the issues that have long hampered effective 
EPA/State relations, we were asked by the chairman of the House 
Subcommittee on VA, HUD and Independent Agencies to examine the 
progress made by EPA in the States since the 1995 agreement. 
Our analysis, issued last year, addressed four questions.
    The first question asked us to identify the status of 
grants and agreements made under NEPPS between EPA and the 
participating States. When NEPPS was initially tested on a 
pilot basis, there were six States that were participating. EPA 
and the States viewed the first year as a time to experiment 
with the new system in various ways to implement it. The number 
of participating States subsequently increased to 45 in fiscal 
year 1998, although the extent of program participation varied 
widely from State to State. EPA's most recent date show that 
State participation in NEPPS has remained about the same since 
our report was issued last year.
    The second question we were asked was: what progress has 
EPA and the States made in developing results-oriented 
performance measures for NEPPS and grants? Both EPA and States 
agree on the importance of measuring outcomes in environmental 
activities rather than just measuring the activities, 
themselves. In attempting to develop these types of outcome 
measures, EPA and the States have faced a number of challenges.
    In particular, it is inherently difficult to quantify 
environmental results. Results of activities designed to 
improve water quality, for example, can take years to appear, 
and the capacity of most States to monitor a significant share 
of their waters is limited. And even when environmental 
conditions are reliably and consistently measured, it is 
difficult to demonstrate the extent to which a particular 
environmental regulation or program resulted in the observed 
outcome.
    These challenges were compounded by disagreements initially 
between EPA and the States on such matters as the degree to 
which States should be allowed to vary from national measures. 
Nonetheless, EPA and State leaders managed to agree on a set of 
core measures for fiscal year 2000 that are widely regarded by 
EPA and the States as significantly improved from those 
negotiated in previous years.
    The third question we addressed in our report, and perhaps 
the most controversial, involves whether the extent of EPA 
oversight is changing in States that are participating in 
NEPPS. Overall, the large majority of State officials we 
contacted generally maintain that participation in NEPPS has 
not yet brought about a significant reduction in EPA oversight, 
nor has it resulted in significant opportunities for States to 
focus on other priorities or to shift resources to weaker 
program areas.
    EPA officials generally acknowledged this point, but 
provided us specific reasons why oversight of State programs 
has not significantly decreased. They pointed out, for example, 
that environmental statutes or regulations sometimes prescribe 
the level of oversight required which, according to some 
headquarters and regional officials, leaves the Agency with 
little room to scale it back.
    These officials also pointed to the difficulty in scaling 
back oversight without measurable assurance that alternative 
approaches are achieving the desired results.
    At the same time, we found a number of barriers preventing 
greater State flexibility that could be more readily addressed. 
For example, senior EPA officials in three of the four regional 
offices we visited acknowledged that the support for NEPPS 
within EPA varies. One senior regional official explained that 
many regional managers and staff are often more comfortable 
with pre-existing ways of doing business and are unsure of how 
they can accomplish their work in the context of the 
partnership under NEPPS. He voiced the opinion that there may 
be a need for training regional staff.
    Another senior official said that some agency staff will 
only take NEPPS seriously when EPA's rewards and incentives are 
more closely tied to staff performance in implementing the 
program.
    The last question we addressed dealt with whether the 
performance partnership agreements and grants had thus far 
achieved the other benefits envisioned.
    EPA and State participants cited a number of benefits 
associated with NEPPS, widely crediting the process for 
improving communications and forging closer working 
relationships among EPA and the States.
    In addition, NEPPS has provided a means of getting buy-in 
for innovative or unique projects and has served as a tool to 
divide an often burdensome work load more efficiently between 
Federal and State agencies.
    Yet, while State participants indicated that their 
participation in the voluntary program would probably continue, 
they also consistently expressed the view that the benefits of 
the program should be greater, that the program has yet to 
achieve its potential, and that improvements are needed.
    Anticipating the need for continuous improvement of the 
NEPPS process, the 1995 agreement called for a joint evaluation 
by EPA and the States. In recent months, a number of 
assessments have been completed, including our own, that point 
the way toward improving the program. Others will soon be 
completed.
    For the NEPPS process to realize its potential, it will be 
critical that EPA and the States respond to these studies in 
ways that address the impediments identified. For example, when 
we did our work, we recommended that EPA develop a set of 
flexible guidelines that could be used to help clarify, among 
other things, the conditions that States must meet to achieve 
reduced oversight by EPA. We think this would be an important 
step in the right direction, and look forward to seeing how 
well EPA follows through on our recommendations and those by 
the others who are currently studying this issue.
    That concludes my remarks, Mr. Chairman. I would be pleased 
to answer any questions you may have.
    Senator Smith. Thank you very much, Mr. Guerrero.
    Mr. McCabe, let me start with your point that a new 
relationship is evolving with the States, that it allows EPA to 
adapt to changing priorities and experiment with new ideas. I 
think that sounds like we are conceptually in agreement.
    Can you specifically identify some approaches that EPA has 
taken to allow the States to adapt to these new, changing 
priorities?
    Mr. McCabe. Yes. In fact, some of the results of the NEPPS 
framework which I have in my testimony offer some examples. We 
have seen in the State of Maryland, for example, that its 
administrative reporting requirements have been cut in 13 
areas, and the goals that were identified through NEPPS for the 
evaluation that was done in conjunction with the State and EPA 
are really at the core of these results, but also at the core 
of the State's strategic plan.
    Florida has developed a new performance measurement and 
tracking system that actually received an Innovations in 
Government Award from the Ford Foundation and the Kennedy 
School of Government at Harvard.
    Minnesota has shifted staff resources from the main office 
closer to where the real issues are in the State, the district 
offices, as a result of the evaluations that they've done.
    And the State of Washington has seen a paperwork reduction 
associated with its annual work plan for grants falling from 40 
pages to four pages.
    These are just some of the examples. This doesn't mean that 
these are all the examples. I would point to other areas of 
State/EPA cooperation as broadly based, perhaps, as the 
Chesapeake Bay program, where EPA and three States have a 
multimedia outcome-based approach to dealing with this large 
estuary.
    Senator Smith. The examples that you gave are good, but I 
think they may be more process-oriented or paperwork-oriented 
than they are really substantive.
    Most of the time, in the conversations I have with State 
officials and a lot of the testimony we've had here in the past 
over the years, the States would say that, although perhaps it 
may happen from time to time, the Federal statutes, themselves, 
sometimes interfere with what they want to accomplish.
    Do you have a specific recommendation on a statutory change 
at EPA that would help us enhance the State flexibility and 
prioritization?
    Mr. McCabe. Well, I would certainly agree, and I think that 
both Administrator Browner and I have stated on this issue that 
there needs to be more flexibility, there needs to be a review 
of our national environmental statutes, many of which were 
created 30 years ago. There has not been that discussion, that 
broad, public discussion on what the environmental outcomes 
ought to be as a result of 30 years of extraordinary progress. 
We would encourage that discussion to take place both in 
Congress and in the public, in general, to see how we might 
reform some of those laws.
    Senator Smith. No specific recommendations at this point?
    Mr. McCabe. At this point I think we need to look at the 
big picture. We need to look at where we are going as a country 
from an environmental perspective and also where we have 
evolved in the State/Federal relationship.
    Senator Smith. Mr. Guerrero, you talk about the inherent 
difficulty in ``letting go,'' which is, I think, the term you 
used with reference to some regulators. One of your 
recommendations is to reduce that resistance toward the 
implementation of the NEPPS through training and strategies.
    What do you have in mind in regard to that type of strategy 
that could produce more cooperation between State and EPA on 
these issues?
    Mr. Guerrero. Mr. Chairman, there are some things that we 
feel can address the cultural issues at EPA--and also at the 
State level, too, because this represents a cumulative three 
decades of doing business in a particular way that States and 
EPA are now trying to change through NEPPS: Training, in terms 
of skills and team-building, teaching both State and EPA 
regional staff how to productively engage in setting goals, 
common goals, and agreeing upon that, providing information, 
sharing information, showing what works, what has worked in one 
State that could be adopted by other States, success examples.
    Most importantly I think is putting in place a set of 
incentives and rewards that encourages behavior so that EPA 
employees are rewarded for using NEPPS and using it to the 
extent that it allows greater flexibility and more cooperative 
working arrangement, that they get rewarded, as opposed to 
being rewarded for the enforcement bean or the inspection bean 
and what traditionally they have been rewarded for. It is going 
to be very hard for the culture to change if people continue to 
be measured by indicators that measure more traditional kinds 
of results that involve the kind of stovepipe approach that you 
talked about in your introductory remarks.
    Senator Smith. Thank you, Mr. Guerrero.
    Mr. Baucus?
    Senator Baucus. Thank you, Mr. Chairman.
    Tell us what are the keys to success in reaching more 
flexibility. Is it an air/water tradeoff or something else? 
Remember the Yorktown benzine plant issue a few years ago, 
where it turned out that the laws were so specific it required 
a result that allowed more benzine to be emitted, whereas if 
the company were to look at the whole plant together, including 
the loading docks, they would have much less cost to achieve 
that result.
    The chairman mentioned stovepipe application to our 
environmental regulations--Clean Air Act, Clean Water Act, and 
so forth--and it is true that a lot of companies find that the 
air person comes in or the water person or the waste person 
comes into the plant. Some of the stuff they ask for is 
contradictory, but with lots of flexibility and coordinating, 
as the chairman says, a more holistic approach, you could 
arguably achieve a much more efficient result--less pollution 
at less cost.
    What are the keys to achieving that? Let me ask each of 
you, what are three of the main standards, keys, approaches, or 
guidelines that come to mind to achieve that?
    Mr. McCabe. Well, Senator, I think administratively we have 
tried to do as much as we can, given limited resources, because 
any time you look at an individual case it requires an 
incredible commitment of resources to deal with that individual 
situation, as opposed to sort of the broad, generic issue. But 
administratively I think that we tried to adapt flexibility 
through a number of EPA programs--Project XL, CSI.
    Senator Baucus. I'm not really asking what you've done, but 
what are three rules of thumb that you use to make this work?
    Mr. McCabe. Well, one is what the standard is, what the 
requirement is that we are actually looking at.
    In the instance of perhaps a manufacturing facility or a 
plant, whether it is an emissions standard or an effluent 
standard, you look at that standard and work with the facility 
to see if they have ways of meeting the standard but in a more 
efficient and effective way.
    Senator Baucus. So one would be to ask the manager of the 
facility or the company for their suggestions?
    Mr. McCabe. Often we do that.
    Senator Baucus. OK. What are some other ways?
    Mr. McCabe. The other ways are better communications, more 
frequent communications with our partners, whether they are the 
States or the regulated entity, to find out what the issues are 
and to avoid any kind of specific problems.
    Senator Baucus. I've got a couple of questions here, so we 
need to cut it short.
    Mr. Guerrero, what do you think?
    Mr. Guerrero. Yes, Senator, a couple things. I completely 
agree with Mike that improved communications is central. A key 
element to----
    Senator Baucus. Communications between?
    Mr. Guerrero. Between States and EPA regions, and, in 
particular, States and EPA's headquarters program managers, 
where communications have not always been as good as they can 
be. And that's a reflection of the EPA organizational 
structure. It is like pushing a string to get things done.
    So communications is key, because that builds trust. The 
one thing we've heard is, if the NEPPS process to date has been 
successful for anything, in particular it is improving 
communications and trust.
    Senator Baucus. Why is there insufficient communications 
and trust? What is the impediment?
    Mr. Guerrero. I think it stems from the origin of the 
environmental protection program, where the Federal Government 
put in place programs, delegated those to the States, and then 
held the States accountable and measured what the States were 
doing by setting annual targets or goals and measuring those in 
terms of outputs, such as numbers of permits issued or 
enforcement actions taken.
    Senator Baucus. So what would you----
    Mr. Guerrero. And it was a very directed kind of process, 
and now that has changed significantly. The States are a major 
player now in environmental protection. It's where the vast 
bulk of the resources are. It is where most of the 
responsibilities for carrying out these laws reside. The EPA-
State relationship has to change, as a result. And to make that 
change, you have to change the communications and the trust 
involved in the process.
    Senator Baucus. Very briefly, the three most common 
mistakes that we should try to avoid as we strive toward, 
generically, flexibility.
    Mr. McCabe. I think that we should avoid the one-size-fits-
all approach. I think that we need to develop good information, 
because if we don't have good information we don't know what 
the baseline is that we are operating from, and effective 
measures to figure out whether we have done a good job. In 
fact, that is part of what NEPPS has been trying to accomplish 
is performance measures.
    Senator Baucus. How about enforcement? I mean, there's a 
lot of tension between States and EPA over enforcements. In 
fact, as I understand it, in your testimony, Mr. Guerrero, you 
talk about an audit which State administrators often refer to 
as--they say that they don't back off on enforcement, because 
audits have shown that State enforcement is perhaps not what it 
could and should be.
    Mr. McCabe. Right.
    Senator Baucus. And there's this over-filing issue, for 
example. There is a lot of tension between States and EPA on 
enforcement. How do we clear that up?
    Mr. McCabe. I think that there was more tension several 
years ago between the States and EPA on enforcement than there 
is now. I think that it has improved.
    In the case of over-filing, in fiscal year 1999 we had 
3,935 administrative and judicial actions, and there were only 
four instances of over-filing, so it really----
    Senator Baucus. So you don't think there is tension----
    Mr. McCabe. There is----
    Senator Baucus.--so significant today that we should get 
worked up about it?
    Mr. McCabe. No. I think that there is a tension. Clearly, 
there is a tension when the Federal Government feels that the 
minimum standards are not being met, or perhaps the States are 
not being as aggressive on pushing certain companies, certain 
members of the regulated community to meet those standards, and 
that is our role. It is our role to----
    Senator Baucus. Mr. Guerrero, your thoughts on Federal/
State enforcement tension.
    Mr. Guerrero. I think the key is to provide EPA this 
measurable assurance that it needs to satisfy the American 
public that these laws are being carried out as intended by the 
Congress. Ultimately I agree with Mike that what is needed is 
better information and better data, especially results-oriented 
data that would help address these concerns.
    Very often these misunderstandings occur because the data 
just are not good, and so focusing on the issue of better data 
and data management at EPA is critical.
    We also say that the whole process under the Results Act, 
where EPA has set some 187 goals and 364 measures to measure 
environmental progress in this country is burdensome, and the 
core performance measures that EPA has negotiated with the 
States need to be integrated with that process. We need to 
figure out how to focus on what the key goals are or what the 
key kinds of measures are.
    Senator Baucus. The core performance provisions in NEPPS I 
think is going in the right direction, you are saying?
    Mr. Guerrero. I think the assessment that--what we've heard 
from both the States and EPA is that they have made progress. 
The core performance measures are vastly improved.
    Senator Baucus. It sounds like we need more resources, 
then.
    Mr. Guerrero. And the third point that I would make to 
address what are the three things, I would completely agree. I 
think there were two comments made in the chairman's opening 
remarks and in yours that really fundamentally we need to be 
realistic about what NEPPS can accomplish, because it is in the 
framework of, as Chairman Smith said, a set of stovepipe laws 
that have accrued over time that don't allow the kind of 
flexibility that perhaps now we would like to see, and 
certainly all of these programs are stressed and taxed and 
limited in terms of the resources they have to get the job 
done, and those are two fundamental issues.
    Senator Baucus. I thank you. I've encroached upon a lot of 
time here, and I apologize very much to my colleagues.
    Senator Lautenberg. If I may, Mr. Chairman, not meaning to 
interrupt the Senator from Rhode Island, I would like to stay. 
I can't. I have another committee meeting starting at 11 and 
I'm an integral part of that discussion, so I would ask, Mr. 
Chairman, that the questions that I will submit in writing be 
answered as promptly as we can, to see if there are things that 
we can do to make the adjustments that seem to be required to 
have this cooperative venture continue and improve.
    I thank you very much and I thank the witnesses.
    Senator Smith. The record will be left open for questions. 
I have some that I will be submitting, as well.
    Senator Lautenberg. Thank you very much.
    Senator Smith. Senator Chafee?
    Senator Chafee. Yes. Thank you, Senator Smith.
    My experience in Rhode Island in visiting various Superfund 
brownfield sites has been it is a positive relationship with 
EPA and the State DEM and on down to the local communities, 
and, indeed, the local activists--nothing but positive. So, as 
you have said, we've come a long way through the years from 
heavy-handed, micromanaging by EPA to the situation we are in.
    I am sure that you, as the Regional Administrator in the 
mid-Atlantic States, have shared that experience. Is that 
accurate, Mr. McCabe?
    Mr. McCabe. Yes, it is. In fact, my colleague, Jim Seif, 
who represented the biggest State in the mid-Atlantic States, 
is here today to talk about some of his experiences.
    I truly believe that the relationships between EPA and the 
States have improved. I think that it really is based on mutual 
respect. I think that the important issues of enforcing Federal 
laws uniformly, making sure that there is consistency among the 
States, is one of the key roles that the Federal Government can 
play, but there needs to be some flexibility above those 
minimums for the State to meet them. I think increasingly we 
have incorporated that into our collaborative roles and 
responsibilities.
    Senator Chafee. As long as that flexibility doesn't include 
letting off those States that are either upstream or upwind. 
Those downstream and downwind see the negative aspects of any 
flexibility.
    Thank you.
    Mr. McCabe. We need to meet the standards.
    Senator Smith. Thank you, Senator Chafee and Senator 
Baucus. As we said we have no further questions, I think we 
will move to the next panel. Thank you, gentlemen, for your 
testimony. I know that several members do have questions in 
writing to submit, and we'd appreciate as prompt a response as 
possible to those questions.
    Bring the second panel up: Mr. R. Lewis Shaw is the Deputy 
Commissioner of Environmental Quality Control, South Carolina 
Department of Health and Environmental Control and the 
president of the Environmental Council of the States; Mr. 
Robert Varney, Commissioner of New Hampshire Department of 
Environmental Services; Mr. James Seif, Secretary of the 
Pennsylvania Department of Environmental Protection; and Mr. 
Brent C. Bradford, the Deputy Director of the Utah Department 
of Environmental Quality.
    We'll just move down the panel from left to right. 
Gentlemen, the same information as to the last panel--your full 
statements will be made part of the record. If you could 
summarize in 3 or 4 minutes, it would be appreciated, since we 
do have another panel.
    Mr. Shaw, we will begin with you.

STATEMENT OF R. LEWIS SHAW, DEPUTY COMMISSIONER, ENVIRONMENTAL 
   QUALITY CONTROL, SOUTH CAROLINA DEPARTMENT OF HEALTH AND 
ENVIRONMENTAL CONTROL, AND PRESIDENT, ENVIRONMENTAL COUNCIL OF 
                           THE STATES

    Mr. Shaw. Mr. Chairman, members of the committee, thank you 
for the opportunity to appear before you today.
    My name is Lewis Shaw. I am the deputy commissioner of the 
South Carolina Department of Health and Environmental Control. 
I have 29 years of service to my State, with the last 16 of 
those in my current position as the State's environmental 
director.
    Today, however, I am here representing the views of the 
Environmental Council of the States, known as ECOS, of which I 
am president.
    ECOS is the national, nonprofit, nonpartisan association of 
the State and territorial environmental agencies. The States 
and territories are our members, and the people we represent 
are the leaders of the various State environmental agencies. 
Other details about our association are provided in the 
attachments to this testimony, which I ask be entered into the 
record.
    I am here to tell you of some of the accomplishments that 
States have made in environmental protection--accomplishments 
that are not widely known. I will make four main points.
    First, States now implement most of the delegable 
environmental programs. This is good news, because this is what 
Congress had intended when it enacted laws such as the Clean 
Air Act and Clean Water Act.
    States now have primary responsibility for carrying out 
those laws. You heard Mr. McCabe mention that about 70 percent 
of the major programs that could be delegated to the States 
have been delegated. This means States are running most of the 
clean water, clean air, safe drinking water, and waste cleanup 
programs that Congress created.
    As you can see from chart one, much of this growth was in 
the 1990's, and, in particular, between 1993 and 1998, a 5-year 
period in which State delegations grew by almost 75 percent.
    As part of this responsibility, States are also collecting 
most of the environmental quality data. Brent Bradford, my 
colleague from the State of Utah, will be speaking more about 
this later.
    We also conduct most of the environmental enforcement 
activities. In recent years, States have averaged between 75 
and 80 percent of all enforcement actions taken by EPA and the 
States, combined. We conduct at least 97 percent of all 
enforcement inspections, but we also conduct many other 
enforcement actions and compliance assistance that EPA may not 
count for one reason or another.
    Last year, Congress directed ECOS to conduct research on 
the issues of counting enforcement and compliance activities 
and report the results to Congress. We are working on this 
project now and expect to report to you early next year.
    A second point is that States are paying for most of this 
environmental protection. As you can see in chart two, State 
spending for environmental protection has grown dramatically 
since 1986. In 1986, States spent $5.2 billion on environmental 
protection and natural resources. Congress, through EPA, 
provided just over $3 billion of that, almost 58 percent. But 
by fiscal year 1996, a very different story has emerged. States 
spent about $12.5 billion, with the EPA providing about $2.5 
billion, or about 20 percent.
    During the 10-year period from 1986 to 1996, State spending 
on the environment increased about 140 percent, while total EPA 
funding to the States decreased about 17 percent. Most of this 
decline is attributable to the reduction in the water 
infrastructure support programs. In 1996, the States spent 
nearly twice as much on environment and natural resources as 
the entire EPA budget.
    My third point is that States conduct many other 
nondelegated programs on their own, and that we are great at 
innovation. For example, in South Carolina we have our own 
laws, rules, and practices on the protection of shellfish beds 
that are not part of the delegated Federal system but are very 
important to our State. Obviously, these kinds of laws vary 
from State to State, but they show the commitment of the States 
to the environment.
    According to the National Conference of State Legislators, 
States passed into law over 700 environmental bills in 1997, 
alone. At least half of these dealt with nondelegated 
environmental programs such as pollution prevention and solid 
waste management.
    As chart No. 3 shows, for example, most of the hazardous 
waste sites in the country are actually being regulated and 
cleaned up under State authority.
    Another study by the Council of State Governments found 
that 80 percent of the States had at least one clean air 
standard that exceeded the Federal minimum standard. In South 
Carolina, for instance, our air toxics list includes 256 
constituents, compared to 188 on the Federal list.
    States implement most environmental protection programs, so 
we are often the first to recognize innovative solutions for 
environmental problems.
    Each year for the past 3 years, ECOS has compiled State 
programs and implementation innovations. These cover the 
complete range of environmental protection, including delegated 
and nondelegated programs. ECOS has now compiled hundreds of 
these innovations. Some of these States' ideas have been 
nationally recognized by innovations awards programs such as 
those of the Council of State Governments and Harvard 
University.
    My final point is that States are committed to the State/
Federal partnership in environmental protection. We believe 
that the time for command and control, top-down programs has 
ended, however. Perhaps it should be replaced by a set of 
mutually agreed-upon national goals and standards which would 
be achieved by the States in the manner we deem most 
appropriate and supplemented by local goals and standards that 
meet the specific needs of the States. After all, you are not 
likely to see the same environmental problems in South Carolina 
as you would in Utah because the States have such different 
ecologies.
    Our final chart shows some of the differences that we think 
will lead to a more harmonious relationship and better 
environmental protection.
    Some people still believe that it is 1970's and that the 
States cannot be trusted to protect the environment. We believe 
the facts presented here today give the real story. States are 
leaders in environmental protection and are committed to 
protecting the health and the environment of the citizens we 
serve.
    Mr. Chairman, I would be glad to answer any questions. 
Thank you for letting me appear here today.
    [The charts referenced in Mr. Shaw's statement follow:]
    
    
    
    
    
    
    
    
    
    
    Senator Smith. Thank you, Mr. Shaw.
    Mr. Varney, welcome.

  STATEMENT OF ROBERT W. VARNEY, COMMISSIONER, NEW HAMPSHIRE 
              DEPARTMENT OF ENVIRONMENTAL SERVICES

    Mr. Varney. Good morning, Mr. Chairman and members of the 
committee. My name is Bob Varney. I'm commissioner of the New 
Hampshire Department of Environmental Services. I've held that 
position for the last 11 years under three different Governors 
of both political parties. I am here today as the past 
president of the Environmental Council of the States. I am here 
to highlight the success of two cooperative programs that ECOS 
and EPA have developed jointly, those being the national 
environmental performance partnership system, or NEPPS, and the 
ECOS EPA regulatory innovations program.
    As you know, NEPPS was created 5 years ago and grew out of 
an awareness that Federal and State government could be more 
effective and efficient if they cooperated as equal partners in 
planning, implementing, and reporting environmental protection.
    The NEPPS agreements are called ``performance partnership 
agreements,'' and in New Hampshire we just signed a performance 
partnership agreement with the regional office of EPA. Our 
comprehensive agreement sets forth the goals, activities, and 
measures of progress for a full range of Federal and State 
programs, which represents a comprehensive plan for all of our 
agency's programs. Before NEPPS existed, no such document 
existed.
    I should mention that our full agreement is available to 
the public on our department's website, and ECOS is linking its 
home page to many other State NEPPS agreements, which are also 
available electronically. This means that any member of the 
public can review and comment on any of our State's goals, 
objectives, and allocation of resources, and so it is truly a 
transparent process with the public that emphasizes public 
participation.
    To date, 38 States have performance partnership agreements 
under the NEPPS system. Many have been accompanied by 
performance partnership grants, which allow for realignment of 
the EPA funds so that limited resources can be used to address 
the most pressing State problems facing the individual State.
    We recognize, at the same time, that the NEPPS process is 
not perfect, and have been working to try to improve the 
process.
    We had a third national meeting in Baltimore, Maryland, 
last fall to further evaluate NEPPS and develop recommendations 
for improvement.
    ECOS and EPA have recommitted to improving this process by 
trying to implement the many recommendations that are in this 
plan, and this was further renewed through the adoption of a 
resolution at our recent national meeting held in April in 
Philadelphia.
    We very much appreciate the work of Deputy Administrator 
McCabe, who is trying to ensure that all EPA staff understand 
and work toward the continuous improvement of the NEPPS 
process.
    I would like to now talk about another cooperative State/
EPA program designed to stimulate innovative approaches to 
regulation. Here I distinguish innovative approaches to 
regulation from technical innovation, which will be addressed 
by another witness.
    The States have been a well-stream for inventiveness. In 
dealing with specific circumstances unique to State location or 
problem, we are forced to develop innovative approaches. These 
documents contain hundreds of State innovations which have been 
developed and are shared with other States, are available in 
published form and are also available on the ECOS website.
    ECOS and EPA recognize that some of these innovations might 
be transferrable to other locations with similar issues, and we 
wanted to provide a process for dealing with regulatory 
innovation by establish a reg innovation agreement, which was 
signed in April 1998.
    In the words of the agreement, itself, ``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.''
    Texas was the first State to submit a project under the reg 
innovation agreement. It involved opacity testing. As a result 
of that agreement, they were able to reduce the number of 
certified inspectors from 100 to 50 each year, which freed up 
more than 75 staff days to do additional facility inspections 
and better protect the environment. This innovative tradeoff is 
now transferrable to other States who can take advantage of 
this idea.
    This simple example demonstrates the goal of identifying 
innovative approaches to make available faster, cheaper, and 
better approaches to environmental protection. It is especially 
useful when, as in this instance, the approach can be tailored 
by other States to meet their own needs.
    At the spring meeting of ECOS, it was reported that, to 
date, five proposals have been submitted to EPA. Four out of 
the five have been approved, and an additional five or six have 
been submitted and are pending approval by EPA.
    This fall, EPA and the States will conduct a national 
workshop on regulatory innovations, with an emphasis on case 
studies presented by the States.
    I have provided for the committee's use several other ECOS 
publications describing State innovations, and they fully 
demonstrate the accomplishments of the States and the ability 
of the States to carry out innovations in an appropriate way 
and one that is responsive to the needs of the public and is 
responsive to the laws that have been set by our legislatures 
and by Congress.
    Thank you.
    Senator Smith. Thank you, Mr. Varney.
    Mr. Seif?

STATEMENT OF JAMES SEIF, SECRETARY, PENNSYLVANIA DEPARTMENT OF 
                    ENVIRONMENTAL PROTECTION

    Mr. Seif. Good morning. Thank you for this opportunity to 
be here. I am the Secretary of environmental protection in 
Pennsylvania. I have also been a member of the ECOS board and 
was a Regional Administrator in Philadelphia for a number of 
years and an environmental prosecutor way back in the 1970's, 
when everybody was an environmental prosecutor, because that 
was the only tool we had.
    I have been before this committee six times now, and with 
continued patience I will keep doing it until I get it right.
    Senator Smith. Do you think you've taught us anything yet?
    Mr. Seif. I always learn more on the way here than I do by 
way of teaching.
    This morning there are 17,000 Pennsylvanians at work on 650 
sites in our States that were, 5 years ago, behind cyclone 
fences. Maybe Alan Greenspan gets some credit for that, as 
well, but I do believe that a very innovative program, which 
many of our States have used, the brownfields program, can also 
get some credit.
    You'll see in the testimony, and in some materials that I 
would be happy to provide, some statistics, lists of awards, 
numbers of sites, how many counties, rural, urban, and all of 
that. It can get kind of tiresome, I remind myself, but we are 
very proud of it.
    These are real cleanups, by the way, and not the Secretary 
of Commerce trying to build stuff, but the Secretary of the 
Environment trying to clean up stuff. That's how many cleanups 
we have, with hundreds more in the pipeline.
    I would call your attention to four elements of the main 
recipe of a successful brownfields bill. One is that you have 
uniform and real cleanup standards, standards that you can know 
about in advance and don't have to argue ad hoc with the GS-14 
at the regional office of EPA. You know what they are: they are 
published; the public agreed to them, and they meet Federal 
requirements for groundwater, soil, and the like.
    Second, rapid, well-known, agreed-upon, simple procedures. 
If you are a commercial developer, you know what the pathway is 
and you know you can get there before your money runs out.
    Third, a liability release. If you don't get a liability 
release, you don't have a negotiable asset. You can't sell it. 
You can't rent it. You don't want to occupy it. The release 
gives you that capacity. It puts the property in play and 
unleashes private sector money, which is how we got all those 
sites cleaned up.
    We do have financial assistance, and that's the fourth 
element. We spent about $20 million for site assessments, not 
for cleanups. The private sector cleans it up because the 
property has value if you can get a real cleanup and a real 
release. The $20 million is for assessments for redevelopment 
authorities and municipalities to find out what is underneath 
the ground in the first place, to see if the property should be 
put in commercial play.
    Let me talk about some of the lessons that have come out of 
what I think we have learned.
    We've talked a lot about delegation this morning. 
Brownfields are the one major State program that is not 
delegated. There is no provision in Superfund to delegate 
programs. The fact is, they were born out of necessity to get 
around the big gorilla in the closet, Superfund, which is, I 
think, the least-successful Federal statute in environmental 
history.
    And I don't mean to argue the numbers about EPA. ``Only X 
number of sites cleaned up, while we cleaned up many more,'' 
and all that. Those numbers are not the point. I think each of 
those two statutes--the State brownfield statutes and the 
Superfund--have a role. The sites we cleaned up aren't the big, 
messy sites that some Superfund cleanups are designed for.
    But the fact is, the uneven borderline between those two 
statutes needs to be, and I hope will be cleared up 
legislatively.
    When Richard Nixon made the choice in December 1970 about 
the basic shape of EPA, it was, ``Should it be the National 
Institute of Health, a standards-setting organization, or 
should it be operational?'' The statutes passed required that 
it be operational, and it has been. I think it is time to 
revisit that, however.
    Second, with respect to the regional offices, we have 10 of 
them, each with about 1,000 people, managing programs. I think, 
as Lewis Shaw has mentioned, we actually really have 50 
regional offices in each of the State capitals and around. 
Maybe we don't need to have people patrolling delegation, and 
that would be especially true in the brownfield area, where 
delegation was not even contemplated.
    I want to mention also some unexpected consequences of the 
law. Once it became possible to find out what was underneath a 
site and you weren't scared to do so because Superfund might 
apply, we went looking. What we found was not much. We don't 
have pandemonium trichloride and methelethyl megadeath under 
every site. You can clean them up, and we do, if you're not 
worried about, as a commercial developer, what might happen 
under Superfund.
    You also have some other developments: the skill mix inside 
the agency changes. You get deal-makers, not enforcers. That's 
how you get a site cleaned up. You bring money, you bring 
scientists, you bring the community, and you get it done--not 
an attorney figuring out who he can sue because in 1958 the 
predecessor corporation dumped a drum there.
    We also saved a lot of greenfields in Pennsylvania. Those 
17,000 people would be working somewhere, I assume, instead of 
in the inner city, typically, where they are.
    Finally, there is the resource issue, which has been much 
mentioned here. We do need more resources in some areas. We 
probably don't need more resources in the brownfield area. The 
economy provides the resource and has provided it well, and it 
makes the choices about what sites to clean up, not a 1,200 
page National Contingency Plan which ranks every site and gives 
a long recipe for what to do next. That's agility. That's what 
the States, among other things, are good for.
    EPA needs to be there. I say that as a former Regional 
Administrator and I say as a proud colleague of Mike McCabe, 
who has done a particularly good job at curing a lot of sore 
problems. But in this area I think some of the basic 
relationships between delegation and between States and the 
regions are shown up to be ripe for reexamination.
    Thank you.
    Senator Smith. Thank you, Mr. Seif.
    Mr. Bradford?

     STATEMENT OF BRENT C. BRADFORD, DEPUTY DIRECTOR, UTAH 
              DEPARTMENT OF ENVIRONMENTAL QUALITY

    Mr. Bradford. Thank you, Mr. Chairman. I appreciate the 
opportunity to appear before you today.
    Mr. Chairman and members of the committee, my name is Brent 
Bradford. I am the deputy director of the Utah Department of 
Environmental Quality. I am here representing the views of the 
Environmental Council of the States, of which I am a member, 
and immediate past chairman of the State EPA Information 
Management Work Group and the current vice chairman of the ECOS 
Strategic Planning Committee.
    I want to speak to you today regarding State activities and 
initiatives in managing environmental information. I'd like to 
give you four messages: first, States generate most of the data 
in EPA's national data systems; second, States are driven to 
manage this data effectively because they must have it to 
operate their own programs; third, States have become the 
greatest innovators in the management of environmental data; 
and, last, States are working with EPA and the public to make 
this data available.
    First, States collect and provide about 94 percent of the 
environmental pollutant information contained in Federal 
program data systems. This includes data from the regulated 
community and direct measurements of environmental quality, 
which include data for air, water, waste, and drinking water.
    States provide EPA nearly all the environmental pollutant 
and compliance data it uses to manage the environment. Data 
that EPA passes on to the public through programs such as 
Envirofacts often originates in State environmental agencies.
    Second, States use this data, themselves, to manage their 
own programs, and so are driven to be sure that the data is 
managed appropriately. This became especially true during the 
1990's, as States assumed more and more of the delegated 
programs from EPA.
    More States over the past several years have improved 
quality and improved public access to data as they've invested 
in information technology and moved toward data integration.
    Some States have made significant investments of State 
funds, and others have relied heavily on Federal funds coming 
through EPA's one-stop program. Such Federal funding has been 
particularly helpful to smaller States, such as ours.
    My third point is that the conditions I've already 
mentioned have led States to become great innovators in 
environmental data management. In my home State of Utah, our 
agency has developed a standard used by all programs to 
identify facilities and link them to program data bases. We've 
also established a global data catalog to allow public access 
to information contained within our data bases. We've developed 
an electronic reporting capability, and we've also developed an 
Internet access capability that will allow public access to 
information 24 hours a day, 7 days a week.
    Other States have also made remarkable progress in this 
area. A few examples are Pennsylvania, No. 1. This was one of 
the first States to present timely multimedia compliance 
information facilities on line to the public. They are now 
sharing that system with other States.
    The State of Washington led States in developing a de facto 
national standard. Its facility identification template for 
States is now in its second version and is being used by at 
least 25 States to help them jump start their data reinvention 
efforts. This saves each State about a $.25 million.
    New Jersey's environmental management system fully 
integrates all regulatory and permitting systems, one of the 
first anywhere to do so. It will be completed later this year.
    Virginia's centralized enterprise data system, created in 
18 months, merged 77 legacy systems that were not compatible 
into a single integrated system. The State, itself, invested 
$12 million of its own resources to create this system. 
Virginia is now offering that system to other States at no 
cost.
    New Hampshire is integrating its environmental data bases 
by linking facility and site data, and has begun making site 
remediation, underground storage tank, and air permitting 
information accessible via the Internet.
    My fourth and final point is that States are committed to 
working with our Federal partners in making our data available 
to the public. The States and EPA created the State EPA Data 
Management Work Group in January 1998. We developed a vision 
statement and a set of operating principles. These define a 
framework for a new way for States and EPA to do business 
together. They commit States and EPA to a partnership in 
building locally and nationally accessible information systems.
    Some major accomplishments of the work group include the 
creation of the Data Standards Council, the development of a 
vision for a national data exchange network, the establishment 
of a joint process for addressing burden reduction in data 
reporting, and a discussion forum and action plan for public 
access to environmental information.
    States are making significant accomplishments in 
environmental data management, but the cost is high. Currently, 
the President's budget proposes $30 million for environmental 
information management--$16 million for States and $14 million 
for EPA. States believe that this funding is essential in 
addressing a new vision of environmental information 
management.
    Continued Federal investment is critical for this vision to 
be realized, and we need to make sure that all States have a 
full opportunity to participate. Collective investments and 
standards development will be needed to make such a network 
viable.
    States envision a national environmental information 
exchange which recognizes that the agencies that collect 
information will be responsible for its stewardship and will 
provide access to such information through the network. Such a 
network is based on common standards and would provide a common 
base of information access, exchange, and use that would allow 
flexibility in meeting individual State and EPA needs regarding 
data housing and data handling. This would move focus away from 
a common national data system toward a focus on data quality 
and interpretation.
    This will require both State and EPA effort to make such an 
exchange work and must be developed in such a way that all 
States, both large and small, can participate in the exchange. 
Given the impact of decisions made based on environmental 
information and the need to assure its accuracy and 
accessibility, it is important that States and the Federal 
Government continue to work together to develop and utilize 
data management technology in a sound, responsible, and 
efficient way.
    There is a long way to go, but significant progress is 
being made. States have provided leadership in this important 
effort and are committed to continuing to do so to assure that 
the ever-increasing demands for information are met and that 
the necessary information is available for responsible 
environmental decisionmaking.
    Thank you, Mr. Chairman.
    Senator Smith. Thank you very much, Mr. Bradford.
    Each one of you, in your own way, with a different 
perspective, talk about greater control and authority to the 
States and the fact that the one-size-fits-all, top-down 
approach doesn't work. Let me just ask each one of you for a 
real quick response, just go right down the panel from Mr. Shaw 
right down. Is this happening in spite of the EPA or are they 
working with you to make these things happen?
    We hear a lot of stories both way, frankly--a lot of focus 
on what the States are doing, successes with the State. If they 
are helping you, tell us how they are, briefly. If they are 
not, tell me then where you think we need to make a change in 
the structure to help us get where we need to get--just 
briefly, so I can get a quick response from each one of you.
    Mr. Shaw.
    Mr. Shaw. Speaking for myself, from my perspective, I do 
think that EPA is genuinely interested in having a better 
system. We have been working with them in a number of instances 
to do just that. However, sometimes they just don't get it. 
Now, maybe they just don't get it because the laws don't allow 
them to. We have heard some discussion of that. But I do think 
there is a genuine interest on their part to do things better 
and do them along with the States.
    You mentioned the enforcement piece and some of the 
problems the State has there. We are very sensitive in South 
Carolina to who does enforcement in our State, but we have 
worked out an agreement with our EPA regional office to share 
some of that enforcement responsibility. Not all States do 
that. Not all States wish to do that. But in our case, we saw 
it as beneficial to both sides, so we have been doing some 
joint enforcement actions in our State. That's an example of 
where we have been able to work together.
    Senator Smith. Mr. Varney?
    Mr. Varney. I would say that there is a period of cultural 
change that is taking place, both within EPA and within the 
State agencies. I think some of the mid-level managers in our 
own agencies, as well as in EPA, don't like change, don't want 
to embrace the new way of doing things, don't want us 
questioning their prioritization or perhaps considering that 
we'll take resources away from this manager and reassign them 
to a different manager. That's very threatening to our own 
staff and to EPA's staff. So there is this temporal aspect, 
this cultural change that is taking place gradually over time.
    Let me also say that I think we have to be very careful to 
make sure that we do not have regulatory or legislative 
barriers in terms of flexibility. An example that I would give 
is in the SRF programs. I think there is a lot to be gained by 
giving States maximum flexibility in shifting resources within 
the State revolving loan fund programs, the SRF for the Clean 
Water Act, the SRF for Safe Drinking Water Act, and even 
perhaps brownfields SRF funding, so that we can shift the money 
around based on the changing needs of the State, and to even 
look at innovative approaches, like using SRF money for water 
conservation, and water storage to achieve in-stream flow 
protections--those kinds of innovative things that may have 
obstacles associated with them because of statutory 
requirements.
    Senator Smith. Moving from one stovepipe to the other?
    Mr. Varney. Yes.
    Senator Smith. That's what it is.
    Mr. Varney. Exactly, Senator.
    Senator Smith. Mr. Seif?
    Mr. Seif. It's getting better, Mr. Chairman, I think. You 
have to remember, though, that the founding fathers set up a 
Federal system which is inherently complicated, and when you 
add new science, modern industrial organization, and 250 
million people, it is never going to run like a Swiss watch. It 
will have its rough spots.
    I think, in the broad sweep of history, if we take the 
Great Society as the height of Federal power, it is moving to 
the States. It is leaching, or running, or whatever, to the 
States.
    We do have two block points. The statutes do freeze 
processes in place, and that's one, and the culture on both 
sides, as Bob makes a very good point about my own bureaucracy, 
as well, do tend to retard growth.
    The thing that retards it most--and we can thank Brent for 
helping the most with this--is the metrics. Senator Baucus 
asked what are the things we really need to do, and metrics is 
one of the three things that would really make the system best.
    What can we agree on that we should measure? And what makes 
a measurement improve or not? And can we alter our resource mix 
to go after improvement in that measure? We can't with the 
culture, the statutes, and so on, being as they are.
    We need from the committee a holistic, integrated 
environmental approach--if not a single, big statute, which 
some have talked about, certainly a great, wide duct as opposed 
to 50 stovepipes.
    Senator Smith. But you do believe that some codification 
modifications are required, some modifications in the law?
    Mr. Seif. Or uncodification.
    Senator Smith. Decodification.
    Mr. Seif. Right. Yes, sir.
    Senator Smith. All right. Mr. Bradford?
    Mr. Bradford. Thank you, Mr. Chairman.
    In Utah we developed, with EPA and local government, a 
southwestern Utah partnership that I believe was probably the 
most successful environmental activity that I have seen 
undertaken in my 28 years in the State of Utah in environmental 
programs, so the system can work, and it worked very well.
    There were a couple of key things that made that happen, I 
believe. First of all, we used a model that said we were going 
to put the problem in the middle of the table and then see what 
each of us brings to it. What is the strength that each of us 
brings? We're not going to worry about oversight jurisdiction. 
We'll just worry about focusing in on the issue.
    We were able to do that, and in doing that we got some 
local ordinances. We determined that the local ordinance was 
the best way to go and the most effective way. We got some 
local ordinances in place we had been trying for over 15 years 
to get in place relating to individual wastewater and to 
drinking water. So the system worked, and it worked very well.
    I think this model of performance partnership and State/EPA 
partnership can work. It took a great amount of leadership from 
the top to do that, and there was a lot of distrust at the 
staff level to begin with and real concerns on the part of 
those people that somehow their job was going to be impacted 
and the traditional role was not going to be in place, and it 
wasn't. And once we could change that attitude, some nice 
things began to happen.
    I think our biggest problem in the State of Utah still 
deals with the enforcement, in that the partnership doesn't 
seem to carry over into that area, but in the areas of the 
program management, itself, it can work and it has worked, and 
I think we have actually established somewhat of a national 
model relative to this performance partnership agreement, and 
it did develop a lot of trust between our agency, the local 
government, and the Federal Government. In working that, that 
strengthened all three of us, I believe, in that process.
    Now we are attempting another partnership right now in 
another portion of our State which will involve tribal 
governments, also, so it will be a four-way partnership. We'll 
see if that one works. It is just underway now. But that one 
may be a little bit more difficult.
    But the system can work. It does require a lot of attention 
and it does require a lot of management in order to make it 
work.
    Senator Smith. Thank you.
    Senator Baucus. Mr. Seif made a point that I think is worth 
remembering: we have a messy system in this country. We have a 
democracy, and it's just the nature of the beast. Winston 
Churchill's oft-repeated statement comes to mind: ``It's the 
world's worst form of government, except there is none 
better.''
    From your testimony I sensed that the drift is going in the 
right direction with NEPPS. So how big of a problem do we 
currently have? As administrators, do you spend 80 percent of 
your time saying, ``My gosh, I can't get my job done because of 
``block points'' and the culture.'' Or do you spend 5 percent 
of your time saying, ``Gee, this isn't working that great, but 
I can do what I need to do without it.'' How big of a problem 
are these block points, whether they are cultural or statutory?
    Mr. Shaw. Let me maybe start out my comment on that. You 
know, in my case it is not the most pressing problem I have. My 
legislature is probably the most pressing problem that I have.
    [Laughter.]
    Mr. Shaw. But, you know, EPA is something that we have to 
deal with day in and day out.
    Senator Baucus. Yes.
    Mr. Shaw. So it does take our attention.
    One thing I would like to say is, every time we have had a 
State's early involvement in the decisionmaking process with 
EPA, we have come out with successes.
    Senator Baucus. Yes.
    Mr. Shaw. Where we have been blind-sided or surprised by 
situations is where we have most of our problems. That's where 
I spend most of my time.
    Senator Baucus. In an ideal world there would be some 
statutory changes, but it is my experience that very often, 
with great leadership, a lot of these problems can be dealt 
with without changing the law.
    Let's take Superfund, for example. I agree with Mr. Seif 
that Superfund has its problems, but I think you'll agree that 
the EPA, through administrative action, is able to solve some 
of those problems. But still, I mean, how much of this can be 
relatively solved with the right attitude?
    Mr. Seif. I think it is right. College sophomores debate 
process versus people, when it turns out people can override 
process.
    Senator Baucus. Right.
    Mr. Seif. And we do every day.
    Senator Baucus. Yes.
    Mr. Seif. I don't consider the time I'm doing today as the 
85 percent worrying about the system. This is part of the 
solution--that is, bringing this message, the statistics and 
such insight as we have been able to provide, encouraging 
devolution, which is, I think, historically inevitable and 
appropriate, given the nature of the environmental problems, 
which are now much smaller, more retail, and the advance of the 
information systems which would give us the metrics which will 
eventually get us there.
    So I don't consider myself being blocked by all of this. 
These are inevitable challenges, but we're going to get there.
    The public still believes in the most important message 
that we have, which is: let's keep after the environment. I 
think environmental mood in the country is as strong as it was 
on the first Earth Day. It's just more sophisticated. There are 
more tools. There are more problems. But we are going to get 
there.
    Senator Baucus. The tone of this hearing is constructive 
and helpful. The Constitution contains the Supremacy Clause and 
I don't think it is going to be repealed soon. I'd like to read 
to you some testimony of Mr. Jorling, who was the EPA 
administrator in New York, I think, in years past.
    Mr. Seif. In the 1980's. Yes, sir.
    Senator Baucus. The New York commissioner. In 1993, we held 
hearings on roughly the same subject, and this is what he said 
at that time: ``It is clear that the three principal 
responsibilities of the Federal Government should be: one, 
setting national minimum standards for health and technology; 
two, being the gorilla in the closet to assure the integrity 
and steadfastness of the Federal program; and, three, assuring 
there is a level playing field across the States by focusing on 
the States that are not performing as well as the other 
States.''
    I'm curious what reaction you have to each of those three 
points.
    Mr. Seif. I might mention Mr. Jorling is now senior vice 
president for environmental programs at International Paper, a 
career progression which is not to be smirked at, frankly. I, 
myself, was at Earth Day in 1970 with my beard and the usual 
buttons, balloons, and baloney. The movement has matured. It is 
integrated. It is people like Jorling who are pioneers in 
enforcement now doing it in the private sector, which is where 
the real action is going to be in the next generation of 
environmental improvement.
    He's right. We don't want to compete against the State. 
That's cutting corners. We want to have a strong enforcement 
program in our State so that the polluter who is cutting 
corners isn't an unfair competitor with people who are doing 
the right thing. So a floor is important.
    But it has been said--and the Benzine study at Yorktown is 
an example--in which a modern enterprise is subjected to all of 
the environmental laws. If the Baucus Widget Company, for 
example, did absolutely everything it was supposed to--no more 
and no less--it couldn't operate. It would be like the game of 
Twister: randomly you put your hand down on the yellow and your 
knee down on the green, and pretty soon you can't move--you 
can't make widgets.
    We need to get out around these historic 30-year cluster of 
constraints--and Jorling has spoken about this very thing 
wearing his new hat. The laws were designed to achieve spot 
results, and did, and they now are in the way of the broader 
result of integration of environmental concerns into everything 
we do, as opposed to just being another regulatory headache. 
That's the step we need to take.
    Consensus is emerging on that, I hope.
    Senator Baucus. Well, how do we advance the ball? You 
haven't come here with a list--nor were you asked to--of 
recommendations to change the statutes.
    Mr. Seif. I would be pleased to participate in that 
process. But you're right--I don't think the time is 
politically ripe to do that.
    Senator Baucus. That's my sense.
    Mr. Seif. I think that, ironically, EPA is doing a large 
number of things that are very good ideas, often in the shadow 
of the corporate culture there, which is still in a ``1970 
shoot-em-up'' enforcement mode. It's still, ``Roll out the 
stats. Get out the press releases.''
    The fact is, the bulk of what EPA does makes a lot of 
sense, and we're working with them.
    It occurs to me that the next President is going to have an 
EPA ready to roll into the 21st century and do this stuff. The 
irony will be that if Gore does it, everybody will say, ``Boy, 
it's about time someone did that,'' and if Bush does the very 
same thing, the Beltway environmentalists will scream bloody 
murder about backsliding. It will be the same stuff. It will 
just be a de-emphasis of the one tool, enforcement, in favor of 
the broad number of tools that actually work.
    Senator Baucus. I'd like to ask the remaining three for 
reactions to Mr. Jorling's statement.
    Mr. Shaw. I agree with Mr. Jorling's principal statements. 
I do think that the States need to have involvement in all 
three of those issues. I mean, we need to have some involvement 
in setting the floor. I'd like to have some knowledge of when 
the gorilla is coming out of the closet. But I don't disagree 
with what he says in principle.
    Senator Baucus. Mr. Varney?
    Mr. Varney. I'd say I also agree, but would just emphasize 
the need for flexibility. Just as if one is cutting a budget 
and you say, ``Keep your sights set on the bottom line,'' we 
need to keep our sights set on the environmental and public 
health outcomes and give EPA and the States maximum flexibility 
to achieve those goals.
    In the interest of being uniform in our application of 
requirements, some of the requirements are overly prescriptive, 
which then get in the way of the best solution or the most 
cost-effective or environmentally sound solution, and those are 
the items that we should be seeking out, identifying, and 
addressing.
    Senator Baucus. But NEPPS is helping a little bit, isn't 
it?
    Mr. Varney. Yes, it is.
    Senator Baucus. Mr. Bradford?
    Mr. Bradford. Yes. I would agree with his statement, 
although I think we have evolved in some regard beyond part of 
it. The need for national standards is important. There is no 
question about that. I think all States have come to a 
realization--we certainly have in Utah--that environment and 
enforcement is important. There are different ways and 
different approaches to get there.
    Our State legislature is notorious for saying that we ought 
not to treat people like criminals when, in fact, what they're 
trying to do is comply in a very complex system, and that we 
ought to be providing some assistance to them to try to help 
them get there if, in fact, the goal is compliance.
    So the need for a gorilla may not be there as much as it 
was early on, because there seems to be a recognition, at least 
in our State, that environment is important and that we need to 
be able to deal with these issues, and there is an honest 
attempt to do that.
    Senator Baucus. I understand that. I think a subsequent 
panelist is going to say something to the effect that 17 or 18 
States just do not rise above the minimum. A lot of States have 
some environmental standards which are above the Federal 
minimums, but for about 17 or 18 just--it's a ceiling. It's not 
a floor, it's a ceiling, which may mean that the gorilla is 
needed. I'm just speculating. Maybe the administrators in those 
States may want the gorilla to tell their legislatures to do a 
little more. I don't know.
    Mr. Bradford. They may. And there certainly is an 
appropriate role for EPA to enforce statutes, but it doesn't 
all have to be done the same way.
    Senator Baucus. I know. I agree completely.
    Mr. Bradford. If we are going to achieve results, 
compliance is the goal. There are lots of ways to get there.
    Senator Baucus. Yes. My experience, too, is that solutions 
generally are reached when so-called ``adversaries'' or 
stakeholders are all in the same room talking together, with 
some kind of enforcer there as well. It may be a Governor, or 
somebody to get them talking and find a solution.
    Mr. Bradford. One key point, I think, again coming back to 
the experience we had in our State, is that if there is a 
recognition on the part of all of the players involved that 
each one brings something unique to the table to help solve the 
problem--and if we can focus on solving the problem and use the 
strengths of each of the players--that is, the States and EPA 
and, in our case, local government--you can get there. It's 
when one of them tries to say, ``We know how to run this,'' and 
the other is not important that you have the problem.
    Senator Baucus. Right. Same old story.
    Senator Smith. Is there anyone who disagrees with the 
statement that State finality would enhance your ability to get 
the job done on these various environmental problems that you 
face?
    Mr. Seif. State finality is always desirable in any given 
transaction. As a national policy matter, however, it depends 
on what the final outcomes are in aggregate of whether that's a 
good thing or not, and so we are back again to who sets 
ultimately the standard. I think the Federal Government has 
that obligation ultimately. And then finality when the standard 
is reached--no second guessing and a lot of things that can 
happen--is the key.
    Senator Smith. Mr. Varney, one final question. In those 
performance partnership agreements that we have in New 
Hampshire, what specifically in those agreements allows the 
States--in this case, New Hampshire--to prioritize specifically 
on its resources? I mean, it might be a good thing to look at. 
I know other States have them, as well.
    Mr. Varney. Yes.
    Senator Smith. But what is the most important of all of 
those requirements in those agreements that allow the States to 
prioritize their own environmental problems?
    Mr. Varney. Well, in the development of our agreement, we 
are essentially putting our strategic plan for the agency with 
our goals and objectives and action items and then putting our 
resources and annual work program in alignment with that 
strategic direction for the department, and then forcing a 
dialog, which is sometimes somewhat painful, forcing a dialog 
internally and with EPA and other stakeholders about what those 
priorities ought to be, and seeking feedback so that we can 
then make adjustments.
    We have seen this process to be extremely beneficial, not 
only in terms of developing an annual program but also in the 
use of carry-over dollars. For example, we have been able to 
reallocate funding to address issues of sprawl, to address 
implementation of our mercury strategy for New Hampshire and 
actually make sure we implement it to restore shellfish beds 
and to address in-stream flow protection requirements in our 
State.
    Having that kind of flexibility is really critical, 
especially to a small State where we have limited resources to 
deal with a problem, and that flexibility becomes crucial to us 
and enables us to get the biggest bang for the buck and to make 
sure that those Federal dollars are used as wisely as possible 
and used within the context of this 75 percent of funding which 
is State dollars. It is only 25 percent Federal, 75 percent 
State, so it enables us to look at the complete picture of 
everything that we do and put it all in one document and enable 
us to look at it from a strategic direction, standpoint, and to 
me that's the right way to allocate resources, it's the right 
way to seek public input and involvement, and the right way to 
manage an agency.
    Senator Smith. Well, I think, as a Congress, I think we are 
beginning finally to move in the direction that you are all 
advocating; however, it seems like you're moving there fairly 
quickly, and then you'll get an issue such as the TMDL issue 
which will pop up on the screen, where, again, a rule proposed 
with a deadline which stirs everybody up and shows the heavy 
hand again without, in my view, at least, the appropriate 
cooperation or discussion before doing such a thing, so now 
we're faced with an implementation of a rule, I think by June 
30th, that everybody is upset about, and meetings all over the 
country on these things. There will be a hearing in New 
Hampshire next week on it.
    In any case, I appreciate your time here.
    Does anybody have a final comment on this panel?
    [No response.]
    Senator Smith. We thank the witnesses for their time.
    The committee will take a 5-minute recess as the next panel 
comes up.
    [Recess.]
    Senator Smith. The hearing will reconvene.
    I'd like to welcome the third panel: Ms Lynn Scarlett, the 
executive director of the Reason Public Policy Institute; Mr. 
Erik Olson, the senior attorney for the Natural Resources 
Defense Counsel; and Mr. Jason Grumet, the executive director 
of the Northeast States for Coordinated Air Use Management.
    Welcome each of you. Thank you all for coming.
    We'll start with you, Ms. Scarlett.

 STATEMENT OF LYNN SCARLETT, EXECUTIVE DIRECTOR, REASON PUBLIC 
                        POLICY INSTITUTE

    Ms. Scarlett. Thank you, Senator Smith, for holding these 
hearings. I'm delighted to be here.
    As indicated, my name is Lynn Scarlett. I am executive 
director of Reason Public Policy Institute. We are a Los 
Angeles-based policy research organization.
    To sort of stitch together some of what you've heard today, 
I'd suggest to you that we have four recurring challenges that 
confront environmental policymakers in order to get to 21st 
century environmental improvement.
    First is how can policies better ensure environmental 
innovation. Second is how can they better focus on results and 
take into account the multiple stovepipes in an integrated way, 
as Senator Smith suggested. Third, how can policies better 
foster incentives for private stewardship? I think what we are 
all after ultimately is a Nation of self-motivated 
environmental stewards. Fourth, how might policies better take 
into account specific local knowledge--the knowledge of time, 
place, and circumstance, those devilish details that vary from 
site to site?
    There are an array of State initiatives. They, indeed, are 
at the forefront of a search for a new environmentalism that 
addresses or attempts to address these four questions. There 
are four features of these programs. You have heard two of 
those features this morning. I want to add two others.
    The first feature is flexibility--that is, States moving 
toward greater flexibility in the options and ways that they 
achieve the goals they are pursuing.
    Second is the focus on performance rather than process.
    But, third, I want to add an additional element, and that 
is the greater use of incentives rather than punishment as the 
first order of effort.
    And, finally, there is a move toward greater place-based 
decisionmaking--that is, looping local folks into decisions at 
watersheds and so forth.
    Let me just give you a little flavor of some of these 
examples and then get to some of the challenges, as I see them.
    On the flexibility front, I think it is worth underscoring 
this is not about roll-back. Indeed, it is about extending the 
performance envelope both upward and outward. Let me give you 
an example of Wisconsin. They have a green tier permit program 
underway. Firms with high levels of performance qualify, not 
just anybody. With this endeavor, they actually develop an 
overall performance compact. That compact is a multiple 
stovepipe, integrated, facility-wide permit and allows that 
firm to look at the entire holistic setting in which they 
operate.
    Oregon has a green permits program very similar. 
Massachusetts has an environmental results program. Frustrated 
with simply spending a lot of time issuing permits, they, 
instead, developed an industry-wide standard, particularly for 
small- and medium-sized businesses--for example, dry cleaners 
and photo processors. With this result, they were able to yield 
dramatic reductions in emissions--43 percent reductions for the 
dry cleaners, 99 percent reductions of silver discharges by the 
photo processors.
    Incidentally, speaking to something that Senator Baucus 
indicated, all of this was done with fewer, not more, 
resources--I think this is something worth paying attention to.
    On the performance focus front, you've heard mention of 
Florida's performance indicators. Let me give you a little 
greater sense of what those look like. They are moving away 
from the enforcement bean counting and, instead, have three 
tiers of indicators. One is the plum--actual ambient ecological 
performance.
    Second is behavioral, but, rather than simply looking at 
compliance, they are also looking at things like how many 
voluntary pollution prevention initiatives they there so that 
they get beyond simply the rule focus.
    And, third, their traditional enforcement tier of 
indicators is not simply a bean counting, but rather tied to 
effectiveness. That is, are these enforcement endeavors 
actually yielding substantial results, and at what cost?
    The third type of innovation is incentives. I want to 
mention one, but there are many, many programs. Texas has a 
clean industries 2000 program--over 140 participating firms 
after one year, 43,000 tons of reductions in hazardous waste 
that was off the radar chart and not attended to in the more 
traditional regulations.
    Pennsylvania, Jim Seif, has a pollution prevention site 
assessment grant program which helps small businesses and 
others actually invest in pollution prevention.
    Finally, turn to place-based decisionmaking. One of the 
most fertile areas here is in watershed management. There are 
literally hundreds of efforts by cooperative State, county, 
Federal agencies coming together, bringing all interested 
stakeholders to cooperatively determine what priorities for a 
watershed will be and how to address those problems in a 
nonadversarial fashion.
    Minnesota, for example, has one chain of lakes, all brought 
under a cooperative management system with multiple 
jurisdictions taking part in that multiple problem solving 
focus.
    Senator Baucus might be interested in the Upper Clark Fork 
River, Montana experience. They had an enormous adversarial 
situation over in-stream flows, ranchers, and so forth in 
contest against the environmentalists on this issue, but, 
instead, came to place-based decisionmaking, sat down, and 
worked out a plan.
    Quickly on the challenges, I think there are three. You've 
heard about the technical challenges--that is, simply 
developing measurement tools and so forth. Second, there is a 
set of challenges regarding fitting the new regulatory 
structures in the old context, and perhaps in the questions we 
can pursue that a little bit more.
    The third set of challenges actually relates to stakeholder 
interests and concerns. Who is at the decision table, 
particularly in these place-based decisionmaking?
    With that, I'll conclude and say that the new 
environmentalism is a discovery process. There is no reason to 
think we got things just exactly right our first go-round, and 
we're now underway trying to figure out ways to do better.
    Thank you.
    Senator Smith. Thank you.
    Mr. Olson?

STATEMENT OF ERIK D. OLSON, SENIOR ATTORNEY, NATURAL RESOURCES 
                        DEFENSE COUNCIL

    Mr. Olson. Good morning. My name is Erik Olson. I'm with 
the Natural Resources Defense Council. I guess I'll stand 
convicted of being a beltway environmentalist.
    We believe that it is important that there are millions of 
Americans who believe that there is an important Federal role 
in environmental protection, and we're glad the committee is 
holding this hearing today.
    As you know, this debate has been going on for over 30 
years, certainly since before the EPA was created. I think that 
this committee has struck a bipartisan balance over the last 30 
years that has formed a set of laws that are international 
models for how environmental protection should work, which is 
not to say that changes are unnecessary or that the State/
Federal relations are perfect.
    We believe that cooperative federalism is a construct that 
is very important and deserves re-evaluation constantly. I 
think a lot of what the previous panel said from the States was 
very constructive, and we are pleased to hear many of the 
comments that were made.
    Certainly, the States have an important role. They have 
more local information, very often, about the local 
environment. They are much more expert on local politics and 
what the local situation is very often. In addition, States 
have the role of the laboratories of democracy, and they 
certainly have a great deal of creativity in many cases to 
address local problems.
    The Federal Government, however, does have a significant 
role that has to be considered. I think Chairman Smith and your 
predecessors, including Senator Chafee, Senator Stafford, and 
many others have recognized this important Federal role.
    First of all, there have been many situations where State 
inaction simply necessitated Federal intervention. We know 
about many of the rivers catching on fire, and so forth, from 
the 1970's, but there still are examples today.
    Second, there is, as we've heard States say just moments 
ago, a need for a level playing field to avoid the race to the 
bottom.
    I wanted to read just briefly from page three of my 
testimony, which quotes a brief filed by five States in which 
they were opposing, strangely enough, a recent court decision 
that said that a State can step in and override an EPA 
enforcement action. Those five States said that, ``By making it 
harder for EPA to maintain a level playing field nationally, 
the panel's decision opens up States to risks that they will 
suffer the adverse effects of pollution generated in 
neighboring States, and that the regulated entities in other 
States will gain an unfair competitive advantage over another 
State's law-abiding competitors.''
    I think that is a significant statement coming from five 
States, ranging from the State of Louisiana to the State of New 
York and California. They are saying that there is a very 
significant, important Federal role to assure that there is a 
baseline Federal minimum set of standards.
    I think it is also important to note that now 19 States 
have adopted ``no more stringent than'' clauses. This shows 
that the race to the bottom is not a theoretical problem. In 19 
States, at least for one or more environmental programs, the 
State is not authorized--in fact, the State legislature has 
prohibited the State--to be any more stringent in any 
regulation than the Federal Government. That suggests that a 
lot of States have their own statutory impediments to creative 
activities.
    I won't discuss it in detail, but it is mentioned in some 
of the law review articles that I cited in my testimony, that 
several court decisions that have prohibited States from using 
their creative juices to adopt stronger programs than the 
Federal Government has, because of these types of clauses.
    In addition, very often only the Federal Government has the 
resources, including the technical and scientific expertise and 
the economies of scale, to address some of the large national 
problems that we are addressing.
    I want to say briefly that we believe there are 
opportunities for more creative and innovative interactions 
between State and Federal authorities. In the future, we think 
programs like NEPPS, perhaps amended, could provide that kind 
of flexibility.
    The Federal Government does need to maintain an important 
role of setting goals and standards and procedural safeguards 
to protect citizens and the environment; however, if the States 
show that they have the resources, show that they have agreed-
upon core measures of performance that are adequate through a 
public process, show that they have the openness to track those 
accomplishments that they are achieving, and are assuring 
enforcement of the State and Federal law, that there are 
opportunities for greater flexibility at the State level.
    We do not believe that there is a need for an overhaul of 
all the statutes. In fact, there are many opportunities under 
current law to use the flexibility inherent in existing 
statutes in order to improve State and Federal relations.
    Thank you very much.
    Senator Smith. Certainly.
    Mr. Grumet?

