Air Pollution: Improvements Needed in Detecting and Preventing Violations

Published by the Government Accountability Office on 1990-09-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Improvements Needed
in Detecting and
Preventing Violations

                                         -_                 CL

RESTBI~--Not          to be released outside the
General Accounting Office unless specifically
approved by the Offlce of Congressional
             54% I!@
Resources, Community, and
Economic Development Division

September 27,199O

The Honorable John D. Dingell
Chairman, Subcommitteeon
  Oversight and Investigations
Committee on Energy and Commerce
Houseof Representatives
Dear Mr. Chairman:

This report respondsto your request that we examine the Environmental Protection
Agency’s (EPA) efforts to ensure that major stationary sourcesof air pollution do not exceed
air pollution control requirements. The report discussesEPA’S efforts to (1) require the use of
the most effective methods to detect air pollution violations at major sourcesand (2) impose
appropriate enforcement actions when violations are found.
Unless you publicly releaseits contents earlier, we plan no further distribution of this report
until 30 days from the date of this letter. At that time, we will send copiesof the report to
appropriate congressionalcommittees; the Administrator, EPA; and other interested parties.
We will make copies available to others upon request.

This work was performed under the general direction of Richard L. Hembra, Director,
Environmental Protection Issues(202) 276-6111.Major contributors to this report are listed
in appendix I.

J. Dexter Peach
Assistant Comptroller General
Executive Summ~

                   Exposure to unsafe levels of air pollution has been linked to incidences
Purpose            of cancer, lung disease,and other health problems, yet over one-third of
                   the nation’s population live in areas that exceededone or more federal
                   standards for air quality. The Environmental Protection Agency (EPA)
                   estimates that nearly 40 percent of air pollution comesfrom about
                   33,500 of the nation’s major stationary sourcesof pollution such as elec-
                   tric utilities, oil refineries, steel mills, and large factories.

                   Concernedabout pollution from major stationary sources,the Chairman,
                   Subcommittee on Oversight and Investigations, HouseCommittee on
                   Energy and Commerce,requested that GAO determine whether EPA (1)
                   usesthe most appropriate method for detecting violations at major sta-
                   tionary sourcesand (2) ensuresthat appropriate enforcement actions
                   are taken when violations are found.

                   Each major source has the potential to emit 100 tons or more of pollu-
Background         tants into the air annually, and somecan emit that much daily. In light
                   of the potential health risk posed by air pollution, the Clean Air Act
                   provides for a federal/state partnership under which states develop,
                   and EPA approves, State Implementation Plans specifying actions to reg-
                   ulate and control these sourcesof air pollution, including the issuanceof
                   permits specifying acceptableemission levels. EPA and authorized state
                   and local agenciesare responsible for detecting, and then abating, viola-
                   tions and for deterring their future occurrence.During 1989, these agen-
                   cies detected violations of permit or other requirements at about 14
                   percent of the major stationary sources.
                   Two primary methods are used to detect violations: on-site inspections
                   and emission monitors. On-site inspections, often lasting less than half a
                   day, are periodic assessmentsof facility compliance that may include
                   visual observation, review of operating equipment and records, and a
                   check of pollution control equipment. Emission monitors-automated
                   mechanical equipment usually placed in a facility’s exhaust or smoke
                   stack-provide direct, accurate measurementsof emissionsand can
                   operate up to 24 hours per day.

                   EPA estimates that emission monitors are 10 times more likely to detect
Results in Brief   air quality violations than on-site inspections becausethey measure
           Y       emissionsdirectly, provide nearly continuous coverageof facility opera-
                   tions, and detect violations that inspectors cannot. Although EPA issued
                   a policy aimed at increasing the use of monitors where feasible, it has

                   Page 2                                  GAO/RCED-90-155 Air Pollution Violations
                        Executive Summary

                        not implemented this policy by developing regulations that (1) establish
                        criteria for determining where monitors are feasible and (2) require
                        monitor use at sourcesmeeting the criteria. As a result, monitors have
                        been installed at only about 1,065, or 11 percent, of the sourceswhere
                        EPA estimates that monitors could be installed. In order to better address
                        the nation’s acid rain problems, proposed Clean Air Act amendments
                        call for the use of monitors at 1,100 sources,principally large utilities
                        that emit large quantities of sulfur dioxide, but someof these sources
                        already have monitors installed and EPA has no plans to require addi-
                        tional monitors beyond those called for in the legislation.
                        When violations are detected, EPA favors cash penalties calculated to
                        offset the economicbenefit that violators gained by not complying with
                        air quality requirements. However, over half of the fiscal year 1988 and
                        1989 violations defined as significant--EPA’s highest enforcement pri-
                        ority-were concluded with no cash penalty imposed. This occurred
                        becausemost enforcement actions against major stationary sourcesare
                        taken by state and local programs which, for the most part, operate
                        under their own enforcement authority. Proposedchangesto the Clean
                        Air Act should improve EPA'S ability to increasestate and local penalty
                        amounts and encouragestate and local agenciesto adopt economicben-
                        efit penalty policies.

Principal Findings

More Extensive Use of   Conditions have changedsince the 1970swhen the concernsof industry
Emission Monitors       and regulators over monitor cost and reliability causedEPA to limit its
                        emission-monitoring regulations to the newest and biggest major station-
Warranted               ary sources.Costs for monitors have becomemore reasonablefor many
                        major sources,to the point where monitor costs are small relative to
                        other pollution control equipment, and monitor reliability has greatly
                        improved. Monitors in Pennsylvania, for example, have collected reli-
                        able data over 90 percent of the time. Becauseof these changedcondi-
                        tions, and the greater detection potential of monitors as compared with
                        inspections, EPA announceda policy in 1988 calling for monitor usage
                        wherever feasible.
                        EPA, however, has not  issued regulations implementing this policy nor
                        has it developed criteria for making such feasibility determinations.
                        Instead, EPA has tried to convince state and local programs to

                        Page 3                                  GAO/RCED-90-155 Air Pollution Violations
                        Executive Summary

                        voluntarily require the use of monitors under their own authorities, but
                        with little success.As a result, only about 1,065 major stationary
                        sourceshad monitors installed by the end of 1989. Senior EPA compli-
                        ance officials estimate that monitors may be feasible at about 9,000
                        more major stationary sources,but they acknowledge the absenceof
                        clear criteria for evaluating sourcesfor monitor feasibility.

