Environmental Protection: EPA's and States' Efforts to "Reinvent"
Environmental Regulation (Testimony, 11/04/97, GAO/T-RCED-98-33).

GAO discussed the Environmental Protection Agency's (EPA) and the
states' roles in promoting and implementing innovative methods of
environmental regulation, focusing on: (1) a draft agreement between EPA
and the Environmental Council of the States (ECOS) on environmental
regulation; and (2) the findings of a GAO report on EPA's and the
states' efforts to reinvent environmental regulation.

GAO noted that: (1) the draft EPA-ECOS agreement provides a useful
framework in two key respects; (2) it attempts to clarify EPA's and the
states' roles in promoting and implementing innovative regulatory
projects; (3) in particular, the agreement addresses sensitive issues
that had been the subject of much debate between EPA and many states,
such as the extent to which innovation projects must demonstrate
improved environmental performance; (4) the agreement attempts to help
EPA manage a growing number of innovation projects by establishing a
process that distinguishes between those projects that can be handled at
lower levels within the agency and those that require senior
management's attention; (5) as with any such agreement, there are a
number of practical questions and procedural issues that need to be
clarified--some of which may be fully addressed only after EPA and ECOS
have had experience implementing the agreement; (6) beyond these
practical considerations, however, a number of broader issues need to be
addressed effectively to create a climate in which regulatory innovation
can succeed and in which environmental regulation can be truly be
reinvented; (7) among these barriers are: (a) many key stakeholders in
the reinvention process have expressed concern over the large number of
complex and demanding initiatives now being undertaken--as well as
confusion over the underlying purpose of some of the agency's major
initiatives; (b) EPA has had difficulty achieving buy-in among the
agency's rank and file, who have grown accustomed to a regulatory
structure that has largely been in place throughout the agency's 27-year
history; (c) the agency has had difficulty achieving agreement among
external stakeholders in a number of its reinvention efforts,
particularly when stakeholders perceive that unanimous agreement is
required before progress can be made; and (d) EPA has an uneven record
in evaluating the success of many of its initiatives; (8) in addition,
today's environmental laws impose requirements that have led to, and
tend to reinforce, many of the existing regulatory and behavioral
practices that EPA is seeking to change; and (9) as a consequence, the
agency will be limited in its ability to reinvent environmental
regulation within this existing legislative framework.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-98-33
     TITLE:  Environmental Protection: EPA's and States' Efforts to 
             "Reinvent" Environmental Regulation
      DATE:  11/04/97
   SUBJECT:  Environmental law
             Pollution control
             Reengineering (management)
             Interagency relations
             Environmental policies
             Federal/state relations
             Agency missions

             
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Cover
================================================================ COVER


Before the Subcommittee on Oversight and Investigations, Committee on
Commerce, House of Representatives

For Release
on Delivery
Expected at
1:00 p.m.  EST
Tuesday
November 4, 1997

ENVIRONMENTAL PROTECTION - EPA'S
AND STATES' EFFORTS TO "REINVENT"
ENVIRONMENTAL REGULATION

Statement of Peter F.  Guerrero, Director,
Environmental Protection Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-33

GAO/RCED-98-33T


(160417)


Abbreviations
=============================================================== ABBREV

  EPA -
  ECOS -
  CSI -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to be here to participate in today's hearing on the
Environmental Protection Agency's (EPA) and the states' roles in
promoting and implementing innovative methods of environmental
regulation.  Specifically, I will discuss (1) a draft agreement
between EPA and the Environmental Council of the States (ECOS)\1 on
this matter and (2) the findings of a recent GAO report on EPA's and
the states' efforts to "reinvent" environmental regulation, which was
prepared at the request of the full Committee and several others.\2

EPA's leadership has noted that future environmental challenges will
be more complicated than those of the past, requiring fundamentally
different regulatory approaches.  EPA has sought to meet these
challenges through a comprehensive effort to reexamine and reshape
its efforts to protect the environment.  As noted in EPA's March 1996
progress report on its efforts to reinvent environmental regulation,
the agency is undertaking a number of initiatives to "apply common
sense, flexibility, and creativity in an effort to move beyond the
one-size-fits-all system of the past and achieve the very best
protection of public health and the environment at the least cost."
In recognition of the states' critical role as co-regulators of
environmental protection, EPA and ECOS entered into negotiations in
1996 to develop an agreement with an overarching framework for EPA
and the states to promote and implement regulatory reinvention
efforts.  ECOS approved a draft of the agreement at its annual
meeting last month. 