  STATEMENT OF JASON S. GRUMET, EXECUTIVE DIRECTOR, NORTHEAST 
           STATES FOR COORDINATED AIR USE MANAGEMENT

    Mr. Grumet. Thank you, Chairman Smith.
    My name, again, is Jason Grumet, and I am the executive 
director of the Northeast States for Coordinated Air Use 
management, or NSCAUM, which is an association of the air 
pollution control agencies representing Connecticut, Maine, 
Massachusetts, New Jersey, New York, Rhode Island, Vermont, 
and, of course, New Hampshire.
    Mr. Chairman, we appreciate the opportunity to address this 
committee regarding innovative efforts to reduce air pollution 
in our region. I should tell you that my challenge to innovate 
begins now, as I try to distill 5,000 words of written 
testimony into 5 minutes. But what I'll endeavor to do, Mr. 
Chairman, is to start out by posing the challenge to innovate 
within our clean air regulatory regime; in the second half of 
my testimony I will then focus on some of the exciting projects 
that we are undertaking, such as diesel pollution, red light 
permitting, Mr. Chairman; and in the ``third half'' of my 
testimony I will say a few words about pollution prevention.
    As we approach the 30th anniversary of the passage of the 
Clean Air Act, it is appropriate, we think, to reflect upon the 
tremendous achievements that both government and industry have 
made in reducing air pollution and protecting public health and 
welfare.
    The desire to provide all citizens with minimum standards 
of protection and to provide industry with consistent national 
obligations compelled Congress in 1970 and in every 
reauthorization of the act since to establish substantial 
Federal oversight and enforcement of our Nation's clean air 
strategy.
    At the same time, however, through the creation of State 
implementation plans, Congress recognized that States must bear 
the ultimate responsibility and, in fact, represent the best 
hope to design and implement effective clean air laws.
    I think it is useful to reflect upon this most basic 
tension between the desires for national consistency, on one 
hand, and the desire for State autonomy on the other, when 
exploring how to promote and honor effective State innovation.
    One of the central challenges, I believe, in a democracy is 
to communicate complicated ideas in simple and ultimately 
popular terms. In this discussion, the subtle complexities of 
federalism are often described as a simple choice between 
command and control Federal prescription, on one hand, and 
innovation and State flexibility on the other.
    This construction, which I often use, results from 
frustration that many of us maintain as we watch government 
erect seemingly nonsensical barriers to the creative, well-
intentioned efforts of business owners and local officials who 
have the courage and the ingenuity to suggest a different 
approach or a better way to achieve a clean environment.
    Even worse, Mr. Chairman, under the time-honored theme that 
no good deed goes unpunished, many of us can cite many examples 
of situations where people who have gone beyond requirements 
are actually undermined by the very regulatory system they are 
trying to improve.
    While my members live this frustration each and every day, 
we recognize that these are not problems born of incompetence 
or malice at any level of government, but rather that these 
moments of apparent insanity flow inherently from a regulatory 
regime necessarily designed to protect the public in situations 
where private economic incentives and volunteerism are 
inadequate.
    While command and control versus innovation is, we believe, 
a rhetorically powerful construct, the polemic in this 
description suggests a false choice, and I do believe that a 
more productive inquiry will flow from the premise that 
national standards, while essential, often fail to capture the 
ingenuity of local government and industry.
    In this light, improving our environmental regulatory 
system is a pursuit to refine and not replace enforceable 
Federal requirements.
    Let me now transition, if I can, from the abstract to the 
particular and touch on two innovative efforts in the 
northeast.
    The first area I want to discuss are some exciting projects 
relating to the retrofit of heavy-duty diesel equipment, and 
then I'd like to say a word, if I can, about the innovative 
efforts to actually reduce pollution before we ever create it 
by employing pollution prevention techniques.
    It is also worth noting that, while we have made tremendous 
success, we have a lot of work left to do. While we've created 
substantial beachheads within the EPA, where there is robust 
collaboration, the EPA, like any mega-entity, has a host of 
corporate cultures. Suffice it to say that those offices within 
EPA charged with the obligation of enforcing the statute and 
EPA regulations are struggling--at times awkwardly struggling--
to maintain a coherent regulatory regime that rewards 
innovation.
    Let me now turn to diesel retrofits. I hope that the pretty 
charts and graphs have been submitted to the record. In this 
kind of ``boy meets truck'' story, Mr. Chairman, it is a bad 
news/good news, bad news/good news story.
    The bad news is that diesel engines are, in fact, creating 
an assault to public health in this country, and the problem 
will actually get worse before it gets better. The good news is 
that technology exists today to achieve tremendous 
improvements, and, so long as the Administration does not 
weaken EPA's proposal to cap diesel sulfur at 15 parts per 
million, we will have an opportunity in the future to have the 
words ``clean'' and ``diesel'' truly belong together in the 
same sentence.
    Again, though, the bad news is that the existing fleet of 
diesel vehicles will be on the road for 25 years or more, 
accumulating up to one million miles a truck, and the current 
Clean Air Act and the regulation and litigation that describes 
it has erected barriers that actually prevent States from 
requiring retrofits.
    Without creativity, this would be the end of the story. The 
good news, however, is that the Northeast States, working with 
the manufacturers and emission controls associations, the 
engine manufacturers, and EPA have joined together to create a 
strategy that embraces the substantial social desire for 
change. The desire to comply with environmental regulations is 
being enabled through a project called VMEP, which is enabling 
Manchester Airport and the New York City Transit Authority to 
achieve substantial SIP credit reductions toward their 
conformity obligations. The desire of private developers to 
move forward in ways that are socially benign--you are 
certainly aware, Mr. Chairman, that we are building the Panama 
Canal in downtown Boston with the affectionate title, the ``Big 
Dig.'' This project has created a tremendous desire among 
corporations in the Boston area----
    Senator Smith. Don't say ``you.''
    Mr. Grumet. The royal ``we,'' Mr. Chairman. I live the Big 
Dig. I just don't have to pay for it.
    It is the desire to make sure that that construction 
happens in a way that is accepted by the community that has 
created a commitment among all those engine manufacturers and 
construction companies to retrofit their equipment.
    Finally, there is a selfless desire among some to actually 
just clean things up. We are working with school districts to 
try to retrofit school buses and a host of other efforts.
    I will only say about pollution prevention that the 
opportunities are robust and so are the barriers.
    I will note the one barrier that I think is probably the 
paradigm of absurdity, which is the ``once in, always in'' 
policy. This is a policy, Mr. Chairman, which suggests that if 
a facility changes its operation from using hydrochloric acid 
to berry juice, they don't get any benefits of reduced 
regulatory obligations. The ``once in, always in'' policy 
suggests that once you've used a toxic chemical, we will treat 
you as if you always use toxic chemicals. That is, of course, 
not an incentive for change.
    In conclusion, Mr. Chairman, I've spoken a lot about the 
States and EPA. There are two roles that Congress can fulfill 
to enable this evolution. The first has been mentioned several 
times, and that is to provide resources and the flexibility to 
use those resources. Change is always held to a higher standard 
that the status quo, and we have to take on that test 
collectively, with the opportunity to succeed.
    Finally, innovation requires trust. We have found that 
trust is ample in the face of success. In order for innovation 
to flourish, that trust has to be equally dependable in those 
rare moments when credible and innovative efforts fall short of 
their desired goals.
    I want to thank you and the committee staff for initiating 
this dialog and welcoming us into it, and certainly hope that 
we have opportunities to explore it further in the months 
ahead.
    Thanks.
    Senator Smith. Thank you very much, Mr. Grumet.
    Mr. Olson, let me begin with you. In my view, there is no 
question that 30 years ago or so, when these laws were put on 
the books, they were desperate measures for a desperate 
situation. They were needed. It was an end-of-pipe solution, if 
you will, for environmental laws, and I think it is obvious 
that a lot of the participants were not willing. They were 
dragged, kicking and screaming, to the altar of environmental 
cleanup.
    In some environmental programs, such as the Everglades 
restoration plan that we worked on in the committee, the term 
``adaptive management'' is used. I might just use that in a 
different perspective here to say we need to be able to adapt 
to changes.
    I think people today--many companies, corporations, States, 
other individuals in the private sector from various 
environmental groups, to others who may not be considered 
``environmental groups,'' have adapted and have changed. They 
have realized now that the mess we did create needs to be 
cleaned up. We're not there yet.
    The question, though, is, as we move into the future, how 
do we get it done so that we don't create more 1970's 
reactions, necessary reactions?
    When you hear about such things as performance partnership 
agreements, as you heard Mr. Varney talk about and others--I 
think 38 States have similar programs--wouldn't you agree that 
these programs and approaches do enhance environmental 
protection?
    Mr. Olson. Certainly they can, and----
    Senator Smith. But do they?
    Mr. Olson.--in many cases they have. The question really 
is, are there resources there? And we believe that in many 
States the resources are there to make this kind of thing work. 
Is the commitment there? And do we have a way to measure to 
make sure that, as there is greater flexibility, in our view 
there is more accountability. As you start to loosen the reins, 
you want to make sure the horse is running in the right 
direction.
    Our concern is that we need to be able to measure that 
success is actually occurring, that we're not just devolving 
for the purpose of devolving and ending up not gaining the 
environmental protection that I think most of us, and virtually 
all of us involved in the process, want.
    Our concern would be that we make sure that, through an 
open process, that we are able to measure the success, and that 
we are not simply using this as an excuse to waive standards.
    We think that most States really do have much more 
commitment than they did 30 years ago. Our concern, as I 
mentioned, is that, although that is true of most, perhaps 
virtually all States, there are a few stragglers. I cited in my 
testimony some States that spend 38 times less per ton of waste 
than some of their colleague States.
    There are States that are stragglers, and the same is true 
in industry, although there has been a corporate culture change 
in many companies, and certainly a change in a lot of State 
attitudes. There are always the stragglers, and those are the 
ones that we worry about.
    Senator Smith. I would agree with you, which is one of the 
reasons why I don't believe in the one-size-fits-all concept. 
There are some States that are better at dealing with these 
problems, have been much more innovative than others. I think 
that is a good reason to provide programs like the performance 
partnership, because it gives a State who deserves it at least 
the opportunity to shine, if you will, and to use that kind of 
innovation to get things done.
    Ms. Scarlett, in your term ``new environmentalism,'' if I 
could compare and contrast the testimony from the two of you 
here for a moment, I think you might say that in the Federal/
State relationship, maybe it is the Feds that are lagging, that 
they have not evolved to the point of where the States are. 
Where the States are moving out forward, it is the Federal 
Government that is hanging back, not wanting to try innovation: 
a new technique, or an opportunity to deal with the current 
environmental problems, and to not create more.
    Ms. Scarlett. Yes. In fact, as Mr. Olson was speaking, and 
particularly his emphasis on measurement and the importance of 
measurement, I could not help but think that the last three 
decades of environmental performance we have tended to use as a 
proxy for success whether someone had a permit or a series of 
permits and so forth. What really is happening in the States, 
in fact, is to say, ``Well, that might have been OK when we 
didn't have really very good ambient air quality measuring 
tools. But we really now need to actually measure real 
results.'' That's what Florida's performance indicators and 
what Oregon's performance indicators are about.
    So I think actually U.S. EPA--and they are working 
themselves in this direction, but I think they have a page, 
something to learn from the States in that regard.
    Senator Smith. Any specific changes that you would propose 
to bring the Federal role into this new environmentalism you're 
talking about?
    Ms. Scarlett. Yes. I would put them in three categories: 
cultural, regulatory, and resources. On the resources front, I 
think one change would be--and you heard some of the State 
regulators say this--to allow in the resources that are 
allocated to the States for environmental performance, allow 
broader latitude in how they expend those.
    Right now, there are some quasi-block grants, but they must 
be spent within a particular medium or particular problem set. 
Give them more latitude to prioritize and direct.
    Second, while it is true that States are moving forward 
with NEPPS and Project XL and so forth, we have done a lot of 
interviewing, both of industry and also of State regulators, 
finding out, well, why are there only 8 or 9 of these examples, 
or 10 or 12, or, in the case of XL, about 50, when you've got 
really thousands of potential facilities that might 
participate.
    What you hear is really one primary point: if you are a 
company in the Midwest and you must sit down and hammer out 
with your local regional EPA and with your State a performance 
compact for your entire facility, but then you have to justify 
with the Federal EPA, say, ``Well, we get to waive this permit 
and that permit.'' Then you're really back on a case-by-case 
basis and a source-by-source-by-source negotiation and 
analysis, which really defeats the purpose.
    That has given some industries cold feet in participating, 
and it also has been a deterrent to State regulators in also 
proceeding.
    And the third thing I would do on the performance front is 
to actually really work with EPA to develop something much more 
like Florida's performance indicators, because it has a way of 
changing the internal corporate culture of EPA.
    If you are measuring real results, that tends to be what 
you spend your time on, rather than on bean counting and so 
forth.
    Senator Smith. I get the sense that the States--not all--
are not moving as quickly as others. But I think the States may 
be way out in front in the sense that they represent the people 
who are the closest to the Superfund sites and the dirty air 
and the dirty water and the contaminated wells, and so forth. I 
think that's why you've seen in the last 25 or 30 years a 
tremendous growth in expertise by the Departments of 
Environmental Services.
    Mr. Grumet, I want to go back to a point you made in your 
testimony about trust. It is almost, to me, as if it is 
distrust. In the Federal Government, the EPA seems to have some 
distrust--Mr. Olson referred to it--in some States, in 
fairness, not to all--that they won't have the ability, or 
maybe not even the intention, to move forward and resolve some 
of these problems. On the other hand, you see the distrust by 
the States for the Federal Government, because the EPA doesn't 
want to let go.
    How do we resolve this? I think we are at a critical point 
here. I think we have an opportunity now to break out of the 
past and move forward into the future, a bright future, a clean 
future, if you will, and we just need to be able to de-couple 
here in a way that gets both sides to remove themselves from 
the distrust and start trusting one another. How do we do that? 
What's your recommendation?
    Mr. Grumet. A couple of thoughts, Mr. Chairman.
    Obviously, I think the aspiration for the States is that 
together we can start to evolve from a bureaucracy to more of a 
meritocracy, and for that to work there needs to be, I think, 
the old adage of trust, but verify.
    I think that we have an obligation to earn the public's 
trust by providing a transparency of process and an access to 
data so that the public can understand and watch as we make 
these transitions and as we ask for these kinds of changes.
    Similarly, I would say that my colleague, Mr. Olson, and 
many colleagues in the environmental community, with the basis 
of that earned trust, have to have the discipline to join us in 
not romanticizing the status quo and holding change to a 
standard of perfection which, of course, is disabling.
    We all have a tendency to think about the good old days, 
but I would suggest to you that within our command and control 
system there are a lot of loopholes, and those are loopholes 
that will only be closed by innovation. Right now, for example, 
in every State in the country, if there is a source that in a 
year or two is going to close down and there's a new sweep of 
environmental laws coming through, those controls don't go on a 
source that's got 2 years of life left in them. They basically 
get an AEL--an alternative emissions limitation--also known as 
a ``free pass.''
    With innovative programs like market-based controls, where 
people have credit trading and the like, you can ensure that, 
while not forcing a facility that's going to go out of business 
in 2 years to go out of business right now by spending $100 
million on pollution control, you have an option other than 
just giving them a free ride by enabling them to offset other 
emission increases somewhere else. So there are gaps in the 
existing system that I think certainly the environment would 
benefit from plugging.
    Senator Smith. Sounds like a pretty good commercial for the 
bubble bill to me.
    Mr. Grumet. I wouldn't call it a bubble bill, necessarily, 
but with strong caps not unlike those that I know you are 
contemplating for the utility industry, Mr. Chairman, I think 
that we then enable a degree of flexibility that is otherwise 
not possible.
    Senator Smith. Does anyone have a further comment they wish 
to make?
    Mr. Olson. I'd just like to note one area where I think 
distrust has been defused.
    We have been involved in a few regulatory negotiations 
where EPA brings together State officials, industry people, 
environmentalists, others in a room to negotiate a regulation. 
Now, this can't be the model for every single rule that is 
issued, and it does require much more resources for EPA to go 
through that process than it would the traditional rulemaking, 
notice and comment rulemaking. I think, however, the end result 
of those kinds of negotiations can be that State officials have 
their input, industry does, environmentalists do, and you reach 
an agreement very often that is much more acceptable to all 
parties and often does not end up in litigation, which is 
traditionally the way it has been done.
    So I think that is certainly one area where the committee 
may want to look. If you are looking for ways to defuse the 
distrust, certainly the regulatory negotiation process, in some 
cases, can make a lot of sense and can be a very effective way 
to achieve that goal.
    Senator Smith. Well, thank you very much, all of you, for 
being here today. I know you had to go out of your way to come. 
We appreciate it.
    This is, as you know, one of a series of hearings that we 
are having on the authorization process with the EPA to try to 
look at attempts to coordinate the various environmental laws 
that we have in a way that we can prioritize in the various 
communities where the impact is the worst, so your testimony 
has been very helpful and appreciated.
    At this point, I would just announce that a lot of members 
had asked about having additional questions, so I'm going to 
leave the committee record open until the close of business on 
Friday to allow Senators to present questions for the record of 
any of the three panels.
    With that, the hearing is adjourned.
    [Whereupon, at 12:27 p.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
    [Additional statements submitted for the record follow:]
   Statement of W. Michael McCabe, Acting Deputy Administrator, U.S. 
                    Environmental Protection Agency
    Good Morning, Chairman Smith, Senator Baucus and members of the 
committee. I am Michael McCabe, Acting Deputy Administrator for the 
Environmental Protection Agency. Thank you for the opportunity to speak 
with the committee about the important work we and our partners, the 
States are doing to protect public health and the environment.
    Looking back over the last 30 years, we are proud of our strong 
track record of achievement. The public widely recognizes our work as 
having dramatically improved environmental conditions throughout the 
country. Working together, we enabled American towns to improve 
wastewater treatment--one of the biggest public works efforts in U.S. 
history. We have cleaned up hazardous waste sites and closed unsafe 
local garbage dumps all over the nation. Our air, land and water are 
safer and visibly cleaner, even with significant economic expansion and 
population growth. And U.S. environmental expertise and technology are 
in demand worldwide.
    Under the nation's environmental laws, EPA and the States each have 
important duties. There always has been a division of labor, and a 
dynamic, evolving Federal-State relationship. At a minimum, EPA is 
charged with developing standards that provide baseline health and 
environmental protection for all citizens. States and Tribes, as well 
as local governments are the primary delivery agents, working directly 
with businesses, communities and concerned individuals.
    Many Federal environmental statutes call for EPA to authorize or 
delegate to States and Tribes the primary responsibility for 
implementing programs and designate them as co-regulators, once EPA has 
confirmed that a State or Tribe meets certain qualifying criteria. Over 
the last quarter century, most States have assumed responsibility for 
implementing many Federal programs, with EPA retaining standard-setting 
responsibility and an oversight role to ensure effective 
implementation. In assuming responsibility for a delegated program, a 
State maintains legal authority, provides its share of program 
resources, carries out the work required to implement the program and 
is accountable for the Federal funds allocated to support it.
    States now have assumed responsibility for approximately 70 percent 
of the EPA programs eligible for delegation. For the past three 
decades, States have developed strong environmental management 
capacity, gained experience and expertise. States have increased their 
financial investment in environmental programs, and many have adopted 
laws and programs beyond that required by Federal statutes, covering 
issues ranging from erosion control to coastal management. Some States 
have environmental standards that are more stringent than existing 
Federal requirements.
    Our challenge now is to build on the progress we have made. But the 
problems we face today are much more complex than those of the past. 
Though significant, past problems were easier to deal with in some 
ways. We could target the ``point sources'' of pollution, and results 
from our work were easily identifiable. But that is no longer the case. 
For example, polluted runoff--our largest remaining water quality 
problem--comes from sources far less evident and greater in number. 
Many issues are international in scope, such as depletion of 
stratospheric ozone and global climate change.
    Under the unprecedented continuity of leadership provided by EPA 
Administrator Carol Browner and the new generation of political 
leadership with strong State experiences appointed by President Clinton 
and Vice President Gore, new ways of thinking about causes of 
pollution, and new approaches to controlling them, are reshaping EPA 
and transforming the organizational culture that marked our first two 
decades. Non-traditional thinking is changing and strengthening our 
relationship with regulated businesses, State and local governments and 
the American public as a whole.
    Because EPA and the States share responsibility for protecting 
human health and the environment, a strong partnership between us is 
essential. States are strong environmental managers, and a new 
relationship with the States is emerging--one that allows us to adapt 
to changing priorities and to experiment with new ideas. We each have 
important roles to play, and by cooperating and collaborating we are 
achieving better results at less cost.
    Today, the States and EPA are working hard to make this new 
partnership succeed. Our existing regulatory structures--reflecting the 
separate laws governing air quality, water quality, and waste 
management--present some challenges to our efforts to find new ways of 
doing business. But we are moving forward and finding ways to address 
environmental problems in more holistic, comprehensive ways. Together, 
we are making tough choices about competing priorities in the face of 
limited public resources, and we are developing more telling measures 
of environmental results.
       The National Environmental Performance Partnership System
    An important milestone in our collaboration was reached in May 
1995, when EPA joined forces with State environmental agency leaders to 
establish the National Environmental Performance Partnership Systems 
(NEPPS).
    Many of the concepts embodied in performance partnerships that had 
been discussed for years such as giving States a stronger role in 
priority setting, focusing scarce resources on the highest priorities, 
and tailoring the amount and type of EPA oversight to an individual 
State's performance were pulled together into a workable, 
understandable framework.
    Performance partnerships between EPA and the States represent a new 
working relationship one in which EPA and the States determine together 
what work will be carried out on an annual or biannual basis, and how 
it will be accomplished.
    The centerpiece of NEPPS is a Performance Partnership Agreement 
(PPA), which sets expectations for performance yet offers flexibility 
in meeting goals. This agreement is an innovative way to identify 
priorities, solve problems, and make the most effective use of our 
collective resources. It emphasizes performance rather than process and 
environmental results rather than administrative details. It gives a 
State greater freedom to focus resources on its highest environmental 
priorities and to select the best strategies for getting results. Prior 
to developing an agreement, a participating State assesses its 
environmental problems and conditions, while actively involving 
citizens in the process. Based on this information, the State then 
proposes environmental and public health objectives along with a plan 
of action. This forms the basis for developing the Performance 
Partnership Agreement with EPA. To date, 34 States have established 
agreements with the Agency.
    Another feature of NEPPS is flexibility in administering grants. 
States now can consolidate a variety of individual grants into one. A 
Performance Partnership Grant (PPG) reduces administrative burdens by 
cutting paperwork and simplifying financial management. It also allows 
the States more flexibility to use grant money to address their most 
pressing environmental problems. Forty-four States have chosen this 
option. To enhance flexibility for States, a State can participate with 
a PPG without a PPA.
    The positive changes resulting from NEPPS can be seen in many 
States:

      Maryland has seen its administrative reporting 
requirements cut in 13 areas, and the goals and objectives identified 
through NEPPS serve as the environmental component in the State's 
strategic plan.
      Florida's emphasis on showing results led them to develop 
a new performance measurement and tracking system that received an 
``Innovations in Government'' award from the Ford Foundation and 
Harvard's Kennedy School of Government.
      Mississippi's interest in targeting resources to solve 
priority problems resulted in a reorganization around specific 
functions, business sectors, and geographic areas.
      Minnesota shifted staff and resources from the main State 
office closer to where the real problems occur--out in the districts.
      Washington saw the paperwork associated with its annual 
work plan for grants fall by an order of magnitude--from about 40 to 4 
pages.

    One of the major components of NEPPS is the use of a common set of 
national environmental indicators to measure the performance of our 
environmental programs. This limited set of national data, called Core 
Performance Measures, is designed to help us better understand the 
effectiveness of our actions and gauge progress toward protection of 
the environment and public health.
    Core Performance Measures, based on data collected and reported 
primarily by States, serve the NEPPS objective of managing for 
environmental results by:

      providing States and the Nation as a whole with the 
information and tools to increase accountability and make policy, 
resource or other changes to support improvements in environmental 
conditions; and
      providing a benchmark upon which States and EPA can focus 
efforts to reduce high cost/low value reporting for public and private 
entities.

    Core Performance Measures help paint a national picture of 
environmental progress.
    Last year EPA and the States took a major step forward in the 
development of measures that rely more on environmental indicators and 
program outcomes rather than process and outputs by agreeing upon a set 
of Core Performance Measures for Fiscal Year 2000 and beyond.
    This agreement was the culmination of a 3-year effort which 
included the personal involvement of EPA National Program Mangers and 
senior State officials. This 1999 agreement demonstrated the broad 
support among the leadership of EPA and The Environmental Council of 
the States (ECOS) for continuing and improving our joint efforts to 
implement the various elements of NEPPS.
    Several States and EPA regions are leading the way in developing 
even better measures of environmental progress, using environmental 
data to drive planning and priority-setting, sharing their findings 
with the public, articulating more efficient oversight arrangements and 
using grant funds in more efficient ways.
    The EPA/State partnership has come a long way, but we have shared 
challenges to confront in the near and long term. We need to jointly 
focus our concerted efforts on fully accomplishing NEPPS goals. 
Recently both EPA and ECOS reaffirmed our commitments to NEPPS. In 
March of this year, I signed a memorandum to senior Agency leadership 
detailing this reaffirmation and calling upon them to ensure all EPA 
employees share our focus on NEPPS. I designated our Associate 
Administrator for Congressional and Intergovernmental Relations as the 
National Program Manager for NEPPS to secure strong and consistent 
leadership in this effort. Last month at its Spring meeting, ECOS 
adopted a resolution reaffirming its support for NEPPS and 
reinvigorating its NEPPS subcommittee to ensure continuing attention 
toward making improvements.
    We are developing tools to help clarify appropriate performance 
expectations, as well as ensure timely and clear communication in 
developing Performance Partnership Agreements. We are identifying what 
additional work is needed to move our Core Performance Measures toward 
more outcome based measures. We are determining what appropriate steps 
should be taken by EPA and the States to allow for greater use by 
States of the flexibility envisioned under the Performance Partnership 
Grant system to shift resources and funding among media programs. 
Together, we are determining how effective public participation in the 
NEPPS process can best be ensured. And, we are developing training to 
strengthen EPA institutional capacity and remove cultural barriers so 
our staff understand how the Performance Partnership System allows them 
to be more effective in finding solutions to key environmental problems 
and better manage their programs.
                    Additional Collaborative Efforts
    In addition to our joint work through NEPPS, our partnership with 
the States is evolving in other areas, leading us to work in a more 
collaborative, coordinated manner. Together, we are applying innovate 
approaches to traditional environmental problems, and we have begun to 
see results. More importantly, we have set the stage for greater 
cooperation and progress in the years ahead. We are beginning to 
realize the benefits of our new working relationship, and the spirit of 
innovation now reflected in so much of our work.
    EPA has several other ongoing efforts with our State partners to 
address today's top issues. There are on-going high level strategic 
interactions with the States on information, enforcement and compliance 
assistance, and our media programs.
    Environmental Information is the foundation for improving 
performance in accomplishing our mission to protect public health and 
the environment. Better, more accurate information and the ability to 
integrate data across media, as well as exchange data with our State 
partners, allows for better decisions on priorities and approaches. 
This need for better use of information and for taking advantage of 
technological advances led to the creation of the Agency's new Office 
of Environmental Information. The fiscal year 2001 President's Budget 
proposes $30 million to fund the Office of Environmental Information 
(OEI).
    OEI is working with the jointly created State-EPA Information 
Management Workgroup. This workgroup has developed a set of operating 
principles that now govern our data and information management 
activities. Recently, the Information Management Workgroup developed an 
agreement and charter for a Data Standards Council. Recently adopted by 
ECOS membership, the Data Standards Council is tasked to develop data 
standards that will ensure that EPA and State environmental programs 
can share data meaningfully and efficiently.
    In addition, the Agency's Office of Research and Development is 
working with the States and Tribes to transfer new methods of measuring 
environmental quality and analyzing trends in the performance of their 
programs.
    EPA's Office of Enforcement and Compliance Assurance and the States 
established an EPA/State Enforcement Forum to discuss enforcement and 
compliance issues of mutual concern. This group has been successful in 
areas such as identifying national priorities, the development of 
enforcement policies, and the design of performance measures. Our work 
with the Forum complements our work with media-specific State and local 
organizations. We look forward to continuing our collaborative 
relationship with the States and other Forum members.
    EPA's Office of Air and Radiation has partnered with the States on 
development of a ``National Air Quality Program: Joint Statement on 
Vision and Goals'' which will be published in the near future. In 
February 2000, The Office of Air and Radiation convened its first 
national State and Local Air Roundtable in Florida. The purpose of this 
forum is to bring together leaders in State and local air program 
administration three-to-four times per year to assess how we are 
working together to achieve air quality goals and to discuss issues of 
mutual concern.
         epa--states agreement to pursue regulatory innovations
    While strengthening our working relationships, NEPPS set the stage 
for another important development between the States and EPA--consensus 
about how to test new ideas that would still work hand-in-hand with 
Federal laws. Based on the States' growing interest in improving 
environmental management, we negotiated the EPA/State Regulatory 
Innovations agreement that expresses our joint interest in innovation 
and specifies how it should occur. It creates a new way for EPA and 
States to use the flexibility available in existing regulations--
allowing new ideas to be tested while assuring consistent levels of 
environmental and public health protection nationwide. It commits EPA 
to promote innovations and gives States room for flexibility at all 
levels, which we are doing. And it commits EPA to consider and respond 
to these ideas in a timely (90 days) manner.
    To date, four Innovations Projects with States have been approved, 
eight are under review and more are in the early consultation phase. 
The projects that have been approved are:


      The Texas Natural Resources and Conservation Commission 
    and EPA mutually agreed to use existing discretion to lower the 
    number of trained air opacity inspectors in Texas to align more 
    closely with the use of opacity as a compliance tool. Texas reduced 
    the number of opacity certified inspectors from approximately 100 
    to 50, yet this will provide the TNRCC with a minimum of 75 more 
    person/days a year to do facility inspections. The savings was 
    created by using a smaller number of inspectors more often and 
    savings hundreds of person/years lost for recertification every 6 
    months.
  We agreed to do concurrent State and Federal rulemaking for 
    Air permits in Michigan.
      We have an agreement to do a multi-year experiment 
    substituting Michigan's Department of Environmental Quality's MS4 
    program for EPA's proposed ``Phase II'' storm water permits. MDEQ 
    is going to start its program 2 years before EPA's Phase II storm 
    water regulations would have gone into effect and Michigan's will 
    cover a broader range of non-point sources than EPA's proposed 
    regulations.
      EPA and Michigan have agreed to develop a Resource 
    Conservation and Recovery Act (RCRA) lender liability team to 
    conduct research on the possibility of providing lenders with 
    liability protection for RCRA corrective action in cases of 
    foreclosure. While both EPA and Michigan agree that liability 
    protection would make clean-ups easier, this agreement is subject 
    to determining a legal mechanism to allow it.
    In another important arena, EPA continues to work with States and 
Tribes as key partners in the cleanup of Superfund hazardous waste 
sites. During the last 2 years, in fiscal years 1998 and 1999, the 
Agency provided approximately $225 million to States and Tribes to help 
manage response activities at Superfund sites. In May 1998, EPA 
released the ``Plan to Enhance the Role of States and Tribes in the 
Superfund Program.'' Seventeen pilot projects with States and Tribes 
have been initiated to help provide additional resources and promote 
increased State and Tribal involvement in the cleanup of hazardous 
waste sites. In addition, EPA provides 42 States approximately $10 
million a year to support the development of effective State voluntary 
cleanup programs. EPA has entered into 14 Memoranda of Agreement (MOA) 
with States regarding these cleanup programs. The MOAs provide a work-
sharing process for the cleanup of hazardous waste sites. The Agency 
continues to work with States to negotiate and sign additional MOAs.
    EPA also is working closely with State and local governments to 
assess, clean up and redevelop contaminated brownfield sites. The 
Agency has awarded more than 300 Brownfields Site Assessment Pilots to 
help large and small communities and Tribes develop brownfield 
programs, assess contaminated properties, and leverage public and 
private sector financial resources for cleanup and development. The 
pilots have contributed to the assessment of 1933 brownfield 
properties, redevelopment of 151 properties, and helped generate more 
than 5,800 jobs. Pilot communities have reported a leveraged economic 
impact of more than $2.3 billion. EPA also has awarded 68 Brownfield 
Cleanup Revolving Loan Fund Pilots (BCRLF) to 88 communities. The BCRLF 
pilots complement the Assessment Pilots by providing a source of 
cleanup funding for contaminated brownfield sites.
    EPA has broadened its impact and effectiveness by reaching out to 
work in partnership with public and private sectors. Today, more than 
ever, EPA recognizes that it must involve everyone--other government 
agencies, businesses, communities, individuals, and especially our 
primary partners, the States--to meet environmental goals. The future 
will undoubtedly raise other challenging issues, but we are now better 
prepared to respond. Environmental solutions through new partnerships 
and new tools--that is our expectation for the future. We will meet 
that expectation along side our State partners with a spirit of 
innovation.
    Thank you, Chairman Smith. This concludes my written testimony. 
I'll be happy to answer any questions the committee may have.
                                 ______
                                 
 Responses by Michael McCabe to Additional Questions from Senator Smith
    Question 1. In its testimony, EPA stated that it is moving forward 
and finding ``new approaches to controlling causes of pollution'' and 
that a ``new relationship is evolving with the States--one that allows 
you to adapt to changing priorities and experiment with new ideas.'' 
Can EPA provide more specificity on these changes in the Agency? Please 
address at least the following: What are some of the ``new approaches'' 
that EPA has taken? How does EPA allow States to adapt to changing 
priorities? Are there changes in the law that would make it easier for 
EPA to achieve those kinds of changes?
    Response. EPA has placed a strong emphasis on new approaches and 
innovation to improve environmental protection. For example, new 
approaches are helping make clean air requirements more flexible and 
less expensive, while yielding better environmental results. Market-
based trading has been successful in controlling acid rain: between 
1995 and 1999, national sulfur dioxide emissions fell by more than 4 
million tons annually; rainfall in the eastern United States is now 
about 25 percent less acidic; and some New England ecosystems show 
signs of recovery. Trading has also successfully reduced emissions of 
nitrogen oxide, the prime ingredient in smog formation: by 1999, States 
participating in the Ozone Transport Commission had cut nitrogen oxide 
emissions 20 percent below levels allowed by law and 50 percent below 
1990 levels.
    Water quality permitting, monitoring, and reporting are now 
integrated into broader strategies that focus on individual watersheds, 
a move that brings greater efficiency, more attention to local 
priorities, and better understanding of local conditions. Today, all 50 
States, 6 territories, and 80 tribal governments have completed 
comprehensive watershed assessments, creating the first coordinated 
overview of water quality priorities in the nation's history.
    New compliance assistance programs and incentives complement strong 
environmental enforcement. During the past 4 years, 675 companies have 
identified potential environmental violations at more than 2,700 
facilities--voluntarily--based on EPA's offer to reduce or eliminate 
penalties for facilities that routinely audit their operations, 
disclose results, and quickly correct problems. Environmental managers 
in different business sectors, local governments, and Federal agencies 
can now find information on environmental requirements and pollution 
prevention by going online to web-based compliance assistance centers.
    The National Environmental Performance Partnership System (NEPPS) 
is one innovation that allows States to adapt to changing priorities. 
NEPPS is built on founding principles which include joint priority 
setting; assessment of environmental conditions and programs; 
negotiation of Performance Partnership Agreements (PPAs); outlining 
roles and responsibilities between EPA and States; measurement of 
environmental performance; and evaluation. Based upon its own 
assessment of environmental conditions and program capabilities, a 
State is able to propose priorities and corresponding work activities 
which may differ from EPA's national program guidance. After consulting 
with an EPA National Program Manager, EPA Regional Office leaders can 
agree to provide the flexibility a State needs to address its own 
priorities, within the boundaries of statutory and regulatory 
requirements. In addition to varying from EPA priorities, States may 
use this flexibility to further address environmental and public health 
protection issues that cross traditional program boundaries, such as 
environmental justice or children's health.
    Under authority provided by Congress to EPA in 1996, EPA now offers 
States the option of combining up to 16 categorical environmental 
program grants into a Performance Partnership Grant (PPG). In addition 
to gaining administrative cost savings, a State can use a PPG to direct 
Federal resources to a negotiated work plan that addresses the State's 
priority problems. PPGs can also fund innovative, cross-media 
approaches to environmental and public health protection--such as 
pollution prevention, community-based environmental management, or 
compliance assistance to small business--that are difficult to fund 
under traditional categorical grants. Even States that choose to 
continue receiving their funds from EPA in categorical grants will soon 
have greater flexibility to direct resources to their own priorities. 
Under proposed revisions to the Code of Federal Regulations Part 35 
rule that governs all EPA State grants, including PPGs, State 
priorities must be explicitly considered when EPA and States negotiate 
grant work plans. EPA expects to submit the final rule to the Office of 
Management and Budget for review in early August.
    We continue to work with States in improving environmental 
information in order to support additional innovations. Having and 
using better environmental data helps ensure that ``new approaches'' 
are in fact better able to protect the environment and public health.
    The joint interest of EPA and States in testing new approaches to 
flexibility available within existing statutes has led to an EPA/State 
Regulatory Innovations Agreement. This agreement allows new ideas on 
environmental management suggested by States to be implemented, while 
assuring consistent levels of environmental and public health 
protection nationwide. I listed four innovations projects in my written 
testimony, and we are considering several more proposals at this time. 
We have found some flexibility within the current statutes to 
experiment with innovative approaches. In some cases, it has been 
necessary to modify our regulations to conduct such experiments, and we 
have done so through site-specific rules.
    EPA is now going through a fundamental change in thinking about 
what we need to make greater progress in implementing innovative 
approaches. We believe we have stretched the limits of the law about as 
far as we can. The authorities now in place have served us well in the 
past; they have allowed us to make extraordinary progress in cleaning 
and protecting the environment and public health. However, we recognize 
that our laws need to change if we are to meet the remaining 
challenges. The Clean Air Act has not changed in 10 years, the Clean 
Water Act in 13, and Superfund in 14. These laws need to be improved, 
and all of us have ideas on how that could be done. It is time for us 
to begin a public, nonpartisan evaluation of the whole legal framework 
under which EPA operates and how we can make it better.

    Question 2. What specific actions has the Agency taken to reduce 
internal resistance toward implementation of the National Environmental 
Performance Partnership System (NEPPS)? What results have you seen?
    Response. The National Environmental Performance Partnership System 
(NEPPS) is a major evolution in how the Agency has interacted with 
State environmental agencies. It requires a fundamental change in 
approach by Agency employees from one of oversight and command-and-
control to one of partnering with a capable government entity. Three 
steps have been taken recently to reinforce the importance of NEPPS: 1) 
the Agency has reaffirmed its commitment to NEPPS and to provide 
leadership and accountability designated the Associate Administrator 
for Congressional and Intergovernmental Relations to as the National 
Program Manager for NEPPS; 2) the Agency has tasked its senior career 
managers to convey to all employees the value of NEPPS to their work 
and the environment; and 3) the Agency is enhancing training to empower 
employees to carry out NEPPS and integrate the components of NEPPS into 
their daily work. While there are many challenges ahead in making the 
transition to a culture of partnership between EPA and States, EPA 
employees increasingly see the value that partnership with States 
brings to accomplishing our mission of protecting public health and the 
environment.

    Question 3. EPA, in its testimony, recognized that States need more 
flexibility to address their environmental priorities. Performance 
Partnership Agreements (PPA) and Performance Partnership Grants (PPG) 
seem like a good first step in this direction. Even those tools seem 
limited, however. The examples provided in the testimony focus largely 
on process and paperwork issues. More substantive steps are needed. For 
example, could a State use these programs to implement alternatives to 
certain Federal programs, like the TMDL program? What can the EPA do to 
make these tools more useful in achieving substantive changes in 
programs?
    Response. One of the principal benefits of the National 
Environmental Performance Partnership System (NEPPS) is that it fosters 
joint development of priorities and work-sharing between EPA and 
States. As a result of negotiating Performance Partnership Agreements 
(PPAs) and Performance Partnership Grants (PPGs) the States and EPA can 
work together on difficult issues. For example, PPAs between Region 10 
(Seattle) and the States of Oregon and Washington divide up the work 
for developing total maximum daily loads (TMDLs) for specific 
pollutants under the Clean Water Act. EPA is focusing on developing 
TMDLs for high priority interstate waters and for water bodies on 
Federal and Tribal lands, while the States are focusing on developing 
TMDLs for waters within their States and on State and private lands. 
Similarly, Region 4 (Atlanta) and the State of Georgia have used their 
PPA/PPG as a vehicle for dividing up work on TMDLs.
    In Nebraska, the PPA includes the Nebraska Mandates Management 
Initiative (NMMI), an innovative approach to help small and rural 
governments cope better with public health and environmental laws and 
regulations. The Initiative uses an intergovernmental and 
interdisciplinary team process to help local leaders better understand 
regulations, analyze local situations and issues to determine which 
problems pose the greatest risk, prioritize those risks, and find 
technically and financially feasible solutions to the problems. The 
Initiative has proven extremely successful, with outcomes including: 
significant savings of capital expenditures; coordination of 
regulatory, technical, and financial assistance programs; and 
empowerment of local leaders and regulatory officials to encourage 
flexible, customized, and common-sense solutions.
    EPA is working continuously to improve implementation of NEPPS. We 
are developing comprehensive training materials based upon our 
experience to date as to what works and what does not. We are 
constantly analyzing feedback we get from within and outside the 
Agency. Through work inside EPA as well as in collaborative efforts 
with States, we are addressing barriers and developing tools to make 
NEPPS more useful in achieving substantive changes in environmental 
protection. Among efforts currently underway we are: more clearly 
defining the parameters of available flexibility; improving 
environmental information collection and use; and finding ways to 
reduce low value, high cost reporting.

    Question 4. The GAO Report on EPA-State Collaborations makes the 
point that EPA's 1995 Agreement with the States called for a joint 
evaluation system for EPA and the States to work together to ensure 
continuous improvement in their partnership effort. That evaluation 
apparently has never been done. GAO also recommended that a joint 
evaluation be conducted. Why hasn't EPA initiated the evaluation? What 
will the Agency do in the future to ensure that the evaluation is done 
and that any recommended improvements are actually implemented?
    Response. EPA and the States have conducted joint workshops to 
assess implementation, identify barriers, and work to remove those 
barriers. In addition, joint EPA/State work groups have tackled 
implementation issues such as core performance measures, information 
management, and reporting burden reduction.
    Prior to the release of the GAO report in June 1999, EPA and the 
Environmental Council of the States (ECOS) met to discuss the 
possibility of conducting a more formal joint evaluation of NEPPS. 
Because several outside evaluations had been recently conducted (GAO, 
EPA Office of Inspector General, and the National Academy of Public 
Administration [NAPA] research reports), EPA and the States decided to 
use the National EPA-EGOS NEPPS Workshop in the Fall of 1999 to review 
the recommendations made in these evaluations. Attendees at the 
workshop discussed the evaluation results, as well as their own 
experiences within the NEPPS process, to develop recommendations for 
action by EPA and the States.
    EPA and the States are now following up on these recommendations. 
Followup work includes giving increased leadership attention to NEPPS, 
developing training for staff so they understand how NEPPS improves 
their ability to do their work, improving the quality and usefulness of 
PPAs and PPGs, and examining how to accelerate efforts to ``right 
size'' State reporting. We also are anticipating the completion of the 
NAPA report due in November of this year. EPA and the States will 
review this report and the progress made in addressing the various 
recommendations before deciding what additional efforts will be 
undertaken.

    Question 5. EPA acknowledged in its testimony that environmental 
problems today are much more complex than those of the past. Would you 
agree then that we need a stronger role for States and their 
innovations in dealing with these more complex issues today more than 
we have in the past?
    Response. Over the last 30 years the capacity of the States to play 
a pivotal role in environmental and public health protection has 
increased dramatically. The States have become important laboratories 
where innovative ideas for more effective management can be tested and 
proven. EPA and States have collaborated on many innovative ideas with 
EPA providing resources, technical assistance, and expertise. Many of 
these ideas hold promise for implementation on a ideas wider basis. EPA 
will continue working with States to help build their capacity for 
innovation so they can assume an even stronger role in generating and 
testing many more new ideas.

    Question 6. The Environmental Law Institute has recommended that 
Congress authorize the flexibility and workload shifting embodied in 
the PPA and PPG concepts. Does EPA support this recommendation?
    Response. We have found a great deal of flexibility within the 
current statutes to implement NEPPS. We are working hard to address the 
barriers that have been identified. We believe this is a more 
productive allocation of our limited resources than proposing statutory 
changes specific to NEPPS or PPGs at this time.
                                 ______
                                 
Responses by Michael McCabe to Additional Questions from Senator Chafee
    Question 1. In your testimony, you state that ``the problems we 
face today are much more complex than those of the past.'' and 
specifically reference nonpoint source water pollution as an example. 
Does the more complicated and site specific nature of many 
environmental challenges, such as nonpoint source pollution, argue 
moving away from existing ``one-size-fits-all'' regulation toward a 
more flexible and locally based approach? How do you envision such a 
flexible program working; in what areas do you feel the States should 
have greater flexibility?
    Response. The Agency has many efforts underway to move away from 
the ``one-size-fits-all'' approach toward more flexible and locally 
based approaches to environmental protection. The National 
Environmental Performance Partnership System (NEPPS), which now serves 
as the framework for our partnership with States, is designed to 
provide States with greater flexibility in how they solve their most 
pressing environmental problems and provides a vehicle for States and 
EPA to negotiate innovative approaches. In the regulatory arena, 
collaborative efforts such as the EPA/State Regulatory Innovations 
Agreement and Project XL are seeking innovative ways to achieve 
environmental protection. The Community Based Environmental Protection 
program and EPA's Watershed Protection Approach to environmental 
management are examples of developing protection efforts based on the 
conditions and needs of local geographic areas. Through such 
collaborative efforts, EPA, States, local governments, businesses, and 
other stakeholders are working to provide greater flexibility in how 
environmental problems are solved while ensuring there is continuous 
improvement in environmental performance.
    NEPPS. The National Environmental Performance Partnerships System 
(NEPPS) is the operating framework for EPA's working relationship with 
States to accomplish our joint mission of protecting public health and 
the environment. Through NEPPS, States can propose alternative 
approaches to priority problems and direct Federal funds to 
implementing these approaches. Under NEPPS, EPA and States set 
priorities jointly based on an assessment of environmental conditions 
and program needs as well as consideration of national, Regional, and 
State priorities. As a result of these negotiations, States have 
greater flexibility to focus environmental protection efforts on their 
most pressing environmental priorities. To address the jointly 
negotiated priorities, the Performance Partnership Grant (PPG) 
authority allows States to combine funds from up to 16 categorical 
grants in a single PPG. Another key element of NEPPS is oversight that 
is tailored to a level appropriate to the performance of each State. We 
continue to work both internally and with States to make the granting 
of flexibility more transparent.
    Project XL. A good example of the short-term results--and long-term 
promise of our search for innovative site specific solutions in 
partnership with States, business, and the public can be seen in 
Project XL. Launched in 1995, this innovative program tests ideas that 
could make the nation's environmental protection system more efficient 
and effective.
    Through Project XL, participants can reap the benefits of reduced 
administrative burdens or increased regulatory flexibility if they take 
steps to do more than just comply with regulations--achieving results 
that go beyond what the law requires. If a pilot project is successful, 
it is evaluated to see if those innovations can be more broadly applied 
to other facilities. This willingness to experiment outside the 
regulatory arena signifies our emphasis on getting results, not simply 
enforcing regulatory requirements. To date, 25 projects are being 
implemented under Project XL.
    Watershed Protection Approach. EPA's Watershed Protection Approach 
is effectively protecting and restoring aquatic ecosystems while 
protecting human health. Rather than just addressing an individual 
water body or discharger, this strategy has as its premise that many 
water quality and ecosystem problems are best solved at the watershed 
level. Major features of the Watershed Protection Approach are: 
targeting priority problems, promoting a high level of stakeholder 
involvement, integrated solutions that make use of the expertise and 
authority of our State partners and other agencies, and measuring 
success through monitoring and other data gathering.

    Question 2. You argue that ``existing regulatory structures. . . 
.present some challenges to our efforts to find new ways of doing 
business.'' Do you feel that our existing environmental laws such as 
the Clean Water Act, provide the necessary flexibility?
    Response. As described in my testimony, EPA and State regulators 
have successfully tackled and addressed many of the nation's pressing 
environmental concerns. Building on these successes, EPA and States are 
now recognizing and focusing our attention on problems that are not as 
easily targeted by the existing statutory and regulatory structure.
    We have found some flexibility within the current statutes to 
experiment with innovative solutions to environmental problems. In some 
cases, we have made site-specific regulatory changes necessary to carry 
out these experiments.
    EPA is now going through a fundamental change in thinking about 
what we need to make greater progress in implementing innovative 
approaches. We believe we have stretched the limits of the law about as 
far as they can go. The authorities now in place have served us well in 
the past; they have allowed us to make extraordinary progress in 
cleaning and protecting the environment. However, we recognize that our 
laws need to change if we are to meet the remaining environmental 
challenges. The Clean Air Act has not changed in 10 years, the Clean 
Water Act in 13, Superfund in 14. These laws need to be improved, and 
all of us have ideas on how that could be done. It is time for us to 
begin a public, nonpartisan evaluation of the whole legal framework 
under which EPA operates, and how we can make it better.
                                 ______
                                 
   Responses by Michael McCabe to Additional Questions from Senator 
                               Lautenberg
Oversight
    Question 1. In 1995, the GAO reported that States complain about 
excessive EPA oversight. States felt that a highly performing State 
should get less oversight than a State that is having difficulty 
implementing a program. Is there a method of measuring such a State 
performance agreed to by both EPA and the States? Are States providing 
and is EPA assembling the information necessary to identify highly 
performing States? If so, what are you finding--which States are 
performing well and which are not performing well?
    Response. EPA Regional Offices work with each of their States to 
address State performance. EPA Regional of rices tailor the type and 
amount of oversight--as well as the kinds of technical and other 
assistance EPA will provide--to the needs and performance of each 
State. Agreements between EPA and the State about how EPA will conduct 
oversight and what technical assistance EPA will provide are often 
incorporated into a Performance Partnership Agreement (PPA) or other 
EPA-State agreement. Among the information considered in the 
negotiation of these agreements is an assessment of the State's 
performance. As envisioned by the National Environmental Performance 
Partnership System (NEPPS) that serves as the framework for EPA-State 
partnerships, EPA and the State will ideally evaluate the effectiveness 
of their efforts jointly.
    When EPA was collaborating with the States in the development of 
NEPPS, States representatives said they did not want EPA to rank or 
compare one State against another. As a result, efforts to develop 
criteria for the leadership aspects of NEPPS were dropped. However, 
there are some examples where criteria for evaluating States have been 
developed, such as Region 8's enforcement oversight model. While 
specific approaches to oversight may vary by Region and program, EPA's 
oversight efforts are designed to foster continuous improvements in 
each State program. In evaluating a State program, EPA considers a 
complex set of factors such as: comparisons of current performance 
measures against past performance; whether the State is meeting its 
program commitments; the quality and adequacy of its program efforts; 
and factors outside the control of the State agency that might be 
affecting its performance. EPA discusses reasons for any problems and 
what could be done to improve with the States, and under NEPPS, a joint 
evaluation approach is considered the ideal.
    We continue to explore ways that would be acceptable to both EPA 
and States to make differential oversight more transparent. The EPA-
State Agreement on Core Performance Measures puts an important tool in 
place that should help in measuring individual State environmental and 
program performance and form a more solid and equitable basis for 
implementing a more formal approach to differential oversight in the 
future.
Environmental Reporting Reform
    Question 2. As you know, I am drafting a bill to streamline 
environmental reporting. The bill will require EPA to give each 
business in the U.S. one point of contact for all Federal environmental 
reporting requirements. This ``one-stop'' electronic reporting system 
will use a common nomenclature throughout and use language 
understandable to a business person, as opposed to an environmental 
specialist. It will also provide pollution prevention information to 
the business. The following questions relate to that bill.
    According to Mr. Bradford's testimony, the States and EPA are 
working together to accomplish many of the objectives I am pursuing in 
drafting my bill. It remains unclear to me, however, which specific 
objectives are currently envisioned by the EPA-State partnership; when 
we might expect to see them realized, and by what means. Your answers 
to the following questions will help clarify my understanding of the 
State-EPA partnership.
    How long have EPA and State agencies been working to integrate 
environmental information management and to streamline environmental 
reporting?
    Response. EPA began its preliminary integration efforts with States 
in 1990 with the development of the Facility Index System, a way of 
tracking a facility through different data sets. In the ensuing years, 
the efforts expanded to include direct program assistance to States 
through the One-Stop Reporting Program; Reinventing Environmental 
Information (REI) efforts designed to establish basic data standards 
and to implement electronic reporting; and convening in 1998, the 
State/EPA Information Management Workgroup to deal with ongoing policy 
issues surrounding information management. Each of these efforts 
contributed to the development of the Information Integration 
Initiative in 1999, the next logical step in developing a comprehensive 
data exchange network that will provide a wide-range of shared 
information among States, EPA, tribes, localities, the regulated 
community, and other data partners.

    Question 2a. Which of the following attributes will the integrated 
reporting system envisioned by the EPA-State partnership expect to 
have.
    Will a facility be able to identify, through one point of contact, 
all EPA reporting requirements that apply to it? Will a facility be 
able to identify as well, through the same point of contact, all State, 
tribal, and local environmental reporting requirements that apply to 
it?
    Response. At present, EPA has not created a single place where a 
given facility can identify all reporting requirements that apply to 
it. However, EPA is taking steps toward consolidating the availability 
of information on Federal regulatory requirements and compliance 
assistance such as:

    1. placing EPA regulations and guidance on line;
    2. providing links to information via sector specific codes;
    3. issuing simplified guidance on reporting; and
    4. establishing compliance assistance centers in cooperation with 
    States and industry associations.

    EPA views these steps as critical to providing necessary assistance 
and guidance. The integration initiative effort to develop a data 
exchange network also will be able to provide internet links to State, 
Tribal, local, and other Federal agency requirements. These links can 
in essence create a ``roadmap'' to information needed by the regulated 
community to improve compliance with environmental laws.

    Question 2c. Will a facility be able to submit, through the same 
point of contact, all information that is normally submitted directly 
to EPA programs?
    Response. The goal of EPA's Central Data Exchange (CDX) effort is 
to centrally process as many of EPA's data collections as possible. For 
information security or other reasons, such as protection of 
confidential business information, some data collections may remain 
independent of CDX.

    Question 2d. Will a facility be able to submit as well, through the 
same point of contact, all information required under applicable State, 
tribal, and local environmental reporting requirements?
    Response. Our current efforts focus on centralizing the exchange of 
data with our co-regulators, emphasizing data to ensure compliance with 
Federal requirements.

    Question 2e. Will the reporting system direct the facility to 
information on applicable OSHA reporting requirements and environmental 
reporting requirements administered by Federal agencies besides EPA?
    Response. While our current efforts focus on centralizing the 
exchange of data with co-regulators to ensure compliance with EPA's 
requirements, it should be possible to create other Federal links as 
necessary in the future.

    Question 2f. Will the reporting system use data standards for units 
of measure, terms for chemicals, pollutants, waste, and biological 
material, and methods of identifying reporting facilities, developed in 
consultation with industry, environmental groups and other 
stakeholders?
    Response. Yes. EPA is working to establish, in consultation with 
our external partners, both data element and ``format'' standards for 
external data reported to EPA. The Environmental Data Standards Council 
consists of EPA, State and Tribal members. Its purpose is to jointly 
develop and implement standards which facilitate the efficient exchange 
and use of environmental information. To date, the Environmental Data 
Standards Council has approved standards for facility identification, 
date, Standard Industrial Classification/North American Industrial 
Classification System (SIC/NAICS), and Latitude/Longitude. The Council 
is working aggressively to also standardize chemical identification, 
biological taxonomy, and other data sets widely used by EPA programs, 
States, and Tribes. Work has been initiated on standards development 
for enforcement and compliance, permitting, Tribal identifiers, and 
geographic data elements. All of these standards will be provided to 
the public for review and comment before they are made final by the 
Council.

    Question 2g. Will the reporting system use an ``open data format'' 
that allows facilities to download information from their own internal 
data management systems directly to the integrated reporting system?
    Response. EPA's Central Data Exchange (CDX) program has the lead 
for establishing the ``transmission formats'' which prescribe the 
arrangement of standard data elements in reporting transactions. CDX 
has recently received approval through the American National Standards 
Institute, an industry/government standards setting body, to deploy a 
standard data format for exchanging compliance data. This format is 
referred to as the ANSI X12 Environmental Compliance Reporting (179) 
Transaction Set. CDX is now in the process of deploying the ANSI X12 
179 transaction set, and is also in the process of developing 
equivalent ``Internet''-based formats, using ``extensible markup 
language,'' to allow a broader range of regulated entities to provide 
data electronically.
    There should be many benefits if facilities connect their internal 
management systems to their environmental management and reporting 
systems. These benefits could include improved data quality, 
identification of pollution prevention and cost-saving opportunities, 
and reporting burden reduction. EPA will engage in outreach to 
commercial vendors developing enterprise resource planning systems, and 
other data management systems for the regulated community, and will 
encourage them to include environmental management and reporting 
components that are compatible with the integrated reporting network.

    Question 2h. To ease reporting by businesses with facilities in 
more than one jurisdiction, will EPA and State, tribal, and local 
agencies all use the same data format and data standards?
    Response. The Environmental Data Standards Council will encourage 
States and Tribes to adopt the approved set of data standards and 
transmission formats. As currently envisioned, all members of the 
integrated reporting network would be required to use approved 
standards and formats as a condition of membership in the network. 
However, EPA cannot require States or Tribes to adopt content and 
format standards, nor can we require these parties to participate in 
the integrated information network. Based on our recent work with 
States and Tribes, it is clear that many, if not all, of these entities 
will partner with EPA in the network.

    Question 2i. Will a facility be able to receive information on 
pollution prevention technologies and practices through the reporting 
system?
    Response. The integrated system envisioned by the EPA-State 
partnership is one which will allow facilities and government to 
exchange a broad range of information such as multimedia environmental 
data, geographic data, and facility data in a stewardship environment. 
As the network evolves, a wider array of information, including 
pollution prevention technology and practices information, may also 
ultimately be made accessible.

    Question 2k. By what date may we expect the envisioned integrated 
reporting system, or aspects of the system, to be in place?
    Response. The Agency will begin to see implementation of concrete 
integration projects in October, 2000, that directly support the State/
EPA data exchange network. The projects are:

      integration of information about regulatory activities 
    (phase 1);
      implementation of a Facility Registry System;
      expanded integration and access of geospatial 
    information; and
      initial implementation of an integrated central data 
    exchange capability.

    These projects create new functionality in data base integration, 
access/application, and State/external data flows.
    EPA also is working closely with our State partners and plans to 
use the fiscal year 2001 funding request to:

      support collaborative State development and knowledge/
    technology sharing;
      work with other data partners beyond States; and
      coordinate the Agency's other program information efforts 
    with States to modernize and integrate.