                        Although proposed amendmentsto the Clean Air Act call for EPA to
                        require monitors at about 1,100 major sulfur dioxide sources,someof
                        these sourcesare among those that have already installed monitors. EPA
                        has no plans to require additional monitors beyond those called for in
                        the proposed legislation, citing insufficient resourcesto addressnew and
                        emerging air quality problems and, at the sametime, develop criteria
                        and regulations to implement its emission-monitoring policy. Neverthe-
                        less,becauseemission monitors represent a significant improvement in
                        ensuring compliance, GAO believes that EPA development of such regula-
                        tions is warranted.

Penalties Often         Both the Clean Air Act’s administrative penalty authority and EPA'S own
Insufficient to Deter   internal civil penalty settlement policy direct agency enforcement offi-
                        cials to seek cash penalties sufficient to remove the economicbenefit to
Violations              noncomplying sources.However, in fiscal years 1988 and 1989, no cash
                        penalties were assessedin more than half of the significant violator
                        casesat major stationary sourcesbecauseEPA, in its review and
                        approval of State Implementation Plans, has not required state and local
                        agencies-which conduct the majority of enforcement actions-to
                        assesspenalties sufficient to eliminate the economicbenefit. GAO'S
                        review of eight state and local programs disclosedthat none regularly
                        sought to recover economicbenefit penalties. For example, GAO found
                        that the $15,000 penalty assessedin one casewas $200,000 lower than
                        the estimated economicbenefit gained by the violating source. Not col-
                        lecting sufficient penalties in such casesmay place sourcesthat comply
                        at an economicdisadvantage to violators.
                        According to EPA, the primary reason that state and local programs gen-
                        erally do not assesseconomicbenefit penalties is that they often seek
                        only to correct the causeof the violation. EPA can “overfile” and impose
                        larger penalties in such cases,but has generally not done so, citing
                        unclear authority and insufficient resources.ProposedClean Air Act
                        amendmentswould broaden EPA'S current authority to administratively
                        assesspenalties and would allow it to overfile in more casesto ensure
                        that economicbenefit penalties are sought. Nevertheless,EPA needsto

                        Page 4                                  GAO/RCED-90.155 Air Pollution Violations
                        Executive Summary

                        take actions to better ensure that state enforcement programs seek eco-
                        nomic benefit penalties when violations are detected so that inequities
                        do not occur between firms that comply and those that do not.

                        Currently proposed amendmentsto the Clean Air Act contain provisions
Recommendationto        that would broaden EPA'S administrative penalty authority to enable it
the Congress            to better ensure that appropriate cash penalties are assessed.GAO sup-
                        ports these proposals and recommendsthat the Congressinclude such
                        penalty authority in the final Clean Air Act legislation.

                        GAO recommendsthat    the Administrator,   EPA
the Environmental   l implement EPA'S emission-monitoring policy by developing regulations
Protection Agency     that (1) establish criteria for determining where monitors are feasible
                      and (2) require monitor use at all sourcesmeeting the criteria and
                    . require EPA enforcement staff to (1) use available enforcement authority
                      to overfile to the maximum extent possible when states assessinade-
                      quate penalties and (2) undertake efforts to include specific standards
                      for assessingeconomicbenefit penalties in the next revisions to State
                      Implementation Plans.

                        GAO discussedthe    report’s contents with appropriate EPA, state, and
Agency Comments         local officials, and their comments have been incorporated as appro-
                        priate. As directed by the SubcommitteeChairman, GAO did not obtain
                        official agency comments on a draft of this report.

                        Page 5                                 GAO/RCED-90-155 Air Pollution Violations

Executive Summary
Chapter 1                                                                                              8
Introduction            EPA, State, and Local Agency Rolesin Controlling
                            Stationary SourceEmissions

                        Ensuring Compliance Through Detecting and Deterring                           12
                        Objectives,Scope,and Methodology                                              13

Chapter 2                                                                                             17
Regulations Needed to   Detection Capability of Emission Monitors
                        Not Enough Emission Monitors in Use
Require Greater         ConcernsRegarding Monitor Reliability and Cost                                22
Emission Monitor Use    EPA’s Monitor Use Policy Not Implemented                                      27
at Major Stationary     Conclusions                                                                   29
                        Recommendation                                                                30
Chapter 3                                                                                             31
Penalty Amounts Not     Economic Benefit Penalties Established to Promote
Sufficient to Deter     Economic Benefit Penalties Not Imposed by State and                           33
Violations                  Local Programs
                        EPA Has Made Little Effort to Increase Penalties                              36
                        ProposedChangesto Clean Air Act May Improve                                   40
                            Penalties, but Clearer Direction Needed
                        Conclusions                                                                   41
                        Recommendationto the Congress                                                 42
                        Recommendationsto the Environmental Protection                                42

Appendix                Appendix I: Major Contributors to This Report                                 44

Tables                  Table 1.1: State and Local Offices in EPA RegionsIII, IV,                     14
                            and IX Included in GAO’s Review
                        Table 3.1: Resolution of State and Local Enforcement                          33
                            Actions for Significant Violator Cases,Fiscal Years

                        Page 0                                  GAO/RCED-99-155 Air Pollution Violations

Figures   Figure 1.1: Contribution of Major Stationary Sourcesto
              Air Pollution Nationwide
          Figure 1.2: Major Stationary SourcesReleasingVisible                         10
          Figure 1.2: Continued                                                        11
          Figure 2.1: Location and Operation of a Typical Opacity                      18


          CEM        continuous emissionsmonitors
          EPA        Environmental Protection Agency
          GAO        General Accounting Office
          NfiQs      National Ambient Air Quality Standards
          NESHAPS    National Emissions Standards for HazardousAir Pollutants
          NO,        nitrogen oxides
          NSPS       New SourcePerformance Standards
          RACT       ReasonablyAvailable Control Technology
          SIP        State Implementation Plan
          so2        sulfur dioxide
          VOC        volatile organic compound

          Page 7                                 GAO/RCED-90-155 Air Pollution Violations
Chapter 1