In summary, we believe that the draft EPA-ECOS agreement provides a
useful framework in two key respects.  First, it attempts to clarify
EPA's and the states' roles in promoting and implementing innovative
regulatory projects.  In particular, the agreement addresses
sensitive issues that had been the subject of much debate between EPA
and many states, such as the extent to which innovation projects must
demonstrate improved environmental performance.  Second, the
agreement attempts to help EPA manage a growing number of innovation
projects by establishing a process that distinguishes between those
projects that can be handled at lower levels within the agency and
those that require senior management's attention.  As with any such
agreement, there are a number of practical questions and procedural
issues that need to be clarified--some of which may be fully
addressed only after EPA and ECOS have had experience implementing
the agreement. 

Beyond these practical considerations, however, a number of broader
issues need to be addressed effectively to create a climate in which
regulatory innovation can succeed and in which environmental
regulation can truly be "reinvented." Among these barriers are the
following, which we noted in our July 1997 report: 

  -- Many key stakeholders in the reinvention process have expressed
     concern over the large number of complex and demanding
     initiatives now being undertaken--as well as confusion over the
     underlying purpose of some of the agency's major initiatives. 

  -- EPA has had difficulty achieving "buy-in" among the agency's
     rank and file, who have grown accustomed to a regulatory
     structure that has largely been in place throughout the agency's
     27-year history. 

  -- The agency has had difficulty achieving agreement among external
     stakeholders (including federal and state regulators and
     representatives of industry and environmental organizations) in
     a number of its reinvention efforts, particularly when
     stakeholders perceive that unanimous agreement is required
     before progress can be made. 

  -- EPA has an uneven record in evaluating the success of many of
     its initiatives.  Evaluation is needed not only to show EPA
     management what does and does not work but also to provide
     convincing evidence to external stakeholders that an alternative
     regulatory strategy is worth pursuing. 

In addition, today's environmental laws impose requirements that have
led to, and tend to reinforce, many of the existing regulatory and
behavioral practices that EPA is seeking to change.  As a
consequence, the agency will be limited in its ability to "reinvent"
environmental regulation within this existing legislative framework. 


--------------------
\1 ECOS is a national nonpartisan, nonprofit association of state and
territorial environmental commissioners. 

\2 Environmental Protection:  Challenges Facing EPA's Efforts to
Reinvent Environmental Regulation (GAO/RCED-97-155, July 2, 1997). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Since the early 1970s, EPA's organization and approach toward
environmental regulation have mirrored the statutes that authorize
the agency's programs.  These statutes generally assign pollution
control responsibilities according to the regulated environmental
medium (such as water or air) or the category of pollutant (such as
pesticides or other chemical substances).  As a result, the statutes
have led to the creation of individual EPA program offices that focus
on reducing pollution within the particular environmental medium for
which each office has responsibility--rather than on reducing overall
pollutant discharges.  Among other problems, this structure has made
it difficult for the agency to base its priorities on an assessment
of risk across all environmental problems and to take into account
the cost and feasibility of various approaches.  The agency's
traditional approach toward environmental regulation has also been
criticized as precluding innovative and more cost-effective ways to
reduce pollution and as being inflexible in dealing with other
stakeholders in the regulatory process, such as states and regulated
entities. 

EPA's efforts to address these issues go back at least as far as the
mid-1980s, when the Administrator called on the agency to manage its
resources and activities so that they (1) account for the relative
risks posed by environmental problems, (2) recognize that pollution
control efforts in one medium can cause pollution problems in
another, and (3) lead to achieving measurable environmental results. 
Other efforts have also sought to involve stakeholders in the process
in a more collaborative manner, calling, for example, for more
negotiated rulemakings.  Since that time, however, GAO, EPA's Science
Advisory Board, the National Academy of Public Administration, and
other organizations have all pointed to the need to make
significantly greater progress in this direction. 

