DRAFT - FOR DISCUSSION PURPOSES 1.0 INTRODUCTION 1.1 Purpose and Scope A 1989 joint project between Amoco Corporation (Amoco) and the United States Environmental Protection Agency (EPA) (referred to as the Yorktown Project) revealed that the current "command and control" system of environmental regulation neither encourages nor rewards innovation. The Project demonstrated that by allowing site-specific flexibility, rather than a "one size fits all" approach, innovation can be encouraged and more effective solutions to environmental problems could result. As a follow-up to the Yorktown Project, this report identifies opportunities for such flexibility under existing federal environmental statutes. Over 20 options have been identified. A few would require statutory amendments, but most can be accomplished under existing statutory authorities. This report is not intended to evaluate possible statutory amendments, although a few obvious examples are noted where appropriate, particularly with respect to the Clean Water Act. Further, the report focuses only on federal environmental laws. State laws and the potential for flexibility at the state level are beyond the scope of this report. Finally, while over 20 options are discussed in this report, we recognize that many other options and opportunities may also exist. We are encouraged by the range of possibilities suggested by this analysis and hope this report can become a starting point for further discussions concerning opportunities for environmental innovation, regulatory flexibility and improved environmental performance. 1.2 The Yorktown Project In late 1989, Amoco and EPA began a voluntary, joint project to study pollution prevention opportunities at Amoco's Yorktown, Virginia refinery. The Project's Workgroup, with representatives from EPA, Amoco and the Commonwealth of Virginia, conducted a comprehensive inventory of refinery "releases" to the environment and evaluated options for reducing these releases. A key conclusion of the Yorktown Project is that similar environmental results can be achieved in a more effective manner than allowed by existing laws. The participants in the Yorktown Project unanimously selected the four most effective pollution prevention options for that particular facility. They also agreed on the least effective options for this facility. The selected options did not necessarily coincide with current regulatory requirements. By prioritizing environmental efforts based on their effectiveness in pollution prevention or control, release reductions equivalent to those required by regulations could have been achieved at the refinery at 25% of the cost. DRAFT-FOR DISCUSSION PURPOSES The Project also demonstrated that today's environmental mandates, with their singlemedia approach, often ignore the technological and logistical issues associated with overlapping environmental challenges, as well as the multimedia impacts of a particular rulemaking. If a facility wishes to take a coordinated, site-wide, multimedia approach to pollution reduction, there is currently no mechanism for allowing it to do so, i.e., there are extremely limited opportunities for coordinating conflicting technical requirements and compliance schedules. Single-media requirements can present a significant disincentive to innovation and coordinated strategies for environmental management. There are three prerequisites to an effective regulatory system that promotes innovation and flexibility. First, regulated facilities must have the flexibility to prioritize environmental efforts based on effectiveness of risk reduction and pollution control or prevention. One way to accomplish this is through performance standards rather than specified design or technology standards. Second, institutionalized obstacles and disincentives must be minimized. These may take the form of inefficient permitting or approval requirements or highly detailed, prescriptive regulations. Finally, a partnership must exist between the EPA, the facility and its state and community. Mutual trust is integral to innovative environmental efforts. The text of this report focuses on the first two of these elements, and attempts to facilitate the third. It identifies opportunities for innovation and flexibility, as well as the corresponding regulatory and institutional obstacles. Some of these options are already being adopted by EPA. For example, EPA recently proposed its Economic Incentive Program regulations under the Clean Air Act, which promote a number of market-based incentives for controlling air pollution. EPA is also reviewing a number of hazardous waste regulations as a result of the RCRA Reform Initiative. This report reviews these initiatives, but goes farther by identifying many other potential opportunities for encouraging innovation and promoting flexibility. Congress, EPA and industry have grown accustomed to and have accomplished much with command and control approaches. There is a natural reluctance to change, especially where a new approach requires greater effort and trust by all parties. All parties will need solid assurance that alternative approaches are achieving the objectives of the regulatory requirements. Additional planning, monitoring, recordkeeping, and enforcement may be required, and may involve new technologies and new approaches to public participation. However, as the cost and complexity of environmental laws continue to escalate, the benefits of tailored approaches to pollution control and prevention are increasingly evident. A spirit of partnership is the key to accomplishing change of this nature. We believe the many legitimate concerns about monitoring, enforcement and recordkeeping are best addressed through partnership demonstration programs involving all the affected parties. Our hope and intent is that this report will facilitate discussion among all interested parties in order to realize more effective and innovative approaches to environmental protection. DRAFT-FOR DISCUSSION PURPOSES 1.3 Statutory Barriers to Regulatory Flexibility Under Federal Environmental The principle federal environmental statutes have not evolved in a coordinated