               As the Congressconsiderssignificant changesto the Clean Air Act, con-
               trolling air pollution continues to be a difficult task, Although signifi-
               cant progress has been made in reducing air pollution, the
               Environmental Protection Agency (EPA) reported in 1990 that more than
               120 million Americans lived in areasthat exceededone or more federal
               standards for acceptableair quality. Increased incidencesof cancer,
               lung disease,and other illnesseshave been linked to air pollution.
               Whether the air we breathe is safe or not dependson many factors, but
               principally, it dependson the amount of emissionsfrom over 170 million
               mobile sourcesand an estimated 300,000 stationary sourcesof air pollu-
               tion Mobile sources,such as cars, trucks, buses,and aircraft, are
               believed to account for nearly half of the emissionsof the six criteria
               pollutants, * including over two-thirds of the carbon monoxide emissions
               and nearly one-third of the volatile organic compounds(WCS). Station-
               ary sourcessuch as electric utilities, factories, and commercial buildings
               are responsible for most of the remaining emissions.Thesesourcesemit
               96 percent of the sulfur dioxide (so,),68 percent of the nitrogen oxides
               (NO,.., and 62 percent of the particulate matter, as well as contributing
               about 61 percent of total voc emissions-a major contributor to the for-
               mation of ozone,generally referred to as “smog.”

               Emissions from most mobile and stationary sourcesare difficult to mon-
               itor and control becauseof their large numbers and diversity of opera-
               tions. However, major stationary sources-comprising about 33,600 of
               the nation’s largest facilities2 -are more readily monitored and con-
               trolled. These sourcesinclude electric utilities, oil refineries, steel mills,
               and large factories and, according to EPA, account for nearly 40 percent
               of the emissionsof criteria pollutants nationwide and nearly 86 percent
               of all stationary source emissions.Figure 1.1 shows the relative contri-
               butions of major stationary sourcesto the nation’s air pollution

               ‘EPA establishedNational Ambient Air Quality Standardsfor six health-relatedpollutants-ozone,
               carbonmonoxide,sulfur dioxide, nitrogen dioxides,particulates,and lead.Thesepollutants are com-
               monly called “criteria pollutants.”
               ‘The term “facility” is usedthroughout this report to describea majorstationary sourceof air

               Page 8                                                GAO/RCED-90-165 Air Pollution Violations
                                      Chapter 1

Figure 1.1: Contrlbutlon of Major
Stationary Sources to Air Pollution
Nationwide                                 r                                        Mobile Sources

                                                                                    Other Sources

                                                                                    Stationary Sources

                                      Source: GAO illustration based on EPA data.

                                      According to EPA officials, control of emissionsat major stationary
                                      sourcesis especially important becauseof their ability to releasegreat
                                      quantities of pollutants if uncontrolled. Major stationary sourcescan
                                      releasemore pollution into the air in one day than many other sources
                                      can in one year. Every major stationary source,by definition, has the
                                      potential to emit 100 tons of pollutants, or more, annually and some
                                      facilities can emit that much pollution daily. For example, so, emissions
                                      from one large electric utility in Pennsylvania can reach 76,000 tons
                                      annually, or over 206 tons each day. Figure 1.2 shows two major
                                      stationary sourcesproducing visible emissions.

                                      Page 9                                        GAO/RCED-90-155 Air Pollution Violations
                         Chapter 1

                         The Clean Air Act provides for a federal-state partnership to be used in
EPA, State, and Local    addressingenvironmental problems. The act requires EPA to set national
Agency Roles in          standards for air quality and provides for states and localities to assume
Controlling Stationary   the responsibility of designing and implementing control strategies to
                         meet these standards. These control strategies are documented in the
Source Emissions         State Implementation Plans (SIPS). EPA is responsible for reviewing and
                         approving the SIPS to ensure that they are adequate to attain and main-
                         tain compliance with national air quality standards, and for overseeing
                         state and local implementation of these plans. In caseswhere state or
                         local plans are not approved, EPA promulgates a federal implementation
                         plan for the affected area. States and localities can propose revisions to
                         SIPS for EPA approval at any time, as long as the revised plan will still
                         attain or maintain the national standards.
                         An essential component of SIPS is the issuanceof permits specifying
                         acceptableemissionslevels to owners and operators of major stationary
                         sources.EPA and authorized state and local agenciesare responsible for
                         detecting violations of these permits and other requirements and, when
                         a violation is discovered, for taking appropriate action to bring the
                         facility back into compliance and to deter future violations. EPA relies
                         heavily on state and local programs to detect and deter violations at
                         major stationary sources.In 1988 and 1989, EPA authorized 107 state
                         and local agenciesto carry out provisions of the act. Under EPA
                         approval, funding assistance,and oversight, these agenciescarry out
                         over 90 percent of the actions designedto detect and deter violations at
                         stationary sourcesof air pollution. For example, state and local agencies
                         performed 34,263 of 37,716 inspections, or about 91 percent of all
                         inspections performed, in fiscal year 1988.

Ensuring Complia&        EPA, state, and local strategies for controlling stationary source emis-
                         sions rely, in part, on educating facility owners and operators through
Through Detecting        the issuanceof regulations and guidance, coupled with technical assis-
and Deterring            tance and site-specific permits that translate and tailor these require-
                         ments to an individual source’soperations. However, once permits
Violations               spelling out how pollution is to be controlled at individual facilities have
                         been issued, regulators generally rely on two methods to ensure that
                         sourcesmaintain compliance:3

                         3EPAalsousesstackteststo assesscompliance;however,thesetestsare not considereda primary
                         detectionmethodbecausethey are scheduledby the facility, employcontractorspaid by the facility,
                         and are performedinfrequently, often only onceevery 6 years during permit application or renewal,
                         accordingto EPA.