The passage of the Government Performance and Results Act of 1993 set
the stage for reinforced efforts to protect the environment more
efficiently and effectively.  The Results Act requires agencies to
consult with the Congress and other stakeholders to clearly define
their missions, establish long-term strategic goals (and annual goals
linked to them), and measure their performance against the goals they
have set.  Importantly, the statute emphasizes the need for agencies
to focus not on the performance of prescribed tasks and processes but
on the achievement of measurable program results. 

EPA and state officials agree that early reinvention efforts were
hampered by disagreements and misunderstandings over EPA's and the
states' roles in developing and implementing reinvention projects. 
These differences centered around issues such as how much flexibility
the states have to negotiate and approve reinvention projects and how
to include stakeholders in negotiations.  These differences came to a
head in February 1997, when EPA temporarily withdrew from
negotiations, begun in November 1996, on a proposal jointly prepared
by ECOS and EPA outlining a framework for EPA and the states to
promote and implement regulatory reinvention efforts.  Among other
things, the proposal was intended to "establish guiding principles
for reinvention and an efficient process that is receptive to
innovation proposals" and "improve decision-making between states and
EPA on innovation proposals, emphasizing clear lines of
communication, decision authority, accountability, and timeliness."
EPA and ECOS subsequently renewed negotiations. 


   THE DRAFT EPA-ECOS AGREEMENT
---------------------------------------------------------- Chapter 0:2

The renewed negotiations between EPA and ECOS led to a draft "Joint
EPA/State Agreement to Pursue Regulatory Innovation," which ECOS
approved on September 24, 1997, and EPA recently published in the
Federal Register for public comment.  As its preamble states, the
purpose of the joint agreement is to "establish a clear pathway and
decision-making process for state innovations that have encountered
federal barriers or need greater attention to help them succeed."
Toward this end, the draft agreement outlines (1) a set of general
principles that will govern regulatory innovation activities that EPA
and the states will manage jointly; (2) a process that EPA and the
states will use to identify which innovation proposals to pursue,
including the establishment of a mechanism for making decisions about
how to manage innovation proposals that do not fit into ongoing
reinvention programs; and (3) guidelines for EPA and the states to
evaluate the success of innovation activities carried out under the
agreement. 


      GENERAL PRINCIPLES
-------------------------------------------------------- Chapter 0:2.1

The agreement outlines seven principles for guiding joint EPA/state
regulatory innovation activities.  The principles, as summarized in
Part I of the agreement, are as follows: 

Experimentation:  Innovation involves change, new ideas,
experimentation, and some risk of failure.  Experiments that will
help achieve environmental goals in better ways are worth pursuing
when success is clearly defined, costs are reasonable, and
environmental and public health protections are maintained. 

Environmental Performance:  Innovations must seek more efficient
and/or effective ways to achieve environmental and programmatic
goals, with the objective of achieving a cleaner, healthier
environment and promoting sustainable ecosystems. 

Smarter Approaches:  To reinvent environmental regulation, regulators
must be willing to change the way [they] traditionally look at
environmental problems and be receptive to innovative, common sense
approaches. 

Stakeholder Involvement:  Stakeholders must have an opportunity for
meaningful involvement in the design and evaluation of innovations. 
.  .  .  The opportunities for stakeholder involvement should be
appropriate to the type and complexity of the innovation proposal. 

Measuring and Verifying Results:  Innovations must be based on
agreed-upon goals and objectives with results that can be reliably
measured in order to enable regulators and stakeholders to monitor
progress, analyze results, and respond appropriately. 

Accountability/Enforcement:  For innovations that can be implemented
within the current regulatory framework, current systems of
accountability and mechanisms of enforcement remain in place.  For
innovations that involve some degree of regulatory flexibility,
innovators must be accountable to the public, both for alternative
regulatory requirements that replace existing regulations and for
meeting commitments that go beyond compliance with current
requirements.  .  .  . 

State-EPA Partnership:  The states and EPA will promote innovations
at all levels to increase the efficiency and effectiveness of
environmental programs.  [They] must work together in the design,
testing, evaluation, and implementation of innovative ideas and
programs, utilizing each other's strengths to full advantage. 