fashion. Each has been forged through compromise and consensus, each at different times, each shaped by widely disparate interest groups. Each new statute or amendment has been debated in the context of the controversial, media-specific issues of the day. Historically, as an environmental statute has undergone mid-course corrective amendments, typically several years after the original enactment, much of the debate has centered upon EPA's alleged lack of progress in achieving certain objectives or deadlines embodied in the preamended law. The amendment process has frequently led to the enactment of detailed legislative mandates which remove EPA's discretion to prescribe environmental quality standards or establish priorities. These legislative requirements often trigger severe sanctions, sometimes referred to as "hammers", which "fall" on the regulated community if EPA fails to adhere to the legislative directives in a timely fashion. Such hammers take effect even if new information comes to light in later years, casting doubt on the prudence of the statutory standards and priorities. Of the many federal environmental protection programs that have evolved over the last twenty-two years, three have the greatest direct impact on industrial facilities in the United States: The Clean Air Act (CAA), the Clean Water Act (CWA) and the Resource Conservation and Recovery Act (RCRA). Each of these statutes makes passing reference to the others, but there is no single federal law which clearly empowers EPA to issue multimedia regulations or permits tailored to the unique environmental and economic circumstances at a particular industrial facility. While federal law currently lacks such an omnibus environmental prioritization provision, varying degrees of flexibility are afforded within the confines of each individual federal environmental statute. This report examines those opportunities for innovation and flexibility under existing federal statutes, particularly the CAA, CWA and RCRA. While some statutory changes may be required, many opportunities exist under existing statutes to allow flexible and innovative approaches to environmental protection. The primary recommendations of the report are summarized on the following pages: 3/ Excellent examples are the 1984 Hazardous and Solid Waste Amendments (HSWA) to RCRA and the 1990 Clean Air Act Amendments to the hazardous air pollutant provisions of $112. Again, the HSWA Amendments to §3004 of RCRA provide a pertinent example. DRAFT -FOR DISCUSSION PURPOSES OPPORTUNITIES FOR INNOVATION AND FLEXIBILITY UNDER EXISTING CLEAN AIR ACT 1. 2. 3. 4. 5. 6. Encourage innovation by using emission or performance standards rather than design or technology standards. For example, EPA's suggested changes to its benzene waste operations rule, discussed in §5.1, will allow entire facilities to devise individualized risk-reduction plans for benzene. This is a positive step in the right direction. Encourage emission trading and averaging by expanding the opportunities to implement alternative compliance strategies, e.g., by broadening the definition of "source." A good example is the "source" definition proposal in the agency's hazardous organic national emission standard. Encourage flexibility in state air programs, e.g., generic bubbles under the operating permit program, market incentives, mobile/stationary source trading, and NSR emission netting. EPA has taken major strides in this direction through its nonattainment area SIP guidance and its new economic incentives program rules. See §2.3.1. Encourage states to prioritize SIP control measures based on appropriate criteria, such as cost effectiveness or effectiveness in reducing pollution or risk. Historically, EPA SIP guidance has placed nearly all of its emphasis on ensuring the "effectiveness" of various air quality improvement strategies. Relatively little emphasis has been placed on encouraging or helping to devise SIP strategies that maximize cost-effectiveness or to prioritize SIP strategies that simultaneously achieve air quality and non-air quality environmental objectives. Encourage emission averaging under CAA Section 112 (or the "MACT," maximum achievable control technology) program, e.g., by allowing trading across source categories. Again, EPA's proposed hazardous organic national emission standard is a positive step forward in this regard. Create a source category or subcategory for facilities which meet the residual risk criteria and delist the category from MACT requirements. DRAFT - FOR DISCUSSION PURPOSES 7. 8. 9. Exempt certain pollution control projects from NSR, e.g., projects which: result in a net risk reduction, when considering multimedia impacts are required by another regulatory program (such as the construction of an EPA is currently reviewing the NSR program with the aim of simplifying the NSR process and providing incentives for projects that will enhance air quality. See §2.3.1. This initiative should be applauded. Revise emission netting procedures to compare actual emissions with future actuals rather than future potentials, such as the procedures employed in the so-called WEPCO rule for electric utilities. EPA is currently considering an extension of the "WEPCO rule" to non-utility source categories. Give priority to innovative technology waivers and allow flexibility in achieving CLEAN WATER ACT 10. Avoid specifying required technologies in permits; specify effluent limitations and give the facility flexibility with respect to the technology. Where effluent limits are based on water quality goals, local rather than national concerns must be recognized in the standard setting and permit-writing processes. RESOURCE CONSERVATION AND RECOVERY ACT 11. Revise the mixture and derived-from rules and definition of hazardous waste to tailor requirements to environmental risks and to promote pollution prevention (and, if necessary, revitalize the delisting process). 12. Revise the definition of solid waste to encourage recycling. 13. Address regulatory obstacles to cost-effective remediation and corrective action. 14. Adopt contingent management standards to promote pollution prevention and to |