                         Page 12                                              GAO/RCED-90-165 Air Pollution Violations
                            Chapter 1

                        l   periodic on-site inspections, which compare facility emissionsand prac-
                            tices with permit levels and conditions, and
                        l   emission-monitoring devices,also known as “continuous emissions
                            monitors” (CEMS), which are mechanical instruments that measurethe
                            amount of pollutants leaving a facility on a near-continuous basis.
                            Section 114 of the Clean Air Act gives EPA the authority to use either or
                            both detection methods, in addition to others, to assessthe compliance
                            of any stationary source.The act doesnot require or prefer one detec-
                            tion method over another, but provides regulators with broad authority
                            to inspect, monitor, test, sample, and review any facility operations that
                            may reasonably be required to assesscompliance.
                            Onceviolations are detected, bringing the facilities back into compliance
                            and deterring future violations largely dependson regulators taking
                            appropriate, timely actions. In 1977, the Congressadded section 120 to
                            the act, which provided EPA with an enforcement mechanism designed
                            specifically to remove financial incentives to noncompliance.In adding
                            this provision to the act, the Congressintended for noncomplying major
                            sourcesto be penalized an amount equal to the economicvalue of the
                            noncomplianceto the polluter. Otherwise, sourcesnot complying were
                            viewed as obtaining a competitive advantage over firms that had
                            already installed the neededcontrol equipment or changedproduction
                            processesto meet their emission limitations. This penalty was to be
                            assessedin all caseswhere EPA found noncomplianceto exist and can be
                            waived only if the violation is de minimis or due to specific causeslisted
                            in the statute.

                            Concernedwith major stationary sources’potential to significantly con-
Objectives, Scope,and       tribute to unsafe levels of air pollution when operating in violation of
Methodology                 the Clean Air Act’s requirements, the Chairman, Subcommitteeon Over-
                            sight and Investigations, HouseCommittee on Energy and Commerce,
                            requested that we determine
                        l whether EPA usesthe most appropriate method of detecting violations at
                          major stationary sourcesof air pollution and
                        . once discovered,whether EPA takes appropriate action to compel compli-
                          ance at these sites.
                            To accomplish these objectives, in accordancewith agreementswith the
                            Chairman’s office, we performed work at the following EPA headquar-
                            ters offices:

                            Page 13                                  GAO/RCED-90-156   Air Pollution   Violntionn
                                                Chapter 1

                                            l   Stationary SourceCompliance Division, Office of Air Quality Planning
                                                and Standards, Office of Air and Radiation.
                                            l   Office of Air Enforcement Counsel,Office of Enforcement and Compli-
                                                ance Monitoring.
                                            l   Legal Enforcement Policy Branch, Office of Enforcement and Compli-
                                                ance Monitoring.
                                            l   Office of the Assistant Inspector General for Audit, Office of the
                                                Inspector General.
                                                We also visited three EPA regions and eight authorized state and local
                                                programs within these regions as shown in table 1.1.
Table 1.1: State and Local Offices in EPA
Regions III, IV, and IX included in GAO’s       EPA region         State agency             Local district
Review                                          Region III         Pennsylvania
                                                                   Department of
                                                Region IV          North Carolina           Mecklenberg County Department of
                                                                   Division of              Environmental Protection
                                                Region IX          California Air           Bay Area Air Quality Management District
                                                                   Resources Board
                                                                   Arizona Department       Maricopa County Bureau of Air Pollution
                                                                   of Environmental         Control
                                                                   Quality, Office of Air
                                                                   Quality                  Pima County Air Quality Control District

                                                Wejudgmentally selectedthese regions, states, and localities for geo-
                                                graphical coverage,program size, and diversity of sources,and because
                                                each had a significant number of the more than 120 million Americans
                                                living in areas that exceededone or more of the nation’s air quality stan-
                                                dards in 1988. For the agenciesselected,we performed work at each
                                                organizational level responsible for establishing, interpreting, and imple-
                                                menting EPA policies for detecting and deterring air pollution violations.
                                                Region III was selectedbecause,according to EPA, it contains someof the
                                                largest industrial sourcesin the nation, someof which are located in
                                                Pennsylvania. In addition to program size, Pennsylvania was selected
                                                because,according to EPA, it has one of the most advancedemission-
                                                monitoring programs in the nation. RegionIV is EPA'S largest region,
                                                responsible for overseeing8 states, 17 local programs, and over 5,400
                                                major stationary sourcesin 1988. North Carolina, with 1,462 major
                                                sources,has the largest single portion of this universe. Region IX was
                                                selectedto provide west coast geographical coverageand also because

                                                Page 14                                       GAO/RCED-99-155 Air Pollution Violations
Chapter 1

California has a large population potentially exposedto unsafe levels of
To addressour first objective, we reviewed agencyregulations, policies,
and selectedsource files, and interviewed air program officials in EPA
headquarters and the above regions, states, and localities to determine
the methods available for detecting violations, the successfulnessand
extent of the use of each, and the benefits and trade-offs of each
method. We gave particular emphasisto Pennsylvania’s use of emission-
monitoring devicesbecauseEPA points to this state as having one of the
most advancedprograms for both detecting and deterring violations
using continuous emissionsmonitors, and to Ohio since this state’s CEM
program was cited as one of the more comprehensiveprograms in EPA’S
1988 Continuous Emission Monitoring policy. We also gave particular
emphasis to EPA’S stationary source inspection program becausethe
effectiveness of this surveillance method was questioned in an earlier
GAO report,4 and becausethis is still the principal method used by EPA,
state, and local programs to detect violations. Additionally, we discussed
emission-monitoring technology with equipment manufacturers and

To addresswhether EPA and the states take appropriate action to ensure
compliance at noncomplying major stationary sources,we interviewed
EPA headquarters and regional compliance and enforcement program
officials, as well as those in the states and localities listed above and
obtained documents,where possible, describing their enforcement
responsepolicies and practices from January 1986 to the present. We
compared and contrasted these policies and practices regarding major
sourceswith Congress’intent in adding enforcement provisions to the
1977 act, and with EPA'S national policies for the appropriate, timely res-
olution of violations. In addition, we judgmentally selectedand reviewed
enforcement casefiles with violations identified from January 1, 1986,
to December3 1, 1987, to illustrate EPA and EPA-approvedenforcement
policies and practices at work. We also reviewed relevant reports issued
by EPA'S Office of the Inspector General.
Our work was performed from February 1988 through December1989.
In conducting our work, we reviewed EPA’S1987 and 1988 Federal Man-
agers’ Financial Integrity Act reports to the Congressand the President
for previously reported internal control weaknesses.Where possible, we

4Air Pollution: EnvironmentalProtectionAgency’sInspectionsof Stationary Sources
(FADIR6GD _85- 1BR, Oct. 24,1986).