      PROCESS TO SELECT AND REVIEW
      PROJECT PROPOSALS
-------------------------------------------------------- Chapter 0:2.2

The draft agreement states that "where procedures currently exist,
innovation proposals should be handled through normal EPA/state
program activities or other ongoing reinvention activities." Such
ongoing reinvention activities would include, for example, Project
XL\3 and the Common Sense Initiative.\4

Those proposals that do not fit into an existing reinvention effort
can be handled by an optional process outlined in the agreement. 
Acknowledging that "the most challenging regulatory innovation
proposals have been difficult to address," the agreement says that
the process provides an option "which states may use to get timely
decisions on innovation proposals." It establishes a management
framework that identifies the steps to be taken in developing and
reviewing innovation proposals; the decisionmakers for each step in
the process; and the procedures for communicating decisions.  The
optional process also requires a 3-month time frame within which EPA
must decide whether to approve a project. 

The new process for reviewing proposals also includes procedures for
classifying projects into one of three categories: 

Category 1:  Straightforward, transparent proposals that have clear
advantages, present few obstacles, are technically achievable, and
pose minimum environmental risk. 

Category 2:  Experimental proposals that have a more uncertain
environmental outcome; require more attention to design, implement,
and evaluate; and may involve some risk of failure. 

Category 3:  Strategic proposals that involve broad-based, new
approaches (e.g., statutory changes) and require policy discussion. 

As the agreement notes, this categorization is intended to ensure
that the level of EPA management attention takes into account a
project's complexity.  For example, the agreement specifies that if a
proposal involves a national policy or regulatory issue, the decision
will be made jointly by the appropriate EPA regional administrator,
relevant EPA national program managers, and officials from EPA's
Office of Reinvention.  EPA and the state will determine the category
into which a proposal falls, and this categorization will affect the
time frame for its implementation. 


--------------------
\3 Under Project XL (which stands for Excellence and Leadership), EPA
allows companies to test innovative ways of achieving environmental
protection at both the facility and the community levels if they can
demonstrate that the proposed changes will yield superior
environmental performance.  This requires applicants to achieve
results that exceed the level of environmental performance that would
have occurred without XL. 

\4 The Common Sense Initiative is an effort by EPA to bring together
government officials at all levels, environmentalists, and industry
leaders to create industry-by-industry strategies that will work
toward "cleaner, cheaper, and smarter" ways to achieve environmental
protection through consensus-based decision-making.  CSI is similar
to Project XL in that both initiatives attempt to reduce pollution in
the most cost-effective manner. 


      MEASURING SUCCESS
-------------------------------------------------------- Chapter 0:2.3

The draft agreement also stresses the importance of measuring both
the success of the decision-making process outlined in the agreement
and the success of individual innovation projects.  In addition, the
agreement acknowledges that developing useful measures is
challenging.  To help measure the success of the decision-making
process, EPA and the states plan to collect a variety of information,
including (1) the number and quality of innovation projects proposed,
(2) the number and quality of innovations implemented, (3) the
timeliness of the actions taken in the process, (4) the number of
proposals appealed, and (5) the speed with which information about
successful innovations is disseminated to other states.  To measure
the success of individual project proposals, the agreement stresses
that common criteria must be used by both EPA and the states to
evaluate projects.  The agreement refers to a separate, ongoing
effort by EPA and ECOS to develop core performance measures and
suggests that the proposed measures developed to date under this
effort be used as a starting point for evaluating projects initiated
under the agreement. 


      ISSUES NEEDING CLARIFICATION
-------------------------------------------------------- Chapter 0:2.4

As might be expected with any such agreement, a number of practical
questions and procedural issues will need to be clarified.  Among the
key issues needing clarification are (1) the extent to which the new
optional process will be used to select and review project proposals
and (2) the degree of environmental protection that innovation
projects will be expected to meet. 

Until EPA and the states have had a chance to implement the
agreement, it may be difficult to predict the extent to which the
states will rely on the optional process in an effort to expedite the
consideration of innovation proposals.  For example, while the
agreement states that current review procedures should be used where
such procedures exist (such as in the case of XL or CSI projects), an
official with EPA's Office of Reinvention suggested that the process
could also be used to address XL projects that run into difficulty. 
State officials we contacted who were involved in the negotiations
also noted that the language in the draft is ambiguous and that it is
presently unclear how many reinvention projects will actually go
through this process.  According to these officials, the extent of
reliance on the optional process should become clearer during
implementation. 