    The States and EPA anticipate completion of a fully developed, 
nationally integrated Network, used by States, Tribes, localities, the 
regulated community, EPA and the public within the next 3 to 5 years.
    Are the air, water, and waste programs of EPA and the State 
agencies fully participating in the development of the integrated 
reporting system?
    EPA's information integration effort is, foremost, a partnership 
with the States. EPA also has included representatives from every major 
Agency program office. These representatives have been organized into a 
multi-disciplinary team of technical information experts responsible 
for recommending and developing the broad foundation pieces for:

      defining and implementing a national network for 
    environmental data exchange in partnership with States and other 
    data partners;
      assisting EPA's information partners to participate in 
    the exchange network;
      positioning EPA to participate in the network and the 
    data exchange it will facilitate; and
      integrating existing information collection processes 
    with data standards and a centralized data exchange to streamline 
    information sharing.
                               __________
  Statement of Peter F. Guerrero, Director, Environmental Protection 
   Issues, Resources, Community, and Economic Development Division, 
                       General Accounting Office
    Mr. Chairman and members of the committee: I am pleased to be here 
to discuss our recent assessment of the National Environmental 
Performance Partnership System (NEPPS). NEPPS was established by a May 
1995 agreement between the Environmental Protection Agency (EPA) and 
the States as a new framework for improving their working relationship, 
and for improving the effectiveness of States' environmental programs. 
Under the program, a State and EPA may enter into a Performance 
Partnership Agreement that identifies the State's environmental goals 
and priorities, and how both EPA and State officials are to address 
them. The two sides may also agree on a Performance Partnership Grant, 
which is intended to allow the State greater flexibility in targeting 
limited resources to meet its most pressing needs.
    Both EPA and the States launched NEPPS to help address long-
standing issues affecting their working relationship. Among these 
issues were concerns that EPA (1) is inconsistent in its oversight of 
States from one region to another, (2) sometimes micromanages the 
States' programs, (3) does not provide sufficient technical support for 
the States' programs increasingly complex requirements, and (4) often 
does not adequately consult the States before making key decisions 
affecting them.
    In signing the agreement that established NEPPS, EPA and State 
leaders stated that they sought to ``strengthen our protection of 
public health and the environment by directing scarce public resources 
toward improving environmental results, allowing States greater 
flexibility to achieve those results, and enhancing our accountability 
to the public and taxpayers.'' Among the key elements of NEPPS were (1) 
EPA's commitment to give States with strong environmental performance 
greater flexibility and autonomy in running their environmental 
programs and (2) the agreement between EPA and the States to develop 
effective ``core'' performance measures to better understand whether 
the States' programs are achieving their intended results.
    Given the expectation among participants that NEPPS could deal with 
many of the issues that have long impeded the EPA-State relationship, 
the Chairman, Subcommittee on VA, HUD, and Independent Agencies, House 
Committee on Appropriations, asked us to examine the progress made by 
EPA and the States since the 1995 Agreement. In response to this 
request, our June 1999 report (1) identified the status of grants and 
agreements made under NEPPS between EPA and participating States, (2) 
examined the progress that EPA and the States have made in developing 
results-oriented performance measures to be incorporated into NEPPS 
agreements and grants to the States, (3) examined how EPA oversight may 
or may not have been changing in States that were participating in 
NEPPS, and (4) discussed the extent to which the use of these 
performance partnership agreements and grants had achieved the benefits 
envisioned for the States and the public. \1\
---------------------------------------------------------------------------
    \1\ Environmental Protection: Collaborative EPA-State Effort Needed 
to Improve New Performance Partnership System (GAO/RCED-99-171)
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    In summary, Mr. Chairman, we found the following:
      State participation in NEPPS grew from 6 pilot States in 
its initial year in fiscal year 1996 to 45 States by the end of fiscal 
year 1998. Of that number, 31 States had both Performance Partnership 
Agreements and Performance Partnership Grants with EPA in 1998; 12 
States had grants only; 2 States had Agreements only; and 5 States did 
not participate at all.
      EPA and the States agree on the importance of measuring 
the outcomes of environmental activities rather than just the 
activities themselves, in order to help them better understand whether 
their programs are achieving their intended results. Despite a number 
of technical challenges (e.g., the inherent difficulty in quantifying 
certain results, and the difficulty of linking program activities to 
environmental results) and disagreements between EPA and the States on 
such matters as the degree to which States should be permitted to vary 
from the national core measures, EPA and State leaders have managed to 
agree on a set of core measures for fiscal year 2000 that are widely 
regarded by EPA and State officials as significantly improved from 
those negotiated in previous years.
      The initial expectation that participation in NEPPS would 
be accompanied by reduced Federal oversight of States has thus far been 
realized to only a limited degree. We identified a number of instances 
among the six States that we visited where oversight reduction did 
accompany participation in the system. However, in other cases cited by 
both State and EPA regional officials, it was difficult to attribute 
reduced oversight directly to NEPPS participation. Other instances were 
cited where oversight had either remained the same or had actually 
increased.
      EPA and State participants cited a number of benefits 
associated with NEPPS noting, for example, that participation provided 
a means of getting buy-in for innovative and/or unique projects and 
served as a tool to divide an often burdensome workload more 
efficiently between Federal and State regulators. Yet while 
participants from each State indicated that their participation in the 
voluntary program would probably continue, they also consistently 
expressed the view that the benefits of the program should be greater; 
that the program has yet to achieve its potential; and that 
improvements are needed. The 1995 Agreement anticipated the 
appropriateness of such reflection in calling for ``a joint evaluation 
system for EPA and the States to review the results of their efforts to 
ensure continuous improvement.'' We recommended in our report that such 
a joint evaluation process be initiated, and suggested a number of 
issues to be considered for attention during such a process.
Background
    Under NEPPS, States may voluntarily enter into ``Performance 
Partnership Agreements'' with their EPA regional offices. While there 
is considerable flexibility in how the agreements may be designed, they 
typically provide a means for EPA and the States to negotiate such 
matters as (1) which problems will receive priority attention within 
the State programs, (2) what EPA's and the States' respective roles 
will be, and (3) how the States' progress in achieving clearly defined 
program objectives will be assessed. An important component of the 
Partnership Agreements is the use of a common set of national 
environmental indicators (called ``Core Performance Measures'') to 
measure the effectiveness and success of States' environmental 
programs. In their efforts to develop these Performance Measures, EPA 
and State officials have sought to move beyond counting the number of 
actions (such as the number of inspections conducted or environmental 
enforcement actions taken), and increasingly toward evaluating the 
impact of programs on the environment.
    While NEPPS provides the overarching framework for developing 
partnership agreements, Performance Partnership Grants, authorized by 
the Congress in April 1996, serves as a major tool to implement them. 
This program allows States to request that funds from 2 or more of the 
15 eligible categorical grants be combined to give governmental 
entities greater flexibility in targeting limited resources to their 
most pressing environmental needs. These grants are also intended to be 
used to better coordinate existing activities across environmental 
media and to develop multimedia programs. While the Partnership 
Agreements are designed to complement the Partnership Grants, States 
are free to negotiate both agreements and grants or to decline 
participation in NEPPS altogether.
    Growth of State Participation in NEPPS
    In fiscal year 1996, NEPPS was initially tested on a pilot basis 
with six participating States. EPA and the States viewed the first year 
as a time to experiment with the new system and various ways to 
implement it. The number of participating States subsequently increased 
to 45 States in fiscal year 1998, although the extent of participation 
varied widely. For example, half the States have negotiated both 
Partnership Agreements and Partnership Grants through their lead 
environmental agencies that cover most EPA programs; other States have 
substantially limited their participation and cover fewer programs.
    States have also varied considerably in the detail and content of 
their Agreements. Senior officials in EPA's Office of State and Local 
Relations explained that the agency has not attempted to impose 
uniformity on the development of Partnership Agreements at this early 
stage of the NEPPS process, and has therefore refrained from issuing 
guidance on how the agreements should be structured. Hence, the 
agreements vary widely in content and emphasis, reflecting each 
individual State's conditions and priorities and reflecting the results 
of negotiations with their respective EPA regional offices.
Progress in Developing Results-Oriented Measures
    Both EPA and the individual States have had a number of efforts 
underway to develop effective performance measures to better understand 
whether their programs are achieving their intended results. Their 
collective efforts to develop such measures for NEPPS has centered 
around the Performance Measures that were negotiated between EPA and 
the Environmental Council of the States during the past several years 
(The Council is a national nonpartisan, nonprofit association of State 
and territorial environmental commissioners.). The effort faced a 
number of technical challenges inherent in developing defensible 
results-oriented measures. The results of activities designed to 
improve water quality, for example, can take years to appear, and the 
capability of many States to monitor a significant share of their 
waters is limited. Moreover, even if environmental conditions could be 
reliably and consistently measured, it may be particularly difficult to 
demonstrate the extent to which a specific government program affected 
that condition. Officials from Florida (which has made a significant 
commitment to measuring compliance rates and environmental indicators), 
for example, explained that such factors outside their control as 
economic activity and weather conditions, make it particularly 
difficult to link program activities with changes in environmental 
conditions.
    In addition to these technical challenges in developing results-
oriented measures, the effort was also challenged by disagreements 
between EPA and the States on issues such as (1) the degree to which 
States should be permitted to vary from the national Performance 
Measures and (2) the composition of these measures, particularly 
regarding the degree to which pre-existing output measures should be 
retained as newer outcome measures are added. Overall, however, the 
States and EPA made progress in meeting these challenges. For example, 
officials in four of the six States whose programs we examined had 
developed and implemented their own measures to address their own 
priorities. At the same time, program officials in each of the six 
States also agreed to report information required for the national 
Performance Measures agreed upon between the Environmental Council of 
the States and EPA. In addition, while they maintained that further 
refinement will still be needed, EPA and State officials agreed on a 
set of fiscal year 2000 measures that, by most accounts, is a 
substantial improvement over those measures negotiated from previous 
years in that they are fewer in number (i.e., better targeted to 
address key goals) and generally more outcome-oriented.
Reductions in Oversight Attributable to NEPPS Have Thus Far Been Modest
    Instances of greater State flexibility and reduced EPA oversight 
tended to focus on reducing the frequency of reporting and, in some 
cases, the frequency of onsite reviews. Maine environmental officials, 
for example, noted that more frequent, and less formal, dialog between 
the program staff and regional staff had replaced written reports, 
saving time and improving the level of cooperation between EPA and 
State staff. While Maine program officials attributed the reductions in 
part to the assignment by EPA's Boston regional office of a liaison for 
each State's delegated programs, they credited NEPPS with formalizing 
or legitimizing the changes. Likewise, Florida program officials 
identified sizable reporting reductions in its waste program as a 
result of a joint effort with EPA included in the Partnership 
Agreement. Other instances were cited by officials in Georgia and 
Minnesota.
    Aside from such individual instances of streamlining reporting 
requirements and similar tracking efforts, the large majority of the 
State officials we contacted generally maintained that participation in 
NEPPS had not yet brought about significant reductions in reporting and 
other oversight activities by EPA staff, nor had it resulted in 
significant opportunities for them to focus on other priorities or to 
shift resources to weaker program areas. EPA officials generally 
acknowledged this point, but they provided specific reasons why the 
agency's oversight of State programs has not significantly decreased as 
a result of NEPPS--and in some cases has actually increased. In this 
connection, we noted that environmental statutes or regulations 
sometimes prescribe the level of oversight required of EPA which, 
according to some headquarters and regional officials, leaves the 
agency with little room to scale it back. These officials also pointed 
to (1) audits that identified problems in some States' enforcement 
programs (such as the underreporting by States of significant 
violations and precipitous decreases in the number of State enforcement 
actions taken), which they believed called for greater oversight, and 
(2) the difficulty in scaling back oversight without measurable 
assurances that the States' programs experimenting with alternative 
compliance strategies are achieving their desired results.
    At the same time, EPA officials cited a number of barriers 
preventing greater State flexibility that could be more readily 
addressed. For example, senior EPA officials in three of the four 
regional offices that we visited acknowledged that support for NEPPS 
within EPA varies. One senior regional official explained that many 
regional managers and staff are often more comfortable with pre-
existing ways of doing business and are unsure as to how they can 
accomplish their work in the context of the partnership approach under 
NEPPS. He voiced the opinion that there may be a need for training EPA 
regional staff in NEPPS implementation. Another senior regional 
official said that some agency staff will only take NEPPS seriously 
when EPA's reward system is more closely tied to their performance in 
implementing the program. Headquarters officials also acknowledged 
another problem cited by many of the State officials we contacted--that 
headquarters guidance, initiatives, and special requests sometimes 
arrived at the regions too late to be used effectively in regional-
State Partnership Agreement negotiations, and that they were working to 
address the problem.
Benefits of NEPPS Participation Cited, But Full Potential Has Yet to be 
        Realized
    Senior officials and program managers from each of the six States 
in our review agreed that NEPPS has provided their programs with 
worthwhile benefits, and that its potential for achieving a more 
effective partnership between EPA and the States was still worth 
pursuing. Among the examples cited were instances in which Partnership 
Agreements were used to more efficiently divide a heavy workload 
between regional and State staff, and in which States were able to take 
at least limited advantage of the flexibility in their Partnership 
Grant agreements to shift resources among their media programs. 
Overall, however, the most frequently cited benefit among both State 
and EPA regional participants was that the two-way negotiation process 
inherent in NEPPS has fostered more frequent and effective 
communication between regional and State participants and improved 
their overall working relationship.
    At the same time, State officials almost unanimously expressed the 
view that the benefits from their investment of time and resources into 
NEPPS should be greater; that it has yet to achieve its potential; and 
that improvements are needed. Of particular note, almost all of the 
State officials we interviewed cited progress in achieving reduced 
oversight and greater autonomy as critical to the future success of 
NEPPS. They also cited the need to continue improving performance 
measures; address the barriers impeding greater acceptance of NEPPS 
among staff within both EPA and State agencies; determine how to make 
greater use of the flexibility under Partnership Grants to shift 
resources and funding to address higher priorities; and improve how 
EPA's headquarters offices provide their input into State-regional 
NEPPS negotiations.
    These concerns pose challenges for the future of NEPPS--challenges 
that were anticipated by the 1995 Agreement that launched the program 
which called for a joint evaluation system for EPA and the States to 
review the results of their efforts to ensure continuous improvement. 
On the basis of the information that can be gleaned from the 
experiences to date of participating States and regional offices, we 
concluded that it was now appropriate to undertake such a joint 
evaluation process. We recommended that EPA work with senior-level 
State officials to initiate a joint evaluation process that (1) seeks 
agreement on the key issues impeding progress in developing a more 
effective National Environmental Performance Partnership System and (2) 
develops mutually agreeable remedies for these issues. Among the issues 
we suggested that such a process could focus on were the following:

      Developing a set of flexible guidelines, to be used as a 
tool by State and EPA regional NEPPS negotiators, that could help to 
clarify the appropriate performance expectations and other conditions 
that States must meet to achieve reduced oversight in carrying out 
their environmental programs, and the type of reduced oversight (e.g., 
reduced frequency of reporting, greater autonomy in setting program 
priorities) that could be achieved.
      Identifying what additional work is needed to improve the 
national Core Performance Measures recently negotiated by EPA and State 
representatives for fiscal year 2000.
      Alleviating the resistance among some staff (both within 
EPA offices and among participating State agencies) toward implementing 
NEPPS through training efforts and other strategies.
      Determining what appropriate steps should be taken by EPA 
and the States to allow for greater use by States of the flexibility 
envisioned under the Performance Partnership Grant system to shift 
resources and funding among their media programs.
      Determining how effective public participation in the 
NEPPS process can best be ensured.
      Developing ways to improve communication among EPA's 
headquarters and regional offices and participating States to ensure 
that States are given clear and timely information on whether key 
elements of their NEPPS-related agreements have the full buy-in of key 
EPA offices.

    In response to this recommendation, EPA pointed out that in March 
1999, EPA and the Environmental Council of the States agreed in 
principle to conduct such a joint evaluation and that it would review 
many of the issues cited in our recommendation. Since that time, 
however, progress has been limited. According to an official with the 
agency's Office of State and Local Relations, EPA and the Council have 
yet to agree on such basic issues as who should undertake the 
evaluation and what its scope should be. Furthermore, it is unclear 
when final resolution will be reached. Our findings suggest that future 
support for this program will depend heavily on the timely resolution 
of many of the barriers that have thus far impeded its effectiveness. 
Therefore, we believe timely efforts by EPA and the Council to identify 
what specific issues are to be addressed, and to identify a timetable 
for addressing them, would be important steps in expanding both the 
participation in, and effectiveness of, this important program.
    This concludes my prepared statement, Mr. Chairman. I would be 
pleased to address any questions that you or other members of the 
committee may have.
                                 ______
                                 
 Responses by Peter Guerrero to Additional Questions from Senator Smith
    Question 1. GAO stated in its report that Federal oversight of 
States participating in the National Environmental Performance 
Partnership System (NEPPS) was not reduced as expected. Among the 
factors GAO cited are: (a) the inherent difficulty in ``letting go'' on 
the part of some regulators and (b) EPA's multi-level organizational 
structure which complicates things. One of GAO's recommendations is to 
reduce the resistance toward implementation of NEPPS through training 
and other strategies. What are some of those strategies that GAO 
believes can produce a more cooperative agency?
    Response. One key step would be for the agency to achieve a shared 
understanding, both within EPA and between EPA and the States, on the 
core measures that articulate the goals and objectives all key parties 
are trying to achieve. In this connection, the agency needs to 
reconcile the differences that still exist between its GPRA measures, 
and the core performance measures it has negotiated with the 
Environmental Council of the States.
    Once this agreement is achieved, NEPPS goals and objectives need to 
be incorporated into performance expectations among EPA employees 
throughout the agency (and, ideally, among their State counterparts). 
Until this occurs, the responsibilities for which EPA staff are 
currently being held accountable will tend to supercede NEPPS-related 
activities in priority.
    NEPPS must be approached with strong communication skills and an 
open mind as to how environmental problems can best be addressed. Such 
attributes are important for all NEPPS participants, but particularly 
for those at the EPA regional level, where managers and staff sometimes 
have to balance conflicting headquarters and State priorities. This 
makes their role particularly important in helping to forge consensus 
under challenging circumstances. Our interviews with both EPA and State 
environmental managers suggest that training to develop these skills 
would be a good investment in helping NEPPS to succeed.
    In the past, Headquarters offices have been criticized for not 
providing States and regions with timely input needed to facilitate 
their NEPPS negotiations. In particular, States have complained that 
headquarters sometimes imposes new requirements on State programs 
during the year--after the States and their corresponding EPA regional 
offices have already agreed on the work to be done for the following 
year. In an effort to be responsive to this issue, headquarters offices 
have attempted to issue 2-year guidance to regions and States to allow 
them greater continuity in carrying out their agreements. We believe 
this is a step in the right direction.

    Question 2. In your opinion, what leadership qualities are needed 
to best overcome those barriers to fully implement the NEPPS program?
    The most important step that senior EPA and State managers can take 
to promote NEPPS' full implementation is to send an unambiguous message 
to the staff in their agencies that they fully support the program. 
Visibility of support and interest from the top levels of EPA and the 
States are critical if mid-level managers and other staff are to treat 
NEPPS as a priority.
    Many EPA staff still tend to view environmental programs with a 
separate, media-specific focus. States, on the other hand, increasingly 
find that they must make tradeoffs among their individual media 
responsibilities to ensure that their most important environmental 
priorities are adequately addressed. EPA leadership needs to advocate 
among its staff a broader, multi-media focus that recognizes the need 
for these tradeoffs, within the constraints posed by the framework of 
existing laws and regulations.

    Question 3. Are there any statutory changes that would make 
Performance Partnership Agreements (PPAs) or Performance Partnership 
Grants (PPGs) more attractive to States?
    Response. As a program promoting a new way of doing business, NEPPS 
bears similarity to many of EPA's and States' ``reinvention'' programs. 
In fact, many States are trying to use their Performance Partnership 
Agreements under NEPPS to accelerate and institutionalize their 
reinvention efforts. In this regard, we agree with the Chairman's 
observation at the hearing that EPA's stove-piped structure has 
complicated the efforts of environmental regulators and the regulated 
community to adopt more flexible and innovative approaches to 
environmental protection. At the request of Congressmen Boehlert, 
Dooley, and Greenwood, we have recently initiated an evaluation of the 
extent to which laws, regulations, and agency policies inhibit 
innovation, and would be pleased to share our findings with the 
committee when they are available.

    Question 4. What should the relationship be between Core 
Performance Measures (CPMs) and EPA's obligations under the Government 
Performance and Results Act (GPRA)?
    Response. CPMs are generally a subset of the agency's GPRA 
measures, and EPA maintains that there is a close relationship between 
the two. However, there is a substantial difference in that the GPRA 
measures are far more numerous and, as a group, tend to be more 
``output'' oriented than the more results-oriented CPMs.
    EPA needs to make more progress in aligning its GPRA measures with 
the CPMs it has negotiated with the States by (1) reducing the overall 
number of GPRA measures to focus on the most significant measures and 
(2) continue to shift the relative balance between output and outcome 
measures to place increasingly greater emphasis on outcome measures.
                                 ______
                                 
Responses by Peter Guerrero to Additional Questions from Senator Chafee
    Question 1. One of your findings is that the ``initial expectation 
that participation in National Environmental Performance Partnership 
System would be accompanied by reduced Federal oversight of States has 
thus far been realized to only a limited degree.'' Yet in your report 
you note that EPA and the States agree that ``a formal system for 
implementing differential oversight . . . would be controversial and 
difficult to implement.'' Do you believe that EPA and the States can 
agree on which programs should be considered ``strong'' environmental 
programs?
    Response. For years, EPA has essentially made decisions as to which 
State environmental programs were strong and which weaker. These 
decisions, however, tended to be informal and were used to support 
annual grant agreement negotiations by identifying areas in which EPA 
would provide additional support to States.
    An additional issue is the complication that arises among States' 
environmental programs in publicly identifying which among them are 
strong performers and which are weak performers. For this reason, the 
effort to formalize such a ``differential oversight'' process through 
NEPPS was discontinued.
    Nevertheless, EPA's Denver region is attempting to develop such a 
formal system of ranking their States to identify stronger and weaker 
States for purposes of focusing attention where it is most warranted. 
This system, called the ``Unified Oversight System,'' is designed to 
evaluate State enforcement and compliance program performance. The 
objective of this system is to strengthen State programs and reward 
strong programs with reduced oversight. The system, which will employ 
both quantitative scoring and narrative feedback, will be used to 
conduct annual joint planning with States and to manage the limited 
oversight resources of EPA. Time will tell whether the Denver region's 
experiment will succeed.

    Question 2. Given the absence of formal criteria for determining 
what constitutes a good program, how can one distinguish between good 
programs that deserve reduced oversight and inadequate programs that 
require additional attention?
    Response. There are a number of factors that have historically 
served as indicators of the strength of State programs. Examples 
include:

      Various measures of enforcement activity, such as the 
    number of inspections conducted, violations disclosed, fines 
    levied/collected, etc.;
      Adequacy of staffing of State programs;
      Results of periodic EPA audits of State programs;

    The challenge in recent years has been to move away from activity 
measures and toward outcome measures, such as the extent to which the 
efforts of programs are resulting in improved compliance or 
improvements in environmental quality. The Core Performance Measures 
negotiated between EPA and the Environmental Council of States are a 
key step in that direction in that they are increasingly designed to 
emphasize measures of the impact of environmental activities on the 
environment, as opposed to measuring the number of activities 
conducted.
    As noted above, the Denver region's experience with its Unified 
Oversight System should be instructive to future efforts to 
systematically assess States' programs, and to practice differential 
oversight on the basis of performance and capability. While the 
measures to be used in the System are initially weighted toward 
outputs, it is anticipated that outcome measures will be relied upon 
increasingly over time.
                                 ______
                                 
               [Report by the General Accounting Office]
  Environmental Protection: Collaborative EPA-State Effort Needed to 
               Improve New Performance Partnership System

                          U.S. General Accounting Office,  
   Resources, Community, and Economic Development Division,
                             Washington, D.C. 20548, June 21, 1999.

The Honorable James T. Walsh, Chairman,
Subcommittee on VA, HUD, and Independent Agencies
Committee on Appropriations House of Representatives.

Dear Mr. Chairman: As requested, we are reporting on the Environmental 
Protection Agency's (EPA) and the States' progress in implementing the 
National Environmental Performance Partnership System.
    As arranged with your office, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
7 days from the date of this letter. At that time, we will send copies 
to the appropriate congressional committees; the Honorable Carol 
Browner, Administrator, EPA, and the Honorable Jacob Lew, Director, 
Office of Management and Budget. We will also make copies available to 
others upon request.
    Please call me at (202) 512-6111 if you or your staff have any 
questions. Major contributors to this report are listed in appendix II.
            Sincerely yours,
                               Peter F. Guerrero, Director,
         Environmental Protection Issues Executive Summary Purpose.
                                 ______
                                 
                           Executive Summary
Purpose
    The Environmental Protection Agency (EPA) has had long-standing 
difficulties in establishing effective partnerships with the States, 
which generally have the lead responsibility in implementing many 
environmental programs. Among the key issues affecting EPA-State 
relationships have been concerns that EPA (1) is inconsistent in its 
oversight across regions, (2) sometimes micromanages State programs, 
(3) does not provide sufficient technical support for State programs' 
increasingly complex requirements, and (4) often does not adequately 
consult the States before making key decisions affecting them. To 
address these problems and improve the effectiveness of environmental 
program implementation, EPA's Administrator and leaders of State 
environmental programs established the National Environmental 
Performance Partnership System (NEPPS) in May 1995. In signing the 
agreement that established NEPPS, EPA and State leaders said that the 
system is designed to strengthen protection of public health and the 
environment by directing scarce public resources toward improving 
environmental results, allowing States greater flexibility to achieve 
those results, and enhancing accountability to the public and 
taxpayers. A key element of NEPPS was EPA's commitment to give States 
with strong environmental performance greater flexibility and autonomy 
in running their environmental programs.
    Given the expectation among participants that NEPPS could deal with 
many of the issues that have long impeded EPA-State relationships, the 
Chairman, Subcommittee on VA, HUD, and Independent Agencies, House 
Committee on Appropriations, asked GAO to examine the progress made by 
EPA and the States since the 1995 agreement. Specifically, as agreed 
with the Chairman's office, this report (1) identifies the status of 
grants and agreements made under NEPPS between EPA and participating 
States, (2) examines the progress that EPA and the States have made in 
developing results-oriented performance measures to be incorporated 
into NEPPS agreements and grants to the States, (3) examines how EPA 
oversight may or may not be changing in States that are participating 
in NEPPS, and (4) discusses the extent to which the use of these 
Performance Partnership Agreements and Grants has achieved the benefits 
envisioned for the States and the public.
Background
    Under NEPPS, States may voluntarily enter into ``Performance 
Partnership Agreements'' with their EPA regional offices. While there 
is considerable flexibility in how the agreements may be designed, they 
typically provide a means for EPA and the States to negotiate such 
matters as (1) which problems will receive priority attention within 
the State programs, (2) what EPA's and the States' respective roles 
will be, and (3) how the States' progress in achieving clearly defined 
program objectives will be assessed. An important component of the 
Partnership Agreements is the use of a common set of national 
environmental indicators (called ``Core Performance Measures'') to 
measure the effectiveness and success of States' environmental 
programs. In their efforts to develop these performance measures, EPA 
and State officials have sought to move beyond counting the number of 
actions (such as the number of inspections conducted or environmental 
enforcement actions taken) and increasingly toward evaluating the 
impact of programs on the environment.
    While NEPPS provides the overarching framework for developing 
Partnership Agreements, the Performance Partnership Grants Program, 
authorized by the Congress in April 1996, is used by many States as a 
major tool to implement them. This program allows States to request 
that funds from 2 or more of the 15 eligible categorical grants be 
combined to give governmental entities greater flexibility in targeting 
limited resources to their most pressing environmental needs. These 
grants are also intended to be used to better coordinate existing 
activities across environmental media and to develop multimedia 
programs. While the Partnership Agreements are designed to complement 
the Partnership Grants, States are free to negotiate agreements and/or 
grants or to decline participation in NEPPS altogether.
Results in Brief
    State participation in the National Environmental Performance 
Partnership System grew from 6 pilot States in its initial year in 
fiscal year 1996 to 45 States by the end of fiscal year 1998. Of that 
number, 31 States had both Performance Partnership Agreements and 
Performance Partnership Grants with EPA in 1998; 12 States had grants 
only; 2 States had agreements only; and 5 States did not participate at 
all. Nationwide, for that year, $217 million of $745 million in State 
environmental program grants was consolidated into Performance 
Partnership Grants-an increase of 28 percent from the previous year.
    EPA and the States agree on the importance of measuring the 
outcomes of environmental activities rather than just the activities 
themselves. However, the development of these measures has been impeded 
by a number of technical challenges, including (1) an absence of 
baseline data against which environmental improvements could be 
measured, (2) the inherent difficulty in quantifying certain results, 
(3) the difficulty of linking program activities to environmental 
results, and (4) the considerable resources needed for high-quality 
performance measurement. In addition, EPA and the States have had to 
resolve fundamental disagreements over a number of issues, including 
(1) the degree to which States should be permitted to vary from the 
national core measures and (2) the composition of the measures-
particularly regarding the degree to which preexisting output measures 
are to be retained as newer outcome measures are added. Despite these 
barriers, EPA and State leaders have managed to agree on a set of core 
measures for fiscal year 2000 that are widely regarded by EPA and State 
officials as significantly improved from those negotiated in previous 
years.
    The initial expectation that participation in NEPPS would be 
accompanied by reduced Federal oversight of States has thus far been 
realized to a limited degree. A number of instances were identified 
among the six participating States GAO visited where oversight 
reduction did accompany participation in the system. \1\ However, in 
other cases cited by both State and EPA regional officials, (1) 
decreased oversight could either not be linked directly to NEPPS 
participation or (2) oversight had either remained the same or 
increased. Among the factors cited by these officials as complicating 
reduced EPA oversight were (1) statutory and/or regulatory requirements 
that in some cases prescribe the kind of oversight required of States 
by EPA; (2) reluctance by EPA regulators to reduce oversight without 
the measures in place to ensure that environmental quality would not be 
compromised; (3) the inherent difficulty in ``letting go'' on the part 
of some regulators that have implemented the existing EPA-State 
oversight arrangement for several decades; and (4) EPA's multi-level 
organizational structure, which complicates efforts to identify whether 
all key agency decisionmakers among the agency's headquarters and 
regional offices are in agreement on key oversight-related questions.
---------------------------------------------------------------------------
    \1\ The six States were Connecticut, Florida, Georgia, Maine, 
Minnesota, and Oregon.
---------------------------------------------------------------------------
    EPA and State participants nonetheless cited a number of benefits 
associated with NEPPS, noting in particular that participation (1) 
provided a means of getting buy-in for innovative and/or unique 
projects, (2) allowed States the option to shift resources and funds 
under the Performance Partnership Grants Program, (3) served as a tool 
to divide an often-burdensome workload more efficiently between Federal 
and State regulators, and (4) improved communication and increased 
understanding among EPA and State program participants about program 
priorities and other key matters. Yet while participants from each 
State indicated that their participation in the voluntary program would 
probably continue, they also consistently expressed the view that the 
benefits of the program should be greater; that the program has yet to 
achieve its potential; and that improvements are needed. The 1995 
agreement anticipated the appropriateness of such reflection in calling 
for ``a joint evaluation system for EPA and the States to review the 
results of their efforts to ensure continuous improvement.'' GAO 
recommends in this report that such a joint evaluation process be 
initiated and suggests a number of issues to be considered for 
attention during such a process.
                           Principal Findings
Growth of State Participation in NEPPS
    NEPPS was initially tested on a pilot basis in fiscal year 1996 
with six participating States. This first year was viewed by EPA and 
the States as a time to experiment with the new system and various ways 
to implement it. The number of participating States has increased since 
that time to 45 States in fiscal year 1998, although the extent of 
their participation has varied widely. For example, half the States 
have negotiated both Partnership Agreements and Partnership Grants 
through their lead environmental agencies that cover most EPA programs; 
other States have thus far limited their participation to a Partnership 
Grant, such as one administered by their agriculture agency that, for 
example, addresses only pesticide programs. States have also varied 
considerably in the detail and content of their agreements. Senior 
officials in EPA's Office of State and Local Relations explained that 
the agency has not attempted to impose uniformity on the development of 
Partnership Agreements at this early stage of the NEPPS process and 
has, therefore, refrained from issuing guidance on how the agreements 
should be structured. Hence, the agreements vary widely in content and 
emphasis, reflecting individual States' conditions and priorities and 
reflecting the results of negotiations with their respective EPA 
regional offices.
    While Performance Partnership Grants allow eligible States to 
request that funds from two or more categorical grants (such as those 
authorized under the Clean Water Act or those used to implement the 
Clean Air Act) be combined to allow for greater flexibility in 
targeting limited resources to States' most pressing environmental 
needs, the percentage of eligible grant funds consolidated under these 
Grants is less than one-third. For fiscal year 1998, $217 million (29 
percent) of eligible grants was consolidated among the participating 
States, while $528 million (71 percent) remained as categorical grants. 
This level of consolidation represents an increase of 28 percent over 
the $169 million that was consolidated the previous year.
Progress in Developing Results-Oriented Measures
    Both EPA and individual States have a number of efforts under way 
to develop effective performance measures to better understand whether 
their programs are achieving their intended results. Their collective 
effort to develop such measures for NEPPS has centered on the ``Core 
Performance Measures'' that have been negotiated between EPA and the 
Environmental Council of the States during the past several years. \2\ 
The effort has faced a number of technical challenges inherent in 
developing defensible results-oriented measures. The results of 
activities designed to improve water quality, for example, can take 
years to appear, and the capability of many States to monitor a 
significant share of their waters is limited. Moreover, even if 
environmental conditions could be reliably and consistently measured, 
it may be particularly difficult to demonstrate the extent to which a 
government program affected that condition. Officials from Florida (a 
State that has made a significant commitment to measuring compliance 
rates and environmental indicators), for example, explained that 
factors outside their control, such as economic activity and weather 
conditions, make it particularly difficult to link program activities 
with changes in environmental conditions.
---------------------------------------------------------------------------
    \2\ The Environmental Council of the States is a national 
nonpartisan, nonprofit association of State and territorial 
environmental commissioners.
---------------------------------------------------------------------------
    In addition to these technical challenges in developing results-
oriented measures, the effort has also been challenged by disagreements 
between EPA and the States on a number of issues, including (1) the 
degree to which States should be permitted to vary from the national 
core measures and (2) the composition of the measures, particularly 
regarding the degree to which preexisting output measures are to be 
retained as newer outcome measures are added. Overall, however, the 
States and EPA have made progress in meeting these challenges. For 
example, officials in four of the six States whose programs GAO 
examined have developed and implemented their own measures to address 
their own priorities. At the same time, program officials in each of 
the six States have also agreed to report information required for the 
national core measures agreed upon between the Environmental Council of 
the States and EPA. In addition, while they maintain that further 
refinement will still be needed, EPA and State officials have agreed on 
a set of fiscal year 2000 measures for use in negotiating EPA-State 
partnership agreements that, by most accounts, are a substantial 
improvement over those negotiated from previous years in that they are 
fewer in number (i.e., better targeted to address key goals) and 
generally more outcome-oriented.
Reductions in Oversight Attributable to NEPPS Have Thus Far Been Modest
    Instances of greater State flexibility and reduced EPA oversight 
tended to focus on reducing the frequency of reporting and, in some 
cases, the frequency of onsite reviews. Maine environmental officials, 
for example, noted that more frequent, and less formal, dialog between 
the program staff and regional staff had replaced written reports, 
saving time and improving the level of cooperation between EPA and 
State staff. While Maine program officials attributed the reductions in 
part to the assignment by EPA's Boston Regional Office of a liaison for 
each State's delegated programs, they credited NEPPS with formalizing 
or legitimizing the changes. Florida program officials identified 
sizable reporting reductions in its waste program as a result of a 
joint State-EPA effort included in the Partnership Agreement. Other 
instances were cited by officials in Georgia and Minnesota.
    Yet aside from such individual instances of streamlining reporting 
requirements and similar tracking efforts, the large majority of the 
State officials GAO contacted generally maintained that participation 
in NEPPS has not yet brought about significant reductions in reporting 
and other oversight activities by EPA staff, nor has it resulted in 
significant opportunities for them to focus on other priorities or to 
shift resources to weaker program areas. EPA officials generally 
acknowledged this point, but provided specific reasons why oversight of 
State programs has not significantly decreased as a result of NEPPS-and 
in some cases has actually increased. Some headquarters and regional 
officials, for example, noted that environmental statutes or 
regulations sometimes prescribe the level of oversight required of EPA, 
leaving little room for EPA to scale it back. The officials also 
pointed to (1) audits that identified problems in some State 
enforcement programs (such as the underreporting by States of 
significant violations and precipitous decreases in the number of State 
enforcement actions taken) that they believed called for greater 
oversight and (2) the difficulty in scaling back oversight without 
measurable assurances indicating that State programs experimenting with 
alternative compliance strategies are achieving their desired results.
    At the same time, EPA officials cited a number of barriers 
preventing greater State flexibility that could be more readily 
addressed. For example, senior EPA officials in three of the four 
regional offices that GAO visited acknowledged that support for NEPPS 
within EPA varies. One senior regional official explained that many 
regional managers and staff are often more comfortable with preexisting 
ways of doing business and are unsure as to how they can accomplish 
their work in the context of the partnership approach under NEPPS. The 
official also said that there may be a need for training EPA regional 
staff in NEPPS implementation. Another senior regional official said 
that some agency staff will only take NEPPS seriously when their reward 
system is more closely tied to their performance in implementing the 
program. Headquarters officials also acknowledged another problem cited 
by many of the State officials GAO contacted-that headquarters' 
guidance, initiatives, and special requests sometimes arrive at the 
regions too late to be used effectively in regional-State Partnership 
Agreement negotiations and that they have taken steps to address the 
problem.
Benefits of NEPPS Participation Cited, But Full Potential Has Yet To Be 
                                Realized
    Despite their disappointment at the rate of progress in achieving 
greater autonomy and greater emphasis on State priorities, senior 
officials and program managers from each of the six States in GAO's 
review agreed that NEPPS has provided their programs with worthwhile 
benefits, and that its potential for achieving a more effective 
partnership between EPA and the States is still worth pursuing. Among 
the examples cited were instances in which Partnership Agreements were 
used to more efficiently divide a heavy workload between regional and 
State staff, and in which States were able to take at least limited 
advantage of the flexibility in their Performance Partnership Grant 
agreements to shift resources among their media programs. Overall, 
however, the most frequently cited benefit among both State and EPA 
regional participants was that the two-way negotiation process inherent 
in the program has fostered more frequent and effective communication 
between regional and State participants and improved their overall 
working relationship.
    At the same time, State officials almost unanimously expressed the 
view that the benefits from their investment of time and resources into 
NEPPS should be greater; that the program has yet to achieve its 
potential; and that improvements are needed. Of particular note, almost 
all of the State officials GAO interviewed cited progress in achieving 
reduced oversight and greater autonomy as critical to the future 
success of the program. Also cited was the need to continue improving 
performance measures; addressing the barriers impeding greater 
acceptance of NEPPS among staff within both EPA and State agencies; 
determining how to make greater use of the flexibility under 
Performance Partnership Grants to shift resources and funding to 
address higher priorities; and improving the manner in which 
headquarters offices provide their input into regional-State NEPPS 
negotiations.
    These concerns pose challenges for the future of NEPPS-challenges 
that were anticipated by the 1995 agreement that launched the program, 
which called for a joint evaluation system for EPA and the States to 
review the results of their efforts to ensure continuous improvement. 
On the basis of the considerable information that can be learned from 
the experiences to date of participating States and regional offices, 
GAO believes that it is now appropriate to undertake such a joint 
evaluation process, with the goals of (1) identifying best practices 
among participating States for dealing with the most challenging 
problems facing the program and (2) eventually obtaining agreement on 
actions that will improve and expand the program. EPA officials and 
representatives of the Environmental Council of the States have, in 
fact, recently agreed upon the basic outline of such a joint evaluation 
process. Further progress (including decisions on the specific issues 
to address and a timetable for addressing them) would be important 
steps in expanding both the participation in, and effectiveness of, 
this important program.
                            Recommendations
    GAO recommends that the Administrator, EPA, work with senior-level 
State officials to initiate a joint evaluation process that (1) seeks 
agreement on the key issues impeding progress in developing a more 
effective National Environmental Performance Partnership System and (2) 
develops mutually agreeable remedies for these issues. Among the issues 
such a process could focus on are these:
      Developing a set of flexible guidelines, to be used as a 
tool by State and EPA regional NEPPS negotiators, that could help to 
clarify the appropriate performance expectations and other conditions 
that States must meet to achieve reduced oversight in carrying out 
their environmental programs and the type of reduced oversight (e.g., 
reduced frequency of reporting, greater autonomy in setting program 
priorities) that could be achieved.
      Identifying what additional work is needed to improve the 
Core Performance Measures recently negotiated by EPA and State 
representatives for fiscal year 2000.
      Alleviating the resistance among some staff (both within 
EPA offices and among participating State agencies) toward implementing 
NEPPS, through training efforts and other strategies.
      Determining what appropriate steps should be taken by EPA 
and the States to allow for greater use by States of the flexibility 
envisioned under the Performance Partnership Grant system to shift 
resources and funding among their media programs.
      Determining how effective public participation in the 
NEPPS process can best be ensured.
      Developing ways to improve communication among EPA's 
headquarters and regional offices and participating States to ensure 
that States are given clear and timely information on whether key 
elements of their NEPPS-related agreements have the full buy-in of key 
EPA offices.
                            Agency Comments
    GAO provided a draft of this report for review and comment to EPA 
and the Environmental Council of the States. EPA said that ``the Report 
describes, in a fair and balanced manner, the progress EPA and the 
States have made through performance partnerships.'' EPA also agreed 
with the report's recommendation that agency and State efforts to 
improve NEPPS should include training and other efforts to achieve the 
cultural change necessary for greater success.
    EPA also commented on GAO's recommendation that EPA and State 
environmental leaders should agree on guidelines that would help to 
clarify, for EPA and State negotiators, the appropriate performance 
expectations that States must meet to achieve reduced oversight in 
carrying out their environmental programs and the type of reduced 
oversight that could be achieved. EPA noted that while it agreed with 
this recommendation in principle, EPA and the States believe that each 
State's Performance Partnership Agreement should specify the degree of 
oversight necessary to accommodate the unique environmental problems 
and varied program capabilities of that State. GAO agrees that 
oversight arrangements should be negotiated between each State and its 
corresponding regional office in a manner that accounts for that 
State's unique circumstances, and that these arrangements should be 
specified in the Performance Partnership Agreement. GAO continues to 
believe, however, that nonbinding national guidance-to be agreed upon 
in advance by EPA and State environmental leaders-would be useful in 
introducing objective parameters to be considered by regional and State 
negotiators as they seek agreement over this sensitive issue.
    In addition to these comments, EPA provided updated information and 
comments on several other issues (discussed at the end of chs. 3, 4, 
and 5). EPA's comments, together with GAO's detailed responses, are 
included in appendix I.
    Representatives of the Council provided a number of suggested 
clarifications. They cautioned that since their comments had not been 
reviewed by the Council's membership, they should be viewed as informal 
suggestions to enhance the accuracy and completeness of the report. GAO 
made revisions as appropriate to incorporate these comments.
                                 ______
                                 
                              Introduction
    The Environmental Protection Agency (EPA) has had long-standing 
difficulties in establishing effective partnerships with the States. 
Among the key issues affecting EPA-State relationships have been 
concerns that EPA (1) is inconsistent in its oversight across regions, 
(2) sometimes micromanages State programs, (3) does not provide 
sufficient technical support for State programs' increasingly complex 
requirements, and (4) often does not adequately consult the States 
before making key decisions affecting them.
    In an effort to address these problems and improve the 
effectiveness of environmental program implementation, EPA and State 
environmental agencies established the National Environmental 
Performance Partnership System (NEPPS). Under this system, strong State 
programs were to be given more leeway to set environmental priorities, 
design new strategies for addressing these priorities, and manage their 
own programs-allowing EPA to concentrate more effort, oversight, and 
technical assistance on weaker programs. A major component of the 
system is the development of Performance Partnership Agreements. These 
agreements are to provide a means for EPA and the States to negotiate 
such matters as (1) which problems will receive priority attention 
within State programs, (2) what EPA's and the States' respective roles 
will be, and (3) how the States' progress in achieving clearly defined 
program objectives will be assessed. States may also establish 
Performance Partnership Grants, which allow them to consolidate grants 
as a way of providing more flexibility in managing their environmental 
grant funds, and to cut paperwork and simplify financial management. 
For example, a State that would otherwise have separate water, air, and 
pesticide grants can now combine the funds from some or all of these 
grants into one or more performance partnership grants.
    Given the expectation among participants that NEPPS could deal with 
many of the issues that have long impeded the EPA-State relationship, 
the Chairman, Subcommittee on VA, HUD, and Independent Agencies, House 
Committee on Appropriations, asked us to examine the progress made by 
EPA and the States since the 1995 agreement. Specifically, as agreed 
with the Chairman's office, this report (1) identifies the status of 
grants and agreements made under NEPPS between EPA and participating 
States, (2) examines the progress that EPA and the States have made in 
developing results-oriented performance measures to be incorporated 
into NEPPS agreements and grants to the States, (3) examines how EPA 
oversight may or may not be changing in States that are participating 
in NEPPS, and (4) discusses the extent to which the use of these 
performance partnership agreements and grants has achieved the benefits 
envisioned for the States and the public.
NEPPS Was Designed to Improve the Effectiveness of the EPA-State 
        Working Relationship
    Most of the nation's environmental statutes envision a strong role 
for the States in implementing and managing environmental programs. 
Toward this end, in 1993, a joint State/EPA task force recommended that 
EPA and the States adopt a more systematic approach to manage 
environmental programs in a way that allows each level of government to 
contribute according to its respective strengths. In May 1993, the EPA 
Administrator established a State/EPA Steering Committee to oversee the 
implementation of the task force's recommendations. Subcommittees were 
established to pursue work on oversight reform, with the goal of 
increasing State participation in EPA decisionmaking, developing 
national environmental goals and measures, allowing flexible funding 
across programs, and improving communications between EPA and States.
    As a result of these efforts, on May 17, 1995, the EPA 
Administrator and the leaders of State environmental programs formally 
agreed to implement a new environmental partnership entitled the 
National Environmental Performance Partnership System. This agreement, 
entitled the Joint Commitment to Reform Oversight and Create a National 
Environmental Performance Partnership System, stated that the long-
range goal of NEPPS was ``to provide strong public health and 
environmental protection by developing a system where EPA and the 
States work together for continuous gains in environmental quality and 
productivity.'' In establishing NEPPS, EPA and the leaders of State 
environmental programs indicated the system is designed to strengthen 
protection of public health and the environment by directing scarce 
resources toward improving environmental results, allowing States 
greater flexibility to achieve those results, and enhancing 
accountability to the public and taxpayers. The seven principle 
components of NEPPS are:
      increased use of environmental goals and indicators in 
order to measure the effectiveness and success of environmental 
programs;
      a new approach for conducting assessments of 
environmental programs, which will include a greater reliance on annual 
environmental and programmatic self-assessments conducted by each State 
and sharing with the public information about environmental conditions, 
goals, priorities, and achievements;
      the development of environmental performance agreements 
that outline environmental priorities and goals agreed to jointly by 
EPA and the States;
      a reduction in oversight for those States with strong 
environmental programs, which will enable EPA to focus resources on 
States that need more assistance;
      the designation of strong State environmental programs as 
``leadership programs'' that are afforded minimal oversight;
      increased opportunity for constructive public involvement 
in the management of environmental programs through a program that 
encourages regulated entities and the general public to review and 
comment on environmental issues; and
      the development of a joint system evaluation for EPA and 
the States to review the results of their efforts to ensure continuous 
improvement.

    As we reported in May 1998, NEPPS is intended to strengthen the 
effectiveness of the nation's environmental programs by redefining the 
Federal and State roles to ensure that public resources are used 
efficiently to address the most important environmental problems. \3\ 
According to EPA, NEPPS is based on a shared recognition that continued 
environmental progress can be achieved most effectively by working 
together as partners. Accordingly, the effort is designed to promote 
joint planning and joint priority-setting, which takes into account 
each State's environmental conditions and objectives. A key element of 
this program is EPA's commitment to give States with strong 
environmental performance greater flexibility and autonomy in running 
their environmental programs. To help document this capability, a 
primary objective of the program is the measuring and reporting of 
EPA's and States' progress toward achieving their environmental and 
programmatic goals.
---------------------------------------------------------------------------
    \3\ Environmental Protection: EPA's and States' Efforts to Focus 
State Enforcement Programs on Results (GAO/RCED-98-113, May 27, 1998).
---------------------------------------------------------------------------
Negotiation of Performance Partnership Agreements and Performance 
        Partnership Grants
    Under NEPPS, States and their corresponding EPA regional offices 
are expected to reach an understanding of the State's environmental 
conditions and to agree on appropriate environmental goals and 
priorities and on program performance indicators to measure progress. 
The results of these negotiations are documented in Performance 
Partnership Agreements and/or Performance Partnership Grants. 
Partnership Agreements are comprehensive agreements that are expected 
to be used as the principal mechanism for implementing NEPPS. According 
to EPA, the agreements are derived from joint discussions by EPA and 
the State on their interests, concerns, choices, and commitments for 
sound environmental performance.
    While NEPPS provides the overarching framework for developing 
partnership agreements, the Performance Partnership Grants Program 
serves as a major tool to implement them. Performance Partnership 
Grants are intended to allow States greater flexibility in deciding how 
Federal grant funds can best be spent to achieve their environmental 
goals. Under these grants, which were authorized by the Congress in 
April 1996, eligible States and tribes may request that funds from two 
or more categorical grants (such as those authorized under the Clean 
Water Act or those used to implement the Clean Air Act) be combined 
into one or more grants to give governmental agencies greater 
flexibility in targeting limited resources to their most pressing 
environmental needs. These grants are also intended to be used to 
better coordinate existing activities across environmental media and to 
develop multimedia programs.
    Importantly, State participation in NEPPS is voluntary. In 
particular, while Partnership Agreements are designed to complement 
Partnership Grants, States are free to negotiate both agreements and 
grants or to decline participation in NEPPS altogether.
Development of Performance Measures Is a Key Component of NEPPS
    A key component of the 1995 NEPPS agreement was the commitment by 
EPA and the Environmental Council of the States to identify a common 
set of national environmental indicators to measure the effectiveness 
and success of States' environmental programs. \4\ In an effort to 
fulfill this commitment, on August 20, 1997, EPA and the Council agreed 
on a set of ``Core Performance Measures'' for EPA and States to use in 
measuring progress toward the achievement of environmental and program 
goals. This first set was used to measure progress in fiscal year 1998 
and, with some minor revisions, was used again in fiscal year 1999.
---------------------------------------------------------------------------
    \4\ The Environmental Council of the States is a national 
nonpartisan, nonprofit association of State and territorial 
environmental commissioners.
---------------------------------------------------------------------------
    In their efforts to develop these performance measures, EPA and 
State officials have sought to move beyond counting the number of 
actions and increasingly toward evaluating the impact of programs on 
the environment. Traditionally, performance measures have focused on 
tracking ``outputs,'' such as the number of inspections conducted and 
enforcement actions taken. Such actions are easiest to count, and they 
provide a useful measure of the level of agency activity. On the other 
hand, measuring the actual results a program is intended to achieve, 
such as the degree to which progress is made in achieving air or water 
quality standards, is more difficult but provides information on 
whether the goals of the regulatory program are being achieved. \5\
---------------------------------------------------------------------------
    \5\ Thus, for example, one outcome-oriented core measure in the air 
program tracks overall emission reductions for key pollutants over 
time.
---------------------------------------------------------------------------
    In order to strike a better balance between output measures and 
measures of program results, EPA and the Council developed a tiered 
approach, shown in table 1.1, to better account for program results. As 
the table indicates, an output measure considers numbers of actions 
taken, demonstrating the level of a particular activity or how 
resources are used. An outcome, on the other hand, can measure the 
results associated with a particular policy, such as the percent of 
facilities in environmental compliance. Finally, environmental 
indicators demonstrate whether overall, long-term agency objectives are 
being achieved, such as the trend in the number of bodies of water 
meeting clean water standards.

                         Table 1.1: Categories of Environmental Performance Measurement
----------------------------------------------------------------------------------------------------------------
               Measure                      Characteristic              Examples                 Purpose
----------------------------------------------------------------------------------------------------------------
Output...............................  Numbers of actions.....  Number of penalty        Demonstrates level of
                                                                 dollars collected;       activity; demonstrates
                                                                 number of violations     how resources are used
                                                                 discovered.
Outcome..............................  Environmental or         Tons of pollution        Demonstrates results of
                                        programmatic results     reduced or percent of    specific initiatives
                                        associated with a        facilities in            or policies
                                        particular program or    environmental
                                        policy.                  compliance.
Environmental indicator..............  Indicators associated    Trend in number of       Demonstrates whether
                                        with overall             bodies of water          overall, long-term
                                        environmental or         meeting clean water      agency objectives are
                                        program objectives.      standards.               being achieved
----------------------------------------------------------------------------------------------------------------
Note: In its efforts to develop overall performance measures for the Government Performance and Results Act of
  1993, EPA uses slightly different terms: ``outputs,'' ``intermediate outcomes,'' and ``long-term outcomes.''
  In its guide to implementing the act, the Office of Management and Budget distinguishes between ``output
  goals'' and ``outcome goals'' and calls on Federal agencies to measure progress toward both. Other experts in
  the field of government performance measurement labeled the three tiers ``outputs,'' ``policy or behavioral
  outcomes,'' and ``program outcomes.'' See for example, Sparrow, Malcolm, ``Regulatory Agencies, Searching for
  Performance Measures That Count,'' and Greiner, John M., ``Positioning Performance Measurement for the Twenty-
  first Century, ``Organization Performance and Measurement in the Public Sector, Quorum Books, (1996).

Source: Environmental Protection: EPA's and States' Efforts to Focus State Enforcement Programs on Results (GAO/
  RCED-98-113, May 27,1998).

    NEPPS' emphasis on performance measurement also provides a critical 
link to the Congress' intent in passing the Government Performance and 
Results Act of 1993. The Results Act requires agencies to clearly 
define their missions, establish long-term strategic goals (and annual 
goals linked to them), measure their performance against the goals they 
have set, and report this information to the Congress. Importantly, 
rather than focusing on the performance of prescribed tasks and 
processes, the statute emphasizes the need for agencies to focus on and 
achieve measurable program results.
Objectives, Scope, and Methodology
    Our objectives in this review were to (1) identify the status of 
grants and agreements made pursuant to NEPPS between EPA and 
participating States, (2) examine the progress that EPA and the States 
have made in developing results-oriented performance measures to be 
incorporated into NEPPS agreements and grants to the States, (3) 
examine how EPA oversight may or may not be changing in States that are 
participating in NEPPS, and (4) discuss the extent to which the use of 
performance partnership agreements and grants has achieved the benefits 
envisioned for the States and the public.
    For the first objective, we reviewed EPA documents describing the 
overall status of performance partnership grants and agreements made 
between EPA and States. We also interviewed officials from EPA's Office 
of State and Local Relations to obtain the latest data and related 
information on the status of Partnership Agreements and Partnership 
Grants signed by the States and EPA.
    For the remaining objectives, we first contacted EPA (headquarters 
and regional) officials to identify appropriate State environmental 
programs for detailed study. In selecting States, we were primarily 
concerned with the degree of State participation in this voluntary 
program, the length of time they have been participating, and the 
desirability of examining States with different experiences and 
geographical locations.
    On the basis of these criteria, we visited six States that have 
experience with NEPPS for detailed study-Connecticut, Florida, Georgia, 
Maine, Minnesota, and Oregon. In each case, we interviewed officials in 
the States' lead environmental agency. For each State, we first 
discussed the program with officials that have overall responsibility 
for NEPPS. To get insights into the status of NEPPS at the program 
level, we interviewed program managers from each of three environmental 
programs: the Resource Conservation and Recovery Act, the Clean Water 
Act, and the Clean Air Act. We also interviewed program officials in 
the EPA regional office with jurisdiction for each State we visited. 
After these visits, we conducted telephone interviews with 
environmental officials from two States that have limited their 
participation in NEPPS-Michigan and Pennsylvania-to determine their 
views of NEPPS and the reasons why they chose not to participate more 
fully.
    At EPA headquarters, we contacted officials from the various 
offices with NEPPS responsibilities, including the Offices of Air and 
Radiation; Water; Solid Waste and Emergency Response; Enforcement and 
Compliance Assurance; Reinvention; and State and Local Relations, to 
discuss our objectives as well as the results of our specific work at 
the States and EPA regional offices.
    We also gathered information on our objectives through interviews 
with officials from other organizations with an interest in NEPPS, 
including the Association of State and Interstate Water Pollution 
Control Administrators, Association of State and Territorial Solid 
Waste Management Officials, Environmental Council of the States, 
National Academy of Public Administration, National Governors 
Association, and State and Territorial Air Pollution Program 
Administrators. Regarding the second objective, we interviewed 
officials from the Green Mountain Institute for Environmental 
Democracy, which participated in studies of issues related to the 
development and/or use of core performance measures.
    We conducted our work from June 1998 through April 1999 in 
accordance with generally accepted government auditing standards. We 
provided copies of this report to EPA and the Environmental Council of 
the States for their review and comment. EPA's comments and our 
responses are included in appendix I. The Council indicated that since 
its response had been prepared without the benefit of review by Council 
membership, its comments should be viewed not as reflecting the 
Council's positions, but rather as informal suggestions to enhance the 
accuracy and completeness of the report. We made revisions as 
appropriate to incorporate these comments. We also provided relevant 
sections of the draft to representatives of the eight States included 
in our review to verify statements attributed to them, and to verify 
other information they provided, and have made revisions as appropriate 
to incorporate their comments.
                                 ______
                                 
                 Growth of State Participation in NEPPS
    State participation in the National Environmental Performance 
Partnership System has grown significantly in the 4 years since the 
system was created, increasing from 6 pilot States in fiscal year 1996 
to 45 States by the end of fiscal year 1998. \6\ However, the extent of 
participation among these 45 States varied considerably: 31 States had 
both performance partnership agreements and grants; 12 States had 
grants only; 2 States had agreements only; and 5 States did not 
participate at all. Moreover, while some States included a full range 
of environmental programs under their agreements, others included only 
one or two programs (such as pesticide or drinking water programs).
---------------------------------------------------------------------------
    \6\ For this report, NEPPS participation is defined as 
participation in Performance Partnership Agreements, Performance 
Partnership Grants, or both.
---------------------------------------------------------------------------
Initial Implementation Was Devoted to Experimentation
    NEPPS was initially tested on a pilot basis in fiscal year 1996 
with 6 participating States. This first year was viewed as a time to 
experiment with the new system and various ways to implement it. 
According to a 1996 study of five of the six pilot efforts conducted by 
the Environmental Law Institute with funding from EPA, \7\ although the 
pilot States shared ideas during the process of developing their 
agreements, the States deliberately avoided discussing some of the 
specifics of their approaches so as to ensure diversity.
---------------------------------------------------------------------------
    \7\ An Independent Review of the State-Federal Environmental 
Partnership Agreements for 1996, Environmental Law Institute, (1996). 
The Performance Partnership Agreement between EPA and the sixth State 
was signed after the Institute completed its review and analysis of the 
other five agreements and thus was not covered by this study. The 
Institute's study did not include a review of Performance Partnership 
Grants since the authority for these grants was not provided by the 
Congress until the middle of fiscal year 1996.
---------------------------------------------------------------------------
    The Environmental Law Institute's study focused on whether, and 
how, the pilot performance partnership agreements achieved and measured 
environmental results, how flexibility was exercised under the program, 
and how accountability was ensured. Based on the experiences of the 
pilot States, the Institute's study concluded that NEPPS showed great 
promise for improving the relationship between EPA and the States and 
for improving the administration of the environmental statutes. 
However, the study cited a number of issues that would need to be 
addressed as the program evolved. It stated, for example, that while 
States and EPA had made progress toward the goal of increasing the use 
of environmental indicators (measures of overall progress in achieving 
environmental objectives), much remained to be done to develop 
appropriate measures. The study also concluded improvements were needed 
to (1) clarify the relationship between Performance Partnership 
Agreements and Grants, (2) more effectively communicate EPA's national 
priorities to EPA regions and States in time to impact State and EPA 
regional office negotiations on Performance Partnership Agreements, and 
(3) increase public participation in the program.
State Participation Expanded Rapidly Since Initial Implementation
    State participation in Performance Partnership Agreements and 
Grants expanded rapidly after the first year. In fiscal year 1997, 
States and regional offices were expected by EPA headquarters to build 
on the prior year's experiences and work on areas that needed 
additional clarification or where barriers needed to be removed. 
Participation grew that year to 44 States and to 45 States in fiscal 
year 1998.


    Of the 45 States participating in fiscal year 1998, 31 had both 
Performance Partnership Agreements and Grants, 12 States had grants 
only, 2 States had agreements only, and 5 States did not participate at 
all. (See fig. 2.1.) Since States can have multiple Performance 
Partnership Agreements and Grants, depending on which State agencies 
handle the different environmental programs, the 45 States accounted 
for a total of 38 agreements and 52 grants.
    According to EPA, States vary in the extent of their participation, 
with half the States participating broadly by negotiating both 
Performance Partnership Agreements and Performance Partnership Grants 
that cover most EPA programs through their State environmental 
agencies, while other States limit their participation by negotiating, 
for example, a partnership grant through their agricultural agency that 
covers pesticide programs. As shown in figure 2.2, of those States that 
participated in NEPPS through their lead environmental agencies in 
fiscal year 1998, 25 had both Performance Partnership Agreements and 
Grants, 4 had grants only, and 6 had agreements only.


    States also vary considerably in terms of the detail and content of 
their partnership agreements. Senior officials in EPA's Office of State 
and Local Relations explained that the agency has not attempted to 
impose uniformity on the development of partnership agreements at this 
early stage of the NEPPS process and has, therefore, refrained from 
issuing guidance on how partnership agreements should be structured. 
Hence, the agreements vary widely in content and emphasis, reflecting 
individual State's conditions and priorities, and their negotiations 
with their respective EPA regional offices.
Most States Have Performance Partnership Grants , but Few Take Full 
        Advantage of the Flexibility Offered
    As discussed in chapter 1, allow eligible Performance Partnership 
Grants States to request that funds from two or more categorical grants 
(such as those authorized under the Clean Water Act or those used to 
implement the Clean Air Act) be combined into one or more grants to 
give greater flexibility in targeting limited resources to their most 
pressing environmental needs. Thus far, however, the States have 
consolidated less than one-third of the eligible categorical grant 
funds under partnership grants. Of the eligible grants, 29 percent, or 
$217 million, was consolidated in fiscal year 1998, while 71 percent, 
or $528 million, remained as categorical grants. This represents an 
increase of 28 percent over the $169 million that was consolidated the 
previous year.
                                 ______
                                 