Page 15                                            GAO/RCED#O-155     Air Pollution   Violations
Chapter 1

sought to identify the underlying causesof problems we found in EPA'S
programs for detecting and deterring Clean Air Act violations and the
associatedmanagementcontrols that should have prevented these
problems from occurring.
The views of EPA officials responsible for overseeingcompliance and
enforcement activities at major stationary sourceswere sought during
our review and are incorporated into the report where appropriate.
However, as requested by the Chairman’s office, we did not obtain offi-
cial agency commentson a draft of this report. Except as noted above,
our work was performed in accordancewith generally acceptedgovern-
ment auditing standards.

Page 16                                GAO/RCED-M-156 Air Pollution Violations
Chapter 2

Regulations Neededto Require Greakr
Emission Monitor Use at Major
Stationary Sources
                       EPA compliance officials estimate that continuous emission monitors are
                       10 times more likely to detect air pollution violations than on-site
                       inspections becausethey measure emissionsdirectly, provide near-
                       continuous coverageof facility operations, and detect violations which
                       inspectors cannot. Although concernsexisted over the reliability and
                       cost of CEMS, their reliability has improved and the costs have become
                       more reasonable.Monitors have been shown to be reliable over 90 per-
                       cent of the time, and while costs may continue to be a concern for some,
                       the economicburden of CEMS doesnot appear substantial for many
                       major sources,and somesourcesmay be able to reduce operating costs
                       by using fuel more efficiently.
                       In 1988, recognizing that conditions for CEMSuse had becomemore
                       favorable, EPA announceda policy encouraging the installation of
                       monitors at any major stationary sourceswhere their use is estimated to
                       be feasible. However, EPA has not issued regulations that (1) establish
                       criteria for determining where CEMuse is feasible and (2) require CEM
                       use at sourcesthat meet the feasibility criteria. As a result, monitors
                       have been installed at only 1,066 facilities, or about 11 percent of the
                       10,000 major sourceswhere EPA estimates that CEMS are feasible, and EPA
                       and states continue to rely primarily on inspections to detect violations.
                       Recentlegislative proposals to amend the Clean Air Act recognizethe
                       value of emission monitors and-in an effort to help addressthe acid
                       rain problem-call for the use of CEMS at about 1,100 of the nation’s
                       largest sourcesof so,. However, EPA compliance officials state that they
                       have insufficient resourcesto develop regulations requiring CEMS at all
                       sourceswhere feasible, and consequently have no plans to require
                       monitors beyond those called for in the proposed legislation.

                              are electro-mechanicalinstruments, usually installed in the
Detection Capability   CEMS
                       facility’s exhaust or smoke stacks, which sample, analyze, measure, and
of Emission Monitors   record the amount of pollutants passing through the stack. CEMS have
                       been developedto measure various types of pollutants emitted by
                       stationary sources.For example, one type of cE:w--opacity monitors-
                       generally operates by measuring the amount of light displaced by visible
                       emissions.This monitor, located in the stack, automatically determines
                       when the amount of displaced light (or opacity) exceedsits permit con-
                       ditions. Figure 2.1 shows the location and operation of a typical opacity

                       Page 17                                 GAO/RCED-90-156 Air Pollution Violations
                                            Chapter 2                                                                  ,
                                            R.egulatio~ Needed to Require Greater
                                            EmWon Monitor Use at Major
                                            Stationary Sources

Figure 2.1: Location and Operation of a Typical Opacity Monitor

                                            Similarly, other CEMS measure visible and nonvisible pollutants such as
                                            so,, NO,, and vocs by analyzing emission gasesseveral times each hour.
                                            Both opacity and gaseousmonitors automatically record emission levels.

Detection Potential of                      Senior EPA compliance officials told us that CEMS are 10 times more likely
Monitors Greater Than                       to detect violations than on-site inspections, unless the violations are
                                            blatant and ongoing at the time of inspection. Somestate officials
Inspections                                 believe that CEMS are even more effective, with regulators in Penn-
                                            sylvania- a state which has made substantial use of monitors since
                                            1984-estimating that CEMS may be up to 60 times more effective than
                                            on-site inspections. While precise comparisonsof the effectiveness of
                                            these different detection methods are difficult to make, both groups said
                                            that the detection potential of CEMS is much greater than that of inspec-
                                            tions becausemonitors

                                         . measure and record emissionsdirectly and accurately,

                                            Page 18                                 GAO/RCED!WlBS Air Pollution Violations
  Chapter 2
  Regulations Needed to Require Greater
  Emission Monitor Use at Major
  stationmy &urMe

. provide near-continuous coverageof facility emissions,and
. detect violations that periodic inspections cannot.
  A 1988 EPA study of CEMS at large facilities in Pennsylvania demon-
  strated that monitors directly measured and recorded accurate opacity
  readings 98 percent of the time and accurate so,readingsover 92 percent
  of the time.’ Conversely, in many situations the inspector, using his
  training and experience,judges a facility’s compliance status without
  empirical evidenceof the quantity, rate, or concentration of pollutants
  emitted. Inspectors often assessfacility compliance by visually
  observing emissionsand by reviewing operating equipment, records, and
  pollution control equipment. Becauseof the uncertainties involved in
  making thesejudgments, inspectors often are unable to determine
  whether sourcesare in compliance. For example, in one inspection
  report we examined, the inspector reported that although visible emis-
  sions from a major stationary source appeared to be about 60 to 80 per-
  cent opacity-well in excessof the 20-percent permit limit-he “could
  not do a visible emission evaluation becauseof the angle of the sun” and
  therefore no violation was officially recorded.
  Unlike inspections, CEMS can operate 24 hours a day and have been
  shown to measure more than 90 percent of a facility’s annual emissions.
  Inspections often cover less than 1 percent of a facility’s annual emis-
  sions, usually take 2 to 4 hours to perform and, becauseinspection
  resourcesare limited, are normally conducted at major stationary
  sourcesonce each year, according to EPA compliance officials. Some
  facilities may be inspected more frequently if resourcesallow for it and
  indications of problems exist. Consequently, facilities are subject to far
  less coveragewhen inspections are the only method used to assess
  CEMS  can also detect violations that inspectors cannot. According to EPA
  compliance officials, inspectors have difficulty judging visible emissions
  at night and in adverse weather, whereas CEMS are not affected by these
  conditions. More importantly, gaseousemissions,such as SO, and NO,, are
  generally not visible, whereas CEMS consistently measurethese gases
  directly and reliably. For somegaseouspollutants, inspectors often can
  only infer compliance by comparing existing processand control system
  operating conditions with those recorded during stack testing. However,
  according to EPA, stack test data are collected under finely tuned process

  ‘According to EPAcrikria, readingsare consideredacceptableif obtainedfrom a quality-assured
  CEMthat has beencalibratedand verified to provide data within 16percentof the true value.