One of the most difficult issues for EPA and the states to resolve
was the level of environmental protection to be required of
innovation projects, as the following examples illustrate: 

  -- Noting that the most desirable innovations result in both
     greater efficiency and a cleaner environment, EPA maintained
     that projects should achieve "superior environmental
     performance" and that the degree of superior performance must be
     proportional to the degree of flexibility sought.  ECOS
     negotiators disagreed with this interpretation, contending that
     some projects should be allowed that only seek more
     cost-effective ways to meet current standards. 

  -- Negotiators for EPA and ECOS debated the extent to which riskier
     projects should be held to higher environmental performance
     standards than other projects.  EPA (and some states) argued
     that riskier projects should be held to a higher standard. 

The present agreement reflects compromises on both of these issues
but also exhibits at least some ambiguity on key issues.  On the
first issue, the agreement provides that while "innovations may be
designed primarily to improve the cost-effectiveness of achieving
environmental goals, these projects must ensure that there is no
adverse impact on environmental protection.  .  .  ." It is unclear,
however, how such assurances can always be provided, given the
inherent uncertainty associated with some innovation projects. 

On the second issue, the two sides agreed that "for projects that
have a greater uncertainty of the environmental outcome, or that
involve experimental technologies or approaches, alternative
requirements should be expected to have the clear potential to
provide increased environmental protection.  .  .  .  " The agreement
further provides that in such cases, EPA and the state agency, in
consultation with stakeholders, will determine whether such proposals
can produce "appropriate" gains in environmental protection, improved
sustainability of the ecosystem, or both.  However, it is not clear
that participants will easily agree on what constitutes "appropriate"
gains in environmental protection.  Also, since several environmental
groups have already raised concerns about this part of the agreement,
state officials involved in the negotiations said they expect this
provision may be a subject of continuing debate while the agreement
is out for public comment. 

Finally, negotiators for EPA and ECOS have worked hard to agree on
the language in the present tentative agreement, but revisions
resulting from the public comment process may affect this consensus. 
Specifically, EPA recently published the agreement in the Federal
Register for public comment and changes may be made in response to
the comments received.  ECOS members will then vote on whether the
agreement is still acceptable.  ECOS members' continued acceptance of
the agreement could depend on the nature of the changes made. 


   BROADER ISSUES TO ADDRESS IF
   REINVENTION EFFORTS ARE TO
   SUCCEED
---------------------------------------------------------- Chapter 0:3

As pointed out in our July 1997 report, a number of broader issues
still need to be effectively addressed if the agreement is to have
its intended effect, and if, in the long run, environmental
regulation is to be truly "reinvented."


      DIFFICULTY IN MANAGING A
      LARGE NUMBER OF INITIATIVES
-------------------------------------------------------- Chapter 0:3.1

Successful reinvention efforts require a clear understanding of an
organization's mission and of the role that individual efforts play
in achieving that mission.  However, our discussions with key
participants in EPA's reinvention process suggest that the large
number of initiatives under way may be diverting attention from the
high-priority efforts most in line with the agency's reinvention
objectives.  Specifically, officials from two of the three EPA
regional offices we visited during our review this past year cited
the large number of initiatives as a problem and indicated that
setting priorities among the initiatives would make the most
efficient use of the agency's resources.  Under the current
situation, they noted, the regional offices are expected to carry out
reinvention activities with few resources beyond those the regions
receive to carry out their traditional programs.  Officials from each
of the states we contacted cited similar problems.\5 The problem is
further compounded by confusion both within EPA and among other
stakeholders over the primary purpose of some of the agency's most
important initiatives.  An EPA-contracted analysis of the Common
Sense Initiative, for example, pointed to the absence of specific
objectives and expectations, noting that "instead of encouraging
out-of-the-box thinking as hoped, this has led to delays.  .  .  .as
[stakeholders] tried to figure out what EPA wanted or would accept
instead of inventing their own priorities and processes."

In light of these issues and EPA's efforts for several years to
encourage its headquarters and regions to develop new initiatives, we
concluded that it may be time for the agency to take stock of the
full range and cumulative impact of its reinvention activities. 
Accordingly, our report recommended that the Associate Administrator
for Reinvention be charged with leading a review of the agency's
reinvention initiatives to (1) determine whether there are any that
no longer support the agency's overall reinvention goals and should
therefore be discontinued, (2) set priorities among those that will
be continued, and (3) issue clarifying guidance, as needed, to help
ensure that the specific objectives and expectations of continuing
initiatives are clear to stakeholders within and outside the agency. 
EPA agreed with this recommendation. 