   EPA and States Have Made Progress in Developing Results-Oriented 
                          Performance Measures
    Both EPA and individual States have a number of efforts underway to 
develop effective performance measures to better understand whether 
their programs are achieving their intended results. Their collective 
effort to develop such measures for NEPPS has centered on the ``Core 
Performance Measures'' that have been negotiated between EPA and the 
Environmental Council of the States during the past several years. 
These measures are intended to be used in tracking States' progress 
toward achieving the most important goals of the nation's environmental 
programs.
    In developing the performance measures, EPA and the States have 
retained a number of the traditional output measures they have used in 
the past but have attempted to focus increasingly on measuring desired 
environmental outcomes. However, overcoming a number of technical 
challenges, and reaching agreement on the most important environmental 
outcomes and on the methodologies to measure progress toward those 
outcomes, has been difficult. Nevertheless, considerable progress has 
been made in developing and improving the performance measures-as 
evidenced by agreement on a set of measures for fiscal year 2000 that 
are widely regarded as improved measures from previous years.
Developing and Agreeing on Core Performance Measures Has Been Difficult
    EPA and State officials agree on the importance of measuring the 
outcomes of environmental activities rather than just the activities 
themselves. However, developing such measures has faced a number of 
challenges. Outputs, by their nature, are inherently easier to measure, 
report, and understand than outcomes and environmental results. 
Compared to output measures, developing defensible results-oriented 
measures has proven to be substantially more difficult. In addition to 
these technical challenges, EPA and the States have differed on what 
the measures should look like (particularly regarding the relative 
emphasis of output versus outcome measures) and on the degree of 
flexibility with which they should be implemented.
Technical Challenges
    EPA and State officials identified several key technical challenges 
that they have had to address in their efforts to focus performance 
measurement on desired results. These include (1) an absence of 
baseline data against which environmental improvements could be 
measured, (2) the inherent difficulty in quantifying certain results, 
(3) the difficulty of linking program activities to environmental 
results, and (4) the considerable resources needed for high-quality 
performance measurement.
Need for Baseline Data to Measure Progress
    As noted in our May 1998 report on EPA's enforcement program, \8\ 
the absence of adequate baseline data for comparison is a common 
problem among many organizations engaged in performance measurement, 
including Federal and State agencies. Measuring environmental 
improvements requires a starting point against which to measure 
changes. Without such a baseline, any environmental measurement system 
can only provide a snapshot in time; it cannot tell whether conditions 
are getting better or worse.
---------------------------------------------------------------------------
    \8\ Environmental Protection: EPA's and States' Efforts to Focus 
State Enforcement Programs on Results (GAO/RCED-98-113, May 27, 1998).
---------------------------------------------------------------------------
    Federal and State agencies have therefore frequently had to build 
entirely new data systems and ways of collecting data because the old 
systems are of limited use in analyzing programs' performance. Our 1998 
report noted that compliance data are especially scarce for small 
businesses that historically received few inspections. Consequently, 
State programs that are just now attempting to measure results have 
limited data with which to compare them. Florida officials, for 
example, told us that their recent environmental reports showing 
industry-wide compliance rates generally have a baseline of 1997 or 
1998, because past information is unavailable or unreliable. An EPA 
official responsible for NEPPS implementation also noted that the 
scarcity of baseline information by which to measure program 
improvements attributable to NEPPS is a particular challenge and a 
major concern to the agency.
Inherent Difficulty in Quantifying Data
    Generating relevant and accurate data is a challenge under the best 
of circumstances. Not only do appropriate measures need to be defined, 
methodologies need to be established to develop the necessary data. In 
enforcement programs, for example, it is difficult to determine the 
impact on the overall environment from individual inspections conducted 
or enforcement actions taken. In addition, as officials told us during 
our review of enforcement programs, quantifying industry-wide 
compliance rates and other outcomes has been complicated by the 
difficulty of deciding both how to define a compliance rate and how to 
calculate it. As another example, the results of activities designed to 
improve water quality can take years to appear, and the capability of 
many States to monitor a significant share of their waters is limited.
    These challenges have led some State officials to note that it may 
be exceedingly difficult to achieve comparability from State to State, 
both in what is being measured and the methodology used in gathering 
data. In particular, a State with more complete data may appear to have 
greater environmental problems than a State with poor data. Minnesota 
officials, for example, told us that their data base for ``impaired 
waters'' (waters that do not meet State water quality standards) 
includes waters that have undergone far more rigorous analysis than 
that performed by other States. Consequently, according to these 
officials, Minnesota's impaired waters may appear to be far more severe 
than those of another State that does not subject its waters to such 
rigorous analysis.
    Similar findings were reached in a 1998 study evaluating an effort 
where six New England State environmental management agencies and EPA's 
Boston office collaborated on a menu of environmental indicators 
intended to measure (1) the status and trends of the quality of the New 
England environment and (2) program accomplishments toward reaching 
State and regional environmental goals. \9\ The findings of the study 
were based on an evaluation of data availability and quality for 12 
example indicators, which included 6 specific performance measures. A 
key finding of this effort was that the level of consistency required 
for regional indicators is difficult to achieve given (1) a lack of 
clarity in terms of what the indicators intend to measure and for what 
purpose and (2) a lack of consistency across States in both the type of 
data collected and methodology used.
---------------------------------------------------------------------------
    \9\ Green Mountain Institute for Environmental Democracy, 
``Indicator Data Catalog, An Evaluation of Data Issues Related to the 
Development of Core Performance Measures and Regional Environmental 
Indicators,'' (Nov. 1998).
---------------------------------------------------------------------------
Challenges in Linking Program Activities to Environmental Outcomes
    Assuming environmental conditions could be reliably and 
consistently measured, it may still be difficult to demonstrate the 
extent to which a government program affected that condition. As we 
noted in a 1997 report on the complexities associated with performance 
measures, ``Separating the impact of [a] program from the impact of 
other factors external to the program was cited by government agency 
officials as the most difficult challenge in analyzing and reporting 
government performance.'' \10\
---------------------------------------------------------------------------
    \10\ Managing for Results: Analytic Challenges in Measuring 
Performance (GAO/HEHS/GGD-97-138, May 30, 1997).
---------------------------------------------------------------------------
    Even in the case of the Florida Department of Environmental 
Protection's significant commitment to measuring compliance rates and 
environmental indicators, regulators made a conscious decision not to 
link their enforcement programs with trends in environmental indicators 
or outcomes like compliance rates. The regulators explained that the 
causes of these trends are subject to other influences outside their 
control, such as the state of the economy, the weather, and other 
departmental actions besides enforcement. The Department's consultant 
agreed, noting, for example, that ``If and when the scallop population 
in Tampa Bay is restored to healthy levels, Florida's Department of 
Environmental Protection . . . would be hard pressed to prove beyond 
doubt that their interventions actually produced this result, no matter 
how compelling their scientific analyses and explanations.'' \11\
---------------------------------------------------------------------------
    \11\ Malcolm Sparrow, ``Regulatory Agencies, Searching for 
Performance Measures That Count,'' (June 9, 1997).
---------------------------------------------------------------------------
    Determining causality has proven to be particularly difficult among 
pollution prevention programs. According to EPA headquarters officials, 
EPA and the States have not yet been able to determine how to establish 
a cause and effect relationship to measure the impacts on the 
environment from many activities that prevent pollution from occurring.
Resource Limitations
    Another barrier, which essentially flows from the others, relates 
to the significant resources and expertise required for identifying and 
testing potential results-oriented performance measures. Once measures 
are in place, gathering and analyzing the data can also be resource-
intensive and can take years to show environmental improvements. In 
addition, several program officials of the States we visited told us 
that some Federal and State data bases will require significant 
improvement in order to track the new information to support results 
measures. A member of the Environmental Council of the States' 
Information Management Workgroup agreed, noting that this is an issue 
EPA and the States still need to address.
    Two States that have developed systems to measure the results of 
selected enforcement efforts found that considerable resources are 
needed to do quality performance measurement. The Florida Department of 
Environmental Protection hired a consultant to assist them in 
developing their new performance measurement system and dedicated 
several of its own staff to this effort. A Massachusetts environmental 
official found that monitoring the results of even a single program can 
require considerable resources. The former Deputy Commissioner said 
that in a pilot test of its new Environmental Results Program, the 
agency had to invest a great deal of time and energy to work with the 
facilities and measure the ultimate results, even though the test 
involved only 18 participating companies. Officials from these and 
other States noted that it is difficult to commit resources to the 
development and implementation of new results-oriented performance 
measures while still meeting other program requirements.
Results-Oriented Measures Easier to Develop for Some Programs Than 
        Others
    As challenging as the exercise may be for all programs, we found 
that developing results-oriented performance measures has been easier 
in the case of some programs than others. Air programs, for example, 
have long had a monitoring network in place to measure ambient air 
quality throughout the country. Accordingly, as officials of EPA's 
Office of Air and Radiation told us, the air program has had 
considerable background with results-oriented performance measures, and 
that this experience has limited both the burden of developing specific 
performance measures and the burden on the States of implementing these 
measures. Officials of the States we visited generally confirmed this 
assessment. A senior official in Georgia's environmental protection 
division, for example, told us that developing results-oriented 
measures is easiest for the air program, more difficult for the water 
program, and most difficult for the waste program. The Georgia official 
attributed the differences to the extensive historical experience of 
the air program with results-oriented measures, the length of time it 
takes to see measurable results in the water program, and the 
difficulty in identifying suitable measures for the waste program. 
Similar comments were made by a Florida air program official that noted 
that States and EPA have been monitoring air quality for some time, 
have good data, and can show results.
Challenges in Obtaining Agreement Between EPA and the States on the 
        Measures
    In addition to these technical challenges, EPA and States have had 
to resolve fundamental disagreement over (1) the degree to which States 
should be permitted to vary from the national core measures and (2) the 
composition of the measures, particularly regarding the degree to which 
pre-existing output measures are to be retained as newer outcome 
measures are added.
Extent to Which States Can Vary From the Core Measures
    EPA's goal to use the performance measures to provide a national 
picture of environmental progress necessitates a degree of consistency 
among the States in what is being measured. To achieve consistency, the 
May 1995 NEPPS Agreement provides that EPA and the States will ``. . 
.develop a limited number of program and multi-media performance 
measures that each State will report so that critical national program 
data is collected.'' However, recognizing that a set of national 
measures may not necessarily address individual States' priorities (or 
represent what individual States consider to be the best measures for 
their State-specific situations), the agreement further provides that 
States may develop other goals and performance indicators that will 
present a more meaningful picture of their State's environmental 
quality. This apparent need was further recognized in the August 1997 
joint statement by EPA and the Environmental Council of the States, 
which accompanied the release of the measures for fiscal year 1998. The 
statement indicated that where a particular performance measure does 
not fit a State's situation, that measure may be modified, substituted, 
or eliminated if mutually agreed to by both the State and EPA. 
Deviations could be warranted, for example, where (1) there may not be 
adequate data to report on the measure, (2) alternative measures may 
work better, or (3) there may be higher priorities in a State.
    According to Council officials, in the first year of the 
performance measures, EPA regions were inconsistent in implementing the 
performance measures across the country: some EPA staff in regional 
offices allowed States flexibility in implementing performance measures 
(as intended by the 1997 joint statement) while staff in other regions 
tried to portray the national performance measures as mandatory and 
inflexible. In June 1998, the president of the Council wrote to the 
Deputy Administrator of EPA, asking that the agency reaffirm its 
support for the flexibility provisions of the joint statement. Noting 
that one of the most challenging aspects of implementing the 
performance measures is balancing the need for uniform national 
measures with the need to accommodate the circumstances of individual 
States, the Deputy Administrator's September 1998 response reaffirmed 
that under certain circumstances, EPA regions can adjust a measure that 
is inappropriate for a particular State. Updated EPA-Council joint 
guidance on the use of performance measures, issued in April 1999 as an 
addendum to the 1997 Joint Statement along with the release of the 
fiscal year 2000 measures, reiterates EPA's commitment to allow 
flexible implementation of the measures in specific situations and with 
approval of both the State and EPA. \12\
---------------------------------------------------------------------------
    \12\ Specifically, the addendum states that a State and EPA may 
jointly agree to deviate from particular performance measures where (1) 
the measure does not apply to a State's or region's physical setting or 
environmental condition; (2) the State does not have authority for the 
program to which the measure applies; (3) data for the measure are not 
available or alternative data are more relevant in painting a picture 
of environmental progress; (4) the State and EPA agree that the measure 
or the work associated with it are not a high priority in the State.
---------------------------------------------------------------------------
States Have Implemented Both Core Performance Measures and Their Own 
        Measures
    As permitted by the 1995 NEPPS agreement, four of the six States 
that we visited have developed some performance measures on their own, 
separately from the national core measures. These States use their own 
measures to track priority issues in their respective States and to 
report environmental progress to their State legislatures and the 
public. Florida environmental officials developed their separate 
measures in conjunction with the NEPPS program, and they continue to 
use them because they believe they are better measures of results than 
the Core Performance Measures. Georgia and Minnesota officials 
developed measures that focus on specific State priorities, and Oregon 
officials developed measures that were specifically tailored to the 
State's strategic plan. While environmental program officials in 
Connecticut and Maine have not developed performance measures apart 
from the core measures, they told us that they believed State-specific 
rather than national measures would be more useful to them and more 
appropriate to measure the results of environmental programs in their 
States.
    Regardless of whether a State developed its own performance 
measures, each of the States we visited also agreed to report on the 
national core measures. Normally, the States did not adopt the core 
performance measures verbatim; they made minor changes where 
appropriate to meet State-specific situations. In each case, however, 
the States' changes to the national Core Performance Measures were 
reviewed and approved by the appropriate EPA regional office to ensure 
that they were compatible with the national measures. EPA officials 
told us that they were aware of only one State (New Jersey) that had 
deviated significantly from the national Core Performance Measures, and 
in that instance, the deviation was reviewed and approved by the 
appropriate EPA headquarters program office.
Concerns About Applying Core Performance Measures to Nonparticipating 
        States
    NEPPS is a voluntary program and not all States have chosen to 
participate. Because core performance measures are a component of 
NEPPS, environmental officials in many States initially presumed that 
they did not apply to nonparticipating States. EPA's intent to use 
performance measure data to present a national environmental picture, 
however, led the agency to request this type of data from all states--
not just NEPPS participants. Accordingly, in an October 1998 internal 
memorandum on EPA implementation of core performance measures, the 
Acting Deputy Administrator stated that: ``The Regions are responsible 
for obtaining data on the Core Performance Measures from all States 
(whether or not they have a Performance Partnership Agreement with EPA) 
because these measures are intended to paint a picture of environmental 
and program progress across the nation.''
    At the Environmental Council of the States' October 1998 annual 
conference, States expressed concern that EPA's policy of seeking to 
make performance measures applicable to all States is inappropriate and 
in conflict with the voluntary concept of the NEPPS program. 
Subsequently, joint EPA-Council guidance was issued with the fiscal 
year 2000 performance measures which stated that ``[Core Performance 
Measures] as such only apply to States participating in NEPPS,'' but 
added that ``States not participating in NEPPS will continue to provide 
key information needed by EPA through State/EPA Agreements, grant work 
plans, or other operating agreements.''
Relative Emphasis on Outputs Vs. Outcomes
    Among Federal and State officials, there is a broad agreement in 
principle on the importance of measuring outcomes rather than just 
outputs. A major concern among State officials, however, has been a 
continued emphasis on output measures by EPA. Ironically, many State 
officials maintain that much of EPA's continued emphasis on outputs 
stems from the agency's implementation of the Results Act.
    The Results Act requires agencies to clearly define their missions, 
establish long-term strategic goals, measure their performance against 
the goals they have set, and report this information to the Congress. 
The statute emphasizes the need for agencies to focus on and achieve 
measurable program results, rather than focusing on the performance of 
prescribed tasks and processes. Thus, EPA's goals under NEPPS and the 
Results Act would appear to share the same focus on environmental 
results. However, as we noted in a 1998 report on the first set of 
performance measures EPA prepared pursuant to the Results Act, the 
overwhelming share of measures were heavily weighted toward numerical 
targets and other outputs. \13\
---------------------------------------------------------------------------
    \13\ Observations on EPA's Annual Performance Plan for Fiscal Year 
1999 (GAO/RCED-98-166R, Apr. 28, 1998).
---------------------------------------------------------------------------
    Broad concern was expressed among the States that we interviewed 
about the impact that EPA's implementation of the Results Act has had 
on core performance measures. To varying degrees, senior level and 
program management officials in five States we visited, and EPA program 
officials in two regions, expressed concern about the apparent conflict 
between the results-oriented performance measures being developed under 
NEPPS and the generally output-oriented performance measures EPA has 
thus far used to report on the Results Act. The officials were 
concerned that EPA's implementation of the Results Act is (1) 
maintaining an emphasis on output rather than outcome measures and (2) 
adding new measures on top of existing measures, leading to an overall 
increase in the amount of data States must gather and report.
    EPA's enforcement program was illustrative of States' concerns 
about the difficulty in moving toward outcome-oriented performance 
measures. Performance measures from an enforcement standpoint have 
tended to focus heavily on outputs, such as the number of inspections 
conducted, the number of significant violations detected, and how 
violations are handled. Senior and program management level officials 
in half the States and EPA regional offices we visited specifically 
cited the relatively heavy focus of EPA's enforcement program on such 
outputs as a barrier to achieving greater progress in developing 
outcome-oriented performance measures. This view echoed those expressed 
by State officials in our May 1998 report on EPA enforcement efforts, 
which relayed concerns among most of the State officials interviewed 
that EPA's Office of Enforcement and Compliance Assurance 
overemphasizes output measures. We recommended at that time that EPA 
ensure that the enforcement-related provisions of EPA's Performance 
Plan, prepared pursuant to the Results Act, focus on outcomes in a 
manner consistent with that of the Core Performance Measures developed 
under NEPPS.
    In a November 1998 response to our enforcement report, EPA 
emphasized a number of initiatives underway, most notably its National 
Performance Measures Strategy, to build in more outcome measures in its 
own enforcement program and to assist States in doing so for their 
programs. \14\ The Office also acknowledged the need to reorient its 
performance plan increasingly toward outcomes and signaled its intent 
to integrate some outcome measures into the fiscal year 2000 core 
performance measures. The Office's fiscal year 2000 measures list seven 
measures, four of which are identified as providing outcome measures. 
The implementation approach for three of the four measures is to work 
with volunteer States to test the measures. In this connection, the 
Office has recently announced the availability of funds for States for 
projects that will improve the design and use of performance measures 
for enforcement and compliance/assistance activities. In evaluating 
project proposals, the Office plans to give priority to projects 
designed to develop outcome measures.
---------------------------------------------------------------------------
    \14\ Among the outcome measures the Office has already implemented 
under this strategy are measures of improvements resulting from EPA 
enforcement actions. Outcome measures currently being implemented 
include (1) the average number of days for significant violators to 
return to compliance or enter enforceable plans or agreements and (2) 
the percentage of significant violators with new or recurrent 
significant violations within 2 years of receiving previous enforcement 
action. Outcome measures targeted for implementation in October 1999 
include assessments of the levels of compliance among selected 
regulated populations.
---------------------------------------------------------------------------
    Progress has also been made in other EPA programs in reorienting 
the agency's Results Act measures toward outcomes. Specifically, we 
found that EPA's fiscal year 2000 annual Performance Plan, which 
contains the measures to be used to track progress toward achieving its 
programs' goals, demonstrated some progress since the performance plan 
of the previous year. \15\ Further progress in coming years would help 
to reduce the disparity between the generally output-oriented focus of 
EPA measures prepared pursuant to the Results Act and the efforts by 
EPA regions and States to focus their negotiations under NEPPS 
increasingly on achieving results.
---------------------------------------------------------------------------
    \15\ Observations on the Environmental Protection Agency's Annual 
Performance Plan For Fiscal Year 2000 (draft). Specifically, we noted 
that among the improvements in the fiscal year 2000 plan are goals and 
measures of generally better quality, and we note some additional 
efforts to implement outcome measures. Overall, however, we found that 
the plan still focuses heavily on output measures.
---------------------------------------------------------------------------
Status of Core Performance Measures
    Notwithstanding concerns among State and some regional officials 
about the potential impact of EPA's implementation of the Results Act 
on their efforts to orient their NEPPS-related activities toward 
outcomes, EPA and the Environmental Council of the States have managed 
to agree on a third set of Core Performance Measures for use in fiscal 
year 2000 and beyond which, by most accounts, are a significant 
improvement over the 1998 and 1999 measures. As both EPA and Council 
officials have noted, one of the most apparent differences between the 
new measures and those of past years is that the fiscal year 2000 
measures are significantly fewer in number. Specifically, as shown in 
table 3.1, data provided by EPA show that the number of Core 
Performance Measures has been reduced from an initial set of 104 
measures for fiscal year 1998 to 37 measures for fiscal year 2000. \16\
---------------------------------------------------------------------------
    \16\ Such a sizable reduction reflects the efforts by EPA and the 
Council to focus Core Performance Measures on what they agreed are the 
most important measures. The magnitude of the reduction, however, 
should be interpreted with caution for several reasons. First, the 
figures reflect the temporary deletion of all 25 measures for the 
Pollution Prevention and Toxic Substances Program. Work is currently 
underway to develop new measures for pollution prevention and toxic 
substances, which are expected to be ready for use in fiscal year 2001. 
Second, the dropping of a measure as a Core Performance Measure does 
not necessarily mean that data will not be gathered in response to that 
measure. Rather, the inclusion or exclusion of the measure as a core 
measure is an expression of its relative importance to the national 
environmental picture. Third, some core measures have multiple parts, 
such as ``trends in air quality for each of the six criteria air 
pollutants'' (actually six measures) or ``trends in emissions of toxic 
air pollutants'' (189 hazardous air pollutants the Clean Air Act 
identifies). The discrete data that are necessary to report under such 
measures may be aggregated or disaggregated depending on the amount of 
detail used to measure performance. Disaggregating the data increases 
the number of perceived performance measures.

    Table 3.1: Number of Core Performance Measures, Fiscal Years 1998
                              Through 2000
------------------------------------------------------------------------
                                           Fiscal     Fiscal     Fiscal
                Program                  Year 1998  Year 1999  Year 2000
------------------------------------------------------------------------
Air and radiation......................         23         16         10
Water..................................         31         31         13
Hazardous waste........................         17         17          7
Pollution prevention and toxic                  25         25          0
 substances............................
Enforcement and compliance.............          8          8          7
                                        --------------------------------
    Totals.............................        104         97         37
------------------------------------------------------------------------
Source: EPA's Office of State and Local Relations.

    In addition to reducing the number of measures to provide greater 
focus on what are perceived as the most important measures, progress 
was also made in shifting the proportion of fiscal year 2000 measures 
increasingly toward outcomes and environmental indicators. 
Specifically, according to EPA, while about 40 percent of the measures 
focused on outcomes or environmental indicators in fiscal year 1998, 
about 60 percent of the measures focus on outcomes and environmental 
indicators in fiscal year 2000. Moreover, while EPA and Council 
officials are not expected to formally vote on a comprehensive set of 
new measures each year, the fiscal year 2000 measures are to be 
periodically updated as deemed appropriate by EPA and the Council. In 
this connection, EPA program officials, told us that they have a number 
of projects currently under way (in addition to those in the 
enforcement program discussed earlier) that are specifically designed 
to develop additional results-oriented performance measures.
    Finally, EPA and the States have also made progress addressing the 
States' concern that EPA had required additional reporting by the 
States to help the agency meet its data requirements under the Results 
Act. Under the April 1999 Addendum to the Joint Statement, co-signed by 
EPA and the Environmental Council of the States, Core Performance 
Measures and other current reporting requirements will be relied upon 
to satisfy EPA's Results Act-related data needs.
                              Conclusions
    There is broad agreement among Federal and State officials on the 
importance of measuring the outcomes of environmental activities. While 
considerable progress has been made in developing and implementing 
results-oriented Core Performance Measures, a number of challenges 
involving technical and policy issues have complicated the process. 
Progress has nonetheless been made in developing fiscal year 2000 
measures which, by most accounts, are a significant improvement over 
measures used in previous years. Continued progress in developing the 
measures-and the data systems needed to support the measures-will be 
critical to States' and EPA's efforts to demonstrate the efficacy of 
their programs under NEPPS. In the past, it has been difficult for 
States to achieve the flexibility they desire without the performance 
measures in place to demonstrate that their environmental goals are 
being achieved, and it will likely continue to be so in the future.
                            Agency Comments
    Citing our observations that (1) EPA has focused on outputs to meet 
its obligations under the Results Act while supporting a transition to 
outcome-based management under NEPPS and (2) these conflicting 
priorities have led to confusion that hinders performance partnerships, 
EPA said that, to the contrary, both the Results Act and NEPPS 
encourage the development of outcome measures and outcome-based 
management. We acknowledge the shared objective of NEPPS and the act in 
focusing on results. The key word, however, is implementation: as we 
have documented in other recent work, the measures EPA has used in its 
implementation of the Results Act have thus far been heavily output-
oriented and, therefore, convey priorities that are often in conflict 
with the more outcome-oriented measures being employed under NEPPS.
    We acknowledge EPA's ongoing efforts to orient its Results Act-
related measures increasingly toward outcomes and believe that further 
progress toward this end will help to alleviate this problem. In 
addition, we modified our discussion of this issue to reflect the 
progress made by EPA and the States in addressing the States' complaint 
that EPA had required additional reporting by the States to help the 
agency meet its data requirements under the Results Act. The chapter 
notes that pursuant to the April 1999 Addendum to the Joint Statement, 
co-signed by EPA and the Environmental Council of the States, Core 
Performance Measures and other current reporting requirements will be 
relied upon to satisfy EPA's Results Act-related data needs.
                                 ______
                                 
Reductions in EPA's Oversight Attributable to NEPPS Have Thus Far Been 
                                 Modest
    As originally envisioned, the principle of differential oversight 
was a key element of NEPPS. Under this principle, States with stronger 
environmental programs would be accorded reduced oversight and greater 
autonomy over delegated programs, thereby allowing these States greater 
flexibility to manage their programs, and providing EPA the opportunity 
to shift greater attention of its own resources toward weaker programs. 
An important component of the concept of differential oversight was 
that programs eligible for reduced oversight would meet certain 
criteria and that the EPA and States would work together to choose a 
group of measures to use in assessing State performance.
    In the years immediately following the 1995 agreement, EPA and many 
States agreed that a formal system implementing differential oversight, 
whereby the merits of a State program would be evaluated based on 
certain standards or criteria to determine whether it qualifies for 
reduced oversight, would be both controversial and difficult to 
implement. Nonetheless, the original concept of reduced EPA oversight 
in exchange for acceptable State environmental performance remains an 
important goal for both EPA and participating States.
    Among the six States we visited, we found instances in which some 
oversight reduction was successfully negotiated between States and 
their corresponding EPA regions. Such instances, however, have thus far 
been limited in both scope and frequency. A number of interrelated 
factors were cited as limiting the reduction of EPA oversight, 
including (1) statutory and/or regulatory requirements that specify 
State reporting requirements and other methods of ensuring State 
accountability to EPA; (2) EPA's reluctance to reduce oversight without 
measurable assurances that environmental goals are still being 
achieved; (3) the inherent difficulty in ``letting go'' on the part of 
some regulators that have implemented the existing EPA-State oversight 
arrangement for several decades; and (4) the challenge faced by EPA of 
communicating to States through a complex, multilevel organization 
involving both headquarters and regional offices.
Initial Expectations Concerning EPA Oversight of Participating States' 
        Programs
    The May 1995 joint agreement between EPA and the Environmental 
Council of the States stated that ``a differential approach to 
oversight should provide an incentive for State programs to perform 
well, rewarding strong State programs and freeing up Federal resources 
to address problems where State programs need assistance.'' It added 
that ``after agreement is reached, EPA will focus on program-wide, 
limited after-the-fact reviews rather than case-by-case intervention 
and will work with States to identify other ways to reduce oversight.''
    Accompanying differential oversight was the concept of 
``performance leadership,'' whereby qualifying programs having a record 
of strong performance would be nationally recognized with 
``leadership'' status. In such instances, the leadership programs would 
be afforded minimum allowable oversight based on the belief that they 
``deserve to be treated with deference whenever possible and do not 
need Federal oversight on a routine basis.''
    In subsequent years, however, both EPA and the States found it 
difficult to implement both a formal differential oversight process and 
to formally designate certain State programs as performance leadership 
programs. One key problem was the inability of EPA and the States to 
agree on criteria to use in making such determinations. EPA officials 
responsible for NEPPS noted that because the capacity of a State 
program can change depending upon circumstances, the proper level of 
oversight should be determined on a State-by-State basis by EPA 
regional managers-not on the basis of specific criteria that would be 
universally applied to all States. In addition, as noted by the 
Environmental Council of the State's Executive Director, many State 
environmental leaders expressed concern that formal designations of 
such programs as performance leaders could be interpreted by EPA, State 
legislatures, and the public as a ``report card'' of good and bad 
performers. Such designations would probably be challenged, 
particularly given the difficulty of developing and applying specific 
criteria to use in making these determinations.
    Nonetheless, the concept of differential oversight, albeit in a 
less structured and visible form, remained an important component of 
State and EPA regional NEPPS negotiations. Officials in the six States 
told us that their early expectations for NEPPS were that the program 
would help them to reduce their oversight workload in some well-run 
program areas and to allow them a stronger focus on State priorities 
and problem areas. Officials in three States noted in particular that 
they believed the NEPPS framework would better allow them to identify 
and address opportunities for multimedia projects, rather than 
continuing to expend time and resources only on the traditional, single 
media air, water, and waste programs.
States and Regional Offices Report Limited Oversight Reduction Thus Far 
        Directly Attributable to NEPPS
    State officials cited a number of instances in which they 
negotiated some reduction in regional oversight of their programs. 
These efforts tended to focus on reducing the frequency of reporting, 
and in some cases the frequency of conducting onsite reviews, in 
situations where both sides agreed such activities were duplicative or 
otherwise of limited value. However, most State program officials 
indicated that the extent of reporting required has either remained the 
same or actually increased in spite of NEPPS, and that few instances 
were identified where States obtained more significant independence in 
operating their programs (e.g., focusing their resources on State 
priorities). Most regional staff we interviewed generally agreed that, 
to date, oversight reduction attributable to NEPPS has been limited.
Instances of Reduced Oversight Cited by States and Regions
    Officials in Maine, Florida, Georgia, and Minnesota cited specific 
instances in which reporting requirements were scaled back, at least in 
part as a result of their participation in NEPPS. Maine environmental 
officials, for example, noted that more frequent dialog and less formal 
reporting between the program staff and regional staff had replaced 
written reports, saving time and improving the level of cooperation 
between EPA and State staff. While Maine program officials attributed 
the reductions in large part to the assignment by EPA's Boston Regional 
Office of a liaison for each State's delegated programs, they credited 
NEPPS with formalizing or legitimizing the changes. Florida program 
officials identified sizable reporting reductions in its Resources 
Conservation and Recovery Act program as a result of a joint State/EPA 
effort included in the Performance Partnership Agreement. The Chief of 
Florida's Bureau of Water Facilities also noted that under the 
agreement, the State was able to streamline oversight of its 
pretreatment program through reduced reporting and by negotiating with 
the EPA Atlanta office a shifting of resources from the conduct of 
routine annual inspections and audits to other priority areas in the 
program. \17\
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    \17\ Under EPA's Pretreatment Program, wastewater treatment plants 
are charged with monitoring and regulating contaminant discharges by 
industrial users into their sewer systems.
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    In some cases, regional and State officials indicated that 
oversight had been scaled back, but that such efforts could not be tied 
directly to a State's participation in NEPPS. Connecticut officials 
reported that quarterly reporting had been eliminated in recent years 
for some of their air, water and waste programs, but attributed the 
change solely to EPA regional efforts that preceded NEPPS. Similarly, 
program officials in EPA's Boston, Chicago, and Seattle offices each 
cited instances in which quarterly reviews and file reviews were 
eliminated, but indicated that such efforts often preceded 
independently of the signing of a NEPPS agreement.
Few Instances of Significant Oversight Reduction Under NEPPS
    Notwithstanding the streamlining of reporting requirements and 
similar tracking efforts, the large majority of the State officials we 
interviewed generally maintained that participation in NEPPS has not 
yet brought about significant reductions in reporting and other 
oversight activities by regional program and audit level staff, nor has 
it resulted in significant opportunities to focus on other priorities 
or shift resources to weaker program areas. Oregon officials, for 
example, explained that their initiatives to focus on the State's 
highest priorities are having difficulty competing with their 
obligations to track and report on the national core performance 
measures and to comply with other EPA reporting requirements. Program 
managers in Connecticut, Florida, Georgia, Maine, and Minnesota 
conveyed similar experiences, indicating that the addition of new core 
measures to preexisting reporting requirements had increased their 
reporting workload, or that they are likely to do so in the future. 
Program managers in three of these States indicated they will need to 
develop the data and systems to report on the new measures.
    Oregon officials also pointed to a significant increase in EPA 
oversight by the regional enforcement officials of its air, water, and 
waste programs. EPA Seattle officials told us that the enforcement 
reviews in Oregon were the outcome of nationwide enforcement reviews by 
both the Office of Enforcement and Compliance Assurance and of EPA's 
Office of the Inspector General, which raised concerns about whether 
and how States were bringing enforcement actions against violators. 
Georgia officials also said that oversight of their hazardous waste 
program has increased, noting that regional enforcement officials were 
making regular monthly visits to review program records.
    EPA regional program and enforcement officials generally 
acknowledged that oversight of State programs has not significantly 
decreased as a result of NEPPS, and that in some cases, has increased. 
Officials in the Atlanta and Chicago Regional Offices noted in 
particular that it may have been unrealistic to assume, as many States 
had at the outset of NEPPS, that States' participation in the program 
would necessarily lead quickly to reduced EPA oversight. Moreover, 
regional officials point to specific reasons why it has been difficult 
to scale back EPA oversight-and why oversight has actually increased in 
certain instances.
Factors Affecting Potential to Reduce Oversight Under NEPPS
    We asked both State and regional officials to identify what they 
believed to be the most important considerations affecting the extent 
to which NEPPS has provided States with reduced oversight, greater 
program autonomy, and the flexibility to emphasize their highest 
priorities. There was considerable consistency on the factors 
identified by both State and EPA officials, although there was some 
variation on the degree to which various factors were emphasized. The 
key factors include (1) statutory and/or regulatory requirements that 
in some cases prescribe the kind of oversight required of States by 
EPA; (2) reluctance by EPA regulators to reduce oversight without 
measurable assurances that environmental protection will not be 
compromised; (3) the inherent difficulty in letting go on the part of 
some regulators that have implemented the existing EPA-State oversight 
arrangement for several decades; and (4) EPA's multilevel 
organizational structure, which complicates efforts to identify whether 
all key decisionmakers among the agency's headquarters and regional 
offices are in agreement on key oversight-related questions.
Statutory or Regulatory Requirements May Limit Options to Reduce 
        Oversight
    In some cases, statutory and/or regulatory requirements may 
prescribe certain types of EPA oversight, limiting the extent to which 
further streamlining can be negotiated. EPA headquarters officials in 
the Office of Air and Radiation noted that some of the core performance 
measures for the air program are driven by statutes and thus are non-
negotiable. The officials noted, for example, that dates by which areas 
in ``non-attainment'' with air quality standards must come into 
compliance are driven by the Clean Air Act and that EPA accordingly has 
no flexibility to alter them. Similarly, a regional official cited the 
Clean Water Act's requirement under section 305(b) that a Water Quality 
Inventory Report be issued every 2 years. One State requested an 
alternative schedule in which the State would submit its information 
for the report every 5 years for each watershed area. EPA denied the 
request as contradicting the 2-year frequency required by the act.
    In addition, EPA Atlanta and Boston regional staff pointed out that 
they have a responsibility to ensure that new regulations, which 
sometimes pose particular challenges for both Federal and State 
regulators, are properly implemented. EPA headquarters officials cited 
as an example their new regulations concerning fine particulate matter, 
which required significant EPA action during the middle of the fiscal 
year. Regional staff said that such actions may inevitably require 
greater EPA oversight and more detailed reporting. Officials in EPA's 
Atlanta Regional Office cited another example where, in the middle of 
the year, headquarters implemented a new initiative that required the 
region to ask the States to do additional inspections of metal 
finishing plants that went beyond the commitment made by States in 
their Performance Partnership Agreements.
    State program managers acknowledged that statutory and regulatory 
requirements do in fact sometimes limit the potential to reduce EPA 
oversight. In addition, while welcoming the administrative relief and 
flexibility allowed under the Performance Partnership Grant Program, 
several noted that the implementation of these grants is still governed 
by certain statutory and regulatory requirements. For example, the 
grants are still subject to certain grant administrative requirements 
and cost accounting standards applicable to Federal grants generally. 
Specifically, while the Partnership Grants do not require the detailed 
accounting required of categorical grants, States must still report to 
EPA on how funds have been spent under the broader categories. 
Furthermore, like other Federal grants, the EPA grant agreements are 
supposed to include adequate oversight procedures to provide EPA 
assurance that Federal funds are used efficiently and effectively.
    Perhaps more significantly, both State and regional officials added 
that the State programs are still held accountable for accomplishing 
program commitments outlined in their work plans and that base program 
requirements under the various statutes must still be met. Such 
competition for limited resources to meet the requirements of 
individual statutes has, in fact, been a long-standing issue that has 
complicated efforts to shift attention and resources to what are 
perceived as the highest environmental priorities. We noted in our 1988 
general management review of EPA, for example, that the objective of 
setting risk-based priorities across environmental media has been 
complicated by the fact that each statute prescribes certain activities 
to deal with its own medium-specific problems. \18\ In 1991, we touched 
on the issue again noting, for example, that numerous legislative 
mandates have led to the creation of individual EPA program offices 
that tended to focus solely on reducing pollution within the particular 
environmental medium for which they have responsibility, rather than on 
reducing overall emissions. \19\ More recently, in testifying on 
efforts by EPA to improve its working relationship with the States and 
to provide them with additional flexibility, \20\ we concluded that as 
long as environmental laws are media-specific and prescriptive and EPA 
personnel are held accountable for meeting the requirements of the 
laws, it will be difficult for the agency to fundamentally change its 
relationships with the States to reduce day-to-day control over program 
activities.
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    \18\ Environmental Protection Agency: Protecting Human Health and 
the Environment Through Improved Management (GAO/RCED-88-101, Aug. 16, 
1988).
    \19\ Environmental Protection: Meeting Public Expectations With 
Limited Resources (GAO/RCED-91-97, June 18, 1991).
    \20\ Environmental Protection: Status of EPA's Initiatives to 
Create a New Partnership With States (GAO/T-RCED-96-87).
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EPA Reluctance to Reduce Oversight Without Measurable Assurances That 
        Environmental Protection Will Not Be Compromised
    Program managers and staff in all four of the EPA regional offices 
we visited questioned the extent to which the agency can reduce 
oversight without measurable assurances that program requirements, and 
environmental objectives, will be achieved. The issue has become 
particularly pronounced in the enforcement program, where some States 
have taken issue with what they perceive to be heavy-handed oversight 
by EPA. Among State officials' complaints are that EPA enforcement 
officials inappropriately hold States accountable for the number of 
enforcement actions (outputs) taken rather than achieving better 
environmental compliance (outcomes). Some States have also cited the 
prospect of EPA taking direct enforcement action in States where the 
lead State environmental agency has primary enforcement authority, or 
of ``overfiling'' with an EPA action in instances where a State 
enforcement action was determined by EPA to be insufficient. State 
officials have also maintained that such a posture is inconsistent with 
the philosophy under NEPPS that EPA should focus its oversight on 
results and should provide States with greater flexibility as to how to 
achieve those results.
    EPA Seattle regional officials, however, have cited the Office of 
Enforcement and Compliance Assurance's recent reviews and those of the 
Office of Inspector General, which have concluded that (1) many States 
have underreported violations by dischargers of pollutant limitations 
and other environmental requirements and (2) the numbers of enforcement 
actions taken by State enforcement officials has declined. These 
reports, the officials contend, raised questions about the ability of 
States to achieve compliance by the regulated community without 
vigilant Federal oversight. Moreover, according to the officials, 
States presently do not have the data to support their contentions that 
environmental compliance is still being achieved in cases where their 
enforcement activity has been curtailed.
    State officials told us, both during this review as well as during 
our 1998 review of State enforcement programs, \21\ that the absence of 
measurable results complicates efforts to use more flexible approaches-
not just because it is harder to get EPA approval, but also because it 
is harder to obtain the confidence of the media and the general public. 
Florida officials, for example, told us that the number of penalties 
assessed, and dollar value of penalties collected, under its federally 
delegated programs decreased from 1994 to 1996, and that questions were 
raised as to whether these decreases resulted, at least in part, from a 
greater emphasis on the use of assistance to achieve compliance. In 
fact, newspapers in the State subsequently published articles 
questioning whether the State was letting violators continue to pollute 
without fear of punishment. Florida officials told us that their major 
investment in measuring the results of their enforcement and compliance 
assistance efforts was undertaken, in part, to determine whether these 
concerns were well-founded.
---------------------------------------------------------------------------
    \21\ Environmental Protection: EPA's and States' Efforts to Focus 
State Enforcement Programs on Results (GAO/RCED-98-113, May 27, 1998).
---------------------------------------------------------------------------
    The Office of Enforcement and Compliance Assurance points out that 
it is addressing the problem through its National Performance Measures 
Strategy and by collaborating on the development of enhanced outcome-
oriented performance measures with a number of States. In addition to 
helping States develop outcome measures, enforcement officials also 
pointed to recently issued guidance that encourages EPA regional 
offices to be more flexible in considering States' preferences when 
negotiating regulatory priorities. \22\ Specifically, the guidance 
calls on regions to ``develop their priorities in partnership with 
their States . . .'' and notes, ``States are not required to adopt 
EPA's national priorities . . . This guidance provides flexibility for 
both regions and States to identify and implement their own 
priorities.'' The guidance further states that EPA is ``addressing 
States' concerns about joint planning and priority-setting, work 
sharing, and oversight responsibilities by identifying this as a 
management focus area to be addressed by each region in the fiscal year 
2000/2001 [memorandum of agreement] process.''
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    \22\ EPA Office of Enforcement and Compliance Assurance, Final 
fiscal year 2000/2001 OECA Memorandum of Agreement (MOA) Guidance (Apr. 
1999).
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Resistance to Change at Lower Levels Within Both EPA and Among State 
        Agencies
    Our 1997 report on EPA's efforts to ``reinvent'' environmental 
regulation observed the widely held view, both within and outside EPA, 
that achieving a full commitment to reinvention by EPA staff will be 
difficult and will take time. \23\ The report further identified 
widespread agreement among EPA officials, State officials, and others 
that the agency has a long way to go before reinvention becomes an 
integral part of its staff's everyday activities, and cites a senior 
EPA reinvention official 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.''
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    \23\ Environmental Protection: Challenges Facing EPA's Efforts to 
Reinvent Environmental Regulation (GAO/RCED-97-155, July 2, 1997).
---------------------------------------------------------------------------
    Many of the State officials we interviewed contended that comfort 
level among some EPA staff with the preexisting oversight arrangement-
which has generally been in place for many years-helps to explain the 
reluctance by many of them to provide States with greater flexibility 
and reduced oversight. Program officials in five of the six States 
provided examples where they believed that regional program staff 
(tasked with the day-to-day implementation of specific programs) asked 
for information that was not included in the Partnership Agreement or 
that they had previously agreed with the region to drop. Minnesota 
officials said that EPA regional waste officials were asking for 
predictive or target numbers (such as the number of inspections the 
State intends to pursue during the coming year)-information, they said, 
that was not required nor included in their Partnership Agreement. 
Similarly, Georgia program officials said that EPA enforcement 
officials requested additional information after their Partnership 
Agreement had been negotiated and was ready to be signed. Georgia's 
Assistant Director and the Atlanta Deputy Regional Administrator, 
recognizing that the difficulty was due in part to different targets 
and schedules for enforcement and the media programs, set up an 
enforcement planning work group consisting of State and regional 
representatives from enforcement and the media programs to study and 
resolve the problem so that they could avoid last minute changes in the 
future. Other State officials told us that EPA has recently requested 
information related to the Results Act which, they believed, was 
outside the scope of their agreements. Several State officials 
commented that an openness toward seeking ways to reduce such 
information requests appears to be greater among senior EPA regional 
managers than among lower-level staff.
    It is possible that what State officials may view as an 
``resistance to change'' could be regarded by EPA staff as a well-
founded concern that program requirements be implemented properly and 
in accordance with laws and regulations. However, officials in three of 
the four EPA regions we visited nonetheless acknowledged that support 
for NEPPS within EPA varies. One senior regional official said that 
managers and staff are often more comfortable with the preexisting way 
of doing business and are unsure as to how they can accomplish their 
work in the context of the partnership approach under NEPPS. He voiced 
the opinion that there may be a need for training in NEPPS 
implementation among regional staff. Another senior regional official 
said that some staff will only take NEPPS seriously when their salaries 
are tied to their performance in implementing the program.
    By the same token, our interviews with senior State officials 
suggest that cultural change is also needed at the State level if NEPPS 
is to achieve its full potential. Specifically, several State officials 
said that State program managers may not always be well-versed in 
recognizing opportunities that would allow them to exercise their 
responsibilities with greater flexibility. Some of them indicated that 
there is resistance to NEPPS at the State program manager and staff 
level because of the perceived threat to their programs. In one State, 
in order to get the program directors' support for participating in 
NEPPS, senior management made a commitment not to make any large-scale 
shift of funds among or between programs. Some regional staff and 
managers also commented that States have not taken advantage of 
opportunities to seek more flexibility under NEPPS, noting in 
particular that none of the States in their regions attempted to move 
significant amounts of funds among programs or across media lines.
Challenges in Communicating Requirements Through a Multi-Level EPA 
        Organizational Structure
    EPA's organizational structure poses additional challenges in 
negotiating agreements that have the full buy-in of all key EPA 
decisionmakers. Headquarters interaction with the States is generally 
conducted indirectly through the regional offices. National Program 
Managers set national strategic direction, and core program 
requirements and priorities, for each of their environmental programs. 
The managers establish overall national goals for their respective 
programs based on a variety of factors, including the underlying 
statutory mandates, congressional directives, administration/
administrator priorities, and their own view of programs and policies 
that their programs should focus upon. The managers also must develop 
an accountability system to ensure program delivery by EPA's regions. 
The regional offices consult with managers in determining national 
priorities and communicate these priorities to the States. As such, the 
regional offices serve as the key EPA focal point in negotiating with 
States on program priorities and oversight arrangements to be reflected 
in NEPPS agreements. Importantly, the States generally have little 
direct communication with the managers. Thus, for example, if States 
wish to deviate from a national core performance measure or priority, 
it is the regions that consult with the managers.
Buy-in by Key Decision Makers and Mixed Messages Confuse States
    As a consequence of this structure, according to the majority of 
State program managers we interviewed, it is not always clear that a 
Partnership Agreement between the State and the region has the full 
buy-in of EPA's key headquarters managers. A senior official with 
Florida's Department of Environmental Protection cited the example of 
the State's ``Joint Compliance and Enforcement Plan,'' negotiated under 
the State's 1998-1999 Performance Partnership Agreement. Under the 
plan, State and regional officials enter into a process that seeks 
agreement, on the basis of industry compliance data, on what the 
State's most important compliance problems are and which methods (e.g., 
enforcement action, technical assistance) are most appropriate to 
address them. The official said that while the State has already 
invested significant time and effort into the plan, and has had 
expressions of strong support from EPA's Atlanta Regional Office, it 
does not know the extent to which EPA's headquarters Office of 
Enforcement and Compliance Assurance supports the effort or whether 
that office will ultimately give its approval.
    Similar observations were made by other States' officials, who 
indicated that provisions were sometimes added at the request of EPA 
headquarters to Partnership Agreements after they were negotiated. The 
timing of headquarters guidance and special requests for input into 
Partnership Agreements was cited by some State and regional officials 
as a key factor: final headquarters guidance, or specific requests in 
some cases, often come too late to be included in regional and State 
negotiations, causing the need for some agreements to be renegotiated. 
\24\
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    \24\ In response to a 1997 survey by the Environmental Council of 
the States, participating States commented that headquarters guidance 
should be finalized by February of each year so that States and regions 
can meet in March to set joint priorities and begin the Performance 
Partnership Agreement process for the following fiscal year.
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    State officials also indicated that some headquarters requirements 
are negotiated separately from the overall Partnership Agreement 
negotiations. Officials with the Minnesota Pollution Control Agency 
told us that after successfully negotiating its agreement with regional 
program officials, the Office of Enforcement and Compliance Assurance 
requested separate measures and a separate section apart from the media 
programs in the Partnership Agreement. In the opinion of the State 
officials, this process illustrated the difficulty in getting all 
headquarters interests incorporated into the agreement in a timely 
fashion. Officials in several other States cited similar circumstances 
where enforcement provisions had to be negotiated outside the scope of 
the Performance Partnership Agreement, making it difficult to develop 
the kind of integrated environmental program NEPPS is intended to 
encourage.
EPA Officials Acknowledge Need for Clearer and More Consistent 
        Communication
    Officials in the four regional offices we visited told us that 
sometimes there are inconsistencies between headquarters and regional 
offices, which complicates the message the agency sends to the States. 
Boston regional officials cited one instance in which Maine and 
Connecticut had proposed to consolidate funds for their wetlands 
programs (1 of the 15 eligible programs) under a performance 
partnership grant and were initially told by the regional office that 
the arrangement would be acceptable. However, EPA's headquarters Water 
Office subsequently objected to allowing all funds to be shifted from a 
categorical grant to a Performance Partnership Grant on the basis that 
a portion of the funds were supposed to be used in a competitive bid 
process for nonprofit organizations (and other eligible parties) to 
propose special projects. According to State and EPA Boston regional 
program managers, EPA's Boston Regional Office resolved the resulting 
confusion by brokering an agreement to allow for some funding from each 
of the New England States' wetlands grant programs to be set aside for 
special regional wetlands pilots.
    Many EPA regional officials said that headquarters officials 
sometimes view NEPPS negotiations as a regional-State matter, and that 
headquarters offices do not view themselves as ``signatories'' to the 
process. The officials noted that it is only when there is a 
significant deviation on the part of the State from a national priority 
that headquarters may become involved with decisions related to NEPPS 
agreements.
    Most of the headquarters managers that we interviewed acknowledged 
that EPA headquarters input into the NEPPS negotiation and agreements 
process is primarily left for the regions, to convey to the States, 
with headquarters primarily engaged in setting the national priorities 
and issuing national program guidance. These headquarters managers 
acknowledged that headquarters input into the NEPPS process can be 
improved, noting in particular that headquarters guidance, initiatives, 
and special requests sometimes arrive at the regions too late to be 
useful. In April 1999, headquarters managers issued 2-year program 
guidance to help address some of the problems related to untimely 
requests. EPA intends that this guidance will allow the regions and 
States to include national program priorities earlier in the 
negotiating process for Performance Partnership Agreements. At the same 
time, however, the managers said certain circumstances that could 
affect a signed agreement, such as those dealing with new regulations, 
are sometimes out of their control.
                            Agency Comments
    EPA provided updated information about the concern that 
headquarters program guidance often arrived too late to be of use in 
Performance Partnership Agreement negotiations between States and their 
EPA regional offices. Specifically, the agency noted that in April 
1999, its headquarters National Program Managers issued 2-year program 
guidance to the regional offices simultaneously and on schedule, so 
that the information would be available prior to Performance 
Partnership Agreement negotiations. EPA said that the new procedure has 
been well received by the regional offices, and that the introduction 
of 2-year guidance will allow regional offices and States to extend 
their planning horizon without fear that the priorities of the National 
Program Managers will change dramatically on an annual basis. We have 
amended this chapter to reflect this progress. At the same time, the 
chapter still conveys agency officials' views that the guidance will 
not necessarily prevent other circumstances, which are out of EPA's 
control, from necessitating the reopening of an agreement.
    EPA also cautioned that the report should more clearly distinguish 
between the terms burden reduction and differential oversight. Burden 
reduction, according to EPA, applies to activities, particularly 
information exchanges, that both EPA and a State agree are unnecessary, 
duplicative, or inefficient. In such cases, EPA believes that all State 
programs should benefit from burden reduction. The term differential 
oversight, according to EPA, means that oversight may vary depending on 
how effectively a State program meets performance expectations. The EPA 
comment draws a clear distinction between issues associated with 
reporting burdens and other issues that are more appropriately viewed 
as related to EPA's oversight of State environmental programs. We 
acknowledge that there are circumstances, separate and apart from EPA 
oversight, in which EPA and a State collaboratively pursue strategies 
to reduce reporting requirements that they both agree are unnecessary, 
duplicative, or inefficient. However, the distinction between this 
activity and oversight is not always so clear. Specifically, in cases 
where States and EPA have disagreed on the need for data not required 
by statute and viewed by States as extraneous, and EPA has continued to 
require reporting of such data, States have often characterized the 
issue as, in their view, a questionable exercise of EPA oversight.
                                 ______
                                 
Benefits of NEPPS Participation Cited, But Full Potential Has Yet To Be 
                                Realized
    State participants' expectations for reduced EPA oversight and 
greater program flexibility-major anticipated benefits at the outset of 
NEPPS in 1995-have thus far met with some disappointment. Yet while 
these participants expressed disappointment at the rate of progress in 
achieving greater autonomy and greater emphasis on State priorities, 
senior officials and program managers from each of the six States that 
we reviewed agreed that NEPPS has provided their programs with 
worthwhile benefits. Among the benefits most frequently cited were that 
NEPPS (1) provided a means of getting buy-in for innovative and/or 
unique projects, (2) allowed States the option to shift resources and 
funds under the Performance Partnership Grants Program, (3) served as a 
tool to divide a burdensome workload more efficiently between Federal 
and State regulators, and (4) improved communication and increased 
understanding among EPA and State program participants about each 
other's program priorities and other key matters. Officials in each of 
the four regions visited substantially agreed with many of the benefits 
of NEPPS participation cited by State officials.
    Yet while participants from each State indicated that their 
participation in the voluntary program would probably continue, they 
also shared a consistent opinion that the benefits of the program 
should be greater, that the program has yet to achieve its potential, 
and that improvements are needed. To some extent, such an outcome 
should not be surprising, given that the program (1) has been in place 
for just a few years and (2) began as an experiment in which 
participants were encouraged to try different tools and techniques. Yet 
these early years of the program have also provided a wealth of 
experiences as to what has worked well, what has not worked, and how 
the program can be improved. The 1995 agreement anticipated the 
appropriateness of such reflection in calling for a joint evaluation 
system for EPA and the States to review the results of their efforts to 
ensure continuous improvement. On the basis of our work, we believe 
that it is now appropriate to begin such a joint evaluation process.
Program Improvements Attributed to NEPPS
    State officials in each of the six States we visited identified a 
number of benefits to their air, water, and waste programs, but 
frequently spoke of some benefits, such as the ability to move funds 
toward the State's highest priorities, as potential future benefits 
rather than as benefits already realized. EPA regional staff 
acknowledged many of the benefits identified by State participants, but 
were often cautious in stating that additional flexibility could be 
exercised only so long as States continue to meet the statutory and 
regulatory requirements associated with their base programs. Benefits 
identified related to the flexibility to work on innovative and special 
projects; to use resources and gain administrative efficiencies through 
the consolidated environmental grant; to more efficiently divide the 
workload among EPA and State regulators; and as a means of improving 
public outreach and involvement in environmental policies and programs.
    The additional benefit most frequently cited by State officials is 
perhaps the most intangible one-that it helped to encourage a more 
systematic and effective communication between EPA and State officials 
on key issues and priorities, leading to increased mutual understanding 
and improved relations. Although many of these officials acknowledged 
that this progress has not yet resulted in the more equal partnership 
with EPA to the extent hoped for, the collaboration and negotiation 
fostered by the process was viewed as a definite step in the right 
direction.
NEPPS Provides a Means of Getting Buy-in for Innovative And/or Unique 
        Projects
    The majority of EPA regional and State officials we contacted cited 
the ability to work on, and get buy-in for, innovative and/or unique 
projects (such as those dealing with cross-cutting issues or multimedia 
projects) as a tangible benefit under NEPPS. Among the examples cited 
was a Quality Assessment Management Plan included in Florida's fiscal 
year 1999 Performance Partnership Agreement, signed between the State's 
Department of Environmental Protection and EPA's Atlanta Regional 
Office. Once fully developed and implemented, the plan is expected to 
provide the State with the ability to identify and improve the quality 
of data provided by private laboratories. The Florida project director 
spearheading the effort on behalf of the State said that elevating the 
project as a priority in the Partnership Agreement legitimized the 
concept and gained the support of key EPA and State decisionmakers. The 
prototype or model of the plan has been completed and submitted to 
State and regional officials with the expectation that the project 
staff will next move on to issues related to implementation. According 
to the project director, the Partnership Agreement-as a document signed 
by the senior officials at both the State and Federal level-was crucial 
in conveying top management buy-in. The project director observed that 
the Agreement, in effect, provided the ``impetus to innovate'' whereby 
State and regional leadership formally endorsed a new way of doing 
business. Environmental officials in Minnesota recently reorganized the 
State's pollution control agency to eliminate its media-specific 
structure. The new organization has three geographic divisions to 
handle most environmental issues and two divisions to handle 
environmental planning and outcomes. The reorganization was undertaken 
because they believed that an integrated approach to environmental 
management was needed and because many problems transcend media 
boundaries. Agency officials noted that the Performance Partnership 
Agreement between the State and EPA's Chicago Regional Office was key 
to establishing a new working relationship with EPA and to Minnesota's 
efforts to find a better way to plan and carry out their work. They 
added that the Partnership Agreement provides the State the flexibility 
to go beyond reporting on media-based program outputs toward linking, 
tracking, and measuring agency activities with actual environmental 
results. Among other examples cited, a program manager in EPA's Atlanta 
Regional Office pointed to North Carolina's effort to use its 
Performance Partnership Agreement to pursue a multimedia inspection 
project for metal finishing plants. The inspections are conducted 
jointly from an air, water, and waste perspective so that each media 
program does not have to do its own separate inspection. The 
Partnership Agreement provided program managers in the State 
environmental agency with a recognized vehicle to propose and implement 
the inspection initiative to share resources across media lines by 
getting a formal buy-in from State and EPA officials through a signed 
agreement.
Flexibility to Shift Resources and Funds Under NEPPS Grant
    As noted earlier in this report, Performance Partnership Grants 
allow States the opportunity to combine individual categorical grant 
funds into a consolidated grant. Once included in the consolidated 
grant, the funds Agreements essentially lose their category-specific 
identity and can be used with considerably greater flexibility.
    Environmental agencies within four of the six States included in 
our review (Maine, Connecticut, Georgia, and Minnesota) have 
Partnership Grants with their corresponding EPA regional offices. 
Importantly, officials in these States told us that they have not been 
able to take greater advantage of the ability to shift funds, primarily 
because the programs covered by the Partnership Grant each have their 
own base program requirements that must be funded. \25\ However, 
several of the officials told us that the flexibility allowed under a 
Partnership Grant to move funds where they are most needed remains an 
important potential benefit of the program. For example, a Georgia 
official said that they hoped to shift funds sometime in the future to 
address nonpoint sources of water pollution and air quality in 
metropolitan Atlanta. This official added that if an emergency were to 
arise, the Partnership Grant would allow the State to move funds and 
staff quickly from various programs to address the problem. A grant 
official with EPA's Boston office noted that prior to the Partnership 
Grant program, States in the region often complained about their 
inability to shift funds from programs that had excess funds to other 
programs that were short of funds. He noted that such complaints have 
declined with the inception of the program.
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    \25\ At a workshop sponsored in July 1997 by the Environmental 
Council of the States, two States reported plans to shift between 5 and 
15 percent of the funds under their Performance Partnership Grants to 
address priorities such as pollution prevention. Also, one State in a 
1997 Council survey of the Performance Partnership Agreement process 
reported setting aside 5 percent of its funds from water grants to 
address wetlands lakes and a new Performance Partnership Grant 
coordinator position.
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    Program officials in all four of the case study States having 
Partnership Grants also cited administrative efficiencies from the 
ability to consolidate their categorical grants. The officials noted 
that the grants have allowed States to condense individual work plans 
into a single consolidated work plan, and States have gained additional 
flexibility in the way they account for staff time. State environmental 
agency officials noted that they were able to reduce the number of 
grant applications, budget documents, and work plans required. Some 
added that they gained administrative relief from not having to track 
staff time and charges on a detailed, grant-by-grant basis. A Maine 
official, for example, noted that under the traditional categorical 
grant process, staff positions funded by multiple categorical grants 
required controls to be in place to ensure that employees charge their 
time to specific grants and budget categories. The Partnership Grants 
provide the flexibility to accomplish necessary work without worrying 
about which tasks are funded by which categorical grants.
    EPA regions' responses to this increased flexibility have been 
mixed. Regional program managers in the four regions visited expressed 
concern about the flexibility of the NEPPS agreement and grants process 
and said that there is a need to retain or develop new State reporting 
requirements if EPA is to retain proper program oversight. These 
program managers commented that eliminating reporting requirements 
results in EPA losing its ability to hold States accountable and argued 
for States to provide predictive annual targets as to what they plan to 
accomplish and to develop short-term or interim measures for reporting 
States' progress toward measuring environmental results. Several 
managers said that it is important for the States to prove that work is 
actually being done and cited the consolidation of grant funds under a 
Partnership Grant as an example where EPA loses a level of control. 
Other regional program managers, however, were more optimistic and 
comfortable with the fact that States provide year-end reports on what 
they have done.
A Tool to Divide a Burdensome Workload Efficiently Between Federal and 
        State Regulators
    In 1997, we reported on EPA's and States' efforts to improve their 
management of Superfund site cleanups, \26\ and cited innovative 
efforts in Minnesota and Washington where State and regional officials 
experienced substantial efficiencies through work-sharing agreements. 
In Washington, State and EPA officials reported that under a formal 
written agreement signed by officials in EPA's Seattle office and the 
State's Department of Ecology, responsibility was formally divided for 
cleaning up the State's National Priority List sites between the two 
agencies. Both EPA and State officials reported that the formal, 
clearly articulated division of responsibility between the two parties 
helped to reduce both the acrimony and the duplication of effort that 
characterized their past relationship. The State official reported a 
strong consensus among the staff that the changes contributed to a 
significant reduction in the number of staff resources needed to 
oversee cleanups at NPL sites. Minnesota officials and Superfund 
officials with EPA's Chicago office reported similar success with such 
a work-sharing agreement.
---------------------------------------------------------------------------
    \26\ Superfund: Stronger EPA-State Relationship Can Improve 
Cleanups and Reduce Costs (GAO/RCED-97-77, Apr. 24, 1997).
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    State and EPA regional officials cited similar benefits of 
Partnership Agreements, as formal documents that clearly articulate the 
obligations of both parties to the agreement. State officials noted 
that in some instances in the past, communication seemed to be one of 
EPA conveying its expectations of the State, rather than the two-way 
communication embodied in many Partnership Agreements. Even where the 
concept of dividing responsibilities and identifying work-sharing 
opportunities has been used, State officials indicated that a formal 
Partnership Agreement brings a commitment and focus to the need to 
share scarce resources and to formalize stated commitments.
    Program managers in several of the regions and States we visited 
cited a number of examples that illustrated the benefits associated 
with the formal division of labor memorialized in a Partnership 
Agreement. Connecticut's NEPPS coordinator, for example, said that the 
Connecticut Department of Environmental Protection negotiated with 
EPA's Boston Regional Office to pick up some of the State's training 
work load, because EPA could provide joint training for all the New 
England States at a lower cost than would be the case if each State 
provided training individually. The Connecticut Partnership Agreement 
specifically States that EPA agrees to assist with training in several 
areas, such as measuring and documenting the success of the State's 
compliance assistance and enforcement activities. The State's fiscal 
year 1999 agreement also documents coordination with the Boston office, 
indicating that the region agrees to work with the State on helping to 
reduce the State's reporting burden. According to the agreement, the 
region was to assume some of the State's inspection workload or 
streamline inspection requirements in order to free up State staff 
resources for compliance assistance activities.
    Georgia's Partnership Agreement includes provisions for EPA's 
Atlanta office to assist the State in training, enforcement, and 
inspection activities generally on an ``as requested'' basis. For 
example, the region provided some expertise to the State and committed 
to dedicating EPA resources to the training of compliance officers 
within the State. Oregon's Partnership Agreement was similarly used to 
address unmet needs in the State's water program. Officials with EPA's 
Seattle Regional Office and the State's Department of Environmental 
Quality agreed that the State's program to identify and remediate 
heavily polluted waters was understaffed and underfunded. Under the 
agreement, the regional office agreed to provide the State with two 
staff to assist in the program.
Opportunity to Improve Public Outreach and Involvement
    A key intended benefit and one of the seven principal components of 
NEPPS in its May 1995 joint agreement is the opportunity to share 
information with the public on State environmental conditions, 
objectives, and performance. Officials with the Environmental Council 
of the States commented that public participation is a strong point of 
the NEPPS program-something that rarely occurred under the formal 
traditional system where public comment was generally sought on 
specific facilities or sites only. At the time of the 1995 agreement, 
some States had begun to share such information through their annual 
State of the environment reports. The NEPPS process, however, offered 
greater opportunities for constructive public involvement.
    EPA and State officials told us that increased public participation 
and involvement remains a principle benefit of the EPA-State NEPPS 
process, but its full potential is largely unmet. State officials have 
found that public interest and input into the NEPPS process has varied 
but that, overall, it has thus far tended to be limited. Minnesota 
officials, for example, said that they sent out a press release and 
copies of their Partnership Agreement to about 400 entities comprised 
of industry, environmental, community, and tribal groups and received 
only a handful of comments. Georgia sought comments on its Partnership 
Agreement at a public meeting and received limited comments, and 
Connecticut held an evening meeting with an advisory board consisting 
of representatives for the different media and similarly obtained 
little feedback. In general, regional and State officials said that it 
will take time to increase the public's understanding and interest in 
focusing on the States' and EPA's long-term environmental goals and 
performance, rather than only on specific activities or conditions of 
more immediate concern.
Improved Communication Among Participants About Program Priorities and 
        Other Key Matters
    Nearly all EPA regional and State officials that we interviewed 
said that a key benefit of NEPPS has been improved communications among 
program participants and the fostering of a better Federal-State 
working relationship. Members of the EPA Chicago Regional Office's 
NEPPS coordinating committee (which represents all media and 
enforcement programs), said that NEPPS has provided the region with a 
better understanding of States' strategic plans, which has assisted the 
States when negotiating a change with the region. In addition, NEPPS 
has encouraged regional and State staff of all media programs to 
discuss their programs jointly, a practice that has helped program 
officials at both the State and regional level gain a better 
understanding of each other's needs. According to State and regional 
officials, this higher level of understanding has been a major factor 
that has helped them to improve the way they set priorities across 
programs.
    Headquarters enforcement officials also point to regional efforts 
to try to use NEPPS as a vehicle to more actively engage the States in 
joint enforcement planning and priority-setting. EPA's Boston Regional 
Office, for example, systematically arrayed a number of multimedia 
enforcement and compliance assistance programs for discussion and 
possible incorporation in States' fiscal year 2000 Performance 
Partnership Agreements. In each case, the priority the agency attaches 
to the program is indicated as well as the type of collaboration EPA 
anticipates having with the States. \27\ Similarly, the officials cited 
as another example a Chicago Regional Office's analysis of its 
Performance Partnership Agreement with Minnesota which describes, on a 
media-specific basis, the State's and EPA's commitments to participate 
in mutually agreed-upon enforcement and compliance assurance activities 
to realize jointly determined environmental objectives.
---------------------------------------------------------------------------
    \27\ EPA's Boston Regional Office, ``Assistance and Pollution 
Prevention Programs & Priorities For Fiscal Year 2000 State/EPA 
Performance Partnership Agreement (PPA) & Compliance Strategy 
Discussions''
---------------------------------------------------------------------------
    Senior officials and program managers in all six States we visited 
also agreed that the NEPPS process has improved EPA-State communication 
and overall relations. Many also noted that NEPPS highlights and 
enhances communication among their own State media programs, as well as 
among EPA regional media programs. Noting that improved communications 
can solve 95 percent of their State-regional problems, Minnesota 
officials have instituted routine monthly conference calls with EPA's 
Chicago Regional Office to address waste issues and are considering 
implementing the same process for their other media programs. EPA 
Chicago Regional Office officials told us that they are also relying 
increasingly on oral communications with their States in an effort to 
encourage a more collegial and efficient approach to resolving 
problems.
Future Prospects for Success Depend on Further Progress
    Officials in each of the case study States that we interviewed 
agree that the concept behind NEPPS, and its potential for achieving a 
more effective partnership between EPA and the States, is worth 
pursuing. Yet while acknowledging some benefit from their 
participation, they also consistently expressed the view that the 
benefits should be greater; that the program has yet to achieve its 
potential; and that improvements are needed. Of particular note, 
providing States with the incentives envisioned initially under NEPPS, 
including the differential oversight as discussed in chapter 4, was 
seen by almost all of the State officials we interviewed as critical to 
the future success of the program.
    This view is reinforced by the resource commitment that some States 
feel has been required to take part in the program. Oregon officials, 
for example, said that they invested a significant amount of their 
resources in conducting a State environmental self assessment and other 
activities to participate in the NEPPS-Performance Partnership 
Agreement process. To date, however, these officials noted that they 
have not gained the advantages of reduced oversight leading to 
increased self management of their delegated programs and greater 
autonomy to focus on State priorities. Similarly, in explaining a major 
reason for their decision not to participate in the program, the Deputy 
Director of Michigan's Department of Environmental Quality noted that 
the heavy investment cited by participating States and the modest 
benefits achieved by those States has led to the Department's decision 
to wait and see how NEPPS evolves. The Deputy Secretary of 
Pennsylvania's Department of Environmental Protection had similar 
reasons for that Department's nonparticipation, noting that the 
department had several State initiatives underway that were important 
and, therefore, they would be reluctant to shift resources to NEPPS. 
The Deputy Secretary said that Pennsylvania is reserving judgment as to 
its future participation in NEPPS, noting that if greater progress and 
benefits under NEPPS accrue over time, it may become advantageous for 
the State to participate.
    For their part, EPA officials acknowledge the States' desire for 
greater program flexibility and autonomy, but believe they are not in a 
position to grant it unconditionally. Specifically, the officials 
maintain that additional program flexibility will have to be 
accompanied by demonstrated, measurable assurances that statutory and 
regulatory requirements and program objectives will still be met.
    As we noted in chapter 4, both EPA and State officials have pointed 
to the difficulty of developing specific, nationwide criteria to be 
used in determining the appropriate level of regional oversight of 
State programs under NEPPS. However, given the importance to the 
program's future of making progress on this issue, it may be helpful 
for EPA and State officials to collaborate in developing some type of 
non-binding guidance that could be used in guiding the negotiations of 
individual regions and States on this sensitive issue.
    In addition to this overriding concern about oversight, NEPPS 
participants believe that the benefits that have accrued from their 
participation in NEPPS have not reached their full potential. For 
example, many participants have noted improvements in communication 
under NEPPS, but said that further improvements are needed to ensure 
that all key EPA offices provide timely input into Partnership 
Agreement and Partnership Grant negotiations to help State agencies 
understand whether their agreements have full buy-in of all EPA 
offices. Similarly, while Partnership Grants allow for greater 
flexibility in shifting funds among media programs, States have thus 
far taken advantage of this opportunity to only a limited degree. To 
some extent, the base program requirements under individual programs 
combined with financial constraints have limited States' flexibility in 
shifting funds as freely as they would like. However, other factors may 
explain the problem as well, including specific grant regulations, 
resistance by EPA headquarters and/or regional staff, or similar 
resistance among State agencies themselves.
Joint EPA-State Evaluation Process Needed to Improve NEPPS
    These concerns pose challenges for the future of the program. 
However, we believe such challenges are to be expected in the context 
of a new program that strives to chart a new direction in the EPA-State 
relationship. Importantly, the need to address such challenges was 
anticipated by the 1995 Agreement that launched the program, which 
called for a joint evaluation system for EPA and the States to review 
the results of their efforts to ensure continuous improvement.
    To some extent, such a joint evaluation process was undertaken to 
produce the core performance measures. The intergovernmental committees 
that developed these measures, composed of representatives of EPA and 
State agencies, produced an initial set of measures for fiscal year 
1998 that was modified and improved in subsequent years. As noted in 
chapter 3, the measures approved for fiscal year 2000 are widely viewed 
as substantially improved by both EPA and State officials.
    EPA's and States' recent efforts to improve their working 
relationship in cleaning up priority Superfund sites may offer another 
useful precedent for such an effort. Reflecting a growing consensus 
among many in the administration, State government, and the Congress 
that States should take on more responsibilities for leading priority 
site cleanups, EPA and representatives from different States formed a 
number of intergovernmental workgroups to recommend ways to overcome 
the key barriers toward this goal. \28\ For example, a ``State 
Readiness Workgroup,'' composed of representatives of EPA headquarters 
and regional offices and State agencies, was charged with clarifying 
the requirements and circumstances under which States could be granted 
additional responsibilities to clean up these priority sites. 
Similarly, an intergovernmental ``Assistance Workgroup'' was also 
established to identify the technical financial, administrative, and 
legal assistance needs of the States in their efforts to take a lead 
role in successfully cleaning up Superfund sites. According to the 
Director of the State, Tribal, and Site Identification Center (within 
the Office of Solid Waste and Emergency Response), the workgroups were 
particularly useful in fostering collaboration among representatives of 
EPA's headquarters and regional offices involved in the cleanups in a 
manner that helped to identify where the key problems were and what 
practices worked well to address them. The Director said that the 
results of the workgroups have since been incorporated into pilot 
projects in seven States (and their corresponding regional offices) 
designed to increase States' responsibilities in leading cleanups of 
these sites.
---------------------------------------------------------------------------
    \28\ State and EPA efforts to augment States' roles in leading 
Superfund cleanups are discussed in our 1997 report, Superfund: 
Stronger EPA-State Relationship Can Improve Cleanups and Reduce Costs 
(GAO/RCED-97-77, Apr. 1997).
---------------------------------------------------------------------------
                              Conclusions
    On the basis of information that can be learned from experiences to 
date of a number of States and their corresponding EPA regional 
offices, we believe the systematic joint evaluation process called for 
by the 1995 Joint Commitment to Reform Oversight and Create a National 
Environmental Performance Partnership System should be initiated. The 
goals of this effort should be to (1) identify best practices among 
participating States for dealing with the most challenging problems 
facing the program and (2) eventually obtain agreement on actions that 
will improve and expand the program.
    Such a process has already been used to develop and improve the 
Core Performance Measures used in the NEPPS program, and has served as 
a successful model elsewhere in EPA where new ideas have been developed 
and tested, and agreement among diverse parties on their implementation 
has been reached. We believe a similar effort, which targets key issues 
affecting NEPPS progress and which involves representation from EPA 
headquarters offices, EPA regional offices, and participating State 
agencies, could similarly help to expand both the participation in, and 
effectiveness of, this important program. The precise format to be used 
for this process (e.g., whether individual working groups should be 
established or whether a single committee composed of senior State and 
EPA officials should be used) should be determined by EPA and State 
environmental leaders.
                            Recommendations
    We recommend that the Administrator of EPA work with senior-level 
State officials to initiate a joint evaluation process that (1) seeks 
agreement on the key issues impeding progress in developing a more 
effective National Environmental Performance Partnership System and (2) 
develops mutually agreeable remedies for these issues. Among the issues 
such a process could focus on are:
      developing a set of flexible guidelines, to be used as a 
tool by State and EPA regional NEPPS negotiators, that could help to 
clarify the appropriate performance expectations and other conditions 
that States must meet to achieve reduced oversight in carrying out 
their environmental programs and the type of reduced oversight (e.g., 
reduced frequency of reporting, greater autonomy in setting program 
priorities) that could be achieved;
      identifying what additional work is needed to address the 
challenges in implementing the Core Performance Measures recently 
negotiated by EPA and the Environmental Council of the States for 
fiscal year 2000, including how these measures can best be reconciled 
with the measures adopted by EPA under the Results Act;
      alleviating the resistance among some staff (both within 
EPA offices and among participating State agencies) toward implementing 
the National Environmental Performance Partnership System, through 
training and other strategies;
      determining what appropriate steps should be taken by EPA 
and the States to allow for greater use by States of the flexibility 
envisioned under the Performance Partnership Grant system to shift 
resources and funding among their media programs;
      determining how effective public participation in the 
NEPPS process can best be ensured;
      and developing ways to improve communication among EPA's 
headquarters and regional offices and participating States to ensure 
that States are given a clear and timely indication on whether key 
elements of their agreements pursuant to the system have the full buy-
in of major EPA offices.
                            Agency Comments
    EPA agreed with the report's recommendation that EPA and State 
efforts to improve NEPPS should include training and other efforts to 
achieve the ``cultural change'' necessary for greater success. The 
agency also pointed out that it recently agreed with representatives of 
the Environmental Council of the States on a basic outline of a joint 
evaluation process. We acknowledge this milestone and note that further 
progress on the details of such a process, including the specific 
issues to be addressed and a timetable for addressing them, will be 
important steps toward improving NEPPS.
    EPA also commented on our recommendation that EPA and State 
environmental leaders should develop guidelines that would help to 
clarify, for EPA and State negotiators, the appropriate performance 
expectations that States must meet to achieve reduced oversight in 
carrying out their environmental programs and the type of reduced 
oversight (e.g., reduced frequency of reporting, greater autonomy in 
setting program priorities) that could be achieved. EPA noted that 
while it agreed with this recommendation in principle, the agency and 
the States believe that each State's Performance Partnership Agreement 
should specify the degree of oversight necessary to accommodate the 
unique environmental problems and varied program capabilities of that 
State. We agree that oversight arrangements should be negotiated 
between each State and its corresponding regional office in a manner 
that accounts for that State's unique circumstances, and that these 
arrangements should be specified in the Performance Partnership 
Agreement. We continue to believe, however, that nonbinding national 
guidance-to be agreed upon in advance by EPA and State environmental 
leaders-would be useful in introducing objective parameters to be 
considered by regional and State negotiators as they seek agreement 
over this sensitive issue.
                                 ______
                                 