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                      Regulation Needed to Require Greater
                      Emission Monitor Uee at MaJor
                      Stationary Sources

                      and control system operating conditions, and thus may be atypical of
                      tests conducted under normal operations, further adding to the diffi-
                      culty of detecting violations of permit conditions for gaseouspollutants.
                      We noted an example of these difficulties during our review. Inspectors
                      performing routine inspections at a large fertilizer-manufacturing plant
                      in North Carolina did not detect emissionsviolations from 1983 until
                      time for permit renewal in November 1986. The State’s Technical Ser-
                      vices Branch Chief said most inspections during this period had focused
                      on whether the required control equipment was in place, similar to their
                      inspection practices at other facilities. At permit renewal, inspectors dis-
                      covered that the facility had altered the pollution control equipment
                      years earlier by removing the materials inside the facility’s scrubbers.
                      According to state officials, these materials were integral to the proper
                      functioning of the control devices,and their removal allowed untold
                      amounts of so, and fluoride to be releasedinto the atmosphere. EPA'S
                      Region IV field inspector responsible for covering North Carolina told us
                      that, had CEMS been installed in this case,many of the emission viola-
                      tions would have been detected earlier and, with prompt enforcement
                      action, the environmental harm lessened.

                      Senior EPA compliance officials told us in October 1989 that only about
Not Enough Emission   1,066 major stationary sourceshad CEMS installed, even though they
Monitors in Use       estimated that CEMS were feasible at about 10,000 sources.These offi-
                      cials’ estimate of 10,000 facilities is basedon their knowledge of the cat-
                      egories,types, and sizesof facilities that constitute the universe of
                      33,600 of the nation’s largest stationary sources.Ten thousand is the
                      number of sourceswhere, in their opinion, one or more CEMS would be
                      technologically feasible and economically viable for use in detecting vio-
                      lations. Although no specific criteria have been developed translating
                      these conceptsfor monitor use into further action, according to the
                      National CEM Coordinator, this means that a facility is capable of
                      installing and maintaining a CEM that provides reliable data at a cost
                      that would not be an economicburden to the firm. EPA had not devel-
                      oped more specific criteria delineating the potential for major stationary
                      sourcesto use monitors at the time of our audit.

                      EPA also lacks precise data on the number of major stationary sources
                      with CEMS, but based its 1989 estimate of 1,065 facilities with one or
                      more monitors installed on its 1989 workload model, contacts with EPA
                      regional and state CEM coordinators, and EPA-sponsored    studies of CEM
                      use. According to the National CEM Coordinator, little has changedsince

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                          chaptw 2
                          Reguhtions Needed to Require Greater
                          Emission Monitor Use at Mdjor
                          stationary sources

                          the findings of a 1988 EPA study that reported that few monitors were in
                          use relative to the potential for their widespread use. The report stated
                          that only 6 states had more than 100 CEMS installed within their jurisdic-
                          tions, and 26 states had 25 or less CEMSinstalled. According to EPA offi-
                          cials, facilities often have more than one device at the samefacility.
                          Additionally, EPA reported in August 1988 that many installed CEMS
                          were not used to detect violations, and that only 16 states had used CEMS
                          to detect violations. Instead, data from monitors were often used only to
                          target sites for inspections.

Extent of Noncompliance   BecauseEPA and state regulators continue to depend largely on on-site
Understated               inspections to detect violations at nearly 95 percent of the major
                          stationary sources,senior EPA compliance program managersbelieve the
                          extent of noncompliance among major stationary sourcesmay be signifi-
                          cantly understated. In this regard, EPA’SStationary SourceCompliance
                          Strategy states that, becauseof the limitations inherent in on-site
                          it is fair to assumethat compliance data being reported by States do not indicate
                          what is happening at a facility on a day-to-day basis, but rather whether the source
                          has been determined to be in compliance at an announced inspection after it has had
                          the opportunity to optimize the performance of its control equipment. Thus, it indi-
                          cates whether the source is capable of being in compliance rather than whether it is
                          in compliance in its day-to-day operations.

                          Similarly, a September 1987 EPARegion IV memorandum points out that
                          EPA’Spractice of relying on opacity observations and on-site inspection
                          of the source does not ensure that the source is in compliance at all
                          times. The memorandum further states that EPA’Spractice is “hit or
                          Even with the limited detection potential of on-site inspections, about 14
                          percent of the major stationary sourceswere detected violating permit
                          or other requirements in fiscal year 1988, with 1,404, or about 30 per-
                          cent, of these noncomplying sourcesin violation one or more times each
                          month for every month of the fiscal year, according to EPAdata.

                          Page 21                                       GAO/RCJ3D-90-166 Air Pollution Violations
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                      l@gulations Needed to Require Greater
                      Emission Monitor Use at Major
                      stationary sources