--------------------
\5 EPA's own Office of Administration and Resources Management also
identified similar problems in a broad review of the agency's
regional structure, noting that "the inability to disinvest from some
activities in order to concentrate on more value-added activities was
mentioned as a problem in all five Regions visited.  As one
individual characterized it, 'EPA is a mile wide and an inch deep.'"
See Innovative Regional Structures:  A Preliminary Assessment of the
FY '95 Regional Office Reorganizations.  (Dec.  1996), p.  73. 


      UNCERTAIN COMMITMENT TO
      REINVENTION AMONG RANK AND
      FILE
-------------------------------------------------------- Chapter 0:3.2

The agreement states that "regulators must be willing to change the
way we traditionally look at environmental problems and be receptive
to innovative approaches." EPA staff and state officials we contacted
generally agreed that EPA's top management has articulated a clear
commitment to the agency's reinvention effort.  But it has been
considerably more difficult to translate this message into an
agencywide commitment among EPA's more than 17,000 employees so that
everyday decisions reflect the Administrator's stated reinvention
principles.  We found that program and regional offices do encourage
staff, to varying degrees, to participate in reinvention activities
and that these efforts have engendered wider staff participation. 
Nonetheless, we also found a consistent acknowledgement from both
headquarters and regional management that achieving full commitment
to reinvention by the agency's rank and file will be difficult and
will take time.  One senior program official, for example, noted that
it will take time for culture change to filter down to EPA line staff
and to see if the change takes hold. 


      DIFFICULTY IN ACHIEVING
      AGREEMENT AMONG ALL
      STAKEHOLDERS
-------------------------------------------------------- Chapter 0:3.3

Under EPA's reinvention strategy, the agency's goal is to share
information and decision-making with all stakeholders, including
those "external" to the agency, such as state regulators and
representatives of industry and environmental organizations.  Among
other things, the agency hopes this strategy will help to avert
litigation by getting up-front agreement among the affected parties
and a commitment by industry to meet requirements it has acknowledged
to be achievable.  We found that the agency has, indeed, made
strenuous efforts to involve stakeholders with different interests
and perspectives but that achieving and maintaining consensus has
been an enormous challenge.  The greatest difficulties have come when
EPA has sought to achieve--or was perceived as seeking to
achieve--100 percent agreement.  Officials from the three states we
contacted noted that efforts to achieve unanimous agreement have been
problematic, particularly in Common Sense Initiative negotiations. 
Industry representatives agreed, some of whom have cited the problem
as a reason for thinking of terminating their participation in the
initiative.  Accordingly, we recommended in our report that EPA
improve the prospects for achieving consensus among concerned parties
in the agency's reinvention efforts by clarifying the circumstances
under which unanimous agreement is required.  EPA agreed with this
recommendation. 


      EFFORTS TO ACHIEVE QUICK
      RESOLUTION OF PROBLEMS
-------------------------------------------------------- Chapter 0:3.4

Some of EPA's earlier reinvention projects were affected by
miscommunication and other problems among the agency's headquarters
and regional offices and other participants.  In one notable instance
involving an XL project submitted by the 3M Company, Minnesota and 3M
officials withdrew their participation because they believed EPA
headquarters and regional officials were raising new issues late in
their negotiations.  To help address these kinds of problems, the
agency designated certain senior managers in September 1996 as
"reinvention ombudsmen" to respond to stakeholders' questions and
resolve problems in a timely fashion.  This process has helped in the
negotiation of a number of XL projects, but many stakeholders have
noted that in the longer term, senior management will not be able to
intervene each time a problem arises.  They cite the need for a more
sustainable process that distinguishes between problems that can be
resolved at lower levels within the agency and those that require
senior management's attention. 

To at least some extent, the agreement negotiated between EPA and
ECOS does appear to address this issue by providing for the attention
of senior-level management and specific decision time frames in
planning and approving complex innovation projects.  According to an
official in EPA's Office of Reinvention, projects that are not
successful under other reinvention efforts can use the project review
process outlined in the draft EPA/ECOS agreement to resolve problems. 
To the extent that projects unsuccessful under other reinvention
efforts are subject to the new agreement, it could help facilitate
decisions on reinvention proposals that need extra attention and
cannot be handled through other reinvention efforts. 