                               Appendix I
  Comments from the Environmental Protection Agency and Our Evaluation
    The following are GAO's comments on the Environmental Protection 
Agency's (EPA) letter dated May 20, 1999.
    1. We have clarified, in the executive summary and chapter 5, that 
EPA officials and representatives of the Environmental Council of the 
States have recently agreed to certain characteristics of a joint 
evaluation process, and that further progress (including decisions on 
the specific issues to address and a timetable for addressing them) 
would be important steps in improving NEPPS.
    2. We have amended the report to reflect the agency's expectation 
that its April 1999 2-year guidance should allow the regions and States 
to consider national program priorities earlier in their partnership 
agreement negotiations, and thus limit the need to renegotiate 
priorities that had been previously established. At the same time, the 
report still conveys agency officials' views that the guidance will not 
necessarily prevent other circumstances, which are out of EPA's 
control, from necessitating the reopening of an agreement.
    3. Citing the observation in chapter 3 that (1) EPA has focused on 
outputs to meet its obligations under the Results Act while supporting 
a transition to outcome-based management under NEPPS and (2) these 
conflicting priorities have led to confusion that hinders performance 
partnerships, EPA stated that, to the contrary, both the Results Act 
and NEPPS encourage the development of outcome measures and outcome-
based management. We acknowledge the shared objective of NEPPS and the 
act in focusing on results. The key word, however, is implementation: 
as we have documented in other recent work, the measures EPA has used 
in its implementation of the Results Act have thus far been heavily 
output-oriented and therefore convey priorities that are often in 
conflict with the more outcome-oriented measures being employed under 
NEPPS. We acknowledge the agency's ongoing efforts to orient its 
Results Act-related measures increasingly toward outcomes, and believe 
that further progress toward this end will help to alleviate this 
problem. In addition, we modified our discussion of this issue in 
Chapter 3 to note that the April 1999 Addendum to the Joint Statement, 
co-signed by EPA and the Environmental Council of the States, States 
that core performance measures and other current reporting requirements 
will be relied upon to satisfy EPA's Results Act-related data needs.
    4. We agree that oversight arrangements should be negotiated 
between each State and its corresponding regional office in a manner 
that accounts for that State's unique circumstances, and that these 
arrangements should be specified in the State's Performance Partnership 
Agreement. We continue to believe, however, that nonbinding national 
guidance-to be agreed upon by EPA and State environmental leaders-would 
be useful in introducing objective parameters to be considered by 
regional and State negotiators as they seek agreement over this 
sensitive issue.
    5. EPA's comment draws a clear distinction between issues 
associated with reporting burdens and other issues related to EPA's 
oversight of State environmental programs. We acknowledge circumstances 
in which EPA and a State collaboratively pursue strategies to reduce 
reporting requirements that both agree are unnecessary, duplicative, or 
inefficient; and that such circumstances could be viewed as outside the 
two parties' oversight arrangement. However, the distinction between 
this activity and oversight is not always so clear. Specifically, where 
States and EPA have disagreed on the need for data not required by 
statute and viewed by States as extraneous, and EPA has continued to 
require reporting of such data, States have often characterized the 
issue as, in their view, a questionable exercise of EPA oversight.
                               __________
    Statement of R. Lewis Shaw, Deputy Commissioner, South Carolina 
     Department of Health and Environmental Control and President, 
               Environmental Council of the States (ECOS)
    Mr. Chairman and members of the committee, thank you for the 
opportunity to appear before you today. My name is R. Lewis Shaw, and I 
am the Deputy Commissioner of the South Carolina Department of Health 
and Environmental Control. I have 29 years of service to my State with 
the last 16 of those in my current position as the State environmental 
director. Today, however, I am here representing the views of the 
Environmental Council of the States (ECOS) of which I am the President.
    ECOS is the national, non-profit, non-partisan association of the 
State and territorial environmental agencies. The States and 
territories are our members and the people we represent are the leaders 
of the various State environmental agencies. Our mission is to:
    1.Champion the cause of States, and
    2.Provide for the exchange of ideas, views and experiences among 
the States, and
    3.Foster cooperation and coordination in environmental management, 
and
    4.Articulate State positions to Congress, Federal agencies and the 
public on environmental issues.
    Other details about our association are provided in the attachments 
to this testimony, which I ask be entered into the record.
    I am here to tell you of some of the accomplishments that States 
have made in environmental protection--accomplishments that are not 
widely known. I will make four main points:
    1)States now implement most of the delegable environmental 
programs, gather most environmental data, and conduct most enforcement 
and compliance actions;
    2)States are paying for the largest share of environmental 
protection;
    3)States implement many of their own environmental programs, and 
have become the chief architects of and advocates for innovations; and
    4)States are committed to an environmental partnership with the 
Federal Government, but have suggestions for how to improve that 
relationship.
    I'd like to now expand on those four points:
    First, States now implement most of the delegable environmental 
programs. This is good news, because that is what Congress intended 
when it enacted laws such as the Clean Air and Clean Water Acts. States 
now have primary responsibility for carrying out those laws. As of 
1999, about 70 percent of the major programs that could be delegated to 
States had been delegated. This means States are running most of the 
clean water programs, clean air programs, drinking water programs, and 
waste clean up programs that Congress created. As you can see from 
Chart 1 (on display and attached), much of this growth was in the 
1990's, and in particular between 1993 and 1998 a 5-year period in 
which State delegations grew by almost 75 percent.
    As part of this responsibility, States are also collecting most of 
the environmental quality data. Brent Bradford, my colleague from the 
State of Utah will be speaking more about this today.
    We also conduct most of the environmental enforcement activities. 
In recent years, States have averaged between 75 and 80 percent of all 
enforcement actions taken by EPA and the States combined. We conduct at 
least 97 percent of all enforcement inspections. But we also conducted 
many other enforcement actions and compliance assistance that EPA may 
not count for one reason or another. Last year, Congress directed ECOS 
to conduct research on the issue of counting enforcement and compliance 
activities and report back to Congress. We are working on this project 
now and expect to report to you early next year.
    My second point is that States are paying for most of this 
environmental protection. As you can see in chart 2 (on display and 
attached), State spending for environmental protection has grown 
dramatically since 1986. In 1986 States spent about $5.2 billion on 
environmental protection and natural resources. Congress, through EPA, 
provided just over $3 billion of that, almost 58 percent. But by fiscal 
1996, a very different story had emerged. States spent about $12.5 
billion, with the EPA providing about $2.5 billion, or about 20 
percent. During the 10-year period from 1986 to 1996, State spending on 
the environment increased about 140 percent, while total EPA funding to 
the States decreased about 17 percent. Most of the decline is 
attributable to reductions in water infrastructure support programs. In 
1996 the States spent nearly twice as much ($12.5 billion) on 
environment/natural resources as the entire EPA budget ($6.5 billion).
    My third point is that States conduct many other non-delegated 
programs on their own, and that we are great at innovation. For 
example, in South Carolina, we have our own laws, rules and practices 
on the protection of shellfish beds that are not part of the delegated 
Federal system, but are very important to our State. Obviously, these 
kinds of laws vary State to State, but they show the commitment of the 
States to the environment. According to the National Conference of 
State Legislatures, the States passed into law over 700 environmental 
bills in 1997 alone. At least half of these dealt with non-delegated 
environmental programs such as pollution prevention and solid waste 
management (chart 3 on display and attached). As the chart shows, for 
example, most of the hazardous waste sites in the country are actually 
being regulated and cleaned up under State authority. Another study by 
The Council of State Governments found that 80 percent of the States 
had at least one Clean Air Standard that exceeded the Federal minimum 
standards. In South Carolina, for instance, our toxics list includes 
258 constituents, compared to 188 on the Federal list.
    States implement most environmental protection programs, so we are 
often the first to recognize innovative solutions for environmental 
problems. Each year for the past 3 years, ECOS has compiled State 
program and implementation innovations. These cover the complete range 
of environmental protection, including delegated and non-delegated 
programs. ECOS has now compiled hundreds of these innovations. Some of 
these State ideas have been nationally recognized by Innovations Awards 
programs such as those of The Council of State Governments and Harvard 
University.
    States are committed to the State-Federal partnership in 
environmental protection. But we believe that the time for command-and-
control, top-down programs has ended. Perhaps it should be replaced by 
a set of mutually agreed upon national goals and standards, which would 
be achieved by the States in the manner we deem most appropriate, and 
supplemented by local goals and standards that meet the specific needs 
of the States. After all, you are not likely to see the same 
environmental problems in South Carolina as you would in Utah because 
the States have such different ecologies. Our final chart shows some of 
the differences that we think will lead to a more harmonious 
relationship and better environmental protection (see display chart and 
attached).
    Some people still believe that it's 1970 and that the States can't 
be trusted to protect the environment. We believe the facts presented 
here today give the real story States are leaders in environmental 
protection and committed to protecting the health and environment of 
the citizens we serve.
    Mr. Chairman, thank you again for the opportunity to appear before 
you today. I am happy to take any questions.
                                 ______
                                 
The Role of State Governments in Environmental Protection Has Increased 
                  Dramatically Over the Last 10 Years.
                          (by R. Steven Brown)
    A remarkable, and largely unnoticed, change in environmental 
protection has occurred over the past five to 10 years. The States have 
become the primary environmental protection agencies across the nation. 
Much has been written about EPA's role, or about State-EPA 
partnerships. This article seeks to tell the States' story.
    Over the past year with help from other State- based organizations 
(many of which have articles in this issue), ECOS compiled a set of 
data that shows a remarkable maturation of the policymaking and 
regulatory capabilities of the State environmental agencies. This 
article presents those data in five categories: delegation, fiscal, 
enforcement, information gathering and policymaking.
Delegation
    Congress intended for the States to administer most Federal 
environmental programs. \1\ Generally, a State petitions the EPA to 
administer one of the delegable programs. This process is commonly 
known as ``delegation,'' or more legally as ``assumption,'' or 
``primacy.'' The Governor files a petition after the legislature has 
passed authorizing legislation that must be at least as stringent as 
the Federal standard and after the State has shown that it has adequate 
resources.
---------------------------------------------------------------------------
    \1\ ECOS has prepared two papers detailing the legislative history 
of the Clean Air Act and the Clean Water Act. We expect to publish 
these in early summer 1999.
---------------------------------------------------------------------------
    Most Federal programs are actually delegated in a piecemeal 
fashion, however. For example, a State may have created a program for 
new source performance standards, but may not have everything in place 
yet to run the hazardous air pollutant part of the Clean Air Act. Such 
a system aids the States in that it allows a State to proceed 
incrementally, but it complicates the discussion about what is 
delegated and which level of government runs which program.
    Nevertheless, it has become clear that the delegation of 
environmental programs to the States has increased dramatically in the 
past 5 years. In the summer of 1998, ECOS completed a delegation study 
for 22 of the programs from most of the major delegable Federal acts. 
\2\ This study showed the number of States with delegated programs for 
the following:
---------------------------------------------------------------------------
    \2\ Currently presented on the ECOS u eb page at: http://
www.sso.org/ecos/states.htm

      Clean Air Act: 42 States \3\
---------------------------------------------------------------------------
    \3\ These are averages for the delegable programs under each Act 
for which ECOS has information.
---------------------------------------------------------------------------
      Clean Water Act: 34 States
      Waste (RCRA): 37 States
      Drinking Water: 39 States
      Pesticides (FIFRA): 39 States

    The overall delegation rate to the States in mid-1998 was about 65 
percent, and about 74 percent for the major environmental programs. 
This means, for example, that of the portions of these Acts that could 
be delegated, about 74 percent had been delegated.
    Contrast this delegation rate to that of 1993, when EPA had 
delegated 39.5 percent of 22 environmental programs to the 50 States. 
By 1998, EPA had delegated 757 of 1,166 possible Federal environmental 
programs to 53 States and territories, nearly a 75 percent increase 
from 5 years prior. States also operate many of their own, nondelegated 
environmental programs. Some of the rapid increase was attributable to 
programs like the wellhead protection program of the Safe Drinking 
Water Act (from 8 to 36 States) and the New Source Review program of 
the Clean Air Act (from 15 to 42 States).
Fiscal
    With such an increase in delegated programs, one might expect a 
parallel increase in both EPA and State funding to support the new 
programs. Starting with fiscal 1986, the Council of State Governments 
periodically researched each State's budget to compile total State 
spending for environmental protection and natural resources for each 
State. Data exists for 1986, 1988, 1991, 1994 and 1996. This State 
spending can be coupled with EPA and U.S. Office of Management and 
Budget data on funds supplied to the States to present a picture of the 
source of environmental protection funds in the States.
    In 1986 States spent about 55.2 billion on environmental protection 
and natural resources. \4\ The EPA provided just over $3 billion of 
that, almost 58 percent. \5\ But by fiscal 1996, a very different story 
had emerged. States spent about $12.5 billion, \6\ with the EPA 
providing about $2.5 billion, or about 20 percent. \7\ During the 10-
year period from 1986 to 1996, State spending on the environment 
increased about 140 percent, while total EPA funding to the States 
decreased about 17 percent. \8\ Most of the decline is attributable to 
reductions in water infrastructure support programs. In 1996 the States 
spent nearly twice as much ($12.5 billion) on environment/ natural 
resources as the entire EPA budget ($6.5 billion).
---------------------------------------------------------------------------
    \4\ R. Steven Brown, et al., Tile Resource Guide to State 
Environmental Protection. Lexington, Kentucky: The Council of State 
Governments, 1988. Page 93.
    \5\ ECOS calculation, based on U.S. Office of Management and Budget 
data. Some funding is also provided to the State environment/natural 
resource agencies by other Federal agencies, but ECOS' preliminary 
research indicates that most Federal funds are from EPA.
    \6\ Karen Marshall, et al. The Resource Guide to State 
Environmental Protection Fifth Edition. Lexington, Kentucky: The 
Council of State Governments, 1999. p.32
    \7\ As per footnote 4.
    \8\ EPA believes it has ``held the States harmless'' by protecting 
the State categorical grant budgets during times of budget cuts. EPA 
has stated to ECOS that these grants are about S850 million per year. 
ECOS has used OMB numbers (which are higher) to reflect total EPA 
funding provided to the States for any purpose. Thus, total EPA funding 
to States has decreased, while categorical grants are reported to have 
increased over the past 10 years.
---------------------------------------------------------------------------
    It should come as no surprise that the States have also increased 
the size of their environmental staff over this 10-year period. In 1986 
the State agencies expended about 38,000 work-years, but by 1996 that 
effort had increased to about 61,000 work-years, almost a 60 percent 
increase.
Enforcement
    States are the primary enforcers of environmental law for delegated 
programs. The States also enforce many State environmental laws that 
are not related to the national laws. EPA tracks and reports the 
enforcement actions that it and the States take each year, but only for 
delegated programs--enforcement actions that the State takes on non-
delegated programs are not counted. Furthermore, EPA may not count some 
State enforcement actions for a variety of other reasons, such as 
differences in data management. Even with those limitations, over the 
past 10 years the States have consistently conducted about 75 percent 
of the enforcement actions \9\ taken, with EPA doing the rest. \10\ In 
recent years, the State workload has risen to 80 percent of the actions 
\11\.
---------------------------------------------------------------------------
    \9\ Administrative actions and judicial referrals.
    \10\ US EPA, Office of Enforcement and Compliance Assurance; 
February 18,1998, web page:http://es.epa.gov/oeca/96accomp/appa6.html.
    \11\ EPA has told ECOS that it is more likely to spend its time on 
large, complex enforcement cases, which it believes have a significant 
qualitative impact, if not a quantitative one.
---------------------------------------------------------------------------
    Many States have also emphasized ``compliance'' over 
``enforcement.'' Methodologies for counting compliance assistance 
activities appear to still be inadequate and are a matter of current 
research by EPA and the States. As a result, it appears EPA and many 
States themselves do not track compliance assistance efforts that the 
States undertake. Unfortunately, this means that States and EPA may not 
be able to count some of the most important ``enforcement actions'' 
that States undertake. While EPA data shows that States perform most of 
the administrative enforcement actions, we know the number to be even 
higher because compliance assistance activities are not part of the 
enforcement action count.
Information
    One of the most visible ``products'' of any environmental 
protection agency, State or Federal, is information. Each State agency 
gathers, compiles, houses and analyzes a great deal of environmental 
information, both for delegated programs and for other environmental 
purposes important to them. When a State is delegated a program, it 
usually agrees to forward key information to EPA to one or more of 13 
national environmental data bases that EPA maintains. Six of these 
national data bases house environmental quality data (the others have 
toxicology information, or information about regulated facilities). In 
the summer of 1999, ECOS and EPA expect to jointly publish a report 
that describes the source of the data in these six national data bases 
\12\. For example:
---------------------------------------------------------------------------
    \12\ Environmental Reporting Data in EPA's National Systems: Data 
Collection by State Agencies. EGOS/EPA, 1999. In press.
---------------------------------------------------------------------------
      Air data: >99 percent of EPA's data comes from States 
\13\
---------------------------------------------------------------------------
    \13\ Aerometric Information Retrieval System (AIRS) and AIRS 
Facility Subsystem (AFS). Essentially, AIRS/ AFS is states' data base.
---------------------------------------------------------------------------
      Water data: ?91 percent of EPA's data comes from States 
\14\
---------------------------------------------------------------------------
    \14\ Safe Drinking Water Information System (SDWIS), 99 percent; 
Permit Compliance System (PCS--a component of the National Pollution 
Discharge Elimination System), 83 percent of major sources and 94 
percent of minor sources; and STORET, 90 percent.
---------------------------------------------------------------------------
    Hazardous waste data: >92 percent of EPA's data waste data 
comes from States \15\.
---------------------------------------------------------------------------
    \15\ Biennial Reporting System (BRS), 92 percent.
---------------------------------------------------------------------------
    That is, over 94 percent of all the environmental quality data in 
EPA's national data bases was first collected and compiled by State 
environmental agencies. The States and EPA share this data for a 
variety of purposes (for example, environmental performance measures).
    The States also collect additional environmental quality data that 
is not contained in national data bases. Some of this data is collected 
for delegated programs, but is not usually forwarded to EPA because EPA 
does not require it (for example, water quality reports from minor 
point sources).
    Some data is collected because of environmental laws that States 
have that are not related to delegated programs (for example, most 
solid retaste, water quantity, natural resource management, growth 
management or land use planning data). ECOS has not yet assessed the 
amount of this other data that States collect, but w e believe it to be 
a significant amount, perhaps even exceeding the environmental data 
reported to EPA.
Policy Making
    States implement most environmental protection programs, so they 
often see innovative solutions for environmental problems first. Each 
year since ECOS began its annual meetings (starting in 1994), it has 
compiled the program and implementation innovations that ECOS' members 
have presented. These cover the complete range of environmental 
protection, including delegated and non-delegated programs. ECOS has 
now compiled hundreds of these innovations. . \16\ Some of these State 
ideas have been nationally recognized by Innovations Awards programs 
such as those of The Council of State Governments and Harvard 
University. Our members have consistently rated this kind of peer- 
sharing as one of the most important benefits of ECOS.
---------------------------------------------------------------------------
    \16\ 1998 State Environmental Innovations. Washington, DC: ECOS, 
1998.
---------------------------------------------------------------------------
    However creative and inventive State agency solutions can be, from 
time to time legislative solutions are more appropriate. States have 
not shied affray from implementation of new environmental laws. 
According to the National Conference of State Legislatures, the States 
passed over 700 environmental bills in 1997 alone. \17\ At least half 
of these dealt with non-delegated environmental programs such as 
pollution prevention and solid waste management.
---------------------------------------------------------------------------
    \17\ George Hagevik and C. Kohler, ``Trends in State Environmental 
Law 1997,'' NCSL Report, 1998.
---------------------------------------------------------------------------
Conclusion
    States have proven to be serious about their responsibilities as 
stewards of the environment, and have more than fulfilled the 
expectations of the 1972 Congress that drafted some of the original 
legislation envisioning the State role in the Federal environmental 
protection system. In fact, almost 30 years later, the States are 
leaders in environmental protection. Whether the yardstick is 
delegation, fiscal, enforcement, information gathering or policymaking, 
the States are responsible for an increasing, and perhaps increasing, 
and perhaps surprising, amount of the work done to protect the nation's 
environment.
                               __________
            State Air Pollution Control Program Survey 1999
         The Council of State Governments, Lexington, Kentucky 
                           http://www.csg.org
Executive summary
    From the lofty heights of Capitol Hill in Washington D.C., it may 
appear that the Federal Government makes all the important decisions 
about clean air policy. After all, U.S. EPA regulations and the 
detailed provisions of the 1990 Clean Air Act regulate pollutants that 
float in the air, pollutants released by industrial and mobile sources 
(cars and trucks), and the type of fines and sanctions levied against 
violators. From the Capitol Hill perspective, all these national 
standards and regulations are absolutely necessary. According to the 
cynics, if left to their own devices the States would adopt weaker and 
weaker environmental protection laws, creating a ``race to the bottom'' 
in which States compete for economic growth by enticing industry with 
less stringent--and less costly--regulations. regulations.
    Reality, however, is often at odds with popular perception. In 
1998, the Environmental Policy Group at The Council of State 
Governments and the University of Kentucky Martin School of Public 
Policy and Administration conducted a survey to review State clean air 
programs, funding and regulations. Overall, the study found that the 
Capitol Hill perspective on clean air programs can be misleading. These 
days, the States conduct most of the important clean air activities, 
provide the bulk of air program funding and oversee a diverse array of 
air pollution control activities. Most importantly, despite perceptions 
to the contrary many States have adopted clean air standards and 
programs that are more stringent than U.S. EPA requirements due to each 
State's unique interests. So much for a ``race to the bottom.''
US EPA and the States
    The States and the U.S. EPA share responsibility for nearly all air 
pollution control activities in the nation. Each State submits a State 
Implementation Plan to the U.S. EPA outlining its clean air program. 
For each major clean air activity--setting air quality and emissions 
standards, monitoring emissions and ambient air, enforcing policy, and 
issuing permits--the U.S. EPA sets minimum criteria for State programs. 
If the U.S. EPA determines that a State's program meets these 
standards, it approves the SIP and grants the State full regulatory 
authority. If the plan does not meet the minimum criteria, the U.S. EPA 
can preempt the State program and create its oven air pollution program 
for the State. The U.S. EPA can preempt all or part of the State 
program, depending on how adequately it addresses the minimum criteria.
Setting Clean Air Standards
    The CSG survey asked respondents to indicate whether their States' 
clean air standards exceeded the U.S. EPA minimum criteria in a variety 
of areas, from ambient air quality to emission limits for new sources. 
Ambient air quality standards are target levels which govern pollutant 
concentrations in the air that people breathe outdoors. The U.S. EPA 
has set National Ambient Air Quality Standards for six ``criteria'' 
pollutants that pose significant health hazards if people breath enough 
of them. The NAAQS pollutants are ozone, particulate matter, carbon 
monoxide, sulfur dioxide, nitrogen dioxide and lead.
    The States can expand on U.S. EPA criteria by setting more 
stringent ambient standards for criteria pollutants and by establishing 
ambient standards for pollutants not listed in the NAAQS. Of the 38 
States responding to the CSG sure ey, six ( 16 percent) reported that 
their standards for one of the NAAQS pollutants exceeded the U.S. EPA's 
minimum criteria, and six more (16 percent) reported that their 
standards exceeded the criteria for two or more pollutants. Only two 
States--Michigan and Illinois--indicated that they did not have U.S. 
EPA authority to implement the NAAQS program, but they expected 
authorization in the near future. Surprisingly, 24 of the 38 responding 
States (63 percent) have set ambient standards for pollutants other 
than those regulated by the U.S. EPA's NAAQS standards. These States 
have set standards for pollutants such as hydrogen sulfide, calcium 
oxide and odors.
    The survey shows that States are exceeding U.S. EPA standards in 
other areas. Eight of the 38 responding States (21 percent) reported 
that their emissions standards for new sources were more stringent than 
the U.S. EPA's New Source Performance Standards. And 25 States (66 
percent) reported that their programs for monitoring ambient air 
quality exceeded Federal minimum requirements.
    The States have also made considerable progress regulating 
hazardous air pollutants, which are thought to pose public health 
risks. The U.S. EPA has long sought to improve HAP regulations, and the 
1990 Clean Air Act created an entirely new regulatory regime for 189 
identified hazardous air pollutants. Thirty-three of the 38 responding 
States (87 percent) have received authority from the U.S. EPA to 
administer the hazardous air pollutant program, with some States again 
exceeding Federal requirements. Eighteen States (47.4 percent) regulate 
hazardous air pollutants in addition to those listed by U.S. EPA and 
another 18 regulate additional sources of hazardous air pollutants.
    In a true ``race to the bottom,'' no State would voluntarily enact 
stricter NAAQS standards or regulate nonmandatory pollutants because 
doing so would risk losing economic growth to States with more lenient 
regulations. The CSG study, however, shows that in many different areas 
of clean air policy States have adopted standards and programs that are 
more stringent than what the U.S. EPA requires for SIP approval.
Funding State Clean Air Programs
    Title V of the 1990 Clean Air Act mandated important changes in how 
States fund their clean air programs. Title V requires States to issue 
operating permits for every major emissions source specifying allowable 
levels of pollutant concentrations and the applicable emission control 
strategies. Title V also requires States to charge a fee of at least 
S25 for each ton of pollutants emitted to help States fund their clean 
air programs. The goal of Title V is to facilitate enforcement by 
centralizing regulations that apply to each source of pollution.
    The major categories of funding sources for State air quality 
programs are State general funds, dedicated State funds (such as 
lottery proceeds or special environmental taxes), fees (including Title 
V permit fees), enforcement (fines and penalties), EPA/Federal grants, 
and other (usually mobile source) income. Title V permit fees have 
become the most important source of State air program funding, 
accounting for 57 percent of the total. Overall, the States still rely 
on EPA/Federal grants, at 22 percent of the total, the second largest 
funding category. State general funds are another major source of clean 
air funding at 12 percent of the total. The other budget source 
categories--dedicated State fund (7 percent), enforcement (2 percent) 
and other (1 percent), make up only a small percentage of State clean 
air funding.
State air program expenditures
    The survey also investigated how States spend their air pollution 
control funds. On average, States spend 24.7 percent of their budgets 
on permitting activities, 15.8 percent on ambient air monitoring, 12.8 
percent on enforcement, 12.1 percent on administration, 10.3 percent on 
source monitoring, 6.3 percent on technical assistance/industry 
outreach, 5 percent on policy analysis, 3.2 percent on environmental 
science research, 2 percent on community outreach, and 9.4 percent on 
other categories (usually mobile source issues). Many States estimated 
income and expenses, since they do not record the budget expenditures 
and sources in the categories listed in the survey.
Conclusion
    The 1990 Clean Air Act contained a series of challenges for State 
clean air programs. The Title V permit section required many States to 
restructure their programs, including their regulatory structures and 
enforcement approaches. The HAP program expanded the scope of State 
clean air regulations to a vast new array of pollutants and sources. 
For the most part, States have met these challenges. Title V permit 
fees have become the most important source of State air program 
funding, as the 1990 Clean Air Act intended. By 1998, the U.S. EPA had 
granted the States authority to administer the vast majority of air 
pollution control programs, including the expansive HAPs program.
    Most importantly, however, is the obvious intent of the States to 
pursue their own environmental protection agenda according to their 
unique circumstances. The CSG study shows that in many policy areas the 
States have gone beyond minimum Federal requirements to become leaders 
in establishing and implementing clean air policy. Rather than racing 
to the bottom, the States seem to be vying for the lead in protecting 
the health of their citizens and ecological resources in a manner as 
unique and diverse as the States themselves.
                                 ______
                                 
 Responses by R. Lewis Shaw to Additional Questions from Senator Smith
    Question 1. The South Carolina Deputy Commissioner and ECOS 
President stated in his testimony that the time for command-and-
control, top-down programs has ended and that it should be replaced by 
a set of mutually agreed upon national goals and standards. He also 
emphasized that a ``one size fits all approach'' has outlived its 
usefulness. He further stated that local and regional environmental 
challenges differ and that requires that States have the flexibility to 
take the lead in adopting environmental goals and standards, and apply 
innovative approaches to achieve them. What is the new direction and 
how do we get there?
    Response. First, in response to this all-encompassing question, we 
are already heading in a new direction. For example, the respective 
roles of EPA and the States have changed dramatically in recent years. 
As I indicated in my written testimony, States have assumed the lion's 
share of environmental responsibility and service delivery.
    The new direction would have the States and Federal agencies 
working as true partners in a Federal environmental protection system. 
States would have early, meaningful, and substantial involvement in the 
development and implementation of environmental statutes, national 
standards, policies, rules, programs, reviews, joint priority setting, 
budget proposals, budget processes, and strategic planning. Under this 
new system, more programs would be delegated to the States and the 
appropriate Federal focus would be on program reviews and joint 
priority setting. EPA would intervene in such State programs only in 
rare and egregious cases after the State has had a chance to correct 
program defects. Where the Federal Government requires that 
environmental actions should be taken, it would fund those actions, and 
not at the expense of other State programs. And, this new direction 
would affirm that the Federal Government would be subject to the same 
environmental rules and requirements, including the susceptibility to 
enforcement that it imposes on States and other parties.
    In this new direction, Congress and the EPA would provide the 
maximum degree of flexibility in the design and implementation of 
environmental programs. The Federal Government would support 
nonregulatory approaches to meeting Federal standards so that 
integrated environmental protection is encouraged and narrow pollution 
control regulations are discouraged.
    To avoid the ``one-size-fits-all'' standard and maximize limited 
resources, flexibility would include the authority for States to 
prioritize environmental problems and allocate resources on a ``worst-
first'' basis, as well as the authority to shift EPA-administered grant 
funds among programs to target local priorities. In addition, EPA would 
look at the cumulative impacts of rules across program areas to ensure 
that unintended burdens could be avoided and inconsistencies minimized.
    A climate that encourages regulatory innovation is critical as we 
face the next generation of environmental problems. The EPA and State 
environmental commissioners have agreed on the need to experiment with 
new approaches to improve our nation's environment, as embodied in the 
Joint EPA/State Agreement to Pursue Regulatory Innovation, signed in 
April 1998. 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.
    Congress could play a key role in defining this new direction. For 
example, Congress could:

      Expand incentives to encourage innovation, such as 
    regulatory process changes (things like predictable, timely 
    permitting and reduced administrative burdens), economic incentives 
    (for example, tax credits, fee waivers, new funding), and greater 
    use of environmental management systems;
      Actively explore both regulatory and nonregulatory 
    innovations directed specifically at existing unregulated problems, 
    such as nonpoint source pollution, habitat loss, diffuse use air 
    pollution and urban sprawl;
      Enact legislation that provides protection to innovators 
    pursuing agreed upon goals and objectives while working ``outside 
    the box;''
      Explore legislation directing EPA to approve delegated 
    State programs that vary from Federal regulations under specific 
    environmental laws, submitted to EPA under the regulatory 
    innovation process described above, if the alternative program 
    approach meets criteria established through discussions among 
    States, EPA, Congress and other interested parties; and
      Enact legislation that paves the way for an integrating 
    environmental statute.

    The new direction would also involve the appropriate use of risk 
assessment and cost-benefit analysis to improve environmental 
decisionmaking. My ECOS colleagues and I believe that the appropriate 
use of risk assessment and cost-benefit analysis will enable Congress, 
EPA and the States to ensure that increasingly limited public resources 
are used most effectively and efficiently in achieving environmental 
objectives.

    Question 2. What transformation does ECOS see that is needed in the 
Federal-State structure to get us there?
    Response. As my previous answer indicates, most of the change that 
we see as required involves relationships and processes. There are, 
nonetheless, certain trends that suggest structural changes that may be 
on the way.
    For example, many of today's challenges are multi-media and 
ecosystem-based, rather than single-source, single-pollutant issues. 
Yet, it is the single source/pollutant focus of the earlier years that 
has dictated our current environmental management structure. As a 
result, Federal statutes and all the actions that have flowed from them 
have had the effect of shifting pollution problems from one 
environmental medium to another. Contaminant-laden ashes and sludge 
from air and water pollution control processes destined for landfills 
are a couple of examples.
    Meeting the challenges posed by meeting water quality criteria help 
illustrate the need for a new structure. Making a stream habitable for 
a particular fish may involve improvements at a wastewater treatment 
facility, the reduction of polluted runoff from farm fields and 
backyards, cleaning up contaminated industrial sites along the stream 
bank, controlling nitrogen oxide and mercury emissions from power 
plants many miles away, restoring wetlands and other fish habitat, 
preventing resuspension of toxics in the stream sediments--and more. 
Historically, these have been isolated and independent activities in 
State and Federal agencies, with little or no policy direction 
regarding the interplay among the problems or opportunities among the 
solutions.
    Recognizing this integration problem, Minnesota has reorganized its 
environmental agency on a geographic basis, as opposed to along media 
lines (air, water, and waste). In order for a truly systematic and 
flexible system to evolve, not only the implementation but also the 
policy-making structure must change. We are concerned that Congress' 
structure, for example, might preclude the kind of comprehensive policy 
direction necessary to tackle watershed quality issues or coastal and 
estuarine challenges that can involve multiple Federal agencies and a 
multitude of State and local jurisdictions.

    Question 3. The GAO points out that there is no guidance for 
negotiating a Performance Partnership Agreement (PPA) and that there is 
a wide variance in content among the various agreements. Would some 
standardization be helpful in reducing the transaction costs that 
accompany these individual negotiations?
    Response. I am not surprised that an auditor would find the PPA 
process a bit unstructured. But, that was the intent. The purpose of 
NEPPS was to move away from the cookie-cutter mentality and embrace the 
reality of State priorities and challenges. The fact that 38 States 
might negotiate completely different agreements with EPA was expected 
and embraced by the States. Our concern all along was how EPA would 
react to this new way of engaging the States.
    Understandably, EPA was concerned about its obligations under 
Federal statutes to ensure their mandates were met, the contents of 
individually negotiated PPAs notwithstanding. Given that understanding, 
and appreciating the need for certain information from the States on 
issues of national significance, ECOS has negotiated Core Performance 
Measures (CPMs) with the principal program offices at EPA.
    We, nonetheless, remain concerned about the interplay of the 
flexibility promised by NEPPS and the relatively rigid expectations of 
the Government Performance and Reporting Act (GPRA). ECOS has resisted 
attempts to transform the PPA process into a dictation by EPA of its 
expectations--whether derived from perceived obligations under GPRA or 
other Federal mandates. The States accept that the Federal 
environmental statutes provide the floor for PPA negotiations, and that 
the purpose of the PPA process was to identify State priorities beyond 
the Federal requirements, and find a way to build the capacity to meet 
those priorities.
    Unfortunately, the NEPPS process is still, to large extent, simply 
laid on top of the usual programmatic expectations. Some regions, for 
example, still require States to submit program workplans in addition 
to PPAs. NEPPS also needs to be more fully integrated into EPA's 
strategic planning.
    In order to address these sorts of issues, EPA and ECOS convened a 
NEPPS Workshop late last year. Several short- and long-term issues were 
addressed. Rather than look for standardization as a way to inject 
efficiency, participants agreed to develop a Best Practices Handbook 
that would describe successful PPAs, practices and negotiations. This, 
rather than a more prescriptive process, would best meet each State's 
desire to shape a relationship with EPA that will meet their respective 
needs.

    Question 4. At the hearing held Tuesday May 2, 2000, by this 
committee, Senator Baucus read that quote to you and asked you to 
respond. Each of you said that you agreed with Mr. Jorling that there 
was a need for the Federal gorilla to remain in the closet. Would you 
please elaborate on that response. In your elaboration, would you 
please address the following issues:
    Question 4a. Is it necessary for the EPA, in order to ensure that 
the States protect the environment, to second-guess the States, or to 
be able to second-guess the States, regarding every exercise of a 
State's enforcement discretion, every permitting decision made by the 
States, and the like?
    Response. The relationship between the States and EPA has in the 
decade of the 1990's moved from that of supervisor/employee where the 
States often disagreed with ``management'' on what were important tasks 
of the job and how to get the job done to a partnership where both 
parties make joint decisions. In a true partnership, there is no place 
for one partner to second-guess the other on individual decisions. 
Instead, the overall performance needs to be evaluated on mutually 
agreed upon outcome based measures. If outcomes are not being achieved, 
the mutually agreed upon corrective actions must be put in place.

    Question 4b. Are the States able and willing to exercise 
reasonable, responsible, and vigorous enforcement and permitting 
discretion if the States are no longer subject to second-guessing in 
every case?
    I. If so, please explain why that is true today, even if it was not 
true in past years.
    II. If so, please support your explanation why that is true with 
examples showing that the States have reasonably, responsibly, and 
vigorously enforced the following:
    A. Federal environmental laws, and
    B. State and local environmental laws, over which the EPA exercises 
    no supervisory responsibility.
    Response. The States have a demonstrated record of their 
willingness to exercise enforcement and permitting authority. The 
States are responsible for between 75 percent and 80 percent of all 
enforcement actions taken by EPA and the States combined. The large 
majority of permits are issued by the States. While many of us are 
concerned about ``enforcement for enforcement sake'' or bean counting, 
we realize that a strong, credible enforcement program is vital to the 
overall mission of environmental protection. In order to be credible, 
enforcement actions must be fair and equitable to all in the regulated 
community and must be timely in order to affectively deter repeat 
violations. Many States have developed penalty matrix to assure fair 
penalties applied consistently to similar violations.
    Since States have largely adopted Federal law and rules into State 
law and regulations, we do not distinguish between enforcing Federal 
law and State law. They are equally enforced. In South Carolina, we 
have enforced against and fined the Department of Energy, Savannah 
River Site, just as we have enforced against and fined a local church 
for demolishing a building without properly inspecting for asbestos. My 
Agency has fined other State Agencies such as the Department of 
Education, Department of Transportation, and Department of Corrections 
for various violations of environmental rules over the years. These 
were obviously politically difficult actions for us to take, but they 
show our commitment to utilize our enforcement authority fairly and 
equitably.

    Question 4c. Are there alternative approaches to the current 
``second-guessing approach'' that could still provide assurance to EPA 
that the States programs are protective of public health and the 
environment? For example, an approach that would allow EPA to review, 
on a 5-year, 7-year, or 10-year, basis, the overall performance of the 
State, and renegotiate the State's delegated authority based on the 
level of progress that the State had made toward a better environment 
during that period.
    Response. I believe that it is appropriate for the States to 
continue to have periodic oversight from EPA. Being accountable for 
meeting long range goals and shorter term outcomes is an expectation 
all States should have. However, this process should focus on overall 
performances and not on individual decisions made by States on specific 
permits or enforcement actions. Such an approach should, however, allow 
EPA to act where a State has made an egregious error and has failed to 
take corrective action after notice from EPA.

    Question 5.Please indicate whether you agree or disagree with the 
following statement: ``Reasonable people, acting in good faith, can 
disagree over the best method for protecting the environment. For 
example, reasonable people can differ over the proper mix of 
enforcement and compliance assistance as generic tools, and the proper 
use of a particular choice of method(s) in a specific case. 
Accordingly, the best approach for gauging a State's environmental 
protection program is to evaluate the entirety of the State's efforts, 
both enforcement and compliance assistance, over a long period of time, 
and to determine whether the State has improved the condition of the 
environment, rather than focusing on a particular case or series of 
cases, the number of enforcement actions brought in a particular State 
(or any other similar so-called `bean counting' system), and the 
preference (if any) between enforcement and compliance assistance.''
    Response. I agree with this statement. Without using the word 
``flexibility'' this statement captures the essence of why flexibility 
is so important to States in their efforts to meet National and State 
environmental protection goals. As long as States are demonstrating 
reasonable progress toward meeting those goals within mutually agreed 
upon timeframes, then EPA should consider those State programs as 
acceptable.
                                 ______
                                 
   Responses by R. Lewis Shaw to an Additional Question from Senator 
                               Voinovich
    Question. As a followup to Senator Baucus' question regarding the 
1993 testimony of New York's former environmental commissioner, Thomas 
C. Jorling, could you please explain in what ways States have changed 
since 1993?
    Response. At the 1993 hearing, Mr. Jorling mentioned that among the 
appropriate roles for EPA was to play the ``gorilla in the closet.'' 
The implication--or perhaps even the explicitly stated reason--was that 
at least some States lacked the commitment and capacity to meet their 
and the Federal Government's environmental expectations. A lot has 
changed since 1993.
    States have demonstrated their commitment to environmental 
protection by taking responsibility for 75 percent of the environmental 
programs that can be delegated to States. They have increased spending 
on environment and natural resources by about 140 percent in the last 
10 years. And, States have increased their work force devoted to the 
environment by about 60 percent in the same timeframe; the State work 
force is now approximately three and one-half times the size of the 
Federal work force.
    Furthermore, the delegation of programs to the States is proceeding 
at an increasing rate, with approximately 75 percent of the total 
delegation having taken place in the last 6 years. And finally, States 
perform the vast majority of environmental protection tasks in America, 
including 80 percent or more of the enforcement actions; 97 percent of 
the environmental inspections; and actions which collect more than 94 
percent of the environmental quality data currently held by the EPA.
    Rather than seeking an EPA gorilla, the States support the 
authorization or delegation of programs to the States and believe that 
when a program has been authorized or delegated, the appropriate 
Federal focus should be on program reviews and joint priority setting. 
We further believe that the Federal Government should intervene in such 
State programs only in rare and egregious cases after the State has had 
a chance to correct program defects or in cases where the State and EPA 
are working cooperatively to force compliance or seek recompense from 
environmental ``bad actors.'' The recent Harmon decision suggests there 
is a solid a legal basis for this view.
                                 ______
                                 
 Responses by R. Lewis Shaw to Additional Questions from Senator Chafee
    Question 1. Chart No. 2 in your handout shows that overall 
expenditures on environmental protection and natural resource programs 
have increased, while EPA grant funding has decreased. While this may 
be true, EPA is not the only government agency that provides 
environmental grants to States; the Department of Interior, the 
National Oceanic and Atmospheric Administration and the Department of 
Agriculture all provide grant funding. Do you have any sense of how 
State expenditures compare to TOTAL Federal expenditures, not just EPA 
programs?
    Response. As of Fiscal Year 1996, States spent, on average, about 
1.67 percent of the total State budget on environment and natural 
resources. This percentage has increased steadily since 1986.
    It is true that States receive funding from other Federal agencies. 
For those States with surface mining activities, the Office of Surface 
Mining within the Department of the Interior can also be a significant 
source of Federal funding. The vast majority of Federal funding our 
environmental agencies receive, however, is from EPA. These other 
Federal agencies invest in natural resource activities, which in many 
of the States are performed in agencies separate from the environmental 
agency.
    Unfortunately, I do not have a sense of how State expenditures 
compare with the total Federal investment in State environmental and 
natural resource programs. That is important information, and it might 
be worth asking the Congressional Research Service to develop those 
figures. We would be happy to assist.

    Question 2. In your testimony, you argue that ``the time for 
command-and-control, top down programs has ended,'' and perhaps it 
should be replaced by a set of ``national goals.'' Several of our 
environmental laws already set national goals; for example the Clean 
Water Act has a goal that all waters should be ``fishable and 
swimmable.'' How would the national goals you refer to in your 
testimony differ from the goals already on the books?
    Response. The Federal statutory goals are THE goals to which most 
of the State and EPA programs are directed. Fishable and swimmable are 
great and appropriate aspirations. Along the road to these goals are 
many others that relate to how one achieves them, how one measures 
progress toward them, and how multiple agencies with responsibility 
coordinate to meet them. EPA's GPRA goals and objectives are examples 
of ``goals within goals.'' The States, as major players in achieving 
the will of Congress, simply desire to be a part of Congress' and EPA's 
processes for identifying the best course for achieving these 
aspirations--including the interim goals along the way.

    Question 3. You propose a system in which the Federal Government 
and the States would agree upon goals, and the States would be left to 
achieve those goals. Should the States fail to attain the agreed upon 
goals, what would be the appropriate response of the Federal 
Government?
    Response. In so many ways, the States are already at the vanguard 
of the process to meet Federal as well as their own goals. States 
already manage 71 percent of the programs that Congress has said are 
delegable to them, and over 75 percent of that delegation has occurred 
over the past 6 years. Clearly, both the States and EPA agree that the 
States have the will and much of the capacity needed to meet Federal 
environmental goals. Furthermore, Congress has already made clear what 
should happen to States who fail to live up to that responsibility. At 
any time a State has demonstrated such an inability or incapacity, its 
authority should be revoked.
    What the States seek is relative autonomy to meet the goals 
established by Congress, rather than be second-guessed step-by-step. 
EPA should evaluate overall State performance on a regular basis, but 
day-to-day operation of the programs--including permitting and 
enforcement and compliance activities--should be the sole province of 
the States. Where irregularities and insufficiencies crop up, EPA 
should discuss those programmatic shortcomings with the States, not 
inject itself into individual cases. In that way, EPA and the States 
can become true and most effective partners, focusing their respective 
skills, abilities and responsibilities on achieving desired 
environmental results.
                                 ______
                                 
   Responses by R. Lewis Shaw to an Additional Question from Senator 
                               Lautenberg
    Question. Do you agree with the notion that a highly performing 
State should get less oversight than a State that is having difficulty 
implementing a program? Is there a method of measuring performance 
agreed to by both EPA and the States? Are States gathering and 
disclosing to EPA and the public the information necessary to evaluate 
the performance of the States? If so, which States are performing well 
and which are not performing well?
    Response. Generally, we agree that highly performing States should 
get less oversight than a State that is having difficulty implementing 
a program. But, more to the point: this is a partnership, and States 
and EPA should be working together to identify goals and helping each 
other to achieve them on an on-going basis. NEPPS provides a great 
model for developing that cooperative working relationship.
    EPA should evaluate State performance under delegated programs. 
Where there are problems, the partners should work to resolve them. 
Under this system, States with difficulties will naturally get more 
``oversight'' and better performing States will get less. The NEPPS 
agreement of 1995 envisioned this sort of ``differential oversight,'' 
but because of the difficulty of measuring comparable State 
performance, ECOS has not pursued this option with EPA. The States of 
Region 8, however, have agreed with EPA to try such a program. Under 
their agreement, the States are rated and ranked on their enforcement 
activities by a set of agreed upon performance measures. Those States 
ranking the lowest receive additional assistance from EPA.
    Each State in negotiating its Performance Partnership Agreement 
(PPA) with its EPA regional office identifies the variety of 
performance measures by which its programs and efforts would be 
measured. This information is shared with EPA and the public--often 
through State of the Environment reports--and is used as part of the 
PPA evaluation process and as a basis for negotiating subsequent PPAs.
    To my knowledge, there is no recent composite list of good and bad 
State performers. Typically, certain States excel in certain areas, 
whereas they and others may be relatively weak in others. For example, 
States and the General Accounting Office have identified significant 
shortfalls in the resources of some States to meet the TMDL 
requirements of the Clean Water Act. States and EPA have jointly 
identified significant resource shortfalls affecting their collective 
efforts to meet certain Clean Air Act requirements. Gaps have been 
identified in several other programs, as well.
    Furthermore, States should not be evaluated as good or bad 
performers based solely on whether or not they have passed so-called 
``no more stringent than Federal requirements'' laws. The Natural 
Resources Defense Council in its testimony before your committee on May 
2, 2000 tried to suggest that 19 States were deficient in their 
environmental commitment because they had such provisions on the books. 
These provisions include up-ramps that permit more stringent 
requirements if deemed necessary. In any case, legislatures are free to 
change such a requirement at any time. Most, if not all, States have 
some environmental requirements more stringent than those mandated by 
the Federal Government. In 1997 alone, State legislatures passed 700 
bills concerning environmental issues.
                               __________
 Statement of Robert W. Varney, Commissioner, New Hampshire Department 
                       of Environmental Services
    Good morning Mr. Chairman and members of the committee. I am Robert 
W. Varney, Commissioner of the New Hampshire Department of 
Environmental Services. I have held that position for the last 12 years 
serving under the last three Governors. I am also the immediate Past 
President of the Environmental Council of the States (ECOS), and it is 
in that capacity which I appear before you today. I would like to 
highlight the success of two cooperative programs that ECOS and the 
U.S. EPA have developed jointly--the National Environmental Performance 
Partnership System or NEPPS and the ECOS/EPA Regulatory Innovations 
Program.
    NEPPS was created 5 years ago and grew out of an awareness that 
Federal and State government could be more effective if they cooperated 
as equal partners in planning, implementing and reporting environmental 
protection. The States and EPA believed that they could be more 
efficient if priorities were determined jointly, and that any planned 
environmental work was based upon an agreed set of goals. The States 
directly implement most environmental laws and often have a better 
understanding of what is needed to effect environmental improvement. 
This demands flexibility to respond to local circumstances so that 
environmental problems can be addressed quickly and effectively. As a 
final component of the NEPPS concept, ECOS and EPA wanted to reduce the 
data reporting burden by improving and streamlining how information is 
gathered and reported from the States to EPA.
    NEPPS agreements are called PPAs, Performance Partnership 
Agreements. In New Hampshire, for instance, we just signed a 2-year PPA 
with the EPA-New England. Our comprehensive agreement sets forth the 
goals, activities and measures of progress for a full range of Federal 
and State programs, which represents a comprehensive plan for all of 
our agency's programs. I should mention that the full agreement is 
available to the public on our Department's website at 
www.des.state.nh.us. ECOS is linking its home page to many other State 
NEPPS agreements also available electronically.
    To gauge how NEPPS is working, Congress has asked the National 
Academy of Public Administration to study that question and provide you 
an answer in approximately 2 months. I appreciate this opportunity to 
tell you why we think it is successful? To date, 38 States have PPAs 
under the system. Many of them have been accompanied by Performance 
Partnership Grants (PPGs) which allow some realignment of EPA funds so 
that limited resources can be allocated for the most pressing problems. 
There now is a cadre of experienced environmental professionals who 
have committed to the NEPPS process and whose work is dedicated to 
continually improving the system. As a result of the third national 
meeting in Baltimore, Maryland, last fall, ECOS and EPA have re-
committed to improving the NEPPS process through renewed emphasis on 
improving how the agreements are forged and how they are carried out. 
The commitment we have to NEPPS was renewed by the adoption of ECOS 
Resolution 00-5, at our national meeting on April 12, 2000. I have 
attached a copy of the resolution to this testimony.
Regulatory Innovation Program
    I would like to now talk about another cooperative State/EPA 
program which was designed to stimulate innovative approaches to 
regulation. Here I distinguish ``innovative approaches to regulation'' 
from ``technical innovation'' which will be addressed by another 
witness. The States have been a well stream for inventiveness. In 
dealing with specific circumstances unique to a State location or 
problem, we are forced to develop innovative approaches. ECOS and EPA 
recognized that some of these innovations might be transferable to 
other locations with similar issues. In April 1998, ECOS and EPA signed 
a ``Regulatory Innovation Agreement'' to review and approve State 
proposals that exhibited such promise. In the words of the agreement 
itself, ``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.''
    Texas was the first State to submit a project under the Innovations 
agreement. The Texas Natural Resource & Conservation Commission (TNRCC) 
wanted to extend the opacity certification period for all air 
inspectors from 6 months to 2 years. Measured opacity is a common test 
of air quality and a certain level of training and certification are 
required to ensure the validity of test results. Texas argued that 
opacity readings are not used often enough in enforcement actions to 
justify the hundreds of person-days lost for training and certification 
each year. TNRCC and EPA agreed to reduce the number of opacity 
certified inspectors from approximately 100 to 50 each year, thus 
freeing up 75 more person-days to do facility inspections. This 
innovative tradeoff is now transferable to other States wanting to 
explore the option.
    This example demonstrates the goal of identifying innovative 
approaches to make available faster, cheaper, better approaches to 
environmental protection. It is especially useful when, as in this 
instance, the approach can be tailored by other States to meet their 
needs.
    Last month at the ECOS Spring Meeting, EPA reported that five State 
proposals have been submitted and four have been approved. Five 
additional proposals were recently received for review and another two 
are expected in early May. It is evident that the Agreement is proving 
to be a useful tool, but there is much innovation occurring 
independently of the agreement as well.
    I have provided for the committee's use several other ECOS 
publications describing myriad State innovations. These innovative 
approaches demonstrate what can be accomplished when States work in 
partnership with each other and with the U.S. EPA, and when we strive 
to develop innovative approaches.
    Thank you for the opportunity to address the committee this morning 
and to tell part of the story of the States. I would be pleased to 
answer any questions I may have raised in my remarks.
                                 ______
                                 
 Responses by Robert Varney to Additional Questions from Senator Smith
    Question 1. Commissioner Varney suggested in his testimony that 
States and the Federal Government need to be equal partners in 
planning, implementing and reporting environmental protection. Does 
this partnership exist today? How can the partnership be improved?
    Response. The relationship is evolving. In 1995, EPA and the States 
entered an agreement to implement the National Environmental 
Performance Partnership System (NEPPS). The theory behind NEPPS, in 
part, was to facilitate a shift from paternalism to partnership in the 
attitude of EPA toward the States. The evolution would include a 
process of identifying State environmental priorities and jointly 
building the capacity to meet those priorities.
    The State/EPA relationship is highly variable--from State to State; 
from program to program; from year to year. The concept of partnership 
involves not only process, but also perspectives. Whereas the 
intentions of EPA's leadership and the leading State officials 
regarding partnership are generally honorable and good, there are many 
instances where the partnership fails to live up to the promise.
    A great deal of investment has been made by the Environmental 
Council of the States (ECOS), EPA, the General Accounting Office, the 
National Academy of Public Administrators and others to determine 
whether the partnership exists and what can be done to improve it. My 
assessment: partnership exists, and like any marriage, it will require 
continuing care and respect to meet expectations.
    The partnership can be improved by ensuring that the Performance 
Partnership Agreements (PPAs) are indeed the foundation for the State/
EPA relationship. These agreements are the opportunity for the partners 
to lay out their concerns, set goals and objectives, agree upon 
measures of performance, and ensure that everyone is pitching in 
appropriately to ensure that national as well as State needs are being 
met. Not only should the EPA regions that negotiate the agreements 
respect them, but also the national program managers in Washington.
    Another major obstacle in the partnership is ensuring that the 
cultures in both the States and at EPA adopt a partnership perspective. 
As Lewis Shaw pointed out in his testimony, no matter how you slice it, 
the States are carrying an increasing majority of the environmental 
management load. That reality needs to be recognized and appreciated 
throughout the system. Given that fact, it is clearly time to reassess 
the relative capacities and charges of the States and EPA to make sure 
the right people are doing the right job. A better partnership will be 
achieved once those roles and responsibilities are clearly articulated.

    Question 2. States are currently taking a leadership role in many 
areas of environmental protection, but lack of resources is often an 
obstacle. Some have suggested that the Federal Government can play an 
important role in this respect by serving more as a resource to the 
States, instead of as a hammer--making available both funding and 
technical assistance. Does the Commissioner agree with that and how 
would the Commissioner suggest that the government's role be enhanced 
in that regard?
    Response. ECOS and I agree with this assertion. The issue of 
defining appropriate roles for States and EPA is crucial. States are 
already doing so much of the day-to-day business of managing the 
environment--roughly 80 percent of the enforcement actions, over 90 
percent of the data collection, the vast majority of interactions of 
any sort with facilities and citizens.

    Question 3. Please describe in more detail how the New Hampshire 
Performance Partnership Agreement works. Please address how and what 
does the Agreement allow the State to do and how does it allow the 
State to prioritize resources? How would you improve it in the future?
    Response. Performance Partnership Agreements (PPAs) are the 
strategic documents that provide the framework for States and EPA in 
the National Environmental Performance Partnership System (NEPPS). 
These Agreements are a product of joint planning and priority-setting 
between States and EPA, with the ultimate goals of improving 
environmental performance and strengthening relationships. Performance 
Partnership Grants (PPGs) are the financial mechanisms to ensure that 
the work outlined in the associated PPA can be carried out. As 
envisioned through NEPPS, the PPA and its associated PPG are the two 
key enabling tools allowing flexibility in both setting environmental 
priorities and directing appropriate financial resources.
    The most current New Hampshire PPA (available on-line at 
www.des.state.nh.us/ppa/ppa--intro.htm) covers the 2-year period 
October 1, 1999 through September 30, 2001, and sets forth the goals, 
activities and measures of progress for the full range of cooperative 
State-Federal environmental programs under the New Hampshire Department 
of Environmental Services' (DES) jurisdiction, as well as all of DES's 
non-Federal programs. Thus, all DES programs are represented, 
regardless of the funding source. In total, the Agreement describes how 
the available financial, human, and technical resources will be used in 
New Hampshire to address the environmental quality issues of the 
greatest concern to the Department and EPA New England.
    The 2000-2001 New Hampshire PPA is distinctly different from the 
previous Agreement in that the core section of the document have been 
organized around the Department's 12 Strategic Goals, rather than 
simply by the three Division--Air Resources, Waste Management, and 
Water. Taken together, the newly formatted 12 goal sections form the 
DES Comprehensive Action and Assessment Plan. This substantial 
formatting change was the direct result of stakeholder comments, and is 
an important step in making the Agreement a key directing document at 
DES.
    For the current PPA, DES communicated its environmental priorities 
and intended resource shifts upfront via detailed program tables, as 
well as through a discrete list of jointly prioritized ``Focal Points 
of Cooperation.'' The information in these tables (and in the Focal 
Points list), in most instances, is the result of frequent staff 
interactions with many on-going and ad hoc stakeholder groups, as well 
as with program counterparts at EPA New England. Also reflected are the 
priorities outlined and discussed at two annual joint planning meetings 
(EPA/States meeting on enforcement and P2 and compliance assistance and 
a regional PPA meeting). EPA New England staff typically review the 
tables and focal points in great detail on at least two points in the 
PPA development provide and provide comments to DES which are reviewed 
and incorporated as is, or are set aside for more detailed 
negotiations. All issues of importance to both agencies must be 
negotiated before a signed PPA can be secured.
    A key component of a fully functioning PPA, is the State self-
assessment process. At a frequency agreed to by the State and EPA 
(typically annually), the State must conduct a self-assessment of 
progress made at accomplishing the work outlined in the PPA, as well as 
specific progress made at addressing identified environmental 
priorities and goals. The intent is for these self-assessments to do an 
increasingly better job of reporting actual environmental results, not 
simply environmentally related activities conducted by the State. While 
good progress has been made, both DES and EPA New England continue to 
struggle with to best conduct and gain improvement value from the self-
assessment process, as well as how to most effectively report on the 
state of the environment in New Hampshire. To help answer these, and 
other, results-based questions, DES has identified ``Environmental 
Indicators and Program Measures'' as a Focal Point and has been 
focusing resources to work through the issue.
    DES has had success working with EPA New England to redirect 
resources to those environmental issues of most importance for New 
Hampshire, both at the upfront PPA negotiation stage, as well as when 
there are limited PPG funds available at the end of the fiscal year 
cycle. One of the significant potential advantages of the PPG is the 
ability to look at the grant funds in total and allocate specific funds 
as appropriate to the different programs and activities according to an 
assessment of State-specific needs and priorities. In the past, DES, 
received different grant awards for each program, and those funds were 
earmarked specifically for that program and could not be used for any 
other purposes. Now, the Department receives a single grant award--
approximately $4.8 million in Federal fiscal year 2000--that provides 
funding for a range of air quality, waste management and water quality 
programs, and the Department and EPA New England can agree to shift 
resources across the programs to reflect the needs and priorities set 
forth in the PPA. The PPA is the single, comprehensive work plan, and 
the PPG is the single funding mechanism to implement the work plan. 
Some recent success stories that reflect refocused State (and EPA) 
priorities include shifting PPG resources to address sprawl, mercury 
strategy, restoration of shellfish beds, and protection of in-stream 
flow in rivers.
    While DES has had some success in both reprogramming priorities and 
funds through existing PPA and PPG mechanisms, there are barriers in 
the process. There appear to be some disconnects between the regional 
and national program offices relative to the earmarking and utilization 
of the various funds (i.e., ``strings''). The national program managers 
appear to be adhering to more stringent standards compared with the 
Region, and therefore may be stifling some of the possible flexibility. 
One example would be strict pass-through requirements for 319 Nonpoint 
and 104(b)(3) Wetland funds. This is an area that could possibly use 
some attention.
    Finally, it is vital that I stress that PPG funds are riot keeping 
place with inflation. The PPG in particular has reached a point where 
flee funds it provides are no longer adequate to support core staff 
positions or the associated core program responsibilities. Without 
increased Federal funding for DES, any flexibility possible through the 
PPA and PPG is a moot issue.

    Question 4. The EPA-State Regulatory Innovation Agreement appears 
to lay the foundation for better collaboration between States and the 
Federal Government to explore new ideas. But again, it seems limited; 
only five proposals have been approved so far, although a few more are 
in the pipeline. How can the Congress encourage SPA and the States to 
take advantage of these programs? Is additional funding or flexibility 
in the laws needed to make these kinds of programs work better?
    Response. The Agreement is beginning to bear fruit. As of May 20, 
2000, 18 projects have entered the process and about one-third of them 
have been approved. Moreover, the principles underlying the Agreement 
are taking root broadly, and a lot of innovation is occurring that is 
not strictly done under the official rubric of the Regulatory 
Innovations Agreement.
    Innovation does not mean changing flee basic objectives of a safe 
and healthy environment. But it does suggest a different way of getting 
there. Collectively, we can expand incentives to encourage innovation, 
such as regulatory process changes (like predictable, timely permitting 
and reduced administrative burdens), economic incentives (tax credits, 
fee waivers, new funding), and greater use of environmental management 
systems.
    An integrated Federal environmental statute would greatly assist 
our efforts to find innovative solutions to increasingly complex, 
multimedia environmental challenges.
    Congress can also help by fostering an accountability system that 
focuses more on environmental results and less on the host of 
administrative proxies that we call ``beans.'' By emphasizing the 
results necessary to achieve our goals, the way would be cleared for 
all the partners--EPA, the States, local government, as well as the 
entire community--to exercise their collective desires, talents and 
experience. Existing prescriptions and a cumbersome process stifle 
creative solutions--including the development of new technologies that 
are essential to attaining environmental goals.
    EPA could be clearly authorized to delegate to the States a certain 
level of ``innovation'' authority which would enable the States to 
develop agreements and manage the day-to-day operations (like 
permitting) under the agreement, and retain for EPA a monitoring 
responsibility to ensure that desired results are achieved. This 
monitoring could be tied to an agreed-upon performance indicator 
process like that developed in Florida.
    Having EPA focus on the agreed upon goal rather than second-
guessing State decisions along the way (including permitting and 
overfiling) would greatly facilitate innovation. Along these lines, we 
would encourage Congress to adopt legislation that would provide 
protection to innovators pursuing agreed upon goals and objectives 
while working outside the box.
    It would be helpful to have clearly identified points of contact 
for innovation projects at both the State and Federal level. For these 
new initiatives, agencies tend to ``borrow'' folks from other 
responsibilities. Since these projects involve a different way of doing 
business, they frequently bring together a diversity of personnel--with 
no one explicitly charged with getting the innovation done.
    In order to encourage commercially viable innovative technologies, 
developers need quick review and acceptance from agencies. 
Certification processes like those being developed by States and EPA 
need to be fostered.
    In a broader sense, we might explore legislation that would direct 
EPA to approve innovative alternatives to delegated State programs that 
vary from Federal regulations if these alternative programs meet 
criteria established through discussions among States, EPA, Congress 
and other interested parties. Innovation includes risk of failure. 
Congress could include some indemnification provisions that would ease 
the legal consequences of failure, thus stimulating the willingness to 
take a chance on new ideas or technologies.

    Question 5. Do you see an expansion of the EPA/State Innovation 
Agreement to produce a more holistic approach to the environmental 
issues?
    Response. We would like to see the EPA/State partnership evolve to 
a point where, with the appropriate goals and accountabilities 
established, there would be no limit to innovation. There is growing 
interest in innovation projects, and several initiatives are in the 
works. We hope that the fears and concerns that have accompanied the 
ideas of innovation and flexibility will fade as we discover ways to 
produce desired environmental results visibly, accountably and 
efficiently. We agree that common sense and creative thinking should 
apply holistically to our environmental challenges.
    One way we would like to see the innovations effort expanded is for 
States, EPA and Congress to pursue innovations directed specifically at 
existing unregulated problems, such as nonpoint source pollution, 
habitat loss, diffuse air pollution and urban sprawl.