                      Industry and regulatory officials have expressedconcernsabout the
Concerns Regarding    reliability and cost of CEMS. According to EPA'S Stationary SourceCom-
Monitor Reliability   pliance Division Deputy Director, monitor reliability has improved sub-
and Cost              stantially and the costs are more reasonablethan they were in 1975,
                      when EPA issued its first SIP emission-monitoring regulations. While these
                      concernsmay have been legitimate in the past, the issuesof reliability
                      and cost, according to EPA'S 1984 National Compliance and Enforcement
                      Strategies, have been replaced to someextent with misinformation and
                      inertia. For example, in Pennsylvania-a state which has made
                      increasing use of CEMs since 1984-emission monitors were required at
                      nearly 200 sourcesas of May 1988. The Chief of Pennsylvania’s Division
                      of Abatement and Compliance, Bureau of Air Quality Control, said that
                      using CEMS is largely a matter of mind-set, and that Pennsylvania had
                      decided several years ago that a properly implemented CEM program
                      could produce accurate, reliable data at a cost that was not burdensome
                      to industry. More importantly, he said that, where they can be used,
                      emission monitors are the most effective method of detecting violations
                      and reducing emissions.The Director of Pennsylvania’s Bureau of Air
                      Quality Control said that, while CEMS are not appropriate for every
                      major stationary source,the state’s experience had been so positive that
                      Pennsylvania will require sevenCEMS on each municipal waste inciner-
                      ator it permits in the future. On average,Pennsylvania CEMS have col-
                      lected reliable data over 90 percent of the time.
                      With respect to cost, EPA compliance officials recognizethat cost may
                      continue to be a concern at somesourceswhere EPA envisions using CEMS
                      to detect violations, but these officials said that in relation to facility
                      size and gross annual revenues,the cost of monitors is justified, in their
                      opinion, at about 10,000of the 33,500 major stationary sources.In their
                      opinion, installing and operating CEMS would not constitute an economic
                      burden for these major stationary sources.Further, EPA points out that
                      using CEMS to detect violations is already an important part of a few
                      state programs. For example, California and Pennsylvania officials have
                      used CEM readings to not only detect violations but also to take enforce-
                      ment actions at a number of sourceswithin their jurisdictions. For
                      example, of the 4,076 total violations cited in the San Francisco Bay
                      Area in 1986 and 1987,216 were basedon CEM readings, while Penn-
                      sylvania issued 260 violations on the basis of CEM readings for a similar
                      2-year period, eventually settling the casesfor $336,600 in penalties.
                      Becausemost state and local agencieshave been slow to implement a
                      CEM regulatory program, EPA sponsoredseveral studies in an attempt to
                      foster their wider acceptanceand use in detecting violations. According

                      Page 22                                  GAO/RCED-90-166 Air Pollution Violations
                       Re@latio~ Needed to Require Greater
                       Emhion    Monitor Use at Major
                       statlonluy sourcee

                       to a June 1986 report,2 state agencies’reluctance to implement an emis-
                       sion-monitoring program centers around (1) perceptions of CEMS as unre-
                       liable and (2) concernsthat their use would place additional burdens on
                       the limited resourcesof regulators. The report stated that the perception
                       of state managerswas that EPA had required the states to proceed with a
                       questionable monitoring program, without adequate state agency con-
                       sultation, and then had not provided sufficient technical and policy sup-
                       port to make the program work.
                       After pilot testing CEMS in two states for more than a year, the study
                       concluded that CEMS’performance showed “very high levels of relia-
                       bility,” and the burden of reviewing excessemission reports was not a
                       burden, averaging less than 1 hour per report. Most importantly, the
                       study demonstrated that CEMS were a highly effective method for
                       assessingthe compliance of selectedfacilities, and that the issue of unre-
                       liability can be readily resolved by a managementcommitment to
                       quality assurance.

Cost Implications of   While an effective quality assuranceprogram can overcomeconcerns
Emission Monitors      about the reliability of CEMS, resolving the issue of cost has not been as
                       easy for EPA. First, becauseinstalling, operating, and quality assuring
                       data from CEMS’ is an expensethat facility owners and operators must
                       absorb, EPA doesnot envision their use at all sources;instead, EPA has
                       targeted only the newest and largest of the major stationary sources.
                       According to EPA compliance officials, the costsof installation vary
                       greatly, from about $10,000 to $150,000, depending on the type, size,
                       location, and facility design, as well as whether any retrofitting is
                       involved. Annual operating and maintenance costs,including quality
                       assuranceand periodic reporting, range from about $6,000 to $60,000.
                       However, EPA’s National CEM Coordinator points out that relative to the
                       cost of other pollution control equipment that major stationary sources
                       must install, these costs are small, reasonable,and justified, in his
                       opinion, at many major stationary sources.
                       To help alleviate industry concern over the issue of cost, EPA conducted
                       reviews of selectedfacilities. As a result, EPA reported in a December
                       1988 Federal Register that CEMS constituted lessthan 4 percent of total
                       air pollution costs.Further, as reported by the 1988 Joint Power Gener-
                       ation Conference,in somecasesCEMS      can reduce operating expenses.

                       ?+unmary Report:A Pilot Projectto Demonstratethe Feasibility of a StateContinuousEmissionMon-
                       itoring System(CEMS)RegulatoryProgram(EPA,June 1986).

                       Page 23                                           GAO/RCELMO-155 Air Pollution Violations
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Regulations Needed to Require Greater
Emission Monitor Use at Major
Stationary Sources

According to the Deputy Director, Stationary SourceCompliance Divi-
sion, the relative cost of installing CEMS at major sourcesis less than the
cost of installing a speedometeron an automobile. He pointed out that
while using CEMS to detect violations may not result in significant sav-
ings in inspection resources,it is the most effective meansof ensuring
facility compliance with permit conditions. According to the National
CEM Coordinator, in addition to unreliability, industry has used cost as a
reason for resisting CEMS when cost is not the reason. The real reason, in
his opinion, is that facilities simply do not want their emissionsmoni-
tored on a full-time basis. CEMS can tell exactly when a sourceexceedsits
permit limits, by how long and how much, he said. He baseshis opinion
on his dealings with industry, EPA regional and state CEM coordinators,
and EPA'S own studies. For example, in responseto one facility’s high
cost estimates for CEMS, an in-depth investigation by EPA found that the
facility’s annual costs would be increased less than two-tenths of 1
Our work similarly indicates that cost may not be a principal reason that
more sourceshave not installed CEMS. For example, we visited a major
coal-fired utility that had installed two opacity and two so, monitors at a
total cost of about $250,000, according to the Assistant Plant Manager.
To place this amount in perspective, he said gross revenuesof this
facility average over $100 million per year through the sale of electric
power to sectionsof the northeastern United States. Company repre-
sentatives told us that CEMS allow them to more closely monitor fuel
combustion efficiency and to better ensure the quality of low-sulfur coal
from suppliers. Although they had not evaluated whether CEMS had
actually reduced operating expenses,the representatives said that the
costs were not unreasonable.
Other firms we contacted said that they had reduced their operating
expensesby using CEMS. For example, a major manufacturer of wall cov-
erings in Ohio reportedly savesabout $50,000 annually in fuel costs
becauseits so, monitors more closely gaugefuel combustion efficiency,
and a large U.S. automobile manufacturer, which also operates its own
power generating facilities, similarly savesat least $12,000 annually in
fuel costs at each of its industrial boilers from GEMS it uses.
Operational cost savings have also resulted from using CEMS at sources
other than large power-generating facilities. Although EPA has promul-
gated no regulations on the use of voc monitors, savings have been esti-
mated for several Pennsylvania facilities using voc monitors. For
example, one inspector reported that one manufacturer reduced its