      LIMITATIONS OF EPA'S
      EVALUATION OF INITIATIVES'
      EFFECTIVENESS
-------------------------------------------------------- Chapter 0:3.5

Measuring performance allows organizations to track their progress
toward achieving their goals and gives managers crucial information
needed to make organizational and management decisions.  EPA has, in
fact, made some progress in measuring the effectiveness of its
reinvention initiatives.  The agency's Office of Enforcement and
Compliance Assurance, for example, has responded to the charge to
measure the results of its programs by implementing a comprehensive
effort with numerous stakeholders to identify innovative ways to
measure environmental compliance.  If successful, the initiative (the
"National Performance Measures Strategy") could facilitate the use of
a broader range of methods to engender compliance beyond the
traditional enforcement response that has been relied on so heavily
until now.\6

At the same time, officials with the agency's Regulatory Reinvention
Team acknowledged that the agency has neither sufficient performance
data nor an evaluation component for many of its initiatives. 
Accordingly, our report recommended that each of the agency's
initiatives include an evaluation component that measures the extent
to which the initiative has accomplished its intended effect.\7


--------------------
\6 In a review requested by the House Committee on Commerce, GAO is
presently examining how states use alternative enforcement strategies
and measure their success. 

\7 As noted earlier in this statement, the draft EPA-ECOS agreement
does address the need to measure both the success of the new
decision-making process outlined under the agreement and the success
of individual innovation projects.  According to the draft agreement,
"Innovations must be based on agreed-upon goals and objectives with
results that can be reliably measured in order to enable regulators
and stakeholders to monitor progress, analyze results, and respond
appropriately."


      LIMITATIONS IMPOSED BY THE
      CURRENT STATUTORY FRAMEWORK
-------------------------------------------------------- Chapter 0:3.6

We found wide disagreement over whether the current environmental
statutes must be revised for reinvention to succeed.  Many state and
industry officials have cited the need for statutory revisions, both
in the near term to encourage experiments in alternative methods of
achieving environmental compliance and in the longer term to achieve
a more fundamental change in the conduct of environmental regulation. 
For example, after identifying problems experienced by industry
participants in some of EPA's initiatives, a September 1996 industry
report concluded that "there is no short-cut, no way around the
difficult task of trying to legislate a better system."\8 In
contrast, EPA, supported by some in the environmental community,
maintains that the current statutory framework is sufficiently
flexible to allow for real progress on most reinvention initiatives. 

On the basis of our past evaluations, the results to date of EPA's
key reinvention efforts, and our contacts with a variety of
stakeholders for this review, we concluded in our July 1997 report
that constructive modifications can be made under the current
environmental statutory framework.  However, the framework does
establish standards that lead to many of the existing regulatory and
behavioral practices the agency is seeking to change.  Consequently,
as we and other organizations have noted in the past, EPA will be
limited in its ability to achieve major changes in environmental
regulation within the legislative framework as presently constructed. 
EPA's Deputy Administrator told us that the agency will reexamine
this issue in light of the recommendations of a key advisory group
(the Enterprise for the Environment) later this year. 


--------------------
\8 Industry Incentives for Environmental Improvement:  Evaluation of
U.S.  Federal Incentives, Resources for the Future (Sept.  1996). 
This report is addressed to the Global Environmental Management
Initiative, a nonprofit organization of 21 leading corporations
dedicated to helping businesses achieve environmental, health, and
safety excellence. 


-------------------------------------------------------- Chapter 0:3.7

In summary, Mr.  Chairman, the EPA-ECOS agreement helps to clarify
some of the difficult issues that have arisen in defining EPA's and
the states' roles in promoting reinvention.  The agreement also sets
forth a process that can be used to resolve particularly difficult
problems that may arise in obtaining agreement on project proposals. 
Only actual experience in implementing this agreement will tell how
well the agreement accomplishes these purposes.  At the same time,
EPA and the states face a number of fundamental barriers to
regulatory innovation that do not fall within the scope of the
agreement.  We believe these barriers, discussed in our July 1997
report, will need to be addressed before environmental regulation can
be substantially reinvented. 

Mr.  Chairman, this concludes our prepared statement.  We would be
pleased to answer any questions you or Members of the Subcommittee
may have. 


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