    Question 6. In the area of regulatory innovations, SPA has 
committed to responding to State suggestions within 4 weeks for initial 
followup and within 90 clays for a preliminary decision. How are these 
deadlines working? Is this an appropriate length of time for these 
decisions?
    So far, there have been no complaints, but EPA has voiced concerns 
that they must evaluate not only the process but also the substance of 
the proposals. From a State perspective, these deadlines seem to be 
working fairly well.
    Question 7. At the hearing held Tuesday May 2, 2000, by this 
committee, Senator Baucus read a quote from a 1993 hearing testimony 
given by Thomas Jorling, and asked you to respond. Each of you said 
that you agreed with Mr. Jorling Flat there was a need for flee Federal 
gorilla to remain in the closet. Would you please elaborate on that 
response. In your elaboration, would you please address the following 
issues:

    A. Is it necessary for the EPA, in order to ensure that the States 
protect the environment, to second-guess the States, or to be able to 
second guess the States, regarding every exercise of a State?s 
enforcement discretion, every permitting decision made by the States, 
and the like?
    B. Are the States able and willing to exercise reasonable, 
responsible, and vigorous enforcement and permitting discretion if the 
States are no longer subject to second-guessing in every case?
    I. If so, please explain why that is true today, even if it was not 
true in past years.
    II. If so, please support your explanation why that is true with 
examples showing that the States have reasonably, responsibly, and 
vigorously enforced the following:
    a. Federal environmental laws, and
    b. State and local environmental laws, over which the EPA exercises 
    no supervisory responsibility.
    c. Are there alternative approaches to the current ``second-
    guessing approach'' that could still provide assurance to EPA that 
    the States programs are protective of public health and the 
    environment?
    Response. As you know, the role and capability of States has 
changed significantly over the past 15 years. From 1986 to 1996, for 
example, State spending on environmental protection increased 142 
percent. In 1993, when Tom Jorling made his statement, only 41 percent 
of eligible programs had been delegated to the States. By 1998, that 
share had grown to 71 percent. Today, State environmental officials 
conduct roughly 80 percent of the approximately 12,000 enforcement 
actions taken each year by environmental agencies at the State and 
Federal level.
    In addition, it should be noted that many States leave requirements 
which exceed Federal requirements. For example, the New Hampshire 
Department of Environmental Services has established standards for the 
land application of sludge which are perhaps the most stringent in the 
nation, and much more restrictive than the Federal 503 standards. We 
also recently set a standard for Methyl tertiary Butyl Ether (MTBE) at 
13 parts per billion, a level which is the most stringent in the 
nation. I could provide many more examples if necessary.
    New Hampshire would prefer that EPA's limited resources be focused 
on research and program performance reviews, rather than waste effort 
on case-by-case reviews. Any decisions can be criticized or second 
guessed on a case-by-case basis--the key is to have an open, 
transparent and accountable system which relies on the States as the 
primary implementation vehicles.
    Question 8. Please indicate whether you agree or disagree with the 
following statement: ``Reasonable people, acting in good faith, can 
disagree over the best method for protecting the environment. For 
example, reasonable people can differ over the proper mix of 
enforcement and compliance assistance as generic tools, and the proper 
use of a particular choice of method(s) in a specific case. 
Accordingly, the best approach for gauging a State's environmental 
protection program is to evaluate the entirety of the State's efforts, 
both enforcement and compliance assistance, over a long period of time, 
and to determine whether the State has improved the condition of the 
environment, rather than focusing on a particular case or series of 
cases, the number of enforcement actions brought in a particular State 
(or any other similar so-called `bean counting' system), and the 
preference (if any) between enforcement and compliance assistance.''
    Response. I would fully agree with this statement. In fact, such a 
philosophy is embodied in an important DES document, the Compliance 
Assurance Response Policy (CARP), which is available on the DES website 
at http://www.des.state.nh.us/legal/carp/. As described in the CARP, 
DES is committed to a consistent, predictable, and appropriate 
compliance assurance response, which is protective of public health and 
the environment while creating a credible deterrence against future 
violations. DES believes that compliance with environmental regulations 
is best ensured by using a multi-tiered, multi-media approach starting 
with education and outreach, and proceeding successively to compliance 
assistance, compliance monitoring, and timely and appropriate 
enforcement. Compliance assurance is a fundamental goal. DES endeavors 
to create incentives for compliance and encourage the regulated 
community to surpass the minimum requirements of compliance through 
pollution prevention and innovation. Accordingly, DES maintains an open 
and on-going dialog with the regulated community.
    DES encourages early intervention to ensure that violations of 
environmental laws are identified and corrected as soon as possible in 
order to minimize impacts to public health and the environment. To this 
end, DES discloses violations to responsible parties as soon as 
possible after they are discovered and will offer or recommend 
appropriate assistance to violators to correct deficiencies even while 
formal enforcement action may concurrently be in development to address 
the violations. To prevent recurrence of noncompliance, DES 
investigates root causes of noncompliance and takes action when 
appropriate. As environmental compliance has a direct impact on 
everyone, DES seeks expanded public involvement in compliance assurance 
activities, and supports the public's right to know which facilities 
are in or out of compliance with environmental laws.
    Over the last few years, and as a key component of the Performance 
Partnership planning process, DES has made significant progress with 
flee development and implementation of improved performance measures. 
The focus of our efforts has been on going beyond the traditional 
``bean-counting'' system, to more fully employ the use outcome-based 
measures and environmental indicators. DES and many other environmental 
agencies have recognized that the sole reliance on the traditional 
measures does not recognize alternative and innovative approaches to 
problem solving and does not tell the entire, increasingly complex, 
environmental protection story. Our most recent initiatives in this 
area include the development of a comprehensive measures data base and 
work on a EPA grant project that will test better compliance measures.
                                 ______
                                 
 Responses by Robert Varney to Additional Questions from Senator Chafee
    Question 1. You note that 38 States have Performance Partnership 
Agreements under this system. Why don't all of the States have these 
agreements, is it because the program is relatively new, or are there 
structural obstacles to getting 100 percent participation?
    Response. The original NEPPS agreement between the States and EPA 
was signed on May 15, 1995. In terms of participation by the States, 
else record in flee short time since has been gratifying. It is not a 
perfect partnership yet, and all the full promise of the original 
agreement remains to be realized. The fact that not all States 
participate probably has more to do with obstacles than the newness of 
the program.
    Among the obstacles is the need to foster a greater understanding 
and support for NEPPS among staff in EPA and the States, especially in 
merging the NEPPS approach with existing priority-setting systems. We 
are also concerned that EPA affirm that burden reduction remains a 
vital aspect of the NEPPS ideal and that the agency increase reporting 
burden efforts to implement and effect burden reduction as a necessary 
requirement of all EPA programs, offices and regions.
    We also see EPA's continuing presence through direct inspection and 
enforcement as inconsistent with NEPPS' call for use of Federal 
resources ill jointly identified State-specific priorities, NEPPS or 
other joint Federal State planning processes.
    EPA also needs to accelerate the transition to a more results-based 
environmental management system by making investments necessary to 
develop improved environmental indicators, outcome-based goals, 
objectives, measures and information management systems for use in 
NEPPS, GPRA and other relevant systems.
    We realize these transitions are a part of the partnership, and 
that States and EPA need to work on these challenges throughout our 
agencies.

    Question 2. In your testimony, you emphasize the importance of 
State innovation. What do you feel are the greatest obstacles to State 
innovation? Given that innovation is an unpredictable process, how 
would one design national environmental laws to encourage innovation?
    Response. Chairman Smith asked the same question, and I offer the 
same response that I will share with you here:
    Innovation does not mean changing the basic objectives of a safe 
and healthy environment. But it does suggest a different way of getting 
there. Collectively, we can expand incentives to encourage innovation, 
such as regulatory process changes (like predictable, timely permitting 
and reduced administrative burdens), economic incentives (tax credits, 
fee waivers, new funding), and greater use of environmental management 
systems. [from Resol. 98-3]
    An integrated Federal environmental statute would greatly assist 
our efforts to find innovative solutions to increasingly complex, 
multimedia environmental challenges. [from Resol. 98-3]
    Congress can also help by fostering an accountability system that 
focuses more on environmental results and less on the host of 
administrative proxies that we call ``beans.'' By emphasizing the 
results necessary to achieve our goals, the way would be cleared for 
all the partners--EPA, the States, local government, as well as the 
entire community--to exercise their collective desires, talents and 
experience. Existing prescriptions and a cumbersome process stifle 
creative solutions--including the development of new technologies that 
are essential to attaining environmental goals.
    EPA could be clearly authorized to delegate to the States a certain 
level of ``innovation'' authority which would enable the States to 
develop agreements and manage the day-to-day operations (like 
permitting) under the agreement, and retain for EPA a monitoring 
responsibility to ensure that desired results are achieved. This 
monitoring could be tied to an agreed-upon performance indicator 
process like that developed in Florida.
    Having EPA focus on the agreed upon goal rather than second-
guessing State decisions along the way (including permitting and 
overfilling) would greatly facilitate innovation. Along these lines, we 
would encourage Congress to adopt legislation that would provide 
protection to innovators pursuing agreed upon goals and objectives 
while working outside the box. [from Resol. 98-3]
    It would be helpful to have clearly identified points of contact 
for innovation projects at both the State and Federal level. As new 
initiatives, alley tend to ``borrow'' folks from other 
responsibilities. Since these projects involve a different way of doing 
business, alley frequently bring together a diversity of personnel--
with no one explicitly charged with getting the innovation done.
    In order to encourage commercially viable innovative technologies, 
developers need quick review and acceptance from agencies. 
Certification processes like those being developed by States and EPA 
need to be fostered.
    In a broader sense, we might explore legislation that would direct 
EPA to approve innovative alternatives to delegated State programs that 
vary from Federal regulations if these alternative programs meet 
criteria established through discussions among States, EPA, Congress 
and other interested parties. [from Resol. 98-3 almost undecipherable]
                               __________
      Statement of James M. Seif, Secretary of the Department of 
                        Environmental Protection
    Mr. Chairman and members of the committee, I am Jim Self, Secretary 
of the Pennsylvania Department of Environmental Protection. 
Pennsylvania is pleased to appear before you today to discuss some of 
the innovative environmental programs that we and other States have 
developed.
    When he took office, Governor Tom Ridge committed to make 
Pennsylvania a leader among States and a competitor among nations. He 
has pursued that commitment by cutting taxes, promoting exports, and 
making Pennsylvania a ``high-tech'' State through the introduction of 
new electronic commerce and electronic government tools. Another 
important part of the Governor's plan was restoring and protecting 
Pennsylvania's environment by cleaning up old industrial sites--
``brownfields''--and returning them to productive use.
    Complicated Federal remedies of the late 1970's and 80's such as 
RCRA and Superfund have, at best, a mixed record in addressing the 
legacy of old industrial sites left from years of being the world's 
industrial leader. The unworkable liability scheme of Superfund often 
produced litigation instead of cleanups. Requirements that contaminated 
sites be returned to pristine condition--a standard that was 
financially and sometimes technologically prohibitive--left once-
productive sites in many communities permanently off the tax roles and 
off-limits to renewal and reuse.
    Governor Ridge, and the leaders of the Pennsylvania General 
Assembly, recognized that we needed a different approach to cleaning up 
contaminated sites. The passage of Acts 2, 3 and 4, the three acts 
establishing Pennsylvania's Land Recycling Program, provided the 
environmental platform to allow us to tear down the fences around these 
sites, to begin to restore our communities, and to turn our 
manufacturing heritage back into an asset.
    Pennsylvania on May 2, 2000 is a much different place than it was 5 
years ago on May 19, 1995, the day that Governor Ridge signed the Land 
Recycling Program into law. Had you been with us that rainy day in 
Western Pennsylvania at the site of the former U. S. Steel National 
Tube Works, you would have seen an environmental scene that could have 
been in Anytown, U.S.A.--a rusted hulk that resulted from the battles 
and success of our first industrial revolution.
    The Lands Recycling Program is an innovative solution that evolved 
from concept to reality so successfully that Governor Ridge has 
described the program as ``simply a case of government making sense.''
    This common sense approach provides a statutory liability release, 
standardized procedures, realistic goals, cleanup options and funding 
assistance. These features destroyed the barriers that stood in the way 
of the Federal and early State remediation programs.
    Don't think that the Land Recycling Program uses lax environmental 
standards. On the contrary, the program used sound science to establish 
cleanup standards that protect public health and the environment. The 
difference is that these standards are realistic enough to promote the 
reuse of contaminated sites.
    The program's four cornerstones--uniform cleanup standards, 
standardized review procedures, release from liability, and financial 
assistance--all address crucial business Issues.
    Uniform standards, under four cleanup options, give communities the 
flexibility they need to attack this nationwide problem. Total costs 
and project time are also easier to establish. Agreements to protect 
buyers' rights and the financial viability of owners of multiple 
contaminated sites are available to business.
    Standardized review procedures provide a uniform statewide process 
for cleanups. A technical guidance manual was published, in plain 
language, to help people use the program. The program imposed review 
time limits and guarantees a reply to applications within 60 days.
    Releases from liability take the risk out of remediation. Anyone 
who cleans up a site to the new standards is released from any 
additional cleanup of the old contamination. This liability travels 
with the property and can extend to financial institutions, economic 
development agencies, and local authorities. It essentially puts the 
site back into the stream of commerce.
    While the program has attracted millions of dollars of private 
sector investment in cleanup, funding assistance is also available to 
help reach sites that might not otherwise get addressed. The Industrial 
Sites Cleanup Fund, initially stocked with $15 million, makes grants 
and low-interest loans available to cover up to 75 percent of the cost 
of site assessment and remediation. Pennsylvania's Department of 
Community and Economic Development has already provided in excess of 
$20 million in grants and loans to assist land recyclers.
    The results speak for themselves. Since the inception of our Land 
Recycling Program, more than 700 sites have been remediated and 
hundreds more are in various stages of cleanup--compared to Superfund, 
in which only 16 of 112 sites on Pennsylvania's NPL have been delisted. 
Many of these brownfields properties are now back on the tax roles, and 
more than 17,000 people now have jobs on these redevelopment sites.
    As David Gergen from U.S. News and World Report has pointed out, 
``These results are impressive. Pennsylvania has created strong 
incentives for businesses to clean up and revitalize abandoned urban 
sites, while preserving farms and undeveloped land in the process.''
    Our program is not only producing environmental protection and 
economic development gains at individuals sites, but also is an 
effective strategy to accomplish broader policy goals such as reversing 
urban blight and developing a sustainable future. Working with 
redevelopment authorities, local government, lending institutions and 
the private sector, we are creating jobs, increasing tax revenues, 
improving transportation infrastructure, revitalizing urban areas, and 
preserving open space.
    Let me go beyond basic statistics though, to give you a flavor of 
how Pennsylvania's brownfields program has affected and influenced 
``real people.''
      A particularly noteworthy Land Recycling Project is the 
site of Bethlehem Steel Corporation's original steel-making facility in 
Bethlehem, Pennsylvania. This represents the largest brownfield project 
currently being undertaken in the Nation (nearly 2000 acres). This 
site, which once supported heavy industrial processes, is being 
converted into a recreational, educational, cultural and entertainment 
center of regional, if not statewide, significance. The Smithsonian 
Institution will occupy a key location there to house and display 
artifacts of our nation's industrial heritage.
      Several other examples include a large industrial 
complex, the Transit America facility, in North Philadelphia that is 
being remediated and returned to open space use as an 18 hole public 
golf course. In West Chester, a turn of the century Laundromat has been 
converted into a fitness center. And in McKeesport, in the Mon Valley, 
a steel mill site has been converted into the eastern headquarters of 
Echostar Corporation and will house more than 2000 customer service 
representatives.
      Our partners in redeveloping these sites have been most 
generous in their praise. A few quotes illustrate how successful the 
program has been. Michael Theisen of Woodmont Corporation, which turned 
an auto wrecking yard into a shopping center pointed out, ``It would 
have been impossible to acquire tenants or the financing needed to make 
such a center feasible, particularly one located downstream from a 
Superfund site, without the support and assurances provided [by the 
Land Recycling Program]. Perhaps the success of our program is most 
easily summed up by Lou Marseglia of Grundy Recreation who said ``If it 
wasn't' for the [Land Recycling Program], we couldn't have built it'' 
in reference to the recreation center built on the site of a former 
carpet mill.
      Further, our program has been recognized as an 
``Innovations in American Government Award Winner'' and a 1997 ``Ford 
Foundation Award Winner.''
      People in other nations have noted our success and looked 
at us as a model for programs of their own. The Scottish Environmental 
Industries Association invited us to share our experience at the 
Contaminated Lands Forum in Scotland. We have also gotten inquires from 
Brazil and Eastern Europe on our program.
    The flexibility offered by Pennsylvania's Land Recycling Program 
has allowed us to be innovative in our approaches to cleaning up sites. 
We have entered into a multi-site agreement with the U.S. Army, Air 
Force, Navy and Defense Logistics Agency to facilitate the cleanup of 
all sites used previously for military purposes and to prepare them for 
reuse a decade earlier than originally scheduled. This was a landmark 
agreement that will have tremendous economic development benefits for 
the Commonwealth and has formalized a plan of action for resolving 
Federal liabilities at 1,260 sites in 26 counties. This agreement was 
only possible because of the flexibility afforded by the State laws 
establishing the Land Recycling Program and clearly can be a model for 
other States to follow.
    As often happens, one successful innovation points the way to 
others. To raise awareness of the availability of sites for 
redevelopment, DEP created the Brownfields Inventory Grant (BIG) 
Program, which provides grants to local governments, economic 
development agencies and other qualifying agencies to inventory the 
brownfields properties in their area. Sites that are identified are 
added to the Pennsylvania Brownfields Directory on our Department's 
website, so that parties interested in developing sites will know that 
they are available. This data base currently lists over 130 sites.
    As a further inducement for the revitalization of communities, 
Governor Ridge signed legislation creating Keystone Opportunity Zones, 
in which tax abatement is offered to businesses locating in 
economically depressed areas.
    The unrealistic standards and open-ended liability of Superfund 
have often been strong deterrents to the use of new technologies at 
environmental cleanups. The cleanup options available to voluntary 
parties under our program are more conducive to the use of new 
technologies. Promoting the use of new technologies is another State 
success story that is shared by many States. States are working 
together to improve State permitting processes and to speed deployment 
of technologies by using the Interstate Technology and Regulatory 
Cooperation Work Group, or ITRC, which is an organization affiliated 
with ECOS. The ITRC is a State-led, national coalition of regulators 
working with industry and stakeholders to improve State permitting 
processes and to speed deployment of technologies through interstate 
and regulatory collaboration.
    Currently, 31 States actively participate in ITRC activities and 
additional States are indirectly involved through participation in 
training events and technical work team activities. Other participants 
include the Departments of Energy and Defense, and the Environmental 
Protection Agency. The ITRC can document success stories in all 50 
States, through the use of ITRC products or examples of institutional 
change.
    These innovations, taken together, have made the efficient re-use 
of industrial land far more attractive in Pennsylvania, and have 
reduced the pressure on undeveloped ``Greenfield'' areas.
    We believe that we have gotten the fundamentals right. Now it is 
time to make it even easier for these sites to be cleaned up and 
returned to productive use. The Pennsylvania Department of 
Environmental Protection in collaboration with a number of other State 
agencies has launched additional new initiatives to do just that.
      Financial Resources for the Environment is one of two 
initiatives of its kind in the Nation in which public sector entities 
are working together with lenders, utilities and corporations to 
develop a financing vehicle to provide funding for brownfields 
redevelopment. In many cases private financing for brownfields projects 
is difficult to obtain. This project will fill in that gap and promote 
more redevelopment without the necessity for increased public funding.
      We are developing a request for proposals to offer a 
Commonwealth-wide insurance policy that can protect owners and 
developers from the uncertain liabilities associated with conducting 
cleanups. By purchasing coverage under this--umbrella policy--owners 
and developers will receive coverage more affordably than seeking it 
alone and can even be insured against actions taken by our Department. 
This will provide even more confidence for individuals seeking to sell 
and buy brownfield sites.
    Many other States have also attacked the problem of brownfields 
with innovative programs of their own. At least 35 States have 
voluntary cleanup programs, and, while many share common elements, each 
is tailored to the particular needs of the State. Thousands of sites 
around the country have been cleaned up under these programs.
    In short, Pennsylvania and the other States have figured it out. 
Brownfield redevelopment is becoming a common and natural aspect of 
real estate development and sound land use planning in our Commonwealth 
and across the nation. There are some legislative steps that can be 
taken to accelerate the pace at which these programs can restore our 
environment and revitalize our communities.
    I encourage the Senate to consider passing brownfield legislation 
based upon the model developed and supported by many States. The key 
elements of such legislation are: (1) a release of Federal liability at 
State land recycling sites, (2) a waiver of Federal permitting 
requirements at State land recycling sites, and (3) Governors 
concurrence on proposed NPL listings.
    A Federal release of liability will heighten developer confidence 
that EPA will not take judicial or administrative action should EPA 
decide to second-guess a State's decision regarding a clean up. Second, 
there needs to be a waiver of Federal permitting requirements at land 
recycling sites being addressed under a State voluntary cleanup 
program. In Pennsylvania, our General Assembly gave DEP the authority 
to waive State permits at sites being handled by our land recycling 
program, but only Congress can waive the requirement to obtain Federal 
permits. These are the same permitting requirements that EPA has the 
authority to waive at sites in the Superfund program. In asking for 
this waiver, be assured that discharges to the air and water are fully 
regulated by our State regulatory programs, and persons cleaning up 
sites in our State system have to meet all of our applicable emission 
and discharge limitations, both during cleanup an thereafter. In 
addition, Congress should reinstate the opportunity for Governors to 
concur on proposed Superfund listings. Governors can best decide 
whether sites have the potential to be redeveloped and, therefore, 
moved through a State land-recycling program as opposed to being 
relegated to the NPL.
    We are very proud of what we have achieved in Pennsylvania. Our 
Land Recycling Program has preserved open space, revitalized town and 
urban centers and made people feel better about their communities and 
the government's role in them. We believe our Program can serve as a 
national model and I thank you for the opportunity to speak with you 
today.
    Thank you.
                                 ______
                                 
       Pennsylvania Department of Environmental Protection,
                                                      June 1, 2000.

Honorable Robert C. Smith, Chairman,
Senate Environment and Public Works Committee,
Senate Office Building,
Washington, D.C. 20510-6175

Dear Chairman Smith: Thank you again for permitting the Environmental 
Council of the States to present some of its views to your committee at 
the hearing on May 2, 2000.
    Toward the end of the hearing you had asked a question about 
finality and I apparently misunderstood it. Your question, as Mr. 
Conover later explained it, was about the need for or value of finality 
in the land recycling process. My answer would be, and perhaps you will 
permit the record to be supplemented, as follows:
    Finality in land recycling transactions is the sine qua non for 
success. Choices made about how sites are selected, about the future 
use of the site, about future ownership patterns, and about financing 
are made by the private sector, and they will not be made at all in 
absence of certainty about the finality of government regulatory 
action. For many sites, this chilling effect of non-finality (for 
example, possible Federal action), will continue to stand in the way of 
cleanup and reuse.
    Thank you again for the opportunity to testify, and I am looking 
forward to an informal visit with some members of your staff to develop 
some additional thoughts on improvements to the statutory structure of 
our nation's environmental programs.
            Sincerely,
                                     James Seif, Secretary.
                                 ______
                                 
   Responses by James Seif to Additional Questions from Senator Smith
    Question 1. The brownfields success in Pennsylvania is a clear 
example of State innovation and a commonsense approach. In your 
testimony, you presented three recommendations for the Senate to 
consider: (1) a release of Federal liability at State land recycling 
sites, which will give the States ``finality'' in their decisions, 
something they do not currently have; (2) a waiver of Federal 
permitting requirements at these sites; and (3) Governor's concurrence 
on proposed NPL listings. How would such a release mentioned in (1) 
work in practice? Would there be instances where Federal involvement 
would be appropriate? What are those instances?
    Response. The Federal Government, through statute, should establish 
that Federal enforcement authorities under CERCLA do not apply to sites 
that have been cleaned up in accordance with the provisions of 
effective State voluntary cleanup programs. Federal involvement at such 
sites could be appropriate if information about the existence of 
serious additional risks from contamination at the site came to light, 
and the State was either unable or unwilling to address those risks 
under the provisions of its own program. Additionally, contaminated 
properties exist which may not be attractive for private investment, 
and may be posing unacceptable risks to public health and the 
environment. It is these sites where Federal and/or State funded 
cleanup involvement is warranted and should be focused. Federal action 
under the emergency (``immediate removal'') provisions of Superfund 
might also be useful in certain fact situations.

    Question 2. What would be the result of providing State finality in 
decisions on cleanup of brownfield properties?
    Response. The opportunity for voluntary parties to obtain both 
State and Federal finality would result in increased participation in 
the State program. We are convinced that this single issue is 
discouraging many property owners from initiating voluntary cleanup 
efforts under our program.

    Question 3. Does the Secretary believe that States that adopt this 
model will find that more funding would be available for cleanup at 
these sites from private and State sources?
    Response. States with proven and recognized voluntary cleanup 
programs have been and will continue to attract a greater level of 
private and public funding for assessment, cleanup and reuse of 
contaminated property.

    Question 4. How important is it to the States' continued success 
that the uncertainty associated with the EPA's second guessing of a 
State's decision regarding cleanup be removed?
    Response. Finality in land recycling transactions is the sine qua 
non for success. Choices made about how sites are selected, about the 
future use of the site, about future ownership patterns, and about 
financing are made by the private sector, and they will not be made at 
all in absence of certainty about the finality of government regulatory 
action. For many sites, this chilling effect of nonfinality continues 
to stand in the way of cleanup and reuse.

    Question 5. At the hearing held Tuesday, May 2, 2000, by this 
committee, Senator Baucus read [a quote of Thomas Jorling] to you and 
asked you to respond. Each of you said that you agreed with Mr. Jorling 
that there was a need for the Federal gorilla to remain in the closet. 
Would you please elaborate on that response?
    Response. It is certainly not necessary for EPA to be able to 
second-guess every individual State decision. In fact, that second 
guessing is just as likely to reduce the effectiveness of State 
programs, as members of the regulated community grow reluctant to 
committing resources to achieving compliance if they believe that 
another opinion of what constitutes compliance is possibly to be 
substituted later. This reverses delegation, turning the day-to-day 
implementation of programs back to the EPA.
    States are willing and able to exercise reasonable and vigorous 
enforcement. Governors are elected by the same citizens who elect 
Senators, and recognize the same strong support among those citizens 
for effective environmental protection. Governors are more likely than 
Senators, I suggest, to be held accountable by those citizens if 
environmental problems in their States are not appropriately addressed. 
The notion that States will ``race to the bottom'' is just not true.
    As evidence of this, States have been shouldering a growing share 
of the effort of environmental protection in this country. States have 
sought and obtained delegation of the vast majority of Federal programs 
that can be delegated. State spending on environmental protection has 
risen steadily and the percentage of State environmental budgets that 
is provided by the Federal Government has shrunk to about 20 percent on 
average, and much lower in some States. States conduct the overwhelming 
majority of environmental inspections, and about 80 percent of the 
enforcement actions taken nationally.
    There are a number of specific instances in Pennsylvania that 
demonstrate our willingness to take strong action against those who 
violate the law. We have assessed and collected a $3.2 million penalty 
against Westinghouse for groundwater contamination at a facility in 
Adams County, using a combination of State and Federal authorities. 
Another example is Action Mining in Somerset County, where we brought 
enforcement action against the company for illegal discharges to a 
stream, resulting in $625,000 in civil penalties.
    An important point to make however, is that vigorous enforcement is 
not, in itself, an adequate measure of an effective environmental 
program. We have achieved, for example, an 88 percent compliance rate 
with the Federal standards for upgrades of underground storage tanks in 
Pennsylvania. The large number of tanks and tank owners throughout the 
State, many of which are small businesses or ``mom-and-pops'', required 
the use of many different tools--outreach, education, compliance 
assistance, and, when needed, enforcement. The enforcement actions 
alone don't tell the story of whether the environment is being 
protected or not; the compliance rate does.
    Also, we take some enforcement actions in cooperation with EPA. We 
recently decertified several laboratories in Pennsylvania for 
inaccurate or fraudulent environmental testing results. EPA then used 
Federal authorities to bring criminal action against those who 
generated fraudulent results. This is the kind of ``gorilla in the 
closet'' that works. We want to have the ability to do the best job we 
can with our authorities, and, only then, the option to turn to the 
Federal Government for help when their authorities or expertise are 
needed.
    The current Federal laws already provide a mechanism whereby the 
Federal Government can maintain oversight without the need to second 
guess individual State permitting and enforcement decisions. EPA must 
approve the delegation of any Federal program to a State, and EPA 
retains the right to revoke that delegation. If any State should fail 
to meet the requirements for operating a delegated program or fail to 
be protective of public health or the environment, EPA can initiate 
proceedings to revoke delegation, and instead run the program itself. 
EPA should delegate the programs, let the States run them, and take 
them back if the States fail. EPA should not pretend to delegate the 
program then continue to make the decisions.

    Question 6. Please indicate whether you agree or disagree with the 
following statement: ``Reasonable people, acting in good faith, can 
disagree over the best method for protecting the environment. . .''
    Response. I agree with the statement. I would add that it is not 
just the mix of enforcement and compliance assistance that matters. We 
have made some of our best environmental gains in Pennsylvania through 
efforts that have little or nothing to do with patrolling a standard. 
The Land Recycling program about which I testified is a good example, 
where we created conditions under which private parties volunteer to 
spend their own money to clean the environment. Through pollution 
prevention and energy efficiency programs we are helping businesses and 
individuals in Pennsylvania go beyond what the law would require. Our 
work to promote new technology is bearing fruit not only for 
Pennsylvania's environment but also for the rest of the country and, in 
fact, the world. Enforcement is just one facet of compliance with the 
law, and compliance is just one facet of environmental protection.
                                 ______
                                 
  Responses by James Seif to Additional Questions from Senator Chafee
    Question 1. You note in your testimony that Pennsylvania is 
pursuing an ``umbrella insurance policy'' for Brownfield cleanups. How 
can environmental insurance facilitate further redevelopment?
    Response. We have found that uncertainty is one of the primary 
inhibitions to private sector investment. Our request for finality is 
one important element in establishing the kind of certainty that will 
promote greater private investment in environmental cleanups. The 
insurance program we envision would establish another kind of 
certainty. Environmental insurance has come into favor as a hedge 
against unanticipated and unexpected costs. We will soon be selecting a 
qualified broker to establish underwriting that builds upon the strong 
points of the Land Recycling Program. Private parties will be able to 
take advantage of competitive premiums for primary coverage options 
including cost overrun, third-party and tort claims, and State and 
Federal reopener and compliance costs. We anticipate that this 
additional certainty as to cost will make potential redevelopment 
projects more attractive to private parties and the lending community 
in particular.

    Question 2. Are most brownfield sites cleaned up under your State 
program brought to your attention by the volunteers or do you discover 
the sites first?
    Response. In most cases, we do not know about a given site until a 
notice of intent to remediate is filed with us. As I mentioned in my 
testimony, we have offered grants to local governments and authorities 
to inventory brownfield sites within their geographic areas, and we 
maintain a data base of such sites for those who may be searching for a 
property to redevelop. The majority of the sites in our program 
however, are first identified by the voluntary party seeking to clean 
up and reuse them.
                               __________
  Statement of Brent C. Bradford, Deputy Director, Utah Department of 
                         Environmental Quality
    Mr. Chairman and members of the committee; my name is Brent C. 
Bradford. I am the Deputy Director of the Utah Department of 
Environmental Quality. I am here representing the views of the 
Environmental Council of the States (ECOS) of which I am a member and 
immediate past chairman of the State/EPA Information Management 
workgroup and current Vice Chairman of the ECOS Strategic Planning 
Committee.
    I want to speak to you today regarding State activities and 
initiatives in managing environmental information. I'd like to give you 
four messages:
    1) States generate most of the data in EPA's national data systems;
    2) States are driven to manage this data effectively because they 
must have it to operate their own programs;
    3) States have become the greatest innovators in the management of 
environmental data, and
    4) States are working with EPA and the public to make this data 
available.
    First, States collect and provide about 94 percent of the 
environmental pollutant information contained in Federal program data 
systems (report attached: ``Environmental Pollutant Reporting Data in 
EPA's National Systems''). This includes data from the regulated 
community and direct measurements of environmental quality. It includes 
data for water, air, waste and drinking water. States provide EPA 
nearly all the environmental pollutant and compliance data it uses to 
manage the environment. Data that EPA passes on the to the public 
through programs such as Envirofacts often originates in the State 
environmental agencies.
    Second, States use this data themselves to manage their own 
programs, and so are driven to make sure that the data is managed 
usefully. This became especially true during the 1990's as the States 
assumed more and more of the delegated programs from EPA. More States 
over the past 2 years have invested in information technology and moved 
toward data integration. This increases the effectiveness of 
environmental program management and provides for sharing and exchange 
of information, and thus improved public access to data and improved 
data quality. States work together through ECOS to share experiences 
and knowledge and thereby assist one another and EPA in developing 
capabilities to manage environmental information. Some States have made 
significant investments of State funds and others have relied heavily 
on Federal funds coming through EPA's One-Stop program. Such Federal 
funding has been particularly helpful to smaller States such as ours.
    My third point is that the conditions I have already mentioned have 
led the States to become great innovators in environmental data 
management.
    In my home State of Utah, our agency has developed a standard used 
by all programs to identify facilities and link them between program 
data bases. We also created a global data catalog to allow public 
access to information contained in our data bases. We have developed an 
electronic reporting capability to allow regulated facilities to report 
required information and to provide for sharing of that information 
among the media programs within the department. From these efforts, we 
developed an Internet access capability that will allow public access 
to information 24 hours per day, 7 days per week. We especially wanted 
to make permitting and compliance information available.
    Other States have also made remarkable progress in this area. For 
example,
    1) Pennsylvania was one of the first States to present timely 
multi-media compliance information on facilities on line to the public. 
They are now sharing that system with other States.
    2) The State of Washington's led other States in developing a de 
facto national standard its Facility Identification Template for States 
is now in its second version and is being used by at least 25 States to 
help them jump-start their data reinvention efforts, saving each State 
about a quarter of a million dollars.
    3) New Jersey's Environmental Management System fully integrates 
all regulatory and permitting systems one of the first anywhere to do 
so when it's completed later this year.
    4) Virginia's Centralized Enterprise Data System was created in 18 
months, merging 77 legacy systems that were not compatible into a 
single integrated system. The State itself invested $12 million of its 
own State tax dollars to create this system. Virginia is now offering 
the system to other States at no cost.
    5) New Hampshire is integrating its environmental data bases by 
linking facility and site data, and has begun making site remediation, 
UST, and air permitting information accessible via the Internet.
    My fourth and final point is that States are committed to working 
with our Federal partners in making our data available to the public. 
The States and EPA created the State/EPA Data Management Workgroup in 
January 1998. We developed a vision statement and a set of operating 
principles (see attached: ``State/EPA Vision and Operating Principles 
for Environmental Information Management''). These define a framework 
for a new way for States and EPA to do business together. They commit 
States and EPA to a partnership in building locally and nationally 
accessible information systems. Major accomplishments of the workgroup 
include:
    1) the creation of a data standards council,
    2) the development of a vision for a national data exchange 
network,
    3) establishment of a joint process for addressing burden reduction 
in data reporting and
    4) a discussion forum and action plan for public access to 
environmental data.
    A full summary of the activities of the workgroup is attached for 
your information.
Conclusions and Plans
    States are making significant accomplishments in environmental data 
management. But the cost is high. Currently, the President's budget 
proposes $30 Million for environmental information management (proposed 
as $16 million for States and $14 million for EPA). States believe that 
this funding is essential in addressing a new vision of environmental 
information management. States and EPA will use this funding to develop 
data exchange standards, and enhance the capability of both States and 
EPA to exchange data. Continued Federal investment is critical for this 
vision to be realized, and we need to make sure that all States have a 
full opportunity to participate. Collective investments in standards 
development will be needed to make such a network viable.
    States envision a national environmental information exchange 
network that recognizes that the agencies that collect information 
would be responsible for its stewardship, and will provide access to 
such information through the network. Such a network is based on common 
standards that will provide a common base for information access, 
exchange and use; but will allow flexibility in meeting individual 
State and EPA needs regarding data housing and handling. This would 
move the focus away from a common national data ``system'' toward a 
focus on data quality and interpretation, while providing States, EPA 
and others the ability to use their on-going work to create ``portals'' 
for access to information sources. This will require both State and EPA 
effort to make such an exchange work and must be developed in such a 
way that all States, both large and small can participate in the 
exchange. (A copy of the working version of the State-EPA ``Shared 
Expectations for a National Environmental Exchange Network'' document 
is attached).
    Given the impact of decisions made based on environmental 
information and the need to assure its accessibility and accuracy, it 
is important that States and the Federal Government continue to work 
together to develop and utilize data management technology in a sound, 
responsible and efficient way. There is a long way to go, but 
significant progress is being made. States have provided leadership in 
this important effort and are committed to continuing to do so to 
assure that the ever-increasing demands for information are met and 
that necessary information is available for responsible environmental 
decisionmaking.
                                 ______
                                 
   EPA Vision and Operating Principles for Environmental Information 
                               Management
 Approved by State/EPA Information Management Work Group at Salt Lake 
                              City Meeting
    The States and U.S. Environmental Protection Agency (EPA) are 
committed to a partnership to build--locally and nationally accessible, 
cohesive and coherent environmental information system that will ensure 
that both the public and regulators have access to the information 
needed to document environmental performance, understand environmental 
conditions, and make sound decisions that ensure environmental 
protection.
Joint State/EPA Operating Principles For Effective Environmental 
        Information Management
    Working closely with local governments, the regulated community, 
the public, and tribal governments, the States and EPA will adhere to 
the following Operating Principles in their efforts to build efficient 
and effective environmental information systems that recognize 
customers'' needs, ensure full public access, strengthen environmental 
program management, minimize reporting costs, and ensure fairness and 
due process in the protection of trade secrets.
    1. Data collected by the States and/or EPA should have a specific 
and demonstrable use that:
      contributes to public understanding and decisionmaking 
about environmental and health risks in their communities;
      supports States' and EPA's ability to manage 
environmental programs effectively and enables regulators, legislators 
and other oversight bodies, and the public to measure success in the 
implementation of such programs, in a manner that is increasingly based 
upon environmental results; and??
      imposes the least burden on the private and public 
sectors, consistent with the above public requirements.
    2. The States and EPA commit to developing ways of sharing core 
environmental information based on jointly developed data standards and 
compatible system design. To this end, business processes and 
information systems designed by either or both States and EPA should:
      be designed and managed employing methods and 
technologies that will assure that the burden of collecting, storing, 
maintaining, and retrieving these data is minimized and provides for 
timely data sharing among all users;
      be managed and maintained to provide enhanced data 
quality, reliability, security and overall system stewardship;
      be integrated across programs and facilities based on 
data standards, in part so that information collection duplication and 
or redundancy is reduced as much as possible;
      provide the context, purpose, reliability, and collection 
methods for these data, in order to enhance users' understanding and 
use of data to address environmental issues; and
      promote ready access to quality environmental information 
for all levels of government, the regulated community, and the public.
    3. The States and EPA will leverage and share existing and future 
State and Federal investments in the use of information technology. 
Recognizing the opportunities and risks associated with the rapid pace 
of developments in information technology, the States and EPA will work 
as partners to modernize environmental information systems as rapidly 
and efficiently as possible, while doing everything possible to ensure 
that all EPA components and all States participate fully in this 
process.
    4. The States and EPA recognize that there is a critical need to 
share information for each agency to be successful in its general 
mission. While recognizing that both have special data needs for 
specific programs that do not require information to be shared or for 
which information sharing may not be necessary, States and EPA 
recognize the overriding importance of transparency in public 
activities and decisionmaking and of respect in the use and 
dissemination of each other's information.
    5. The States and EPA will improve the collection, management, and 
sharing of environmental information to support the achievement of 
their respective and shared environmental goals and priorities. 
Integration of and agreement on these goals and priorities will occur 
through a structured dialog (such as the National Environmental 
Performance Partnership System [NEPPS]).
                                 ______
                                 
  Responses by Brent C. Bradford to Additional Questions from Senator 
                                 Smith
    Question 1. The EPA's testimony stated that Core Performance 
Measures are needed to paint a national picture of environmental 
progress. Can you describe what some of these core performance measures 
are? How are the data collected by the States related to the Core 
Performance Measures and environmental indicators?
    Response. Core Performance Measures (CPMs) have been developed 
through the joint efforts of EPA's program offices and ECOS. The 1995 
NEPPS Agreement established a system for developing Performance 
Partnership Agreements (PPAs) between States and the EPA. The PPAs, in 
turn, provide a vehicle for articulating both State and national 
environmental priorities and for establishing results-based performance 
measures. In 1997, the States and EPA signed a Joint Statement on 
Measuring Progress and produced the first set of CPMs for fiscal year 
1998.
    CPMs are a set of environmental indicators, program outcome and 
output measures used to assess progress in certain subject areas, such 
as protection of aquatic ecological health, reduction of pollutant 
discharges, and others. They have been developed for air, waste, water 
and accountability measures have been developed for enforcement and 
compliance assurance programs. There are no CPMs for pollution 
prevention, pesticide, and toxic programs in fiscal year 2000.
    As an example, within the air and radiation programs, ECOS and EPA 
have agreed upon the following CPMs for reducing air toxic emissions 
and health risks: Core Environmental Indicator: Trends in emissions of 
toxic air pollutants as reflected in EPA's National Toxics Inventory; 
Core Program Outcome Measure: Reduction in air toxic emissions from 
1990 levels; and Core Program Output Measure: State progress in 
collecting and compiling ambient and emission source data for toxics to 
better understanding the nature and extent of the air toxics problem.
    Each media committee of ECOS and its EPA program counterparts, as a 
part of the Core Performance Measures development process, determined 
not only the measures, but the information needed to evaluate the 
measures. In most cases, it was jointly determined that the data were 
already being collected and that additional information was not needed. 
However, it was determined that States and EPA would have to work 
together on interpretation of information and assure that the data were 
used for the purposes for which it was collected. This has come to be 
known between States and EPA as the issue of respectful use. This issue 
of respectful use resulted in a joint effort on the part of State, EPA, 
environmental groups and industry to address how environmental 
information is used and interpreted, how data quality is assured and 
how data gaps are appropriately filled. While States and EPA have 
agreed to continue to search for and eliminate nonproductive data 
collection, this does not seem to be nearly as important an issue as 
how those data are used and interpreted.

    Question 2. What are the States doing now to ensure that the data 
they collect relating to core performance measures is of good quality 
and used in the right context? One concern that is heard often is that 
States collect different types of data that may not translate well into 
a national data base and, also, that data collected in one context may 
not be applicable when they are considered in another context. Do these 
issues affect the use of information for core performance measures?
    Response. The collective State/EPA process that led to CPMs ensured 
that the data supporting CPMs would be accessible and of good quality. 
By their nature, CPMs are a collection of data that translates well 
into a national data base--intended, as Mike McCabe's testimony on 
behalf of EPA indicated, to paint a national picture of environmental 
progress. It is important to understand that the information collected 
by the States is utilized to manage State programs. These data are the 
same information that is shared by States and EPA in the Core 
Performance Measures. Individually, States have taken steps to assure 
quality of data as they are used for the States own purposes and are 
available to those to whom the State agency is responsible. Thus, there 
is incentive for the State to assure the data are of highest quality. 
Many of the national data bases are outdated and unworkable. This has 
been recognized by both the States and EPA. Therefore, the current work 
of the State/EPA Data Management Workgroup is focused on the creation 
of a new data exchange network that would eliminate the needed for 
inputting data into national program data bases and would allow EPA 
direct access to State data. This system would preclude double entry of 
data and create new ways for States and EPA to share information and 
assure its quality and accuracy.
    Of course, the envisioned data exchange network does not imply that 
all State-generated and transmitted data will be used as originally or 
appropriately intended. There are occasions, for example, when States 
and EPA have disagreed about the release of certain data or the 
proposed use of that data. We understand and share the urgency to 
ensure our citizens have access to environmental information. For that 
reason, we must continue to work with EPA to ensure that the 
information and its characterizations have received the necessary 
quality assurance, peer review, and appropriate instructions for 
interpretation and use. Fortunately, EPA and ECOS have established a 
solid working relationship focused on the need for relevant, reliable, 
high-quality, accessible, and useful data.

    Question 3. What is the impact on the type and quality of the data 
collected, if the EPA and the States have not agreed on the 
environmental priorities and goals?
    Response. One of the big challenges facing EPA and the States is 
identifying what data is necessary to support our collective priorities 
and goals. ECOS and I believe that greater attention needs to be placed 
by EPA and the States on developing high quality environmental goals, 
objectives and performance measures that the majority of Americans can 
understand and rally around. These goals, objectives and measures will 
be significantly enhanced if they are developed in close consultation 
with State environmental agency leaders who possess significant 
expertise and experience in environmental management along with 
significant responsibility for environmental protection. We give credit 
to EPA for its recent effort to reach out to State environmental 
leaders to identify their priorities as EPA undertakes its strategic, 
operational and budget planning.
    One of the challenges of an increasingly results-based 
environmental management system is that old measures of activities are 
increasingly irrelevant. Some may still be important, but many others 
are not. New measures, particularly environmental indicators, will 
require new monitoring efforts--and resources are a major concern. As 
States and EPA tackle increasingly complex environmental issues such as 
nonpoint source pollution, ecosystem health, and toxic risks, new data 
and analytic tools will become necessary. The good news is the science 
is now available. The bad news is that the funds frequently are not.
    National data collection that does not support the attainment of 
agreed upon priorities is suspect, and as the process of collective 
priority setting moves ahead, my colleagues and I are looking for 
opportunities to drop unnecessary data burdens.

    Question 4. What additional assistance, if any, do the States need 
from EPA to develop and implement core performance measures?
    Response. For the CPMs that are currently in place, States do not 
need much more assistance. However, ECOS continues to push for 
increasingly results-based measures, and these will require a joint 
commitment of resources to identify and implement. One of the reasons 
we are still heavily reliant on output, or activity, measures is that 
they are relatively easy to measure, we are already measuring them, and 
they are relatively cheap. Besides, we have been measuring those things 
for years; they are part of the culture. Unfortunately, they are poor 
proxies for real measures of our environmental condition.
    We also need the ability to collect data over substantial periods. 
Environmental results often take a long time to develop and 
materialize. Good, long-term, data are needed to ensure that the trends 
are in the right direction and the investment is paying off.
    As the States and EPA continue--through NEPPS and other joint 
planning efforts, like GPRA--to identify our environmental priorities, 
appropriate results measures will also become evident. We need a 
culture at the State and EPA levels, as well as in Congress, that will 
embrace this new management approach and which will provide the 
resources necessary to put it in place.

    Question 5. Is it necessary for the EPA, in order to ensure that 
the States protect the environment, to second-guess the States, or to 
be able to second guess the States, regarding every exercise of a 
State's enforcement discretion, every permitting decision made by the 
States, and the like?
    Response. Not only is it unnecessary for EPA to second guess the 
States, it is unproductive, contentious and costly. It results in 
delays in compliance and undermines the ability of the State to 
effectively take and complete enforcement actions. It is important to 
realize that State environmental agencies are much closer to these 
enforcement issues than EPA and are also held much more closely 
accountable by the public and elected officials. Further, it is 
important to understand that States have the knowledge and ability to 
take into consideration local conditions and situations that may have a 
significant impact on achieving and maintaining compliance. EPA 
generally fails to consider such situations in taking actions. In Utah, 
our experience with EPA enforcement has generally been very negative. 
EPA has waited until cases have been negotiated by the State, said 
little or nothing regarding those negotiations and then, after a 
settlement has been reached, come in to reopen the case and attempt to 
extract additional or different penalties. This has a significant 
adverse impact on the State agency, on the local community and on the 
facility.
    By way of example, the experience of the town of Spanish Fork, Utah 
may be helpful. The town of Spanish Fork is a rural Utah community with 
a population of approximately 8000 people. The town built a new sewage 
treatment facility, for which our agency issued a permit. The design of 
this facility is similar to that of others that are currently operating 
in the State. The facility did not operate in compliance with permit 
requirements and the town contacted DEQ and reported the noncompliance 
problem. After reviewing the available data, we issued an enforcement 
action and the town hired a consultant to try to identify and correct 
the noncompliance problem. A second consultant was brought in to assess 
the problem and determine the reason for high residual chlorine. Our 
staff that had reviewed the plans and also worked onsite to help 
identify the problem. Finally, the city expended an additional $800,000 
for a de-chlorination unit and the problem was corrected and compliance 
was achieved. The State settled the case without penalty because of the 
good faith shown by the city in identifying the problem and coming 
forth to fix it. Four years after the issue had been resolved, EPA 
notified the State that they wanted DEQ to reopen the issue and collect 
a penalty of at least $100,000. The DEQ attempted to dissuade EPA from 
this position given that compliance had been achieved and maintained 
over a lengthy period. EPA insisted on pursuing the case. The Region 
was requested by the State to meet with representatives of the town and 
the State, including State legislators, prior to initiating any action. 
EPA refused, issued an enforcement action and then, reluctantly, met 
with the community indicating that if the State had ``done its job'', 
they would not be there. They further indicated that if the town wanted 
to appeal the action, a hearing could be requested, but would be held 
in Denver. This precludes attendance of many who may be interested, 
including elected officials who serve part time. EPA then contacted the 
State and indicated that they would back out of active participation if 
the State would reopen its action and obtain a minimum penalty of 
$100,000. The community approached DEQ about the possibility of having 
the State join them in a suite against the EPA action. Ultimately, the 
community did meet with EPA in Denver and EPA settled the case for 
$24,000. (After telling the State, that they would accept nothing less 
than $100,000 in a State-negotiated settlement). Subsequent to this 
action, the State legislature passed, and the Governor signed, a joint 
resolution stating the State position on enforcement, identifying what 
they believe is the appropriate EPA role in environmental enforcement 
and requesting action on the part of EPA. EPA has never acknowledged or 
responded to the resolution This case is typical of the heavy-handed 
EPA approach to enforcement and an example of second guessing the 
State. The EPA action cost the State, the town, the elected officials 
and the public time and funding, accomplished no further progress in 
environmental protection and may have permanently damaged relationships 
between the State, town and Federal Government. The DEQ has seriously 
questioned whether this was what Congress intended when they empowered 
EPA to enforce environmental statutes. If, in good faith, an entity is 
attempting to understand and comply with environmental requirements 
should they be treated as a criminal? This is the question that the 
elected officials of this State continue to ask as a result of this and 
other cases brought by EPA in our State.
    EPA's goal in this case was not compliance. That had been achieved. 
EPA was intent on flexing its Federal muscle and establishing a 
presence in enforcement in Utah. In doing so, EPA only delayed work on 
the problem, alienated all associated with it and undercut the ability 
of the State to take effective enforcement actions. When EPA takes this 
kind of approach, it significantly undermines the ability of the State 
to enforce, because facilities are reluctant to negotiate with the 
State for fear that EPA will not accept the settlement. The result is 
delay in achieving compliance, continued threat to the environment 
because of legal positioning of the regulated facility, a lesser 
commitment on the part of the facility to cooperatively correct the 
problem and finally, damage to relationships between the State agency, 
elected officials, the public and the regulated community.
    Another example that may be of interest is that of the State action 
regarding excess emissions at the company's Salt Lake Refinery. The 
State initiated an enforcement action for excessive emissions at the 
refinery. After reviewing the Federal and State rules and evaluating 
the information received during inspections and from the company in 
response to the enforcement action it was determined that the emissions 
were a result of unavoidable breakdown as defined in Federal and State 
rule and therefore, penalties were not appropriate as actions had been 
taken to correct the problem. EPA determined that the State action was 
inappropriate and that the rules had been interpreted incorrectly. EPA 
sought a $1 million penalty from the company. The action has been in 
the legal process for 2 years. The State has recently been informed 
that EPA now believes that the State interpretation was, in fact, 
correct and that violations did not occur.
    In the meantime, both the company and the State have incurred 
substantial legal costs. The EPA action did nothing to achieve 
compliance, but did create a costly and contentious process for a 
period of 2 years.

    Question 6. Are the States able and willing to exercise reasonable, 
and vigorous enforcement and permitting discretion if the States are no 
longer subject to second-guessing in every case?
    If so, please explain why that is true today, even if it was not 
true in past years.
    Response. In Utah, we have always taken our responsibility to 
enforce environmental requirements seriously and have aggressively 
pursued compliance with environmental requirements of both State and 
Federal laws. It is important to recognize that the majority of 
compliance actions taken are State, not EPA actions. In Utah, we have 
the capability to take such actions and we take our stewardship to 
protect the environment seriously. It is our belief that much of the 
current problem, at least between our State and the EPA, is a result of 
two things: 1) a difference in the philosophy of enforcement and 21 
differences between the State and EPA in what constitutes a measure ot 
success In enforcement and compliance issues. The position of the State 
has been that the goal is compliance with environmental requirements. 
There are many tools to help us gain that compliance and the 
enforcement tools represent an important part of the toolbox but not 
the only tool in the box. However, if compliance is the goal, then it 
may not be necessary to always utilize extensive penalties, orders, and 
court actions if the facility is cooperative and compliance can be 
achieved with lesser actions.
    EPA has placed emphasis in three areas: 1) deterrent value of 
penalties, 2) national consistency and 3) the importance of a Federal 
presence in each State. All three of these areas have been troublesome 
to Utah. While we don't disagree that there is value in penalties, when 
the penalty becomes the major objective in settling a case at the 
expense of compliance, this is problematic. This has been our 
experience with EPA in Utah. National consistency may be important for 
EPA, however, it has not allowed for consideration of local 
circumstances and conditions that may be important in assuring an 
adequate solution to the problem. Federal presence has generally not 
been to the benefit of the State, because of the credibility issues 
that have resulted from the unwillingness of EPA to work with the State 
and local government in solving compliance and enforcement issues. 
Federal presence only tends to entrench the parties further and 
undermine the ability of the State to expeditiously resolve compliance 
issues. If measures of success are shifted to problem resolution and 
compliance rates as opposed to actions taken and penalties collected, 
the effectiveness of State actions becomes readily apparent. In Utah, 
we are achieving compliance. For example, recently, we shared with EPA 
the compliance rates that had been achieved in the Underground Storage 
Tank program as a result of implementing a compliance assistance 
program to help tank owners understand and comply with tank 
requirements. Current compliance rates are substantially higher as a 
result of such assistance than they were when an aggressive enforcement 
program was underway. In this example, enforcement and penalties were 
not achieving the compliance goal. Assistance was the key and 
compliance was the result. This is an example of using the right tool 
for the right job. EPA had refused to use this tool. While we have used 
enforcement vigorously where it is needed, other approaches have also 
been effective in achieving compliance if it becomes the goal.
    Question 6a. If so, please support your explanation why that is 
true with examples showing that the States have reasonably, responsibly 
and vigorously enforced the following: A. Federal environmental laws, 
and
    B. State and local environmental laws, over which the EPA exercises 
no supervisory responsibility.
    Response. The following are some typical examples of State actions 
to enforce Federal environmental laws:
    The State filed a natural resources damage claim against Kennecott 
Copper Corporation for contamination of soils and ground water 
throughout the western portion of the Salt Lake Valley. The State 
negotiated a settlement which has resulted in a program for cleanup of 
contaminated sites and ground water. That cleanup program is ongoing. 
The State has taken action against other major industry violations in 
the mining, oil and power industries. In addition, we have focused 
efforts on minor sources which contribute significantly to the 
nonattainment status along Utah's Wasatch Front. We have aggressively 
administered the provisions of the Clean Air Act relating to prevention 
of significant deterioration to protect the unique canyon country of 
southern and southeastern Utah.
    The following are examples of actions taken regarding State 
environmental laws over which EPA has no responsibility:
    The State has developed an underground storage tank program that 
includes certification programs for tank installers and inspectors. The 
State vigorously enforces this certification program. There is also a 
State underground storage tank financial trust fund established for 
meeting the financial assurance requirements of the State and Federal 
law. The compliance requirements for a tank owner to get onto the fund 
and utilize it are much more stringent than the Federal requirements 
and are vigorously enforced by the State. The State has established a 
ground water protection program and groundwater permitting requirements 
that do not exist at the Federal level and these are vigorously 
enforced. Individual waste water disposal system rules are a joint 
responsibility of the State and local governments. These are critical 
given the growth being experienced in rural Utah. Such rules do not 
exist at the Federal level. These rules are aggressively enforced by 
the State and local government. Utah has designated nerve agents as 
hazardous waste and has enforced hazardous waste requirements against 
the U.S. Army at the Tooele Army Depot chemical agent destruction 
facility. Federal rules do not treat nerve agents as hazardous waste. 
Utah has established requirements for Air Quality permits for minor 
sources of air pollution. This is above and beyond the requirements for 
permits under the Federal clean air act. These are just a few examples 
of where the State has established and enforced requirements above and 
beyond those established under Federal law. Each of these requirements 
is designed to assure appropriate environmental protection in the State 
and address concerns that are either unique to Utah or are of higher 
priority to the State than to the Federal Government.

    Question 7. Are there alternative approaches to the current 
``second-guessing approach'' that could still provide assurance to EPA 
that the State programs are protective of public health and the 
environment? For example, an approach that would allow EPA to review, 
on a 5-year, 7-year, or 10-year basis, the overall performance of the 
State, and renegotiate the State's delegate authority based on the 
level of progress that the State had made toward a better environment 
during that period.
    Response. EPA could have a number of significant and helpful roles 
in enforcement. First, EPA could continue to provide resources to the 
State in the form of funding, training and technical assistance. 
Second, they do have an oversight responsibility under the Federal 
environmental statutes and it is appropriate that such a role exist. 
However, the problem is the ``philosophy'' enforcement. If EPA 
continues to take an ``enforcement for enforcement sake'' position when 
the State takes ``compliance is the goal'' approach, it doesn't matter 
whether EPA reviews State actions once a month, once a year, or once 
every 10 years, the conflict will continue to exist. Until EPA and 
States can agree to a common goal tor enforcement and agree to measures 
that appropriately reflect that goal, it will be difficult, at best, to 
find a productive resolution to this problem. Third, EPA can assist the 
State enforcement and compliance issues where the State has a 
jurisdictional issue or a resource problem that precludes the State 
from appropriately addressing the issue. When programs are delegated to 
a State, Federal law requires EPA to make a determination that the 
State has adequate resources, expertise and authority to conduct the 
delegated program. When such a determination has been made, EPA should 
shift its emphasis from over sight to collaboration.
    By partnering with the State, EPA can bring its expertise, 
resources and authorities to the table to work with the State in a 
State driven process for addressing compliance and enforcement issues. 
This kind of partnership would allow focus of limited State and Federal 
resources on problem solving instead of continuing an unproductive 
dispute over who controls enforcement.

    Question 8. Please indicate whether you agree or disagree with the 
following statement: ``reasonable people, acting in good faith, can 
disagree over the best method for protecting the environment''. For 
example, reasonable people can differ over the proper mix of 
enforcement and compliance assistance as generic tools, and the proper 
use of a particular choice of methods in a specific case. Accordingly, 
the best approach for gaging a State's environmental protection program 
is to evaluate the entirety of the State's efforts, both enforcement 
and compliance assistance, over a long period of time, and to determine 
whether the State has improved the condition of the environment, rather 
than focusing on a particular case or series of cases, the number of 
enforcement actions brought in a particular State (or any other similar 
so-called ``bean counting'' system) and the preference (if any) between 
enforcement and compliance assistance.
    Response. This statement is basically true. If the goal is 
environmental protection, then measuring progress toward that 
protection is important and may be the best measure of effectiveness of 
any environmental program. However, there may be value in measuring 
compliance to be able to ascertain the effectiveness of programs. There 
is a significant difference between measuring compliance rates and 
measuring enforcement activities. In certain cases, compliance may be 
achieved effectively with methods other than enforcement. There is too 
much emphasis placed by EPA on the negative incentives of enforcement 
and not enough emphasis on positive incentives that can be used in 
achieving compliance. The net result is that many compliance approaches 
other than traditional enforcement are not being utilized effectively. 
Measures of success which evaluate all aspects of the compliance 
process along with trends in environmental protection would be much 
more appropriate.
                                 ______
                                 
  Responses of Brent C. Bradford to Additional Questions from Senator 
                               Lautenberg
    Question 1. How long have EPA and State agencies been working to 
integrate environmental information management and to streamline 
environmental reporting?
    Response. The State/EPA Data Management Workgroup was formed in the 
fall of 1997 and held its first meeting in January, 1998. The first 
effort of the workgroup was to establish a shared Vision and a set of 
Operating Principles. These have become the foundation upon which 
States and EPA have built their work around environmental data issues 
(copy attached). After the establishment of the joint vision and 
operating principles, the three initial priorities of the work group 
were to look at the issues of what information is being collected for 
what purpose, how is it being housed and shared and how is it being 
used. The workgroup formed a series of action teams to address issues 
around technology transfer, facility identification, appropriate use of 
data, etc. As the work of these teams went forward it became evident 
that several issues were important to address. Standards became a 
central theme around which all data discussions had to revolve and a 
data standards council has now been formed. Data quality and data gaps 
have become significant issues for both industry and environmental 
groups and a forum for discussion of these issues has been formed as a 
part of the respectful use discussions. In 1999, EPA realized the 
importance of this effort and created their Of flee of Environmental 
Information to establish a structure within the agency to better handle 
data issues within the EPA and to focus work with States in this 
important area. There has been a recognition on the part of EPA and 
States that 94 percent of the environmental program data are collected 
and managed by States; but, that both States and EPA rely on those data 
for program management. This makes it critical that a way be found to 
share information, make it easily available to those who have a need 
for or interest in it and assure that the information is accurate and 
used appropriately. The most recent work effort of the workgroup is the 
development of a vision for a national environmental data exchange 
network in which the stewardship of information resides at the point it 
is collected, primarily within the States, while providing the ability 
for EPA and other interested parties to gain direct access to that 
information. This would eliminate the need for program legacy data 
bases and would eliminate the need for reporting on the part of 
regulated entities and States. This has been an evolutionary process 
which has developed as States and EPA have come to better understand 
needs, relationships, technology, interests and importance of data 
issues. It continues to evolve.

    Question 2. Which of the following attributes will the integrated 
reporting system envisioned by the EPA-State partnership be expected to 
have:
    Will a facility be able to identify, through one point of contact, 
all the EPA reporting requirements that apply to it? Will a facility be 
able to identify as well, through the same point of contact, all the 
State, Tribal, and local environmental reporting requirements that 
apply to it?
    Response. The environmental information exchange network envisioned 
by the States and EPA is not about creating a single point of contact 
to determine applicable reporting requirements. It is about sharing 
information through direct access to it. It would be virtually 
impossible to have a single point of contact that could keep track of 
all Federal, State and local reporting requirements or needs. However, 
realizing that States collect a majority of information and are the 
stewards of that information, a system can be created that will allow 
sharing of that information between States and EPA and thereby reduce 
reporting burdens on industry and States and allow EPA access to 
necessary information.

    Question 3. Will a facility be able to submit, through the same 
point of contact, all information that is normally submitted directly 
to EPA programs? Will a facility be able to submit as well, through the 
same point of contact, all information required under applicable State, 
Tribal and local environmental reporting requirements?
    Response. The data exchange network would recognize the importance 
of the State role as collector and steward of information and would 
provide for EPA to be able to access information directly within a 
State data base. EPA would then create the capability to share that 
information within the agency with those programs that need the 
information. This would eliminate duplicate reporting on the part of 
the regulated entity, eliminate a significant reporting burden on 
States and ensure better quality of information by eliminating multiple 
inputting of data into various systems. While the discussions have 
focused on the relationships between State and EPA, local and tribal 
needs could be addressed through this same mechanism.

    Question 4. Will the reporting system direct the facility to 
information on applicable OSHA reporting requirements and environmental 
reporting requirements administered by Federal agencies besides EPA?
    Response. The data exchange network currently being discussed would 
not address reporting requirements from OSHA and other Federal agencies 
as the basis for the current vision is access to and sharing of 
information, not the reporting requirements themselves. The reporting 
requirements have been addressed in two other forums: the work of ECOS 
and EPA around Core Performance Measures and the burden reduction 
efforts of the State EPA Burden Reduction Action team. The data system 
discussion is not the place that discussions about appropriate 
reporting requirements have been held.

    Question 5. Will the reporting system use data standards for units 
of measure, terms for chemicals, pollutants, waste, and biological 
material, and methods of identifying reporting facilities, developed in 
consultation with industry, environmental groups and other 
stakeholders?
    Response. Data standards are a fundamental component of the 
information exchange network. States and EPA have created a Data 
Standards Council to discuss these and other standards issues. Tribal 
interests are also included on the Council. A standards development 
process is envisioned which would allow participation of interested 
stakeholders.

    Question 6. Will the reporting system use an ``open data format'' 
that allows facilities to download information from their own internal 
data management systems directly to the integrated reporting system?
    Response. Again, it is important to note that we are not discussing 
a single national reporting system; but, rather an information exchange 
network which allows sharing of information once it is reported and 
which recognizes most environmental information as collected. 
Electronic reporting is currently the subject of discussion in many 
States. In Utah, for example, we have developed electronic reporting 
capability that allows regulated entities to report air emissions 
inventory and water quality monitoring data electronically. The 
information can then be accessed and shared by various programs within 
the Department of Environmental Quality. In the data exchange network 
envisioned, these data would be accessible to EPA but would continue to 
reside in our State data warehouse. The State/EPA data management 
workgroup is working with the National Governor's Association and the 
EPA One-Stop program to evaluate and encourage electronic reporting, 
but; given the nature of environmental data collection today, such 
capability will have to be developed at the individual State level in 
order for electronic reporting to be effective.

    Question 7. To ease reporting by businesses with facilities in more 
than one jurisdiction, will EPA and State, tribal and local agencies 
all use he same data format and standards?
    Response. The previously mentioned Data Standards Council will 
address the issue of standards. The question of format becomes 
important at the point of collection, but given that once the 
information is collected, it will be shared by direct access to it, it 
would relieve the reporter of the burden of having to concern 
themselves further with data format.

    Question 8. Will a facility be able to receive information on 
pollution prevention technologies and practices through the reporting 
system.
    Response. This issue has not been specifically discussed to date. 
The focus of the data exchange network discussions have been data flows 
and information itself. Pollution prevention information could be made 
accessible through such an exchange network to the extent that such 
information is being collected.

    Question 9. By what date may we expect the envisioned integrated 
reporting system, or aspects of the system, to be in place?
    Response. Significant progress has been made, a facility 
identification standard has been developed and other standards are 
under discussion, the vision for the national environmental data 
exchange network has been developed and discussions between States and 
EPA are on-going. One key factor to the success of this effort is the 
continuation of Federal funding. In the President's budget there are 
$30 million identified for environmental information management ($16 
million for State and $14 million for EPA). This funding is critical if 
this effort is to go forward. States have committed significant 
resources of their own to develop the capability to manage 
environmental information, the EPA one-stop program has been key for 
many smaller States to enhance their capabilities. The realization of 
this national data exchange vision can only happen if the resources 
necessary to create the structure are available. Without such funding, 
the States and EPA would have to divert existing resources to this 
effort. For many States, this may be impossible.

    Question 10. Are the air, water and waste programs of EPA and the 
State agencies fully participating in the development of the integrated 
reporting system?
    Response. EPA has created the Of flee of Environmental Information 
and charged it with the responsibility of overseeing and coordinating 
this effort within EPA. OEI is having discussions with EPA's Quality 
Information Council regarding this issue. The QIC in an internal EPA 
group made up of executive representation from the various programs 
which is advisory to the Office of Environmental Information. ECOS is 
coordinating this effort through the Information Management Workgroup, 
a part of the ECOS Strategic Planning committee and through the 
committee structure established within ECOS. In addition to these 
efforts, the joint State/EPA Data Management Workgroup has 
representatives from EPA programs who are actively participating in 
these discussions.
                                 ______
                                 
  Response of Brent C. Bradford to Additional Questions from Senator 
                                 Chafee
    Question 1. You note in your testimony that the States are making 
significant accomplishments in environmental data management, but the 
cost is high and continued Federal investment is essential. On average, 
how much of their own resources do the States spend on environmental 
information management?
    Response. States spend, on average, about 1.67 percent (as of 
Fiscal Year 1996) of the total State budget on environment and natural 
resources. This has increased steadily since 1986. Unfortunately, we do 
not yet have any estimates on average State spending on environmental 
information management.
    In Utah, in the past 3 years, we have expended approximately $3.5 
million of State Funds to enhance our data management capabilities and 
make information accessible to EPA and the public. In addition, we have 
utilized a $500,000 EPA one-stop grant to develop a specific project 
related to public accessibility to permitting and compliance 
information, electronic reporting or inventory and water quality 
monitoring data. States such as ours rely heavily on Federal funding to 
accomplish our data management goals.
    Some States have spent significant State funds on information 
management. For example, the Commonwealth of Virginia has spent about 
$12 million over a 2-year period for its Comprehensive Environmental 
Data Systems (CEDS). Other States are making considerable investments, 
as well. On the other hand, many States have not yet made or had the 
capability to make substantial investments. One thing seems certain, 
however. In order to manage better the data that already exists, and to 
be able to maximize its utility to managers, government partners, 
industry and the public, substantial investments will be required 
across the board. While States are stepping up to that need, Federal 
assistance would be valuable considering States generate well over 90 
percent of the data that EPA relies on to tell the nation's 
environmental story.

    Question 2. The lack of adequate data has been cited as an obstacle 
to current environmental efforts. Do you feel that we as a nation are 
investing sufficient resources in data collection? How much do the 
States spend on monitoring programs?
    Response. In many respects, we are data rich but information poor. 
We collect lots of data, but we cannot always make sense of it without 
additional resources for analysis.
    Much of the question related to adequate data must be looked at in 
terms of what information may be needed to determine progress in 
environmental protection. This then relates to goals established for 
that protection and the measures of success associated with those 
goals. In some cases additional information may be necessary, in 
others, it may be more a case of how to appropriately use the 
information we have.
    As we focus environmental management more on environmental results, 
we will have to begin to measure environmental conditions in a way and 
to an extent that is unprecedented. This may require additional or 
different information to be gathered. It certainly will require 
substantial work on the part of both EPA and the States to understand 
and properly utilize the information we collect. An investment in 
development of proper measures and the gathering and interpretation of 
data needed for those measures will be essential if the environment is 
to be protected.
    I do not have figures on State spending on monitoring.
                                 ______
                                 
                                 ______
                                 
                         ENROLLED COPY H.C.R. 3
         RESOLUTION ON THE ADMINISTRATION OF ENVIRONMENTAL LAWS
                          1999 GENERAL SESSION
                             STATE OF UTAH

A CONCURRENT RESOLUTION OF THE LEGISLATURE AND THE GOVERNOR REQUESTING 
        THE ENVIRONMENTAL PROTECTION AGENCY TO REFRAIN FROM OVERFILING 
        ON STATE-NEGOTIATED COMPLIANCE ACTIONS AND TO DEFER TO STATE 
        AND LOCAL PRIORITIES IN TAKING COMPLIANCE ACTION; AND 
        REQUESTING CONGRESS TO INVESTIGATE ENFORCEMENT ACTIVITIES OF 
        THE ENVIRONMENTAL PROTECTION AGENCY AND REQUIRE THE AGENCY TO 
        DEFER TO STATE ENFORCEMENT AND COMPLIANCE ACTIONS WHERE ACTIONS 
        ACHIEVE COMPLIANCE AND ARE PROTECTIVE OF HEALTH AND THE 
        ENVIRONMENT
    Be it resolved by the Legislature of the State of Utah, the 
Governor concurring therein:
    WHEREAS, protection of public health and the environment are among 
the highest priorities of State governments;
    WHEREAS, Congress has provided by statute for the delegation of 
certain Federal program responsibilities to the States;
    WHEREAS, to obtain delegation of Federal environmental programs, a 
State must demonstrate that it has adopted laws, regulations, and 
policies as stringent as Federal laws, regulations, and policies;
    WHEREAS, over the past 25 years, the States have developed and 
demonstrated expertise in operation of Federal environmental programs 
enabling States to obtain and maintain the delegations;
    WHEREAS, the States of Utah, Colorado, Montana, Wyoming, North 
Dakota, and South Dakota constitute an area designated by the 
Environmental Protection Agency (EPA) as Region VIII;
    WHEREAS, the States in Region VIII make compliance with 
environmental laws, rules, and permits the highest priority;
    WHEREAS, the State of Utah has full delegation in all Federal 
environmental programs;
    WHEREAS, the EPA and the States have bilaterally developed over the 
past 25 years policy agreements which reflect roles and which recognize 
that the primary responsibility for enforcement and compliance resides 
with the States, with the EPA taking enforcement action principally 
when the State requests assistance or is unwilling or unable to take 
timely and appropriate enforcement action;
    WHEREAS, inconsistent with these policy agreements, the EPA has 
conducted direct Federal inspections within programs delegated to 
States, has taken direct enforcement actions, has levied fines and 
penalties against regulated entities in cases where the State 
previously took appropriate action consistent with the agreements to 
bring the entities into compliance, and has failed to notify the States 
in advance of their action;
    WHEREAS, the EPA has begun to use its enforcement authority in 
cases where the State had worked with the regulated entity to achieve 
compliance, and the overfiling by the EPA accomplished no further 
protection of the public health or environment but only imposed an 
additional penalty on the regulated entity;
    WHEREAS, the EPA's current enforcement practices and policies and 
the resultant detailed oversight and overfilling of State actions 
substantially weaken the State's ability to take compliance actions and 
resolve environmental issues;
    WHEREAS, the EPA's enforcement practices and policies have had an 
adverse impact on working relationships between the EPA and States;
    WHEREAS, the EPA's reliance on the threat of enforcement action to 
force compliance may not result in environmental protection, but rather 
may result in delay and litigation, cripple incentives for 
technological innovation, and provoke animosity between government, 
industry, and the public; and
    WHEREAS, the Western Governor's Association has adopted 
``Principles for Environmental Protection in the West,'' which 
encourages collaboration not polarization, advocates the replacement of 
command and control with economic incentives and rewarding results, and 
encourages the weighing of costs against benefits in environmental 
decisions:
    NOW, THEREFORE, BE IT RESOLVED that the Legislature of the State of 
Utah, the Governor concurring therein, requests the EPA to refrain from 
overfiling or threatening to overfile on State-negotiated compliance 
actions if the actions achieve compliance with applicable State and 
Federal law and are protective of health and the environment.
    BE IT FURTHER RESOLVED that the Legislature and the Governor 
request that the EPA, in taking enforcement and compliance actions, 
recognize and defer to individual State and local priorities that are 
important for the protection of the environment.
    BE IT FURTHER RESOLVED that the EPA should work with and assist 
States in evaluating the overall effectiveness of State compliance 
programs and not focus on the detail of individual actions.
    BE IT FURTHER RESOLVED that the Legislature and the Governor 
request the Congress of the United States to investigate EPA 
enforcement activities and require the EPA to defer to State 
enforcement and compliance actions in delegated States where the 
actions achieve compliance and are protective of health and the 
environment.
    BE IT FURTHER RESOLVED that copies of this resolution be sent to 
the President of the United States, the President of the U.S. Senate, 
the Speaker of the U.S. House of Representatives, each member of the 
Utah congressional delegation, the Administrator of the U.S. 
Environmental Protection Agency, the Assistant Administrator of the 
U.S. EPA Office of Enforcement and Compliance, the Regional 
Administrator of the U.S. EPA Region VIII, the National Governor's 
Association, the National Council of State Legislators, the Council of 
State Governments, the Western Governor's Association, and the 
Environmental Council of the States.
                               __________
 Statement of Lynn Scarlett, Executive Director, Reason Public Policy 
                               Institute
    Senator Smith and members of the committee, thank you for inviting 
me here today. My name is Lynn Scarlett. I am Executive Director of 
Reason Public Policy Institute, a nonprofit, nonpartisan policy 
research organization located in Los Angeles, California.
Earth Day Legacy
    April 2000 marked the 30th anniversary of Earth Day. After three 
decades of environmental policy initiated since that first Earth Day, 
environmental policy is in a state of transition. The environmental 
model that emerged after the first Earth Day had four characteristics. 
First, the model engendered relatively prescriptive regulations that 
both set goals and required particular technologies and methods to meet 
those goals. Second, the model emphasized process over performance, 
with permits often serving as a proxy measure of performance. Third, 
the old model segregated environmental problems into discrete 
categories air, water, and waste, for example and addressed each 
separately. Finally, the model tended to focus on punishment 
enforcement actions as the central strategy for achieving environmental 
progress. ``Sticks'' rather than ``carrots'' predominated.
    This regulatory strategy produced some successes. Open dumps were 
virtually eliminated. Phosphorous levels, a major indicator of water 
pollution, had fallen 40 percent or more in the Great Lakes by the 
1990's contrasted with pollution levels in the 1970's. In Los Angeles, 
stage one smog alerts declined from more than 120 in 1977 to 13 in 
1995.
    But all is not well. The punitive model often engendered high 
conflict and litigation. The prescriptive emphasis tended to stifle 
innovations in pollution prevention and environmental restoration. 
Segregating problems into distinct categories sometimes resulted in 
unintended consequences shifting of pollutants from one medium to 
another. And, finally, costs to achieve results were higher than might 
have been possible in a context that inspired innovation and wider 
implementation options.
    Moreover, circumstances are changing, giving rise to increasing 
tensions between the regulatory model of the 20th century and the 
complex and dynamic 21st century context.
    First, new kinds of problems are moving center stage. The old model 
focused primarily on ``point'' sources of pollution. By 2000, many 
remaining challenges took the form of ``nonpoint'' pollution from 
agricultural waste, stormwater runoff, and so on.
    Second, a new breed of industry had emerged that reflected the 
environmental values of the broader American culture. By the 1990's, 
industries had begun to move toward ``knowledge-based'' production and 
products and ``closed loop'' production, accelerating the process of 
dematerialization using fewer resources for each good or service 
produced. ``Industrial ecology'' the deliberate incorporation of 
environmental values into product-design and process decisions began to 
flourish. In this context, a survey of large American corporations 
showed that 77 percent cited pollution prevention as an important 
business strategy.
    Architects of environmental policy thus face a new ``problem set.'' 
There is a growing mismatch between permit-focused compliance and the 
reality of complex, often dispersed problems. There are growing 
tensions between prescriptive regulations and the broadening press for 
fast-paced innovation within firms and on farms and ranches. Finally, 
the punitive model has limited scope for inspiring environmental 
excellence a nation of self-motivated environmental stewards.
    Put another way, four recurring challenges confront environmental 
stewards in both the public and private sectors:
      How can policies better ensure environmental innovations?
      How can policies better focus on results and take into 
account simultaneously many interrelated goals and complexity of the 
physical world?
      How can policies better foster private incentives for 
stewardship?
      How might policies better take into account specific, or 
local, knowledge the knowledge of time, place, and circumstance?
New Environmentalism
    In this changing context with its combination of new and old 
challenges, a new environmentalism is emerging. The States and their 
environmental protection agencies, working with the private sector, are 
at the forefront of this ``discovery process.'' Programs and policies 
emerging as part of this new environmentalism have four features. These 
features include: (1) greater flexibility in how firms, farmers, and 
local communities might achieve environmental goals; (2) a focus on 
performance rather than on process; (3) a move toward incentives rather 
than punishment as the strategy of choice; and, (4) a move toward 
place-based decisions where the ``devilish details'' of local 
circumstance become part of the decision process.
    Flexibility. By the 1990's, States were overseeing, implementing, 
and enforcing the majority of all environmental programs. That day-to-
day, hands-on experience made State regulators acutely aware of some of 
the challenges, missed opportunities, and unintended consequences of 
prescriptive and process-focused environmental regulations. Acting upon 
this recognition, State regulators have launched an array of programs 
intended to inject greater flexibility into the way the regulated 
community may achieve desired environmental goals.
    These experiments in flexibility do not imply ``roll back'' quite 
the opposite. Most of these endeavors involve extending the performance 
envelope upward and outward to cover more environmental problems and 
with higher ultimate goals. Some of these endeavors have been initiated 
independently by the States. Others have advanced in tandem with 
Federal programs such as Project XL and the National Environmental 
Performance Partnership system.
    These programs include the development of ``environmental 
performance compacts'' with firms and farmers; facility-wide permitting 
programs that move away from source-by-source permit requirements; and 
industry-wide permits. Some are pilot programs; some have become more 
broad-based initiatives. States with both Democratic and Republican 
legislatures and Governors are moving in this direction.
    Among the trend setters in developing these programs are Wisconsin, 
Oregon, Illinois, Minnesota, Massachusetts, New Jersey, and Florida.
    Wisconsin's Green Tier program establishes a two-tier permit 
option. The first, the Control Tier, applies traditional source-by-
source permits. The second, the Green Tier, allows firms that 
demonstrate high levels of compliance an opportunity to develop a 
``performance compact'' in effect, a single, facility-wide permit. This 
permit establishes a set of performance criteria, potentially on a 
multi-media basis, spelled out in a ``contract'' or ``compact'' between 
the firm and the public. The compact is enforceable in the courts.
    Under its Green Permits program, Oregon's Department of 
Environmental Quality (DEQ) offers two types of permits available to 
facilities that have achieved superior environmental performance a 
Green Environmental Management System (GEMS) Permit and a ``Custom 
Waiver Permit.'' The GEMS permit requires that firms use a formal 
environmental management system through which firms establish and 
maintain environmental goals. The custom waiver allows limited waivers 
of normal permit requirements if a waiver is needed for the facility to 
achieve superior environmental results (for example, through pollution 
prevention).
    Florida is developing a Phosphate Industry permit that establishes 
a single permit for an entire mining operation over its life. The 
permit agreement sets performance standards and identifies 
environmental data the industry must report and make available to the 
public. It will allow reductions in paperwork and process burdens, 
results-based performance, and increased public accountability.
    Massachusetts introduced an Environmental Results Program, which 
establishes performance goals and compliance assistance for selected 
industries on an industry-wide basis. Under the traditional permitting 
program, some 10,000 facilities in the target industries were regulated 
using over 16,000 permits. The Department of Environmental Protection 
spent significant resources issuing permits rather than focusing on 
achievement of environmental results. For example, the department was 
issuing air permits to some 4,400 facilities, of which two-thirds were 
small- and medium-sized companies that accounted for just 5 percent of 
the State's total air emissions. Under the new program, the State 
created industry-wide standards. Participating firms agreed to comply 
with the standards; the State focused on auditing and enforcement. The 
program resulted in a 43 percent reduction in fugitive emissions from 
participating dry cleaners and a 99 percent reduction in silver 
discharges by photoprocessors.
    In the mid-1990's, New Jersey experimented with a facility-wide 
permitting program. Through the program, participating facilities must 
keep emissions below specified performance caps but may achieve those 
goals in whatever ways they deem most effective and efficient. For one 
firm, the old, source-by-source permitting process had generated ten 
binders of paperwork. The new system reduced paperwork to a 1.5-inch 
thick packet. A single permit replaced 80 separate permits and could be 
processed in 90 days rather than 18 months. One firm estimated that it 
reduced 8.5 million pounds of emissions per year because the permit 
allowed them to modernize their facility (without getting new permits 
for each individual process change). Through the modernization, the 
firm eliminated 107 of 350 pieces of equipment.
    Performance. While most State-initiated new environmental programs 
emphasize results (rather than process), several programs have 
particularly focused on developing performance indicators. Among these 
efforts are programs in both Florida and Oregon.
    Florida, for example, has developed a three-pronged set of 
performance measures that move away from simple ``bean-counting'' of 
enforcement actions as the proxy for performance. The first tier of 
measures sets forth direct indicators for environmental and public-
health outcomes. These include indicators of air quality, surface and 
groundwater quality, aquatic and marine-resource protection, public 
health and safety, and public recreational opportunities. The second 
tier evaluates behavioral and cultural measures that go beyond mere 
compliance statistics. While the State measures regulatory compliance, 
it also looks at voluntary adoption of environmental technologies, 
pollution prevention achievements, energy consumption, per capita 
freshwater consumption, and so on. Tier three includes traditional 
enforcement statistics, but they attempt to measure internal agency 
efficiency and effectiveness as well time taken to issue permits, 
resources spent on compliance assistance, research, and monitoring, 
resource management, and land acquisition. Indicators are ranked as 
``good,'' ``watch,'' or ``focus'' areas, allowing State regulators to 
set priorities by focusing on those areas in which resources are most 
needed to solve problems.
    Incentives. The ultimate goal of environmental policy is to foster 
a nation of self-motivated environmental stewards. As States grapple 
with how to inspire firms and farmers to move ``beyond compliance'', 
many have introduced environmental-incentive and compliance-assistance 
programs. Through its Texas Clean Industries 2000 program, for example, 
Texas has attracted over 140 participating firms into pollution-
prevention activities. The firms commit to achieving a 50 percent 
reduction in toxic chemicals over a 2-year period. After one year, the 
program was credited with fostering reductions in hazardous waste by 
43,000 tons; reductions in energy consumption by 11.3 million kilowatt 
hours; and reductions in 317 million gallons of water consumption. Also 
in Texas, the State established a landowner incentive program to 
encourage farmers and ranchers to restore and maintain habitats to 
attract threatened species such as the lesser prairie chicken.
    Mississippi launched a voluntary stream protection program in which 
the Department of Wildlife, Fisheries, and Parks worked jointly with 
farmers, riparian landowners, and individual citizens to reduce water 
pollution, primarily through pollution-prevention efforts. 
Pennsylvania, through its Pollution Prevention Site Assessment grants, 
helps small-business owners identify pollution-prevention and energy-
conservation strategies. Wyoming has an Outreach and Environmental 
Assistance program also designed to help participants meet 
environmental goals. Illinois, through its Clean Break Amnesty program, 
offers compliance assistance to small businesses. In exchange for their 
participation and completion of pollution-reduction efforts, the small 
businesses are exempted from various fees and fines.
    Among the more notable incentive programs are those designed to 
clean up ``brownfield'' (abandoned hazardous waste) sites. A number of 
States, including Michigan, Pennsylvania, Illinois, New York, and many 
others now have voluntary remediation programs. The programs typically 
have several central features. First, they often tailor clean-up 
standards to the proposed use of the property, so standards are based 
on expected exposures to hazards rather than on a single, bright-line 
clean up standard. Second, they often provide some liability protection 
to developers that invest in site clean up to the prescribed levels. 
Liability protection does not extend to future pollution but applies to 
pre-existing conditions only.
    Place-based Decision-making. As experience with environmental 
problems builds, one observation recurs many environmental challenges 
involve location-specific details. A landfill in Florida, with high 
water tables, faces different challenges compared to a landfill in a 
desert. Fast-moving streams involve problems that differ from slow-
moving delta streams. Forests in low, wet latitudes require different 
management practices than forests in high, dry mountains. The 
recognition of location-specific challenges of many environmental 
problems has led many States to experiment with place-based 
decisionmaking. Local settings also have the potential to bring 
together diverse people with varying interests and needs in 
relationship to local resources.
    To some extent, voluntary remediation programs represent a move to 
place-based decisionmaking, because local economic, environmental, and 
social interests are woven together in final clean up decisions. But 
one of the most fertile arenas for place-based decisions has centered 
on watershed management challenges. Numerous States and localities have 
attempted to tailor decisions about watershed management to local 
circumstances and priorities by devolving decisions to those most 
affected by such decisions.
    In Minnesota, for example, the Department of Natural Resources, 
City of St. Paul, University of Minnesota, and the Ramsey-Washington 
Metro Watershed District joined forces to develop a watershed 
management program for the Phalen Chain of Lakes in the Mississippi 
River basin. Since the project's inception, another seven city 
governments and two counties have joined the effort. The project moves 
away from the single-problem focus of the more traditional regulatory 
process, addressing simultaneously water quality, fisheries, wetland 
protection, vegetation and wildlife management, and river corridor 
protection and restoration.
    Minnesota and Idaho have both pioneered effluent-trading schemes 
that improve water quality by involving ``point-source'' and 
``nonpoint'' (for example, chemical runoff from farming practices) 
sources. The Minnesota Pollution Control Agency (MPCA) has capped new 
and existing discharges into the Minnesota River. Because the cap made 
it difficult for firms to modernize or upgrade, the MPCA agreed to work 
with the Coalition for a Clean Minnesota River and one brewing company 
to institute an effluent-trading program. Under the program, the 
brewing company was permitted to discharge effluent from its new 
wastewater treatment plant if it helped reduce other discharge sources 
along the river. The company agreed to offset its emissions by 
investing in programs that helped farmers reduce their chemical runoff 
and other pollution sources.
    On the Upper Clark Fork River basin in Montana, initial disputes 
between environmental activists and farmers over instream flows yielded 
to consensus for a leasing arrangement after a local, collaborative 
decision process was initiated. The lease agreement allowed for 
temporary transfer of pre-1973 water rights rather than the outright 
sale or relinquishment of those rights. The lease allayed fears of 
ranchers that they would lose prior claims to those water rights, while 
still allowing them to be remunerated for conserving water and leasing 
the ``saved'' water for instream flow maintenance. Increased instream 
flows, in turn, helped to maintain wildlife habitats.
Challenges and Opportunities
    State environmental innovations toward flexibility, performance 
focus, incentives, and place-based decisionmaking invite substantial 
new opportunities to improve environmental performance. In general, 
these programs allow for a more holistic approach to environmental 
problem-solving that recognizes the interconnectedness of many of these 
problems. They also nurture private-sector innovation and private 
stewardship, creating a context in which firms and communities are 
better able to set priorities, target resources to critical problems, 
and craft more cost-effective approaches to reducing these problems.
    But these efforts face both political and implementation 
challenges, including constraints imposed by the existing Federal 
regulatory context. For example, an April 2000 survey by the 
Environmental Council of the States, an association of State 
environmental regulators, ranked problems with EPA's existing policies, 
procedures, and rules as the most significant barrier to their efforts 
at innovation.
    In general, challenges cluster into three categories. First are 
challenges posed by fitting new regulatory structures within the old 
regulatory context. These include uncertainties about allocation of 
enforcement responsibilities between Federal and State agencies. Lack 
of clarity in this regard has given rise to concerns about potential 
overfiling in enforcement cases by Federal regulators.
    Another central challenge tied to regulatory structures is how to 
ensure that permits or agreements initiated under the new programs, 
which often deliberately avoid issuance of traditional source-by-source 
permits, will supplant the source-by-source permits without: (a) 
triggering an enforcement action, or (b) requiring a negotiation 
process with Federal regulators on each and every source-by-source 
permit that is intended to be avoided through the flexible-permitting, 
or multi-media permitting process. Some streamlined Federal mechanism 
to allow the new permits to supersede the old may be warranted. 
Currently, through its Project XL and other programs, U.S. EPA has 
attempted to create conditions for this blending of the old and the new 
to occur. However, these processes remain unevenly implemented; 
procedures and qualifying conditions remain unpredictable.
    States also face difficulties in meshing new data-reporting 
mechanisms that emerge from more holistic and performance-focused 
programs with the data-reporting requirements of the old regulatory 
model.
    The second set of challenges are technical.
    For example, as States move toward effluent trading, for example, 
establishing equivalencies among pollutants subject to trades is not 
straightforward. Allocation of initial baselines or emission credits as 
part of tradable credit schemes is also difficult and often 
contentious. At least one proposed State air-pollution trading program 
failed because of difficulties over these allocation questions.
    Development of appropriate performance indicators by States also 
poses technical and conceptual challenges. Environmental problems are 
complex and numerous. Reducing indicators to a workable set and 
determining appropriate measures for different problems involves data 
aggregation and simplification. Regulators face a choice between what 
might be called ``richness'' detailed, highly tailored indicators and 
``reach'' indicators that are sufficiently generic so that they can be 
reduced to a manageable and broad set.
    The third set of challenges relate to stakeholder interests and 
concerns.
    In developing facility-wide compacts with firms or in establishing 
place-based watershed management programs, a key question is which 
``stakeholders'' should be at the decision table. These issues likely 
should not be settled at the Federal level but rather on an individual 
basis by States as they determine what decisionmaking forums work well 
in different circumstances.
    Some stakeholders have also raised questions about ``fairness'' as 
well as about the certainty of outcomes that might emerge in programs 
with multi-media permits, compacts, or voluntary incentives. Air-permit 
trading, for example, may shift pollution to certain ``hotspots,'' 
thereby unevenly benefiting different populations.
Conclusion
    George Meyer, Secretary of the Wisconsin Department of Natural 
Resources, eloquently summarized the new environmental challenge to 
lawmakers:
    It is time for public policymakers to unleash America's potential 
to solve its remaining and emerging environmental problems. . . . With 
Congressional direction, and adequate infrastructure, the States can 
create a learning system, with useful knowledge applied outward to each 
other and upward to Washington, their co-implementation partner.
    New environmentalism involves a discovery process a search not only 
for new technologies but also for new institutional forms that inspire 
environmental stewardship and yield continuing environmental progress. 
There is no reason to think that, in our first attempts at constructing 
rules and decision processes to address environmental issues, we 
achieved institutional perfection. Current State innovations are 
pointing to new institutional forms that have potential to reduce 
conflict, enhance environmental performance, and more efficiently 
deliver environmental benefits.
                                 ______
                                 
 Responses by Lynn Scarlett to Additional Questions from Senator Smith
    Question 1. What legislative changes does the Institute think are 
needed to get to a new environmentalism approach?

    Question 2. What changes does the Institute propose to the Federal 
role in the new environmentalism?
    Response. The new environmentalism, as embodied in State 
initiatives toward flexibility, incentives, and a performance focus, 
shows substantial promise to deliver environmental performance more 
holistically and efficiently. While some innovations are occurring, 
without changes in Federal law these innovations will likely remain 
marginal ``special'' programs. Fostering these State initiatives does 
not require an overhaul of the major environmental statutes. It does, 
however, require what Debra Knopmann of the Progressive Policy 
Institute has referred to as ``transitional legal space.''
    Crafting that transitional space requires a delicate balance 
between, on the one hand, asserting congressional commitment and 
authorization for flexibility and, on the other hand, resisting 
prescription and micro-management of the innovation process. Moreover, 
expression of congressional commitment to innovation may be inadequate. 
The new environmentalism places a premium on performance measurement, 
which may require additional resources allocated toward monitoring and 
helping States invest in developing indicators. Finally, a Federal 
commitment to a new environmentalism will require a more systematic way 
of tying priorities and resource allocation to results as measured 
through various indicators--a challenge States like Florida, Oregon, 
and New Hampshire have begun to address independently.
Options
    Congress has a number of options that could facilitate the move 
toward a new environmentalism more focused on performance, incentives, 
and innovation made possible through greater flexibility for States and 
firms.
    Congress could institute changes through:

      the reauthorization of existing statutes, with provisions 
for greater flexibility in reaching environmental goals (it has been 
over decade since the last CAA debate, 13 years since the CWA received 
a full review, and 14 years since Superfund was overhauled).
      development of an EPA authorizing statute that would 
clarify Federal, State, and regional agency roles and specifically 
indicate congressional intent to foster State environmental 
innovations, perhaps by endorsing and clarifying the NEPPS mechanism to 
provide State flexibility. One mechanism could be through a tiered 
approach in which States would hold all permitting and enforcement 
authority for fully delegated programs, with Federal monitoring of 
real-world results. If results fell short of required levels as agreed 
to in the delegation (or NEPPS-style) agreement, EPA action would be 
triggered. The nature of that action would need to be clarified. Those 
programs that were not delegated would be implemented by U.S. EPA or 
its regions. Through periodic reauthorization of the EPA authorizing 
statute, additional changes could be made to individual statutes to 
remove specific barriers to integrated, flexible approaches to 
environmental management.
      development of an environmental indicators statute that 
allocated resources to States to support the development by States of 
their performance indicators. Such a statute could also require 
development by EPA of threshold measurement criteria to be used by the 
States to allow some consistency and comparability among measures 
(particularly for water and air quality). The statute might link to the 
GPRA process so that performance indicators are linked to resource 
allocation decisions and agency accountability (e.g., modeled after 
Australia or the U.S. Agricultural Extension Service, which has used 
analysis of performance measures to enhance outcomes).

    Whatever congressional mechanism(s) are selected, Congress should 
resist prescribing a particular ``flexibility and incentive'' 
environmental management regime. As experience with Project XL, the 
various State alternative permitting programs, and other environmental 
management innovations have demonstrated, different permitting and 
decision models may be applicable in different circumstances. Moreover, 
decisions regarding which firms might participate, what benefits they 
receive for participation in incentive-based or flexible programs, and 
so on, should be left to States to allow for maximum experimentation 
with different environmental management models.

    Question 3. Is it necessary for the EPA, in order to ensure that 
the States protect the environment, to second-guess the States, or to 
be able to second-guess the States, regarding every exercise of a 
State's enforcement discretion, every permitting decision made by the 
States, and the like?
    Response. Clearer lines of authority and responsibility between the 
States and U.S. EPA are necessary to ensure less duplication of effort 
and greater certainty by States and the regulated community regarding 
the legal status of State permits or other performance agreements. The 
States now account for over 80 percent of enforcement actions. They 
have demonstrated an ability and commitment to effectively enforce 
environmental statutes. One possible arrangement of roles and 
responsibilities would be for U.S. EPA to maintain permitting and 
enforcement programs for nondelegated programs and for States that 
choose not to have authority delegated to them. For those States that 
have signed NEPPS agreements or have otherwise been delegated 
implementation authority for specific programs, the States should have 
sole permitting and enforcement responsibility. EPA's role, in these 
instances, should be to monitor the State's performance, ensuring that 
it is meeting its obligations. If it is not doing so, EPA can take 
action to challenge the delegation agreement. In other words, the 
``backstop'' role of EPA should not be to overfile on enforcement 
matters, nor to require its own second set of permits. Rather, its 
backstop role should be to monitor State performance, with 
accountability assured through review of delegation or other 
partnership agreements with the States.

    Question 4. Are the States able and willing to exercise reasonable, 
responsible, and vigorous enforcement and permitting discretion if the 
States are no longer subject to second-guessing in every case? If so, 
why is this true today even if it was not true in past years? Support 
your explanation with examples showing that States have reasonably, 
responsibly, and vigorously enforced Federal environmental laws, State 
and local environmental laws over which EPA exercises no supervisory 
responsibility.
    Response. States have become the center of environmental activity.

      By 2000 70 percent of major programs that could be 
delegated had been delegated
      States undertake on average between 75-80 percent of all 
enforcement actions and 97 percent all enforcement inspections.
      State spending on environmental and natural resource 
protection has grown from $5.6 billion in 1986 to $12.5 billion in 1999
      In 1986, the Federal Government provided 58 percent of 
spending dollars for States; by 1996, the Federal Government provided 
20 percent ($2.5 billion) of State environmental spending dollars. From 
1986 to 1996, State spending increased 140 percent.
      States conduct many other nondelegated programs on their 
own, including innovations toward more flexible, results-focused 
programs. States passed over 700 environmental laws in 1997 alone, at 
least half deal with nondelegated environmental programs (pollution 
prevention, waste management, etc.)
      80 percent of States have at least one clean air standard 
stricter than Federal minimums.

    These data suggest that States have invested increasingly 
significant resources in environmental protection. The charge that 
States are likely to ``race to the bottom'' appears unfounded given 
that 80 percent of States have at least one air quality standard that 
is stricter than Federal standards and have initiated programs for many 
environmental problems not addressed by Federal law, and many States 
have environmental protection programs that address issues unregulated 
by the Federal Government.
    The vigorous commitment to environmental quality by States is 
particularly evident in the lead role they have taken in solid waste 
management and resource recovery. While the Federal Government does 
regulate landfill safety, it does not regulate resource recovery. 
Nonetheless, 48 of the 50 States have independently developed recycling 
and waste diversion mandates or goals, with no Federal oversight or 
requirement that the States implement such programs. These programs 
have been responsible for increasing the Up. recycling rate from below 
l O percent of municipal waste in the early 1980's to nearly 30 percent 
by 2000.
    Also notable are State efforts to clean up hazardous waste sites. 
For example, through their brownfields clean-up programs, Pennsylvania 
and Illinois have each cleaned up several hundred sites within a few 
years of having implemented their programs. By contrast, a recent GAO 
report notes that after nearly 20 years and $14 billion spent, clean up 
at Federal Superfund (hazardous waste) sites had not been completed at 
over 40 percent of National Priority List sites. Numerous other States 
have now emulated the models set forth by Illinois and Pennsylvania.
    A number of States have pollution-prevention programs not tied to 
any Federal program. Through its pollution-prevention program, 
California worked with the petroleum industry to achieve 66,000 tons of 
hazardous waste reductions in one year--a 30 percent reduction. 
Examples of State programs implemented without Federal involvement are 
too numerous to catalogue here. For additional examples, please refer 
to Race to the Top:
    State Environmental Innovations, by Alexander Volokh, Lynn 
Scarlett, and Scott Bush (Los Angeles. RPPI, 1998).

    Question 5. Would States be able to protect the public health and 
the environment if the EPA, instead of having the ability to second-
guess every decision made by a State, were limited to reviewing on a 5-
year, 7-year, or 10-year, basis, the overall performance of the State, 
with the EPA having the ability to withdraw a State's delegated 
authority if the State could not prove that it had made progress toward 
a better environment during that period?
    Response. Most States have both the inclination and the skills to 
manage environmental programs to maintain public health and eco-system 
protection (and restoration). Some States, for example, California, 
actually have greater capabilities than the U.S. EPA in areas such as 
air quality protection. Only a handful of States have chosen not to 
invest significant resources in environmental protection, some have 
chosen to defer to EPA to implement and enforce programs.
    A tiered approach to environmental protection would ensure that 
those States with the commitment and capabilities to manage 
environmental programs are able to do so, while those without this 
commitment or resources could defer to the Federal Government. 
Specifically, an EPA authorizing statute could clarify Federal, State, 
and regional agency roles and specifically indicate congressional 
intent to foster State environmental innovations, perhaps by endorsing 
and clarifying the NEPPS mechanism to provide State flexibility. One 
mechanism could be through a tiered approach in which States would hold 
all permitting and enforcement authority for fully delegated programs, 
with Federal monitoring of real-world results. If results fell short of 
required levels as agreed to in the delegation (or NEPPS-style) 
agreement, EPA action would be triggered. The nature of that action 
would need to be clarif ed. Those programs that were not delegated 
would be implemented by U.S. EPA or its regions. Initially, the 
periodic review of State delegated programs should probably occur at 
intervals of no more than 5 years. Depending upon State performance, 
that interval could lengthen over time. Another option would be to have 
an initial ``probation'' period after program delegation, with EPA 
review occurring after a 2-year interval. If the State is successfully 
implementing and enforcing the program, subsequent reviews would extend 
to intervals office years, with the focus on review of actual outcomes 
and performance indicators rather than on ``bean-counting'' of 
enforcement actions and review of permitting activity.
    Any congressional effort to clarify State and Federal roles and to 
support State innovations should also be accompanied by development of 
an environmental indicators initiative that would allocate resources to 
States to support the development by States of their performance 
indicators. Such an initiative could also require development by EPA of 
threshold measurement criteria to be used by the States to allow some 
consistency and comparability among measures (particularly for water 
and air quality). The statute might link to the GPRA process so that 
performance indicators are linked to resource allocation decisions and 
agency accountability (e.g. modeled after Australia or the U.S. 
Agricultural Extension Service, which has used analysis of performance 
measures to enhance outcomes).
    Whatever congressional mechanism(s) are selected, Congress should 
resist prescribing a particular ``flexibility and incentive'' 
environmental management regime. As experience with Project XL, the 
various State alternative permitting programs, and other environmental 
management innovations have demonstrated, different permitting and 
decision models may be applicable in different circumstances. Moreover, 
decisions regarding which f rms might participate, what benef ts they 
receive for participation in incentive-based or flexible programs, and 
so on, should be left to States to allow for maximum experimentation 
with different environmental management models.
                                 ______
                                 
               [From the Reason Public Policy Institute]
 Moving to a New Environmentalism Summary: Barriers and Next Steps for 
                                Congress
                           (By Lynn Scarlett)
    What, if any changes are needed to encourage innovation and improve 
environmental performance? How can these changes be orchestrated? What 
are the respective roles of the legislature through policy 
modifications and the executive branch through executive orders and 
agency policy changes?
Background
    Modern environmental regulations developed over the past 30 years 
have yielded some successes. But persistent challenges remain, and new 
circumstances require different policy directions. Specifically, 
environmental laws and regulations have generated high conflict, 
stifled innovation in some instances, and least-cost options have not 
generally been pursued. In addition, lines of responsibility have been 
unclear among the U.S. Environmental Protection Agency (EPA), its 
regional offices, the States, and regulated entities. Lack of clarity 
has resulted in some duplication of effort.
    Moreover, the traditional regulatory model is sometimes ill suited 
to new problems, such as those created by dispersed (nonpoint) 
pollution, and the traditional model limits the possibilities for 
holistic environmental management by firms.
    Finally, the traditional regulatory approach, with its focus on 
permitting of pollution sources and hazards by medium (air, water, 
waste), inhibits opportunities for integrated environmental management. 
The regulatory focus on prescribing technological solutions and tying 
permits to those technologies has also turned attention away from 
development of clear performance indicators and priority setting based 
on measuring results.
State Environmental Policy Innovations
            Scope of State Initiatives
    As embodied in the Clean Air Act (CAA), Clean Water Act (CWA), 
Resource Conservation and Recovery Act (RCRA), Safe Drinking Water Act 
(SDWA), and other Federal statutes, the traditional regulatory approach 
offers some latitude for program variations. Through several special 
Federal programs and through programs operated by States under 
delegated authority, experiments with a new environmental model are 
surfacing.
    States have, in fact, become the center of environmental activity:

      By 2000 70 percent of major programs that could be 
delegated had been delegated
      States undertake on average between 75-80 percent of all 
enforcement actions and 97 percent all enforcement inspections.
      State spending on environmental and natural resource 
protection has grown from $5.6 billion in 1986 to $12.5 billion in 1999
      In 1986, the Federal Government provided 58 percent of 
spending dollars for States; by 1996, the Federal Government provided 
20 percent ($2.5 billion) of State environmental spending dollars. From 
1986 to 1996, State spending increased 140 percent.
      States conduct many other nondelegated programs on their 
own, including innovations toward more flexible, results-focused 
programs.
      States passed over 700 environmental laws in 1997 alone; 
at least half deal with nondelegated environmental programs (pollution 
prevention, waste management, etc.)
      80 percent of States have at least one clean air standard 
stricter than Federal minimums.
A New Environmentalism
    Of particular note among these State activities is the 
proliferation of experiments with a new environmental model that 
emphasizes flexibility, incentives, and results. An informal survey of 
regulated industries indicates interest in the following State program 
features:

      Permitting flexibility (e.g., Wisconsin)
      Fewer inspections
      Fewer or consolidated reporting (e.g., New Jersey and 
Colorado)
      Longer permit duration
      Credits for reductions in emissions or discharges 
(Colorado)
      Acceleration of review and processing of permits/
equipment changes (Oregon)
      Single agency point of contact for permitting (New 
Jersey, Oklahoma) Plant-wide applicability limit permit (Michigan)
      Expedited permitting (New Jersey, Oregon)

Deterrents to Participation: Private-sector Perspective
    Deterrents to participation in some of these programs limit the 
breadth and scope of their implementation. These deterrents fall into 
two categories: 1) persistence of some highly prescriptive 
implementation details in some cases; and 2) limited benefits or extra 
costs associated with Federal constraints or a lack of clarity in the 
respective roles of State, regional, and Federal agencies.
    Prescriptive deterrents include provisions in which States have 
linked program flexibility or incentives to requirements that firms 
employ specific environmental management systems such as ISO 14001, 
that ISO 14001 systems be externally certified, that firms recycle 100 
percent of onsite residuals, or that they conduct mandatory audits.
    Deterrents also result from unclear Federal, State, or regional 
roles. On the one hand, lack of clarity sometimes constrains States to 
offer only minimal or public relations benefits since they do not 
perceive that they have full authority to supplant source-based Federal 
permits with flexible alternatives. A corollary to this limitation is 
that details regarding the scope of flexibility offered are sometimes 
lacking. On the other hand, lack of clarity also sometimes induces 
increased costs and workload, since participating firms must navigate 
two, or even three, regulatory systems (State, regional, and Federal) 
to get approvals for alternative permits. To avoid this challenge, some 
States have limited permit flexibility to State permits only, thereby 
limiting the overall potential of the new programs.
Deterrents to Innovation: State Perspective
    The Environmental Council of States undertook an informal survey of 
its member State environmental agencies to explore what they perceived 
as key barriers to State innovation toward improved environmental 
performance. Respondents ranked the following as notable barriers:

      EPA headquarters doesn't adequately consider States' 
opinions or recommendations in establishing priorities, procedures, and 
rules
      Resource limitations, including funding and expertise
      Congress doesn't adequately consider States and passes 
laws that limit innovation
      National environmental groups are a deterrent by charging 
States with backsliding if program changes are proposed
      The innovation process is a barrier--it is time 
consuming, resource intensive, and often yields too limited benefits
    State regulators consider their ability to innovate most limited by 
air regulations, followed by water and waste regulations.
Federal Innovations
            Lessons of Project XL
    A brief survey of 45 projects initiated under EPA's XL program 
showed that one-fourth of participants sought exemptions or changes in 
RCRA regulations, including reclassification of a chemical in order to 
treat hazardous materials more efficiently onsite. A handful of XL 
projects sought changes relating to the Clean Water Act and Clean Air 
Act. One each sought changes relating to Superfund provisions and to 
the Toxic Substances Control Act.
    Types of changes sought were highly situation specific. However, 
some common themes emerge. For example, several firms sought pre-
approval of modifications to their manufacturing processes; a number of 
firms sought multimedia permits. Both changes help firms innovate and 
maintain their competitiveness in a context of rapidly changing 
technology. Other desired changes sought through XL projects included a 
transition to incentive-based monitoring; continuous monitoring rather 
than permit-required ``grab'' sampling; simplified monitoring, online 
permit applications and renewals, and real-time compliance information.
    In each XL project, participants sought to reduce permit 
acquisition, monitoring, and reporting costs as a prerequisite to 
improving their overall environmental and economic performance.
Lessons of the National Environmental Performance Partnership (NEPPS)
    The NEPPS program was unveiled in May 1995 to provide a framework 
for improving the effectiveness of environmental programs. It emerged 
out of concerns about inconsistent oversight by EPA, micro-management 
of State actions by EPA, insufficient technical support, and inadequate 
consultation of State regulators by EPA. Under the program, States sign 
agreements with EPA designed to give to the States greater flexibility 
while setting forth core performance measures. Though NEPPS agreements 
have extended beyond the initial six pilot States to include 45 States 
by the end of 1998, the impact of these agreements appears to be 
limited. A review of NEPPS programs prepared for the National Academy 
of Public Administration concluded that their effectiveness in reducing 
Federal micro-management of States has been limited. Nonetheless, the 
NEPPS partnership agreements in some States (for example, New 
Hampshire) have been credited with improving priority setting and 
enhancing State flexibility.
Key Needs
    The new environmentalism, as embodied in State initiatives toward 
flexibility, incentives, and a performance focus, shows substantial 
promise to deliver environmental performance more holistically and 
efficiently. While some innovations are occurring, without changes in 
Federal law these innovations will likely remain marginal ``special'' 
programs. Fostering these State initiatives does not require an 
overhaul of the major environmental statutes. It does, however, require 
what Debra Knopmann of the Progressive Policy Institute has referred to 
as ``transitional legal space.''
    Crafting that transitional space requires a delicate balance 
between, on the one hand, asserting congressional commitment and 
authorization for flexibility and, on the other hand, resisting 
prescription and micro-management of the innovation process. Moreover, 
expression of congressional commitment to innovation may be inadequate. 
The new environmentalism places a premium on performance measurement, 
which may require additional resources allocated toward monitoring and 
helping States invest in developing indicators. Finally, a Federal 
commitment to a new environmentalism will require a more systematic way 
of tying priorities and resource allocation to results as measured 
through various indicators--a challenge States like Florida, Oregon, 
and New Hampshire have begun to address independently.
Options
    Congress has a number of options that could facilitate the move 
toward a new environmentalism more focused on performance, incentives, 
and innovation made possible through greater flexibility for States and 
firms.
    Congress could institute changes through:

      the reauthorization of existing statutes, with provisions 
for greater flexibility reaching environmental goals (it has been over 
decade since the last CAA debate, 13 years since the CWA received a 
full review, and 14 years since Superfund was overhauled).
      the creation of an Advisory Panel on Intergovernmental 
Liaisons, established by statute as an advisory body to EPA to function 
like the Science Advisory Panel, but with a focus on institutional 
interaction.
      development of an EPA authorizing statute that would 
clarify Federal, State, and regional agency roles and specifically 
indicate congressional intent to foster State environmental 
innovations, perhaps by endorsing and clarifying the NEPPS mechanism to 
provide State flexibility. One mechanism could be through a tiered 
approach in which States would hold all permitting and enforcement 
authority for fully delegated programs, with Federal monitoring of 
real-world results. If results fell short of required levels as agreed 
to in the delegation (or NEPPS-style) agreement, EPA action would be 
triggered. The nature of that action would need to be clarified. Those 
programs that were not delegated would be implemented by U.S. EPA or 
its regions. Through periodic reauthorization of the EPA authorizing 
statute, additional changes could be made to individual statutes to 
remove specific barriers to integrated, flexible approaches to 
environmental management.
      development of an environmental indicators statute that 
allocated resources to States to support the development by States of 
their performance indicators. Such a statute could also require 
development by EPA of threshold measurement criteria to be used by the 
States to allow some consistency and comparability among measures 
(particularly for water and air quality). The statute might link to the 
GPRA process so that performance indicators are linked to resource 
allocation decisions and agency accountability (e.g., modeled after 
Australia or the U.S. Agricultural Extension Service, which has used 
analysis of performance measures to enhance outcomes).

    Whatever congressional mechanism(s) are selected, Congress should 
resist prescribing a particular ``flexibility and incentive'' 
environmental management regime. As experience with Project XL, the 
various State alternative permitting programs, and other environmental 
management innovations have demonstrated, different permitting and 
decision models may be applicable in different circumstances. Moreover, 
decisions regarding which firms might participate, what benefits they 
receive for participation in incentive-based or flexible programs, and 
so on, should be left to States to allow for maximum experimentation 
with different environmental management models.
                               __________
Statement of Erik D. Olson, Senior Attorney, Natural Resources Defense 
                                Council
                            I. Introduction
    I am Erik D. Olson, a Senior Attorney at the Natural Resources 
Defense Council (NRDC), a national, non-profit public interest 
organization with over 400,000 members dedicated to protecting public 
health and the environment. We appreciate the opportunity to testify on 
the important issue of State-Federal relations in environmental 
programs, often referred to as ``environmental federalism.''
    The appropriate State and Federal roles in environmental programs 
have been debated for decades, beginning well before President Nixon 
created the U.S. Environmental Protection Agency through a 
Reorganization Plan, shortly after the first Earth Day in April 1970, 
almost exactly 30 years ago. From the 1940's on, the Federal 
Government's role in the environmental field traditionally was limited 
to conducting research, assisting State authorities, and occasionally 
issuing generally voluntary, hortatory Federal guidelines such as 
drinking water guidelines. States usually were free to adopt or reject 
the Federal standards.
    It became increasingly clear by 1970 that serious air and water 
pollution problems and other environmental crises had reached a 
critical point. Infamous problems such as the Cuyahoga River catching 
on fire, Lake Erie essentially dying, air pollution in Donora, 
Pennsylvania and elsewhere killing local residents, and a series of 
drinking water contamination problems and waterborne disease outbreaks 
made it clear that the Federal Government had to step into the breach. 
States were unable or unwilling to address these and other problems.
    The enactment of the major Federal environmental statutes by 
Congress, often lead by this committee, have been a widely touted 
triumph, immensely successful at cleaning up the environment, popular 
with the American public, and heralded internationally as landmark 
events in the history of environmental protection. These statutes, such 
as the Clean Air Act, Clean Water Act, and Safe Drinking Water Act, 
generally adopted the ``cooperative federalism'' model. The Federal 
Government sets national standards, while States use their special 
knowledge of local issues to implement and apply those standards, with 
some remaining Federal oversight and enforcement presence. States are 
expected to live up to national environmental and health standards, but 
generally are free to go beyond Federal minimum requirements.
              II. The Importance of Cooperative Federalism
    The concept of environmental federalism seeks to take advantage of 
the best the State and Federal Governments have to offer. This approach 
recognizes that States often have greater localized knowledge of 
environmental conditions and problems than the Federal Government may 
have, and recognizes that the Federal Government needs ``the 
substantial resources, expertise, information, and political support of 
State and local officials'' to make the programs work. It also 
acknowledges that State officials often are more knowledgeable about 
the local players and political landscape than are Federal officials. 
Moreover, cooperative federalism seeks to capture the benefits of the 
fact that the States are the ``laboratories of democracy,'' because 
``States are a natural laboratory for testing new ideas.''
    However, cooperative federalism also acknowledges the realities 
that States can be more susceptible to local political influences and 
political ``brownmail'' from powerful local industries that threaten to 
withdraw from the State or to produce political repercussions if State 
officials crack down on pollution. This approach also seeks to 
recognize that States may not be able to muster the political 
wherewithal to address pollution problems that primarily affect 
downstream States, and acknowledges that States often have fewer 
scientific and technical resources than the Federal Government.
III. Rationale for a Significant Federal Presence in Environmental Laws
    In these days when the Federal Government's role in environmental 
programs has come under increasing attack from some State officials, it 
is worth briefly reviewing the rationale relied upon by this committee, 
academic commentators, and many other observers for supporting a 
significant Federal presence under our environmental statutes. Among 
the most critical factors are:
      State Inaction in the Face of Significant Environmental 
and Health Problems. Before the adoption of the Clean Air Act, Clean 
Water Act, Safe Drinking Water Act, Resource Conservation and Recovery 
Act, and other major Federal statutes, many States simply failed to 
address critical and obvious environmental and health problems. For 
example, although the U.S. Public Health Service had issued drinking 
water standards since the 1940's, and although 130 waterborne disease 
outbreaks had been documented in the previous decade, as of 1971, only 
14 States had adopted these standards, and enforcement of the standards 
was ``poor.'' Similar State inaction was documented in the air, surface 
water, hazardous waste, and many other areas.
      Need for a ``Level Playing Field'' Nationally for 
Industry to Avoid a ``Race to the Bottom.'' In the words of a leading 
treatise by academic legal commentators, ``it is widely accepted that 
Federal standards help prevent States from succumbing to local economic 
pressures.'' Without minimum Federal standards, there is immense 
pressure on States competing for industries and jobs to adopt weak 
environmental standards and enforcement policies even though over the 
long run, such weak policies are economically destructive. The ``race 
to the bottom'' is especially likely where the environmental or health 
problems are not immediately readily visible or traceable to particular 
sources of pollution. This makes it difficult for the public to 
recognize the problem even if objectively it is extremely serious. A 
legal brief recently filed by five States makes this point surprisingly 
bluntly. The States noted (in opposing a court decision that will 
undermine EPA's ability to enforce where a State later comes in and 
settles with the same polluter), that ``by making it harder for EPA to 
maintain a level playing field nationally, the panel's decision opens 
up States to the risks that they will suffer the adverse effects of 
pollution generated in neighboring States and that regulated entities 
in other States will gain an unfair competitive advantage over another 
State's law-abiding competitors.''
      The Growing Use of State ``No More Stringent Than Federal 
Standards'' Clauses Demonstrates the ``Race to the Bottom'' is at Work 
Today. By 1995, 19 States had adopted at least one statute (and 
sometimes more than one law), prohibiting the State from adopting 
environmental rules that are more stringent than Federal requirements. 
Some of these ``no more stringent than'' clauses apply to all State 
environmental programs; others apply only to certain State laws such as 
a State clean air law. The increasing use of such clauses lead a 
leading commentator to note:
    the trend among State legislatures to embrace Federal minimum 
standards as State maximum standards, viewed in the context of the 
States' historical failure to produce socially desirable environmental 
improvements through State legislation and regulation, provides some 
evidence that the concern about a ``race to the bottom'' in the absence 
of Federal minimum standards remains valid.
      Right to Baseline Minimum Public Health and Environmental 
Protections for All Americans. When Americans travel across the 
country, they expect to be able to breathe the air, drink the water, 
swim, fish, and enjoy the environment wherever they go. They do not 
expect that their family's health, or that of their fellow citizens, 
will be put at risk, depending upon the State in which they are 
traveling or living. A healthy environment is the foundation of a long-
term healthy economy and high quality of life for the U.S. Only with 
minimum Federal standards can we be assured that all Americans, and our 
national environmental heritage are protected. As one academician has 
put it, the Nation ``decided to make a moral and arguably 
constitutional commitment to afford all citizens the same basic level 
of protection.''
      Only the Federal Government Has the Scientific and 
Technical Resources and Expertise, and the Economies of Scale, to Adopt 
Many Standards. With the increasing complexity of the scientific and 
technical issues that are raised by standards for protecting public 
health and the environment, most States simply do not have the 
resources or scientific expertise to adopt standards that are 
scientifically sound and technically well grounded. This is 
particularly the case as we move toward more specific, highly 
technically sophisticated standards that must take into account the 
technical capabilities of major industries. The more tailored a 
standard is to a particular industry (as opposed to the often-
criticized ``cookie cutter'' approach), the more scientific and 
technical expertise is required to promulgate the standard. Local and 
State authorities often lack the resources and political capability to 
face down major multinational companies that have the financial, 
technical, and political resources to bury them in studies, litigation, 
political challenges, and other diversions that may make it virtually 
impossible for the State to act. While in some areas a handful of 
States have developed significant scientific and technical expertise, 
because of ``the substantial economies of scale in having environmental 
standards adopted on a national scale,'' often only the Federal 
Government has the resources to adopt complex standards.
      The Need for a Federal ``Gorilla in the Closet.'' State 
officials, while usually not saying so in public, often admit privately 
that without mandatory Federal requirements, it can be difficult for 
them to muster the resources and political support to adopt important 
environmental and health standards, or to take enforcement actions. 
They sometimes need to point to the Federal ``gorilla in the closet'' 
to take actions that they feel are necessary, but politically 
difficult, to take.
      The Need to Address Interstate and Trans-boundary 
Pollution Problems. States may have little incentive to impose 
restrictions on pollution by powerful local industries (or others for 
that matter) when the ill-effects of that pollution are most heavily 
felt in other States. Thus, the ``river of smog'' that travels from the 
Midwest to the Northeastern U.S., the acid rain problem exacerbated by 
tall stacks that put pollutants high into the atmosphere to come down 
and contaminate communities hundreds of miles away, and the pollution 
of interstate rivers, estuaries, and the Great Lakes, all are 
illustrations of the problem. The State of New Hampshire and several 
other States, for example, have filed petitions to seek redress for 
such interstate air pollution problems.
      National or International Industries Benefit from 
National Standards. Major corporations actually benefit from the 
relative predictability and centralized authority that comes with a 
Federal environmental legal framework even though the States are free 
to adopt more stringent State rules that tailor these minimum Federal 
requirements to local needs.
      Ironically, Federal Minimum Standards Have Been Shown to 
Spur State Creativity and Experimentation. Because Federal 
environmental laws have stimulated States to establish their own 
agencies, staffs, and statutes to carry out environmental programs, 
experts have found that rather than stifling State creativity, adoption 
of Federal environmental law ``paradoxically gives States greater 
opportunity and incentives to undertake policy experimentation.''
     IV. Experience with Environmental Federalism: How It's Working
    Most States have responded to the challenge in Federal 
environmental statutes by adopting State programs that EPA has approved 
for delegation. Thus, according to a recent law review summary, 
delegations include:
      Clean Air Act: 42 States
      Clean Water Act: 34 States
      Hazardous Waste (RCRA): 37 States
      Drinking Water: 39 States (49 States have at least 
partial primacy for public water systems)
      Pesticides (FIFRA): 39 States.
    Some of these State programs can be pointed to as models 
demonstrating that the ``laboratory of democracy'' truly is at work. 
Indeed, some States have put enormous effort into innovative laws and 
programs that build upon or take a different tack from Federal 
requirements. In many cases, these innovative State programs later are 
adopted by other States, or by the Federal Government.
    Recent examples include California's and New York's drinking water 
right to know requirements, recently adopted into Federal law under the 
1996 Safe Drinking Water Act Amendments. In other States, including 
Wisconsin, Iowa, and New Jersey, State authorities have adopted 
innovative programs to protect groundwater from contamination.
    However, these innovative State laws and EPA's delegation of 
programs to States does not tell the whole story. Programs that EPA 
delegated to many States are not living up to legal requirements. 
Enforcement problems at the State level abound, as do problems with 
inadequate State resources, poor data management and compliance 
tracking, and failures to address significant environmental problems. 
For example:
      Serious State Enforcement Inadequacies Have Been 
Repeatedly Documented by GAO and the EPA Inspector General (IG). A 
plethora of GAO and EPA IG studies have documented that many States 
simply are unable or unwilling to effectively enforce certain Federal 
programs even in the face of legal requirements to do so. Among the 
most significant problems are: (1) inadequate monitoring of regulated 
parties; (2) failure to pursue ``timely and appropriate'' enforcement 
actions against significant violators; (3) failure to recover economic 
benefit of noncompliance; (4) inconsistencies in the approaches used to 
enforce and in the level of enforcement activity; and serious problems 
with enforcement and other data. One recent case is Virginia's failure 
for many years to take meaningful enforcement action against Smithfield 
Foods' swine slaughtering and processing plants for major violations of 
its clean water permit, ultimately requiring EPA to step in with 
Federal enforcement action, alleging serious environmental harm, false 
reporting, and destruction of records; a recent court decision affirmed 
liability and a large multimillion dollar penalty.
      Failure to Track and Document Violations. GAO, the EPA 
IG, and EPA itself have repeatedly documented that many States with 
delegated programs simply do not adequately track compliance and 
violations, nor do they report even many significant violations to EPA 
as required. In one recent example, EPA made front page news when it 
completed an audit of 27 States' drinking water programs and found that 
States were reporting only 19 percent of known Maximum Contaminant 
Level (health standard) violations for chemicals in tap water. 
Moreover, States reported just 11 percent of treatment standard 
violations, and only 10 percent of monitoring violations to the agency. 
The ``good'' news was that States reported 68 percent of total coliform 
violations to EPA.
      Inadequate State Resources. While some States have 
successfully sought significant resources to implement their 
environmental programs, others have fallen well behind the curve. A 
recent review of State spending found huge disparities among the 
States, and said that it was likely that ``some States are committing 
severely inadequate resources to environmental protection.'' For 
example, State expenditures per capita on environmental programs varied 
by almost four-fold; spending per ton of toxic emissions varied even 
more, with Mississippi spending over 38-fold less per pound of toxics 
than Colorado. A recent study of State hazardous waste cleanup programs 
found serious State program resource problems. For example, New York's 
program ran out of money in 1999, Kansas, Idaho, Wyoming, and Puerto 
Rico had zero balances, Missouri had a negative balance, Nebraska and 
D.C. had no cleanup fund, eight States had balances of under $1 
million, and 14 States had fund balances of $1 million to $5 million.
      State Inaction on Expired Permits. Recent studies by GAO, 
the EPA IG, and others have shown that there is a pattern in many 
States of failure to address expired State permits for water and air 
polluters. In Michigan, for example, 65 percent of major facilities 
were operating on expired water permits, and many other States had 
serious backlogs, according to a 1995 GAO report. A more recent 
analysis of 6,700 permits for major water pollution sources nationally 
found that more than half of all permits for major polluters had 
expired in seven States, and that more than one-third are expired in 17 
States. Expired permits not only violate the law, they fail to assure 
progress toward improving air and water quality, and shut the public 
out of the process of seeking water quality improvements.
      State Failures to Address Major Environmental Problems. 
There is a long history, continuing over the past 30 years, of State 
failures to address significant environmental problems, sometimes even 
when they are required to do so under Federal law. For example:
    State Inaction on Cryptosporidium in Tap Water. Despite several 
significant outbreaks from this disease-carrying organism, including 
the largest documented waterborne disease outbreak in U.S. history in 
1993 in Milwaukee Wisconsin in which over 400,000 people were sickened 
and over 100 died, to our knowledge not a single State adopted a 
Cryptosporidium standard for tap water until mandated to do so in 1998 
EPA rules.
    State Inaction on Concentrated Animal Feeding Operations (CAFO). 
While it is widely recognized that CAFOs are major sources of surface 
and ground water pollution, most States have done little to address the 
problem. Officials in the few States that have begun to tackle the 
issue, such as Maryland, have privately expressed concerns about 
threats that industry may move their businesses to other, more lax, 
States.
    Failure to Issue Maximum Pollution Loading Requirements for 
Nutrients and Other Water Pollutants. Over 25 States have been sued for 
failing to adopt the required ``Total Maximum Daily Load'' (TMDL) rules 
required by the Clean Water Act since 1972. These TMDLs are supposed to 
force a crack down on many unaddressed sources of pollution in 
watersheds that are seriously contaminated, since over 40 percent of 
the nation's rivers and lakes that have been assessed are not fishable 
or swimmable, according to EPA.
    States' Failure to Address Trans-Boundary Air Pollution Problems. 
Acid rain problems in the Northeast are due in large part to long-range 
transport of sulfur dioxide and nitrogen oxides often from tall stacks 
at fossil fuel-fired power plants in the Midwestern U.S. Similarly, the 
``river of smog'' problem is caused by long-range transport of air 
pollutants from heavily industrialized and urbanized areas, often to 
less populated down wind areas. These problems generally have not been 
voluntarily addressed by polluting States. Federal intervention has 
been necessary, and still is needed, to force States to deal with these 
classic ``externalities'' that they cause but that may not visibly 
directly affect them.
  V. Conclusions and Opportunities for Cooperative Federalism in the 
                                 Future
    Many observers suggest that there are opportunities to improve 
State-Federal relations in the future. EPA and States have initiated a 
program in 1995 known as the National Environmental Performance 
Partnership System (NEPPS), which allows States more ``flexibility'' to 
implement Federal laws.
    While the concept of NEPPS is attractive in principle, it raises 
several significant issues. First and foremost among them is whether 
the States are able and willing to make this program work, and whether 
they will agree with EPA, through an open public process, to assure 
environmental protection by meaningfully tracking, measuring, and 
assuring adequate EPA oversight of progress in implementing the 
programs.
    Academic observers have suggested that if this program goes awry 
and there is a significant chance that without improvements it may ``we 
could lose substantial ground before the public or Congress realizes 
what is happening.'' A former State and EPA enforcement official 
recently suggested in a law review article that many States lack the 
resources for such an approach, and that it NEPPS ``could lead to a 
further decline in deterrence-based enforcement, given States' lack of 
interest in conducting such enforcement and other factors.''
    However, it is possible to streamline and improve State-Federal 
relations in environmental programs, so long as the following key 
principles are observed:
    The Federal Government should:
      Establish national goals;
      Set national health and environmental standards;
      Establish minimum procedural safeguards for citizen 
participation
      Approves State programs and maintain a backstop 
enforcement role;
      Periodically publicly review and make findings regarding 
State performance;
      Provide resources and technical and scientific 
assistance.
    States should:
      Assume primary implementation and enforcement 
responsibility, where qualified;
      Meet national goals and standards;
      Show they have adequate resources and procedural 
safeguards to make the programs work;
      Develop innovative solutions to problems;
      Agree with EPA on performance tracking and documentation 
of successes or failures.
    Within this context of shared responsibilities, there is much room 
for State innovation. EPA has recognized that it must, in appropriate 
cases, loosen the reins of Federal oversight where a State can show 
that its is qualified and meets the criteria for flexible delegation. 
Such loosened reins cannot, however, mean that EPA gives up its 
oversight responsibility or waives basic legal requirements.
    In conclusion, NRDC agrees that there is much room for improvement 
of State-Federal relations. While State flexibility can and does work 
in some cases, it must be remembered that States must have the 
capability and willingness to make this work. States must agree with 
EPA upon specific measures to assure that the State is accountable for 
making the progress envisioned by Federal laws, that enforcement and 
implementation of basic requirements will not be compromised, and that 
EPA and public oversight and participation are meaningful.
                               __________
   Statement of Jason S. Grumet, Executive Director of the Northeast 
          States for Coordinated Air Use Management (NESCAUM)
Introduction
    Thank you Mr. Chairman. My name is Jason Grumet and I am the 
Executive Director of the Northeast States for Coordinated Air Use 
Management (NESCAUM). NESCAUM is an association of State air pollution 
control agencies representing Connecticut, Maine, Massachusetts, New 
Hampshire, New Jersey, New York, Rhode Island and Vermont. The 
Association provides technical assistance and policy guidance to our 
member States on regional air pollution issues of concern to the 
Northeast. We appreciate this opportunity to address the committee 
regarding innovative efforts to reduce air pollution in our region.
    As we approach the 30th anniversary of the passage of the Clean Air 
Act, it is appropriate to reflect upon the tremendous achievements 
government and industry have made in reducing air pollution and 
protecting public health and welfare. The interlocking Federal and 
State authority and obligations set forth in the 1970 Clean Air Act are 
fairly understood to mark the modern era of environmental protection in 
our nation. The desire to provide all citizens with minimum standards 
of protection and to provide industry with consistent national 
obligations compelled Congress in 1970, and in every reauthorization 
since, to establish substantial Federal oversight and enforcement of 
our nation's clean air strategy. At the same time, public health 
protection in our Federal republic is appropriately vested within the 
obligations and police powers of State government. Through the creation 
of State Implementation Plans (SIPs), Congress recognized that States 
must bear the ultimate responsibility and represent the best hope to 
design and implement effective clean air laws. I believe that it is 
useful to reflect upon this most basic tension between the desires for 
national consistency and State autonomy when exploring how to promote 
and honor effective State innovation.
    One of the central challenges of democracy is to communicate 
complex themes in simple and popular terms. In this discussion, the 
subtle complexities of federalism are often described as a choice 
between ``command and control'' Federal prescription and ``innovative 
and flexible'' State efforts. This construction results from the 
frustration many of us maintain as we watch government erect seemingly 
nonsensical barriers to the creative, well intentioned efforts of 
business owners and local officials who have the courage and ingenuity 
to suggest a different approach or a better way to achieve a clean 
environment. Even worse, under the time honored theme ``no good deed 
goes unpunished,'' every close observer of clean air policy can cite 
several examples where innovation is met not only with disinterest but 
is actually penalized by our regulatory system.
    While my members live this frustration, we recognize that it is not 
borne of malice or incompetence at any level of government. Instead we 
recognize that these moments of apparent insanity flow inherently from 
a regulatory regime necessarily designed to protect the public in 
situations where private economic incentives and volunteerism are 
inadequate. While the ``Command and Control vs. innovation'' construct 
is rhetorically powerful, the polemic in this description suggests a 
false choice. I believe that a more productive inquiry follows from the 
premise that national standards, while essential, often fail to capture 
and channel the ingenuity of local government and industry. In this 
light, improving our environmental regulatory system is a pursuit to 
refine and not replace enforceable Federal requirements. Congress' 
appreciation of the need for clear and enforceable national clean air 
requirements is evidenced by the fact that in every reauthorization 
since the first clean air public health statutes in the 1950's, 
Congress has consistently increased the Act's prescriptive national 
requirements and limited the discretion of both the EPA and the States. 
It is fruitful to reflect upon this history as we begin to contemplate 
the amendments that will guide the fourth decade of our nation's 
pursuit of clean air.
    Let me now transition from the abstract to the particular and 
describe two innovative efforts in the Northeast. These initiatives 
demonstrate that through creativity and collaboration, States, EPA and 
industry can identify mutual interests and opportunities that the 
current regulatory system would otherwise squander and direct these 
energies toward environmental improvement. The first area I will 
discuss is an exciting array of projects to reduce pollution by 
retrofitting heavy-duty diesel equipment. The second initiative I will 
describe is an innovative effort that goes by the acronym P4 which 
stands for Pollution Prevention in the Permitting Process. The 
essential wisdom of this effort is that there is no better way to 
reduce air pollution than to never create it. In both projects, the 
northeast States have partnered with regional and national EPA offices 
and industry to achieve considerable successes. However, let me stress 
at the outset that these successes have not come easy and we are far 
from finished. While we have created effective beachheads within EPA to 
launch these collaborative efforts, the EPA is a large institution with 
an array of corporate cultures. Suffice it to say that those offices 
charged with the obligation of enforcing the statute and EPA 
regulations are struggling, at times awkwardly, to maintain a coherent 
enforcement regime that rewards innovation.
Diesel Retrofits
            Overview of the Diesel Pollution Problem
    Diesel engine pollution is one of the prime concerns of air quality 
regulators in the U.S. The 10 million heavy duty diesel engines 
operating in the U.S. emit millions of tons of soot and ozone-forming 
pollutants annually. Heavy duty diesel emissions comprise 33 percent of 
total NOx (from all sources) and 80 percent of mobile source 
particulate pollution in the northeast States. In addition, diesels 
contribute substantially to the nation's inventory of toxic pollution 
such as formaldehyde. The relative contribution from diesels to our 
nation's air pollution is rising annually. Several factors contribute 
to this trend of increasing heavy-duty diesel pollution. First, the use 
of diesel engines to power the nation's fleets of buses and trucks is 
becoming more pervasive due to the durability of these engines. Second, 
growth in annual truck miles traveled continues to increase steadily. 
Third, diesel engines pollute at a higher rate than do gasoline engines 
and thus replacing gasoline engines with diesels will cause continued 
increases in air pollution from mobile sources.
            Technologies Exist to Reduce Diesel Engine Emissions
    The good news is that there are commercialized technologies to 
reduce diesel PM, NOx, and toxic pollution such as formaldehyde. New 
technologies used in the New York City bus fleet and in Europe have 
proven that diesel engine NOx and PM pollution can be reduced by 90 
percent. The Federal Urban Bus program (begun in 1993) has established 
the potential of rebuild/retrofit programs to significantly reduce 
emissions from heavy duty diesels. In 1993, the U.S. EPA began 
regulating engine retrofit/rebuilds in heavy duty urban buses in cities 
of over 750,000 population. The regulations require that newly 
overhauled transit bus engines meet more stringent particulate 
standards than required by the original engine certification. As part 
of this program, EPA has certified over ten products to reduce 
emissions from urban buses. Certified products have the potential to 
reduce particulate emissions by up to 80 percent. Over 40 urban areas 
have benefited from reduced urban bus emissions due to this program. 
Urban bus certified products can also be retrofitted onto most existing 
truck engines. California and New Jersey have established guidelines 
and methodologies for implementing retrofit/rebuild programs in non-
urban buses.
            Diesel Standards Lag Behind Gasoline Engine Standards
    While new technologies exist, diesel engine exhaust standards 
currently lag behind standards for gasoline engines by 10 years or 
more. The Federal Government must close this gap by adopting strict new 
engine standards for future diesel vehicles. Implementation of 
protective diesel emission standards is contingent upon dramatically 
reducing the level of sulfur in diesel fuel. Like lead, sulfur can 
poison many of the after-treatment emission control strategies that 
must be employed to reduce diesel pollution. We understand that EPA is 
on the verge of proposing regulations that will cap diesel sulfur 
levels at 15 ppm by 2007. Once enacted, this proposal and the resulting 
emission controls that it enables will dramatically improve public 
health across the nation. Ensuring the timely implementation of a 15 
ppm sulfur cap on all diesel fuel is the most important single action 
Congress could undertake to promote innovative diesel reduction 
strategies.
            Slow Diesel Fleet Turnover Requires a Control Program for 
                    Existing Engines
    While there is good news in the potential for cleaner new diesel 
engines, the problem of the existing, highly polluting fleet of 10 
million diesel vehicles must also be addressed. Diesel engines last as 
long as 25 years and travel more than a million miles in many 
applications. Older engines pollute at a much higher rate than new 
engines due to 1) engine deterioration and 2) less stringent emission 
levels in older model year engines. Thus, targeting emissions from 
older diesel engines is essential to reducing the pollution from the 
nation's diesel fleets in the near term.
            Legal Barriers Prevent Traditional Regulatory Programs
    Unfortunately, while cost-effective retrofit technologies exist to 
significantly reduce diesel emissions from existing engines, and while 
Federal action has been taken to reduce emissions from a small subset 
of diesels, States are substantially preempted by the Clean Air Act 
from taking large steps to reduce pollution from existing diesel 
vehicles. Historically, States have been given authority under the 
Clean Air Act to regulate in-use engine emissions from mobile sources, 
but are largely preempted from adopting independent requirements 
affecting new vehicles. However, a 1996 lawsuit brought by the Engine 
Manufacturers Association (EMA) resulted in a change to the nonroad 
engine rule which preempts States from requiring the retrofit of in-use 
nonroad engines (such as those found in construction equipment) to 
control emissions. Similarly, States face legal hurdles to the 
establishment of mandatory retrofit programs for highway vehicles. As 
an example, a State cannot pass a regulation requiring construction 
companies to install pollution control devices on construction 
equipment even though cost effective products are available. Similarly, 
a State cannot pass a law to require school buses to be retrofitted to 
reduce childrens' exposure to carcinogenic elements in diesel exhaust.
Collaborative Action to Overcome Regulatory Barriers
    In the face of these legal barriers, Northeast State environmental 
staff have worked with the EPA, the Engine Manufacturers Association, 
the Manufacturers of Emission Controls Association, and many others to 
develop opportunities to integrate voluntary diesel-retrofit mechanisms 
into the existing regulatory regime. Through this collaborative effort 
we have encouraged the use of commercially available technologies by 
developing a standardized method for States to calculate State 
Implementation Plan (``SIP'') credits for retrofit projects. To enable 
timely, cost-effective action and diminish administrative burden we 
have developed a third party verification system to review new 
technologies. Last we have developed a menu of recommendations on 
technology matches between retrofit equipment and heavy-duty engine 
applications.
    EPA has provided an overarching forum for this collaborative effort 
by creating the Voluntary Measures Retrofit Program (VMEP). VMEP is a 
quintessential example of creating a space within the existing 
regulatory framework where innovation can flourish. The premise behind 
VMEP is to trust but verify. Through this program States are empowered 
to take credit for non-traditional measures to reduce mobile source 
pollution in their SIPs. Prior to VMEP, States often had to wait years 
for EPA to even consider new approaches before they could proceed with 
implementation. The VMEP pilot program inspires innovation by allowing 
States to credit innovative measures for a de minimis portion of a 
State's total SIP inventory so long as States commit to verify that 
these programs actually achieve their projected benefit in practice. As 
part of the VMEP retrofit program, EPA announced the establishment of a 
coalition to achieve the retrofit of 10,000 heavy-duty diesel vehicles 
within the next year. The program is also providing technical support 
to public agencies and State and local regulators that are implementing 
retrofit programs. Due in large part to this effort, a highly 
successful retrofit program has developed in the Northeast.
            Specific Examples of Retrofit Projects
    The specific examples that follow are each inspired to varying 
degrees by three main themes: 1) Compliance with regulatory 
requirements (SIP obligations, conformity requirements etc.); 2) 
Addressing community concerns over growth and new construction; and 3) 
The selfless desire to reduce air pollution.
            New York Urban Bus Retrofit Project
    New York City has just attained the existing PM 10 standards and 
recognizes that further regulatory efforts will be necessary to address 
levels of fine particle pollution in the coming years. In light of the 
City's recent non-attainment status and the overwhelming evidence of 
fine particle health consequences, New York State is devoting 
considerable energy to reducing in-use diesel emissions. In 1999, the 
New York City Transit Authority along with the New York Department of 
Environmental Conservation, fuel producers, and retrofit technology 
developers established a program to retrofit 50 urban buses with 
continuously regenerating particulate traps. To date, 30 buses have 
been retrofitted and testing results show that PM pollution is reduced 
90 percent in the retrofitted buses. Because of the success of the 
program, Governor Pataki recently announced a significant expansion of 
the program. Under this breakthrough agreement, the New York City 
Transit Authority (NYCTA) will purchase low sulfur fuel and traps for 
the entire fleet of 3,700 hundred buses. Through the VMEP program, New 
York State will now be able to take credit for this substantial 
achievement in future PM attainment plans.
            Big Dig Retrofit Project
    In Boston, over 100 pieces of construction equipment are being 
retrofitted as part of the ``Big Dig'' retrofit project. The multi-
billion dollar Big Dig project has concentrated hundreds of pieces of 
construction equipment in the City of Boston, many of them operating 
next to apartment and office buildings and hospitals. The retrofit 
program was initiated when residents living adjacent to the Big Dig 
complained about diesel exhaust from construction equipment. NESCAUM 
worked with Massachusetts transportation and environmental officials to 
fund and implement the retrofitting of nearly < of the permanent diesel 
construction equipment on the project. The project has evolved to 
include a strictly voluntary component and a mandatory component. The 
voluntary retrofits are being undertaken and paid for by the highway 
department and contractors. There is also a contractual requirement 
stipulating that machines operating near hospitals, apartment and 
office buildings be retrofitted. Massachusetts is pursuing similar 
requirements in a host of major construction initiatives in the State. 
Here, the need to reconcile the needs of the community with the need to 
accommodate development in Boston spurred meaningful innovation.
            Manchester Airport Retrofit Project
    At the Manchester Airport in New Hampshire, airport operators, the 
New Hampshire Department of Environmental Services, and NESCAUM are 
collaborating in an effort to retrofit a majority of diesel ground 
service equipment. Like many airports, the Manchester airport is 
currently undergoing a major expansion in order to increase aircraft 
service and vehicle access for airport users. This expansion is likely 
to increase air pollution associated with airport operations. In part 
to offset this increase in emissions, the airport is moving ahead with 
a project to retrofit 60 airport owned nonroad vehicles such as de-
icers and snow removal machines. The Manchester project is a 
combination of a program that aims to do environmental good combined 
with the need to comply with regulatory (conformity) requirements.
            School Bus Retrofit Project
    Another project under active consideration by Northeast air quality 
regulators is a school bus retrofit project. As part of the program, 
school districts in Northeast States will be encouraged to devote 
resources necessary to implement an varying array of diesel fuel 
quality improvements and emission control retrofits. In this case, the 
major impetus for the project will be to improve environmental quality 
and to reduce childrens' exposure to toxins.
            Diesel Retrofit Conclusion
    All told, we anticipate that up to 15,000 vehicles in the Northeast 
will be retrofitted in the first phase of this incentive driven 
initiative. As a result, thousands of tons of PM, hydrocarbon, and 
toxic emissions will be reduced in the Northeast. In all of these 
projects, a combination of regulatory requirements and voluntary 
measures have been combined to result in a highly successful program. 
Our model is presently being replicated in several cities in California 
and in Chicago. Based on the broad interest we have received from 
programs across the country, we are optimistic that similar retrofit 
efforts will be commonplace in the next several years.
Pollution Prevention in Permitting Programs (P4)
            Overview of P4 Projects
    Efforts to encourage pollution prevention within the existing 
regulatory structure reveal many of the barriers to innovation that I 
identified earlier. While the traditional Federal/State regulatory 
regime has achieved great success, the traditional focus on technology 
based control strategies presents several shortcomings:
      Overly prescriptive compliance approaches foster a focus 
on actions rather than results.
      The focus on pollution control rather than pollution 
prevention discourages industry from investing in less toxic and more 
efficient technologies.
      The emphasis on single media technology requirements 
tolerates the shifting of pollution from one media to another rather 
than eliminating it at the source.
    EPA and the States have developed several innovative programs to 
address these shortcomings without jeopardizing the environmental gains 
that have been achieved through traditional regulatory efforts. One 
such program is the Pollution Prevention in Permitting Project (P4).
    The logic of pollution prevention is unassailable. Rather than 
spending millions of dollars to manufacture, handle, and ultimately 
control the pollutant emissions of hazardous substances used in the 
creation of desirable goods and services, pollution prevention enables 
the creation of these same goods using comparably benign methods. By 
changing manufacturing processes, many industries have determined that 
they can reduce air pollution considerably and cost-effectively. Under 
this approach, facilities are given maximum flexibility to operate 
their business while still maintaining adequate measures to ensure 
compliance with environmental regulations. Ultimately, these permits 
create a regulatory incentive to design waste out of the process and 
increase production efficiency.
            P4 Permits
    In 1995, Intel and the Oregon DEQ wrote the first P4 permit. This 
permit had two goals; (1) to increase operational flexibility at 
Intel's Aloha facility and (2) create a regulatory program that creates 
incentives for facilities to use pollution prevention to meet 
regulatory requirements. To meet these goals, the permit contained pre-
approvals for specific operational, pollutant-specific, plant-wide 
emission caps. Speed and flexibility to expand the facility were key 
factors for Intel wishing to seek a P4 permit. As a result of the P4 
permit, both the goals of flexibility and pollution prevention were 
realized. In the first 2 years of the P4 permit, VOC emissions per 
product unit fell 47 percent, while production increased 70 percent. In 
addition, the facility was reconfigured without re-opening their Title 
V permit. Finally, the use of pollution prevention to reduce per-unit 
emissions and to keep emissions under regulatory thresholds resulted in 
Intel saving $2 million in avoided control costs. This innovative 
effort brought considerable benefit to the environment and the company.
            NESCAUM P4 Pilot Project
    Seeking to replicate this success in our region, NESCAUM has 
embarked on a multi-State effort to incorporate pollution prevention 
into the next generation of environmental permits. The basic tenet of 
our effort is to set stringent environmental outcomes while providing 
companies with optimum flexibility to design their compliance strategy. 
To date, EPA's efforts to support P4 initiatives nation-wide have 
resulted in several important achievements:
      Development of six enforceable Title V permits that meet 
all substantive and procedural requirements;
      Creation of permit terms which encourage pollution 
prevention to achieve compliance; and
      Integration of ``living'' Title V permits which include 
flexibility conditions that support rapid, cost-effective operational 
change and creates lower administrative burdens for both sources and 
permitting authorities.
    NESCAUM seeks to build upon these successes by leading an effort to 
fully integrate P4 approaches into traditional air permitting 
activities. Through this effort NESCAUM is working with our member 
States and EPA to identify and overcome regulatory barriers that stand 
in the way of integrating P4 into the traditional regulatory regime. In 
addition, NESCAUM will be working in targeted sectors to develop 
flexible Title V permits. Targeted sector includes chemical 
manufacturing, semiconductor (chip manufacturing), pharmaceutical 
manufacturing, metals manufacturing (coating, anodizing), and pulp and 
paper operations.
    Our focus on these target sectors is premised on the recognition 
that P4 is not equally appropriate in all sectors or for all companies. 
P4 permits require considerable effort and resources to develop. 
Therefore, we have opted to focus our energies on those sectors with 
the greatest need for flexibility in order to evolve with dynamic 
market demands. In addition, P4 permits should only be written for 
those specific facilities that have demonstrated and credible 
environmental management systems. Facilities with poor compliance 
records tend to have poor process controls. Establishing flexible 
permits with such facilities could render the public open to 
unacceptable risks. By the end of our 2-year effort, NESCAUM expects to 
have identified a host of sources that are appropriate candidates for 
P4 and develop consistent approaches among our member States in 
crafting these permits.
            Barriers to P4 Permits
    A current barrier to promoting P4 permits is the overarching 
deadline for States to complete issuance of all Title V permits. 
Permitting agencies are under intense pressure to issue all their Title 
V permits by January 1. 2001. Permitting programs in the Northeast were 
among the last to receive interim approval and therefore have had the 
least time to write these permits. This situation puts the States at 
odds with P4. Working flexibility into permits requires significantly 
more time than writing a traditional permit. Given this pressure to 
issue permits, States are reluctant to devote significant resources to 
programs that will slow down the permit process.
    Furthermore, barriers created in existing regulations and policies 
can often hamper innovative efforts. One such barrier is the ``once in, 
always in'' policy developed for MACT standards. Under Title III of the 
Clean Air Act, EPA regulates hazardous air pollutants or HAPs. 
Generally, these regulations require significant amounts of monitoring, 
record keeping, and reporting activities. The ``once in always in'' 
policy creates a perverse disincentive to reduce the use of hazardous 
substances because even the elimination of hazardous production 
materials does not alleviate the unique regulatory burdens that were 
explicitly designed for HAP sources. Given this situation, facilities 
have little inducement to investigate alternative technologies that are 
less polluting.
            P4 Conclusion
    The NESCAUM project has been underway for nearly 6 months. Work to 
date has found that many facilities and permitting agencies are eager 
to engage in this process. Critics within the government and 
environmental communities however, continue to express the anxiety that 
flexible programs, such as P4, do not provide adequate protections for 
the public. The result of these fears has been to hold P4 permits to a 
far higher standard than that of traditional permitting activities. Our 
hope is that the scrutiny and transparency provided by our 
collaborative regional effort will help to overcome these fears and 
enable P4 permits to proceed efficiently.
Conclusion
    While the focus of my remarks has reflected upon State and EPA 
efforts there are two fundamental roles that Congress must fulfill for 
this evolution to succeed. First, in the short term, innovation costs 
money. While our society will save billions of dollars each year by 
honing the regulatory system to appreciate the heterogeneity of our 
States and businesses, designing and administering flexible yet 
credible approaches is a far more complex and costly undertaking than 
the ``one size fits all'' schemes that many appropriately deride. EPA 
and the States must be provided the necessary resources and flexibility 
to use them if we hope to navigate this transition. Without increased 
resources, well intentioned efforts toward flexibility will ultimately 
be undermined by a small minority of interests who will seek to exploit 
this flexibility for private gain. Since change is always held to a 
higher standard than the status quo, Congress, EPA and the States must 
work together to ensure that we are collectively up to the test.
    Second, even more than financial resources, successful innovation 
requires trust. Trust is ample when innovation succeeds. However, 
innovation will not occur unless trust isn't also dependable when well-
intentioned, credible efforts fail. Sources must trust State agencies 
to provide constructive havens to remedy the creative control 
approaches that will inevitably fall short of expectations. States must 
trust the EPA to acknowledge and not penalize innovative State programs 
both when they succeed and when they do not. EPA must trust 
Environmental organizations to recognize that some efforts will not 
succeed and environmental organizations must trust that failed efforts 
will be remedied when critiquing perceived inadequacies. Of course in 
all cases, trust must be earned through dialog, access, and 
transparency of data. Congress, as the creator of laws and overseer of 
EPA plays a vital role in setting the tone for this evolution toward 
innovation and trust. I would like to thank Senator Smith for 
initiating this dialog and look forward to working with the committee 
in the months ahead.
                                 ______
                                 
              Heavy-Duty Diesel Emission Reduction Project
                       Retrofit/Rebuild Component
   (Prepared by NESCAUM for the U.S. Environmental Protection Agency)
Executive Summary
    The purpose of this document is to expand the use of retrofit 
pollution control technologies in heavy-duty engines through the 
development of consistent guidelines for voluntary retrofit programs. 
Such programs would be targeted to heavy-duty vehicles not affected by 
the Federal Urban Bus Program and would include control technologies 
not certified under that program as well as Urban Bus Program certified 
technologies. Specifically, this document recommends 1) a protocol for 
calculating State implementation plan (SIP) credits for voluntary 
retrofit projects; 2) the structure of a third party retrofit 
verification system for retrofit technologies; and 3) an in-use testing 
program to ensure that emission reduction credits claimed are achieved 
in the field. The last chapter of this document outlines model State 
policies to reduce heavy-duty engine pollution through retrofit 
initiatives.
    This effort builds on the above mentioned U.S. Environmental 
Protection Agency (EPA) initiative begun in 1993 to reduce urban 
residents' exposure to diesel exhaust, the Urban Bus Retrofit/Rebuild 
program. The program requires that urban buses operating in 
metropolitan areas with populations over 750,000 be equipped with EPA 
certified retrofit pollution control devices such as oxidation 
catalysts or be rebuilt using certified low emission components at the 
time of engine overhaul. To date, approximately 10,000 of 42,000 
eligible urban buses have been retrofitted or rebuilt as a result of 
the program. Two States, New Jersey and California, have undertaken 
retrofit programs or guidelines as well. These efforts are intended to 
expand the significant emission reductions gained through the Federal 
Urban Bus Program by promoting the use of pollution reducing 
technologies on the existing heavy-duty fleets in those States.
    The need for reducing emissions from the nation's in-use heavy-duty 
diesel fleets is clear. Current inventories estimate that heavy duty 
engine emissions comprise 33 percent of all nitrogen oxides (NOx) 
pollution and 80 percent of all particulates (PM) from mobile sources 
in the Northeast States. Emissions from these engines contribute to 
serious air pollution problems in the region. NOx causes eutrophication 
of lakes and streams, acid rain, and is a precursor to ozone which 
aggravates lung disease. Hydrocarbon (HC) emissions are also ozone 
precursors and are made up, in part, of toxic substances such as 
benzene, toluene, and 1,3 butadiene, some of which are known 
carcinogens. PM emissions are very high from diesel engines and are 
known to aggravate lung diseases such as asthma, emphysema, and 
bronchitis. In addition, PM has been labeled a probable human 
carcinogen by EPA and a toxic air contaminant by the California Air 
Resources Board. In order for States to achieve air quality goals, 
significant reductions in heavy-duty diesel emissions will need to be 
made.
    The recommendations contained in this document are based on 
discussions of a workgroup organized by the Northeast States for 
Coordinated Air Use Management (NESCAUM). The workgroup was created to 
provide guidance to State and local agencies, as well as to private 
organizations that plan to retrofit heavy-duty diesel vehicles with 
pollution control devices. It included input from State and Federal 
agency staff, testing laboratories, and control equipment 
manufacturers. In addition, a draft of these guidelines was distributed 
to EPA regional offices and the heavy-duty engine manufacturers. Their 
comments and suggestions were reviewed and incorporated by the 
workgroup into the recommendations contained in this report.
                        Primary Recommendations
    All of the recommendations detailed below represent the views of 
the Retrofit/Rebuild workgroup and NESCAUM.
1. Use of Urban Bus Program Certified Technologies
    Oxidation catalysts certified with the Urban Bus Program should be 
eligible without administrative or peer review for use in any highway 
heavy-duty engine, with States being allowed to claim a 20 percent 
reduction for PM, a 40 percent reduction for carbon monoxide (CO), and 
a 50 percent reduction for HC. These credits may be claimed before a 
project is implemented. Verification of emission reductions should be 
conducted during or after project implementation by 1) a review of 
retrofitting records and 2) through in-use emissions testing. These 
recommendations are detailed in Chapter I, section D and Chapter III.
    For use of technologies certified with the Urban Bus Program that 
are engine specific such as rebuild kits, the workgroup recommends that 
a PM emission reduction credit of 20 percent be granted automatically 
when the rebuild kits are used in engines that the technologies are 
certified for under the Urban Bus Program. Chapter I, section B 
describes the credit allowed for ``.1'' technologies. As with the use 
of oxidation catalysts, reporting and in-use testing recommendations 
for rebuild kits are detailed in Chapters I.D and III.
2. Use of Technologies Not Certified with the Urban Bus Program
    For all products that have not been certified with the Urban Bus 
Program, emissions testing should be conducted by the manufacturer to 
determine the emission reductions potential (percent reductions) of the 
retrofit/rebuild product. Similar data should be required for the 
voluntary program as are required for certification with the Urban Bus 
Program (see Chapter III, section A for a detailed description). An 
engineering analysis should be conducted by the manufacturer to 
determine which engines the retrofit/rebuild equipment may be used on. 
These data and analysis will be reviewed by the third party verifier to 
establish the emission reduction level and applicability for engine 
families for the voluntary retrofit program.
3. Third Party Verification System
    A third party verification system should be established which 
consists of an administrator and a peer review committee. The workgroup 
recommends that Environment Canada be the administrator for this 
program. The administrator will process all applications to the 
retrofit/rebuild program, review data for thoroughness, organize the 
work of the peer review group, make decisions on the level of in-use 
testing required, and communicate with EPA. The peer review committee 
should consist of temporary volunteer members from industry, 
laboratories, and trade organizations (such as the Society of 
Automotive Engineers) with expertise in heavy-duty engines and retrofit 
equipment. The committee will make determinations for emission control 
devices on the level of in-use testing, completion of the in-use 
testing requirement, acceptability of in-use testing method, emission 
reduction potential of emission control products, and engine families 
that control equipment can be used with.
4. In-use Testing Requirement
    In order to verify the emission reductions claimed from retrofit 
projects and to assess control equipment durability a percentage of all 
emission control products installed as part of a retrofit/rebuild 
program should be tested in-use. The procedure for establishing the 
number of units to be tested in the field is outlined in Chapter III 
and is adapted from EPA's in-use compliance testing requirements for 
new pleasure craft marine engines. An in-use testing trigger should be 
established for different types of technologies based on unit sales. A 
70 percent pass rate on tested units will be needed in order for 
devices to ``test out'' of the in-use requirement.
5. Calculating SIP Credits
    In order to calculate SIP credits from retrofit projects, baseline 
emission factors for heavy-duty engines to be retrofitted needs to be 
established. The workgroup recommends that Federal Test Procedure (FTP) 
certification data for engine families be used as baseline emission 
rates for retrofitted engines. Emission reduction percentages (as 
recommended in this document for devices certified with the Urban Bus 
Program and as established by the third party verifier for devices not 
certified with the Urban Bus Program) can be applied to these baseline 
rates. Mass emissions reductions can be calculated for individual 
fleets using the formulas detailed in Chapter IV and information 
available to fleet operators such as vehicle mileage, hours in 
operation, or fuel consumption. In some cases, States may choose to 
develop baseline emission rates through testing of heavy-duty engines 
in-use. The States will need to develop a testing plan in coordination 
with EPA to determine these baseline levels.
6. Retrofit/Rebuild Program Information/Website
    The workgroup recommends that if possible all retrofit/rebuild 
devices certified with the Urban Bus Program and all devices 
``verified'' through third party review be listed on a retrofit/rebuild 
website which States and others interested in undertaking retrofit 
projects can easily access. The retrofit website could provide SIP 
credit calculation formulas, information on emission control products, 
applicable engines, and EPA certification data for engine families.
7. Model State Retrofit Policies
    States have policy and funding options to increase the use of 
retrofit devices to reduce heavy-duty diesel pollution. Retrofitting 
heavy-duty vehicles and machines to reduce PM, HC, CO, toxics, and in 
some cases NOx, can assist States in reaching air quality standards. 
Executive orders, contract requirements, and agency policies represent 
potential methods to increase the use of retrofit devices. Funding from 
Federal sources such as the Congestion Mitigation Air Quality 
Improvement program (CMAQ), State funding in the form of bond issues 
and agency budgets, and supplemental environmental moneys can provide 
financial support for retrofit projects. The last section of this 
report outlines model retrofit policies that have been used in the 
region, funding sources, and example strategies to increase the use of 
pollution control equipment.
                                 ______
                                 
    Responses of Jason Grumet to Additional Questions from Senator 
                               Lautenberg
Interstate Transportation of Air Pollution
    Question 1. NESCAUM has studied the movement of air pollution into 
the northeastern States from other States. What have you learned and 
what does that say about the need to maintain a strong Federal role in 
environmental policy?
    Response. This response presents NESCAUM's work in two particular 
areas of air pollution transport that have received a great deal of 
attention in recent years. The first area concerns ozone (smog). The 
U.S. Environmental Protection Agency (EPA) recently implemented a 
regional plan to reduce emissions of nitrogen oxides (NOx), the most 
important precursor contributing to ozone transport on a regional 
scale. The second area concerns acid rain. NESCAUM has done recent work 
on acidic deposition in New England and linkages with pollution sources 
in upwind regions. The 1990 Clean Air Act Amendments (CAAA) created the 
Federal Acid Rain Program that has resulted in a significant decrease 
in sulfur dioxide (SO2) emissions, the precursor to acidic 
sulfate deposition. NESCAUM's work indicates that upwind reductions in 
SO2 emissions correlate strongly with downwind reductions in 
acidic sulfate deposition. Unfortunately, environmental recovery 
appears to be slower than expected, and additional regional reductions 
are likely needed to adequately protect sensitive land and water 
resources from the damaging effects of acid rain.
    In keeping with the theme of the May 2 hearing before the Senate 
Committee on Environment and Public Works, NESCAUM would like to 
reiterate its strong support for State flexibility in addressing 
environmental problems. The NESCAUM States take pride in developing 
their own innovative efforts to reduce pollution within their borders--
an approach that requires a cooperative framework with the Federal 
Government to provide sufficient flexibility for the States. While the 
NESCAUM States seek flexibility in addressing the pollution sources 
within their borders, they also recognize the need for a Federal role 
in addressing pollution caused by sources outside a State's borders. In 
light of NESCAUM's work on air pollution transport, we clearly see the 
need to maintain a strong Federal role in environmental policy to deal 
with these types of interstate air pollution issues. Unfortunately, an 
upwind State all too often has little incentive to reduce pollution 
from in-State sources when public health and environmental damage occur 
downwind outside the State. In the experience of the NESCAUM States, it 
seems that upwind States all too often believe a downwind State must 
control in-State sources almost to the verge of bankruptcy before 
upwind States feel obligated to reduce their own contributions to a 
downwind State's pollution problem. The Clean Air Act, however, places 
equal responsibility on all pollution sources for their contributions 
to downwind pollution problems, regardless of where the sources are 
located. When upwind States mistakenly believe they have less of an 
obligation to address their own contribution to downwind pollution 
problems, downwind States have little recourse but to appeal to the 
Federal Government for relief.
    In addition to interstate pollution transport, there is another 
need to maintain a strong Federal role in environmental policy. A 
number of cost-effective pollution control options, such as low sulfur 
fuels and heavy-duty diesel engine standards, are often national in 
scope and fall outside State jurisdiction. These types of control 
options are the quintessential programs best addressed by the Federal 
Government.
I. Ozone and precursor transport
    The transport of NOx and ozone in power plant plumes has been known 
since at least the mid-1970's. Measurements of power plant plumes have 
documented high ozone levels transported from Wisconsin into Michigan 
(Miller, et al., 1978), Tennessee into Indiana (Gillani & Wilson, 
1980), and Missouri toward Chicago (White, et al., 1983). These studies 
show that NOx in power plant plumes produces significant amounts of 
ozone, and the ozone travels long distances into neighboring States.
    Within the Ohio River Valley, where the concentration of large 
coal-fired power plants is greatest, there is a large and persistent 
area of high ozone during the summer months relative to air in other 
parts of the country (Husar, 1996). Within this region, winds 
intermingle ozone pollution from different power plant plumes (as well 
as other pollution sources). Because of this mixing, a large 
``reservoir'' of ozone forms across much of the east-central United 
States. People living in southern Indiana, southern Ohio, northern 
Kentucky, and most of West Virginia actually experience higher long-
term ozone levels than people living in metropolitan Chicago or Boston 
(see Figure 1).
    The large ozone reservoir in the Ohio River Valley returns each 
summer with little abatement. Researchers have found no significant 
trends in regional ozone levels from 1980 to 1995 (Five, et al., 1998). 
While urban levels have decreased somewhat due to pollution controls on 
automobiles, regional ozone and NOx levels have not significantly 
changed. This is due in large part to the lack of significant NOx 
reductions from fossil fuel power plants which, in places such as the 
Ohio River Valley, contribute 40-50 percent of the total NOx emissions 
in a given region. Between 1987 and 1996, NOx emissions from power 
plants rose 3 percent nationally (EPA, 1998). Because regional ozone is 
more sensitive to NOx controls than volatile organic compound (VOC) 
controls, the lack of significant NOx reductions from power plants is 
impeding progress toward reducing ozone levels.
    Researchers observed the movement of ozone from the Ohio River 
Valley into the Northeast as early as 1979. During early August in 
1979, scientists tracked a mass of ozone leaving Ohio, crossing 
Pennsylvania and southern New York, and entering into the Northeast 
Corridor (Clarke and Ching, 1983). When this mass of air from the Ohio 
River Valley entered into the Northeast Corridor, it contained about 90 
parts per billion (ppb) of ozone. \1\ The current 1-hour Federal ozone 
standard is equivalent to 120 ppb (0.12 parts per million). Therefore, 
the amount of ozone observed entering the Northeast was 75 percent of 
the 1-hour ozone standard and represented a significant contribution to 
the overall ozone burden experienced in the Northeast during that time.
---------------------------------------------------------------------------
    \1\ The researchers also indicated that as the air mass entered the 
Northeast corridor, it contained enough transported precursor emissions 
to generate an additional 35 ppb of ozone on top of the 90 ppb already 
formed. Consequently, the amount of background ozone and precursors 
entering the Northeast could have resulted in an exceedance of the l-
hour ozone standard in the Northeast even if only minimal additional 
precursor emissions occurred locally.
---------------------------------------------------------------------------
    As the persistent ozone reservoir establishes itself every summer 
in the Ohio River Valley, large amounts of ozone continue to be 
transported into the Northeast from the west. During the summer of 
1995, the North American Research Strategy for Tropospheric Ozone-
Northeast (NARSTO-NE) conducted aircraft measurements of ozone in air 
masses along the western edge of the Northeast Corridor. During pre-
dawn hours, scientists measured ozone levels up to and in excess of 100 
ppb above Shenandoah, VA, Gettysburg, PA, Poughkeepsie, NY, and other 
locations in the Northeast (Lurmann, et al., 1997). During this time of 
morning, the ozone could not have been formed locally (no sunlight is 
present to initiate the formation of ozone), so it must have been 
transported during the overnight hours. Wind direction on some of the 
highest ozone days (e.g., July 14, 1995) was out of the west 
(Blumenthal, et al., 1997). Therefore, we can conclude that the ozone 
traveled into the Northeast from points to the west, i.e., the Ohio 
River Valley.
    At transported ozone levels of over 100 ppb during the pre-dawn 
hours, the Northeast is already over 80 percent on the way to an 
exceedance of the 1-hour standard before the sun rises. The Northeast 
is in the predicament of achieving the 1-hour 120 ppb Federal ozone 
standard in situations where 100 ppb or more of the ozone is beyond its 
control. Only an additional 20 ppb of ozone generated within the 
Northeast will cause an exceedance of the 1-hour standard, and the 
situation is even worse for the more protective 80 ppb 8-hour standard. 
\2\ The high levels of transported ozone virtually guarantee that the 
Northeast will not achieve air quality goals without NOx reductions 
from upwind sources.
---------------------------------------------------------------------------
    \2\ The U.S. Court of Appeals for the District of Columbia Circuit 
(D.C. Circuit) has remanded the revised 8-hour ozone standard back to 
EPA, a decision currently on appeal to the U.S. Supreme Court. Although 
questioning the standard on constitutional grounds, the D. C. Circuit 
recognized that detrimental health impacts occur at ozone levels below 
the current l-hour standard.
---------------------------------------------------------------------------
Estimating Ozone Transport into the Northeast
    A range of ozone transport into the Northeast can be estimated from 
the field measurements mentioned in the preceding section, and from 
computer modeling of ozone formation and transport. Based on results 
from a model called CALGRID, \3\ we estimate a plausible contribution 
of transported ozone from outside the Northeast to ozone exposure above 
the 1-hour 120 ppb and the 8-hour 80 ppb standards inside the Northeast 
in the range of 20-45 percent. This was estimated as described in the 
following text.
---------------------------------------------------------------------------
    \3\ U.S. EPA has approved the CALGRID model for ozone attainment 
planning purposes in the New England Domain.
---------------------------------------------------------------------------
    Two modeled scenarios were generated for a severe ozone episode 
occurring on 11-15 July 1995 in the eastern United States. \4\ In the 
first modeled scenario, the reductions proposed in the EPA NOx SIP Call 
were applied only within the Northeast Ozone Transport Region (OTR), 
and current Clean Air Act measures were put in place outside the OTR 
using emissions projected for 2007 (Run 1). In the second scenario, the 
EPA NOx SIP Call reductions were applied throughout 22 eastern States 
(Run 2).
---------------------------------------------------------------------------
    \4\ Communication from Mark Fernau, Earth Tech, Inc., Concord, MA.
---------------------------------------------------------------------------
    In each scenario, the total ozone exposure above the 1-hour 120 ppb 
standard and the 8-hour 80 ppb standard was determined. The total 
exposure to ozone above the 1-hour standard was calculated from the 
model by multiplying all calculated ozone concentrations above 125 ppb 
by the total hours above 125 ppb and the area of each modeled grid cell 
(144 km2) in which an ozone concentration above 125 ppb occurred. For 
the 8-hour standard, a surrogate 1-hour value of 110 ppb was used as 
the threshold exposure level in the model, and the total exposure was 
calculated in the same manner as for the 125 ppb threshold. The 1-hour 
threshold of 110 ppb is used because ozone monitoring data suggest that 
when a 1-hour concentration of 110 ppb is reached or exceeded, it 
typically coincides with an 8-hour average above 85 ppb at the same 
monitor. \5\
---------------------------------------------------------------------------
    \5\ The values of 125 ppb (1-hour) and 85 ppb (8-hour) are used to 
be consistent with EPA's monitoring test for an ozone exceedance. 
According to EPA's data truncation guidance, an exceedance of the l-
hour ozone standard does not occur until monitored l-hour 
concentrations reach or exceed 125 ppb, and an 8-hour exceedance does 
not occur until the 8-hour average reaches or exceeds 85 ppb. For the 
modeling test, this may be a conservative threshold to use because 
models often underestimate observed peak ozone concentrations.
---------------------------------------------------------------------------
    The reduction in ozone exposure within the Northeast Ozone 
Transport Region due to NOx controls outside the Northeast is shown in 
Table 1. The reduction is given as the percentage decrease in ozone 
exposure between Run 1 (EPA NOx SIP Call in the OTR only) and Run 2 
(EPA NOx SIP Call in 22 eastern States).

  Table 1. Percent reduction in ozone exposure (ppb hr/km2) greater than 125 ppb (1-hour standard) and 110 ppb
(surrogate for 8-hour standard) within the Northeast Ozone Transport Region due to applying the EPA NOx SIP Call
                                         beyond the borders of the QTR.
  Percent daily reduction in modeled ozone exposure within the Northeast Ozone Transport Region due to 22 State
                                                  NOx SIP Call
----------------------------------------------------------------------------------------------------------------
                                                                 July 11   July 12   July 13   July 14   July 15
----------------------------------------------------------------------------------------------------------------
Reduction in ozone exposure 2125 ppb..........................      -31%      -16%      -35%      -33%      -42%
Reduction in ozone exposure 2110 ppb..........................      -37%      -27%      -32%      -34%      -47%
----------------------------------------------------------------------------------------------------------------
Modeled reductions are based on 11-15 July 1995 ozone episode.

    Based on the modeled reductions in Table 1 and the high levels of 
ozone observed entering the Northeast during the field studies 
mentioned above, NESCAUM estimates a plausible contribution range of 
20-45 percent to ozone exposure above the 1-hour and 8-hour standards 
in the Northeast Ozone Transport Region due to transported ozone from 
outside the region.
    The estimated range is consistent with modeling results from the 
Ozone Transport Assessment Group (OTAG). OTAG estimated ozone transport 
impacts by ``turning off'' all human-related sources of NOx and VOC 
emissions in various parts of the eastern United States. When human-
related emission sources were set to zero in the OTAG model (OTAG used 
a model called UAM-V), changes in ozone levels in downwind receptor 
regions could be estimated. These modeling runs indicated that human-
related emissions in various upwind regions significantly contributed 
to ozone levels in downwind receptor regions. For example, OTAG results 
for the July 1995 episode indicated that turning off NOx and VOC 
emissions in parts of the Ohio River Valley reduced ozone exposure 
above 120 ppb in the Philadelphia area by 41 percent, and in the 
Baltimore/Washington, DC area by 43 percent. \6\
---------------------------------------------------------------------------
    \6\ Tables of ozone exposure data calculated from the OTAG July 
1995 modeled episode can be found at the OTAG Northeast Modeling and 
Analysis Center web address: http://sage.mcnc.org/OTAGDC/aqm/uamv/
jul95.
---------------------------------------------------------------------------
The Economic Impact of Ozone Transport Into the Northeast
    The out-of-region ozone transport contributing to ozone levels 
above Federal standards within the Northeast Ozone Transport Region 
creates additional economic costs within the Northeast due to the need 
for more stringent local controls.
    If no additional NOx measures beyond Clean Air Act acid rain 
controls are applied on sources upwind, the additional control costs in 
the Northeast to compensate for ozone transport could be from $1.4 to 
$3.9 billion each year. If upwind sources met the reductions in EPA's 
NOx SIP Call, the economic costs to the Northeast will be reduced to 
about $0.2 to $1.1 billion each year (NESCAUM, 1998).
    In addition, there are significantly more low-cost opportunities 
for reducing NOx emissions at upwind sources than in the Northeast. 
Upwind power plants are estimated to be able to meet the EPA NOx SIP 
Call budgets at an average cost of $662/ton. Northeast power plants 
will spend about 50 percent more to achieve the same budget 
requirements--about $1,013/ton. While the cost to Northeast power 
plants is still reasonable, there are not enough available reductions 
remaining from these emission sources to fully offset the impact of 
transported ozone. Any additional reductions in the Northeast must come 
from other emission sectors at higher costs.
The Need for a Federal Role
    The NESCAUM States have struggled for years to overcome the amount 
of smog transported into their region from upwind sources beyond their 
jurisdiction. Without a Federal presence to implement a multistate 
regional smog strategy, there is little likelihood that air quality 
standards can be met for millions of people living in the Northeast. 
The U.S. EPA's regional NOx SIP Call, recently upheld in large part by 
the D.C. Circuit, is the first major step by the Federal Government 
toward addressing this problem. A Federal ``cap and trade'' program for 
NOx, similar to the successful SO2 trading program under 
Title IV of the CAAA, promises a cost effective regional program for 
reducing smog that cannot be accomplished through individual, 
uncoordinated State action (or inaction). The program provides needed 
flexibility to the States to devise their own control options, but the 
application of the program's NOx reduction targets across many States 
is the proper and necessary role of the Federal Government.
II. Acid deposition in the New England States
    A number of recent studies have investigated acidic deposition 
trends (sulfates and nitrates) since the 1980's in areas of the United 
States (Lynch et al., 1996; Husain et al., 1998; Holland et al., 1999; 
Shannon, 1999). NESCAUM's work focuses on the New England region and 
extends the period of analysis to 1998, which is the most recent year 
for which deposition data are currently available. Consistent with the 
results of the earlier studies, NESCAUM found a decreasing trend in 
annual sulfate deposition in New England since 1980 (Miller, 1999). The 
decline after 1990 is presumably a result of SO2 emission 
reductions under Title IV of the 1990 Clean Air Act Amendments, 
although SO2 power plant emissions have increased somewhat 
since 1995 following a period of significant decline. Nitrate 
deposition trends show no discernable change over the same period, nor 
do NOx emissions.
    In general, NESCAUM finds that the decreasing sulfate deposition 
trend in New England strongly correlates with the SO2 
emissions trend from fossil fuel power plants located within a group of 
eastern States and the Province of Ontario. NESCAUM estimated the 
geographical scope of the SO2 source region that influences 
downwind sulfate deposition in New England using results from EPA's 
Regional Acid Deposition Model (RADM) (EPA, 1995). The RADM model 
``tagged'' SO2 emissions from power plants and large 
industrial sources in 53 separate subregions of the eastern United 
States and Canada. For each subregion, the model simulated 
SO2 emissions in 1985 and projected for 2010 after 
implementation of Title IV of the Clean Air Act, and then tracked the 
SO2 and its chemical transformations during downwind 
transport and ultimate deposition. From RADM's deposition contribution 
plots, NESCAUM identified the following States and province as 
containing sources that contribute some level of sulfate deposition in 
New England: Connecticut, Delaware, District of Columbia, Illinois, 
Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New 
Hampshire, New Jersey, New York, Ohio, Ontario, Pennsylvania, Rhode 
Island, Vermont, Virginia, and West Virginia (see Figure 2).
    To correlate with the SO2 emissions trend, NESCAUM used 
sulfate deposition data from ten monitoring sites in New England 
collected by the National Atmospheric Deposition Program (NADP). \7\ 
The usual caveat applies in assessing a correlation. A strong 
correlation between emission and deposition trends does not necessarily 
imply a cause-and-effect relationship. The difficulty is that 
SO2 emissions from power plants are decreasing across much 
of the eastern United States. Any deposition decrease in New England 
could be positively correlated with any decrease in SO2 
emissions no matter where it occurs in the eastern United States. 
Therefore, NESCAUM uses the RADM modeling results to better refine the 
scale of the potential source region. Determining which upwind areas, 
based on the RADM results, contain sources contributing to downwind 
deposition provides an objective rationale for narrowing the 
geographical scope of the potential source region. While not completely 
conclusive, it provides a reasonable basis for believing a positive 
correlation between SO2 emissions and sulfate deposition in 
the New England region will be more than coincidental.
---------------------------------------------------------------------------
    \7\ National Atmospheric Deposition Program (NRSP-3)/National 
Trends Network, 1998, NADP Program Office, Illinois State Water Survey, 
2204 Griffith Drive, Champaign, IL 61820.
---------------------------------------------------------------------------
    Figure 3 presents a plot of the emissions-related correlation with 
the scaled sulfate deposition. The trend in sulfate deposition in the 
New England region is strongly correlated with fossil fuel 
SO2 emissions in the source region identified from the RADM 
modeling results (correlation coefficient R2 = 0.78). \8\ The results 
are consistent with previous trend analyses by other researchers 
(Holland et al., 1999; Shannon 1999). The strong correlation supports a 
conclusion that upwind sources in the region identified by th RADM 
results contribute to acidic deposition in New England, and recent 
SO2 reductions at these sources have led to decreases in 
downwind acidic deposition.
---------------------------------------------------------------------------
    \8\ A correlation coefficient R2 approaching a value of one 
indicates a strong correlation. On the other hand, an R2 approaching 
zero would indicate a weak correlation.
---------------------------------------------------------------------------
The Need for a Federal Role
    A report by the General Accounting Office (GAO, 2000) concludes 
that at the time Congress drafted the 1990 Clean Air Act Amendments, it 
did not recognize how lakes and soils in the Adirondacks and other 
eastern areas might lose the ability to neutralize acidic deposition or 
use excess nitrogen. Therefore, even with reduced emissions of acid 
forming pollutants under the 1990 CAAA, the Northeast's ecosystems may 
be too impaired to respond. Noticeable improvement in the environment 
may not occur unless pollution sources make deeper reductions beyond 
current CAA requirements.
    Although pollution sources are meeting the CAAA acid rain 
requirements, the acidification of northeastern surface waters 
continues. Recent reports suggest that pollution sources will need to 
achieve additional substantial reductions in SO2 and NOx 
emissions beyond what the CAAA Title IV requires (GAO, 2000; Acidifying 
Emissions Task Group, 1997). Action at the State level is beginning to 
respond to the CAAA shortcomings. Recently signed legislation in the 
State of New York attempts to discourage New York businesses from 
selling any available emission allowances to upwind States where the 
added emissions may contribute further to New York's acid deposition 
problem. While there is debate over whether New York's action will have 
much of an impact, it indicates a growing level of frustration with 
progress toward reducing acidic deposition that is beginning to 
manifest itself politically. Unfortunately, a State has only limited 
ability to compensate for environmental damage caused by pollution 
sources located over a broad region outside its borders. To 
realistically address this problem, States need action at the Federal 
level.
Conclusion
    States need flexibility to develop innovative programs that will 
meet public health and environmental goals. At the same time, the 
Federal Government has an important role to play in ensuring that out-
of-State pollution sources share equal responsibility in solving 
downwind pollution problems. Air pollution transport is one such area 
that requires in-State flexibility combined with a Federal role to that 
ensure all States recognize their mutual obligations to address 
interstate pollution problems.9
    One approach that combines State flexibility with a strong Federal 
role is a multistate and multipollutant ``cap and trade'' program. 
Title IV of the CAAA has had great success in accomplishing cheap 
reductions of SO2 pollution across a broad region of the 
country. The Federal Government set an overall target, but left it up 
to the States and pollution sources to develop the best approach for 
meeting the reduction target. The requirements of EPA's NOx SIP Call 
promise similar flexibility in reducing NOx emissions during the ozone 
season.
    At the Federal level, a multi-pollutant cap and trade scheme along 
the lines proposed by Senator Smith would facilitate flexible State 
action in partnership with a Federal role. Under a multi-pollutant 
scheme, further reductions in SO2 and NOx emissions could 
build upon the success of the current CAAA Title IV national 
SO2 emission cap and trade program. The NOx SIP Call, as 
currently being implemented, will cap NOx emissions in a number of 
eastern States, but only during the 5-month ozone season. States will 
need Federal support to further tighten the SO2 cap beyond 
current Title IV levels, and extend NOx limits from seasonal to annual 
requirements in order to fully address continuing acid rain problems. 
States could also pursue complementary reductions in other pollutants, 
such as mercury, and develop voluntary programs to reduce carbon 
dioxide, a potent greenhouse gas. The multipollutant approach would 
give States flexibility in developing innovative strategies to reduce a 
range of pollutants emitted in-State, but retain a Federal presence to 
ensure all pollution sources share in their mutual responsibility to 
address interstate pollution problems, regardless of where the sources 
are located.
                               References
    Acidifying Emissions Task Group, 1997. Toward a National Acid Rain 
Strategy, Submitted to the National Air Issues Coordinating Committee. 
Report available from Environment Canada, Ottawa (October).
    Blumenthal, D.L., et al. 1997. Transport and Mixing Phenomena 
Related to Ozone Exceedances in the Northeast U.S., Sonoma Technology 
Report STI-996133-1710-WD1.1, February.
    Clarke, J.F. & J.K.S. Ching 1983. Aircraft Observations of Regional 
Transport of Ozone in the Northeastern United States, Atmos. Envt., 
Vol. 17, pp. 1703-12.
    EPA, 1995. Acid Deposition Standard Feasibility Study Report to 
Congress, EPA 430-R-95-001a (October).
    EPA 1998. National Air Quality and Emissions Trends Report, 1996, 
EPA 454/R-97-013, p. 17, January.
    Fiore, A.M., D.J. Jacob, J.A. Logan, & J.H. Yin 1998. Long-Term 
Trends in Ground Level Ozone over the Contiguous United States, 1980-
1995. J. Geophys. Res., Vol. 103, pp. 1471-80.
    GAO (General Accounting Office), 2000. Acid Rain: Emissions Trends 
and Effects in the Eastern United States, General Accounting Office, 
Washington, DC (March).
    Gillani, N.V. & W.E. Wilson 1980. Formation and Transport of Ozone 
and Aerosols in Power Plant Plumes, Ann. N.Y. Acad. Sci., Vol. 338, pp. 
276-96.
    Holland, D.M., P.P. Principe, and J.E. Sickles, II, 1999. Trends in 
atmospheric sulfur and nitrogen species in the eastern United States 
for 1989-1995, Atmos. Envt., Vol. 33, pp. 37-49.
    Husar, R.B. 1996. Spatial pattern of daily maximum ozone over the 
OTAG region, Web address: http://capita.wustl.edu/OTAG/Reports/
otagspat/otagspat.html.
    Husain, L., V.A. Dutkiewicz, and M. Das, 1998. Evidence for 
decrease in atmospheric sulfur burden in the eastern United States 
caused by reduction in SO2 emissions, Geophys. Lett., Vol. 
25, pp. 967-970.
    Lurmann, F.W., et al. 1997. Evaluation of the UAM-V Model 
Performance in the Northeast Region for OTAG Episodes, Sonoma 
Technology Report STI-996133-1716-WD2.1, March.
    Lynch, J.A., V.C. Bowersox, and J.W. Grimm, 1996. Trends in 
precipitation chemistry in the United States, 1983-1994--An Analysis of 
the effects of Phase I of the Clean Air Act Amendments of 1990, Title 
IV, U.S. Geological Survey Open-File Report 96-0346.
    Miller, D.F., A.J. Alkezweeny, J.M. Hales, & R.N. Lee 1978. Ozone 
Formation Related to Power Plant Emissions, Science, Vol. 202, pp. 
1186-88.
    Miller, Paul J., 1999. Emissions-related acidic deposition trends 
in Maine and New England, EPA Project No. CX826563-01-0, NESCAUM, 
Boston, MA (December).
    NESCAUM (Northeast States for Coordinated Air Use Management), 
1998. The Costs of Ozone Transport: Achieving Clean Air in the East, 
NESCAUM, Boston, MA, (July).
    Shannon, J.D., 1999. Regional trends in wet deposition of sulfate 
in the United States and SO emissions from 1980 through 1995, Atmos. 
Envt., Vol. 33, pp. 807-816.
    White, W.H., D.E. Patterson & W.E. Wilson, Jr. 1983. Urban Exports 
to the Nonurban Troposphere: Results from Project MISTT, J. Geophys. 
Res., Vol. 88, pp. 10,745-52.
                               __________
    Statement of Robert J. Huston, Chairman, Texas Natural Resource 
                        Conservation Commission
    Mr. Chairman, members of the Senate Committee on the Environment 
and Public Works, I am Bob Huston, Chairman of the Texas Natural 
Resource Conservation Commission. I am pleased to provide information 
to you about the successes we've had in Texas in assuming delegation of 
environmental responsibilities from the U.S. Environmental Protection 
Agency, in particular delegation of the National Pollutant Discharge 
Elimination System (NPDES) permitting authority.
    I add my testimony to that of other representatives from across the 
United States: from South Carolina, from New Hampshire, from 
Pennsylvania, and Utah. There are many more like us who could also 
testify to the successes that come from devolution of environmental 
responsibilities. Because while the issues may be similar across the 
States, there are marked differences in how those issues should be 
approached. Quality air, good water, safe waste disposal these are the 
goals to which we all adhere. Geology, climatic conditions, topography, 
industrial and commercial activity, population clusters, diversity of 
natural resources these are some of the variables that make each of our 
States unique and that require responses that are tailor-made rather 
than cut down from a one-size-fits-all.
    EPA cannot begin to respond to the unique needs and circumstances 
of each State. The sheer size of this country makes that a foregone 
conclusion. Rather, EPA works best when it serves as our partner, 
providing oversight, guidance and assistance.
    I say this with profound conviction born of first-hand experience 
through baptism by fire.
    Let me lay out the scene for you:
    I was appointed to the TNRCC by Governor George W. Bush in January 
1999. I stepped into the position just as Texas, after 25 years of 
effort, was delegated responsibility from the EPA for administering the 
NPDES program. NPDES is the national program for issuing permits to all 
facilities that discharge wastewater. Permittees range from huge 
industrial complexes and municipal wastewater treatment facilities to 
confined animal feeding operations to facilities serving a single 
subdivision or mobile home park. Permits specify a whole host of 
criteria: the volume of wastewater that can be discharged under 
differing conditions as well as the composition of the discharge, such 
as the concentration of chemicals, nutrients, and other substances 
contained in the discharge. Those who fail to comply with the terms of 
the permit face significant penalties. NPDES permits expire after 5 
years; when reissued, they often require the permitted facility to meet 
tighter discharge parameters. This process ensures continued progress 
toward enhanced water quality . . . at least in theory.
    In reality, the NPDES program for Texas was not in very good 
condition. When Texas inherited NPDES from EPA we also inherited a 
backlog of some 4,000 permit files, including many applications, some 
for renewals, others for new permits. Many of the files were obsolete. 
Some of the files included applications that were 20 years old . . . 
and had never been acted on.
    This is not to say, however, that no one in Texas was tracking, 
monitoring, assessing, and, when appropriate, enforcing water quality 
regulations. The State of Texas was handling these tasks and handling 
them well. Texas knows how to properly run a water permitting program. 
During the 25 years that NPDES had remained a federally managed program 
in Texas, we had been issuing State discharge permits to a much broader 
universe of facilities. Although NPDES requires permits of all 
facilities, the program as administered by EPA was focused on major 
facilities. As demonstrated by the backlog, it was unable to handle 
most of the minor facilities. Texas waste-water discharge permits, on 
the other hand, were being issued to all facilities, major and minor. 
This is significant because we are unique among States in having 
significantly more almost five times more minor facilities as major 
ones. Our current tally is about 550 major facilities compared to about 
2,500 minor facilities.
    Those minor facilities would have fallen through the cracks without 
our State permitting program. And as we all know, small facilities can 
have potentially major impacts, and the cumulative effects of this 
universe of dischargers cannot be ignored.
    Basically we were running a system that was parallel to the NPDES 
but much more comprehensive. Furthermore, the discharge parameters for 
all permits whether written by EPA or by Texas have always been based 
on water quality standards set by the State, as provided by the Clean 
Water Act. The States are the ones with detailed knowledge about the 
water bodies within our boundaries.
    Over the years, we continued to refine our system to reflect our 
ongoing work in the field. For example, Texas has successfully moved 
permit renewals to a basin rotation, so that all permits within a given 
river basin come up for renewal at the same time. This allows us to 
consider the cumulative impacts of wastewater discharges on water 
quality, rather than looking at each facility in isolation.
    In Texas, like in many other States, the program was working and 
working well. Overlaying this comprehensive and effective State program 
with a Federal program provided little benefit to the environment and 
was burdensome to the regulated community.
    Fortunately, Texas was delegated the program in September 1998, 
along with its 4,000 files.
    Now, with the new Texas Pollutant Discharge Elimination System, 
facilities no longer need both a Federal and a State permit. They can 
now apply for a single wastewater discharge permit through a 
streamlined and more cost-effective permitting process. For entities 
with complex permits, this means thousands of dollars in cost savings 
and processing time. For Texas, it means more efficient and effective 
water quality protection, with permits tailored to the needs and 
conditions of each local water body and the communities it serves. The 
end result is efficient protection of our water resources.
    Building this new system was not easy. We needed to quickly merge 
the two permitting systems, absorb the Federal backlog, and do so 
without unduly affecting the many permittees who expect and deserve 
their new and renewal applications be processed in a timely fashion. It 
was akin to changing a tire on a moving car.
    The TNRCC workload increased dramatically. Nonetheless, after first 
organizing and categorizing the massive set of inherited files, we set 
for ourselves an ambitious goal of clearing out in one year (calendar 
1999) the permit backlog accumulated by EPA over 20-plus years. I am 
proud to say we excelled at the job: by January 2000 we had erased the 
backlog and had the new TPDES program running on an even keel.
    How did we do it? There are three parts to that answer. Hard work 
and know-how are one part. Certainly, we could not have accomplished 
this feat without the dedication of TNRCC staff and their years of 
experience in developing wastewater discharge permits, their thorough 
knowledge of the State's water bodies, and their comprehensive 
understanding of Texas water quality standards.
    Another part of the answer is flexibility. We reallocated resources 
from other parts of the agency primarily permit writers from our air 
and waste programs so that we could focus intensive efforts on this 
project. This type of flexibility is the hallmark of State 
environmental programs; we can respond to priorities in ways not 
available to the EPA. In Texas, we see the future of environmental 
successes not always in prescriptive regulations and procedural 
mandates but rather in regulatory flexibilities that set clearly 
defined goals and standards for accountability. This is the way we run 
our agency and the way we craft our programs.
    Finally, the third part of the answer is EPA itself. Region 6, 
under Regional Administrator Gregg Cooke, provided us with $2.5 million 
in grants to bring additional resources to the effort. Just as 
importantly, Region 6 furnished technical resources and provided 
oversight assistance. Region 6 made delegation work.
    TPDES is a success story for everyone:
      for the TNRCC, which took an already massive State 
permitting program and merged it seamlessly with a Federal program;
      for Texas facilities, which now have a single efficient 
system for permitting wastewater discharges;
      for Texas communities, which enjoy a sound and 
responsible program for protecting the quality of water in their lakes 
and rivers; and
      for the EPA, which can now focus on its proper role of 
overseeing and providing resources to ensure successful implementation 
of Clean Water Act objectives. Through delegation, it has achieved its 
goals.
    In Texas, we firmly believe this success can be replicated in other 
areas, most notably with the Total Maximum Daily Load program. To EPA 
we say yes, set the goals, but give us the flexibility to achieve those 
goals in the most efficient and effective manner, taking into account 
our unique circumstances. Delegation, not micromanagement, is the key 
to successful protection of the environment.
    Thank you for the opportunity to share this success story with you.
                               __________
                   Georgia Department of Natural Resources,
                                                      May 19, 2000.

The Honorable Robert C. Smith, Chair,
Senate Environment and Public Works Committee,
U.S. Senate,
Washington, D. C. 20510

Dear Chairman Smith: I appreciate the opportunity to enhance the 
testimony of my ECOS colleagues as to the role of the States in 
enforcement of the environmental statutes of the nation.
    The Georgia Environmental Protection Division (EPD) is responsible 
for enforcing 20 State laws passed over the past 34 years to protect 
Georgia's environmental resources. In addition, the responsibility for 
environmental programs under four Federal laws is delegated to EPD.
    The regulated community affected by these laws is extremely 
diverse, ranging from individual car owners to large corporations to 
most local governments.
    EPD directly regulates over 60,000 facilities by permit, rule and 
license. There are 30,480 facilities regulated by permit, 29,260 
regulated by rule and 772 regulated by license. In addition, there are 
2,800,000 vehicles in metropolitan Atlanta regulated by emission 
testing and inspection.
    EPD uses various mechanisms to assure compliance and to respond to 
non- compliance. These include inspections, review of self monitoring 
data, written violation notices, orders, monetary settlement 
(penalties) collection and referrals to the Attorney General for 
penalty imposition hearings.
    We estimate the compliance rate of facilities in Georgia to be 
roughly 90 percent. The remaining 10 percent is the subject of our 
enforcement.
    From 1991 through 1997, EPD executed an average of 412 enforcement 
orders each year. However, starting in 1998 our enforcement has been 
increasing. In 1998, we issued 996 enforcement orders and in 1999,1410 
orders. Since 1991, EPD has collected over $50,000,000 in environmental 
penalties.
    An important question is, ``How many of our enforcement orders 
pertain to federally delegated programs?'' The answer is ``the vast 
majority''. For example, in 1999,1263 of the 1410 orders were for such 
programs.
    I would like to highlight an important Georgia enforcement policy. 
Starting in 1998, Georgia has ``zero-tolerance'' for violations of the 
Georgia Water Quality Control Act (the equivalent of the Federal Clean 
Water Act) for facilities located in sensitive river basins (basically 
all of highly populated North Georgia). This zero-tolerance policy 
provides that any violation, no matter how minor, results in a monetary 
penalty. This includes wastewater permit violations, sewer overflows or 
spills, and failure to meet construction schedules. This policy was put 
in place with the thinking that the owners and operators of wastewater 
systems have had adequate time to know the requirements and to adhere 
to them. This policy allows no excuse for violations. In 1998, 79 
enforcement orders were executed and $339,000 penalty dollars collected 
resulting from this policy. In 1999, the 75 enforcement orders were 
issued and $552,000 were collected. It is our hope that theses numbers 
will decrease over time as our enforcement policy will convince cities 
and industries to avoid even the most minor infractions.
    It would be inappropriate to fail to mention and commend Region IV 
of the U.S. Environmental Protection Agency for its support of our 
enforcement program. Although EPD carries out a very effective program, 
we typically ask and receive assistance from Region IV on a few key 
enforcement cases yearly. Region IV accepts our requests willingly and 
aggressively.
    Thank you for your consideration of our information and the 
testimony of other ECOS members.
            Sincerely,
                                Harold F. Reheis, Director,
                                The States Protect the Environment.

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