Page 24                                  GAO/RCED-SO-155 Air Pollution Violations
                                 Chapter 2
                                 Regulatlone Needed to Require Greater
                                 Jhlssion Monitor Use at Major
                                 Stationary Sources

                                 annual costs for solvent by $50,000 after equipping its carbon absorp-
                                 tion unit with WC monitors and changing its operating practices accord-
                                 ingly. Solvent recovery for this firm increased from 68 percent in June
                                 1988 to 87 percent in September 1988 after installing CEMS to detect
                                 excessemissions.Another Pennsylvania facility’s solvent usagewas
                                 nearly cut in half after installing voc monitors and correcting inefficient
                                 operating techniques. According to a 1988 inspection report, this firm
                                 decreasedits solvent usageby 46 percent, representing an annual reduc-
                                 tion in operating expensesof about $20,000.

Monitors Believed Feasible EPA, state, and industry officials told us that CEMS are technologically
at More Sources            feasible and economically viable, or capable of providing reliable emis-
                           sions data at a cost that would not be an economicburden to the source,
                                 at many more sourcesthan those that currently use them. For example,
                                 the Coordinator of Ohio’s CEM program said steam generators as small as
                                 10 million Btus in size have been required to install and operate CEMS to
                                 monitor so, emissionsin Ohio, whereas EPA'S regulations require CEMS
                                 only on steam generators that are larger than 250 million Btus. A Ford
                                 Motor Company Regional Environmental Engineer agreed,noting that
                                 Ford has used CEMS extensively since 1981 becausethe company found
                                 that CEMS help Ford reduce operating costs.He said they are even used
                                 on power boilers not covered by Ohio’s CEM requirements. Furthermore,
                                 California and Pennsylvania local air compliance program officials told
                                 us that in selectedcases,voc monitors are feasible and already used in
                                 their states to detect violations, even though EPA has no regulations
                                 requiring WC monitors at any major sources.Pennsylvania officials told
                                 us they also plan to use CEMS on hazardous, municipal, and infectious
                                 waste incinerators.
                                 Other indicators also support the position that CEMS are potentially fea-
                                 sible for many more sourcesthan currently use them. For example,
                                 according to the National CEM Coordinator, EPA has an effort underway
                                 to improve its emission-monitoring data base for so, monitors at major
                                 power-generating facilities as part of EPA'S increasedemphasis on acid
                                 rain. Airborne so, is a major component of acid rain. Data from this
                                 effort indicate that, as of January 1988, only 366 of 2,414 major SO,
                                 sourcesin the United States used so, monitors. According to EPA'S
                                 National CEM Coordinator, CEMS are economically feasible at nearly all of
                                 these facilities.

                                 Page 25                                  GAO/RCED-90-156 Air Pollution Violations
                           Chapter 2
                           Regulations Needed to ReqnIre Greater
                           Fhnission Monitor Use at M&w
                           stationary som.ees

EPA Regulations Focus on   Sections 110, 111, and 114 of the Clean Air Act collectively provide EPA
Newest and Biggest         with the authority to require any stationary source to install, use, and
                           maintain emission-monitoring equipment. Under this authority, EPA has
Sources                    issued regulations requiring CEMS to be installed at 23 categoriesof new
                           sourcesand 4 categoriesof existing major stationary sources.However,
                           becauseof the reliability and cost concernsdiscussedabove, EPA'S regu-
                           lations governing the use of CEMS   have largely targeted only the newest
                           and biggest sources,and have allowed even these sourcesalternatives
                           and exceptions to the use of CEMS, according to EPA compliance officials.
                           For example, in August 1988 EPA reported that only 36 sourcescould be
                           categorized as electric utility steam generators of greater than 250 mil-
                           lion Btu-per-hour capacity that had begun construction after September
                           18,1978-one of the New SourcePerformance Standard (NSPS)" catego-
                           ries required to install CEMS  under section 111 of the act. Similarly,
                           under another subpart of the new source regulations, only those indus-
                           tries that began construction of large steam generators (greater than
                           100 million Btus per hour capacity) after June 19, 1984, are to install

                           The number of CEMS EPA requires under other sectionsof the act is sim-
                           ilar to its new source requirements, targeting only the biggest of sources.
                           Under section 110 of the act, EPA is to ensure that state and local pro-
                           grams’ SIPSrequire certain existing facilities to monitor emissions.
                           Although states are free to target additional sources,EPA has designated
                           only four narrowly defined categoriesof existing sourcessubject to
                           these requirements. These categoriesinclude (1) fossil fuel-fired steam
                           generators with a rated capacity of greater than 260 million Btus per
                           hour, (2) nitric acid plants with production capacity of more than 300
                           tons of nitric acid per day and which are also located in nonattainment
                           areas for NO,,, (3) sulfuric acid plants with production capacity of more
                           than 300 tons of sulfuric acid per day, and (4) fluid bed catalytic
                           cracking units at petroleum refineries with production capacity of more
                           than 20,000 barrels per day.

                           “Msjor stationary sourcesconstructedafter specificdatesidentified in EPA’sregulationsare subject
                           to NSPSstandards,which generally require installation and useof morestringent controls to attain
                           lower emissionlevels and, in the caseof selectedNSPSsources,continuousmonitoring of emissions.

                           Page 26                                              GAO/RCEIMO-156 Air Pollution Violations
                    Chnpter 2
                    Regulatlo~ Needed to Require Greater
                    Emhadon Monitor Ulle at Major
                    stationary sourcee

                    Efforts to ensure that major stationary sourcesmaintain compliance
EPA’s Monitor Use   have becomeincreasingly important, according to EPA, now that most
Policy Not          facilities have installed the basic pollution control equipment. In recog-
Implemented         nition of this growing need and becausemonitor reliability has improved
                    and, according to EPA, the costs are more reasonable,in March 1988 EPA'S
                    Office of Air Quality Planning and Standards issued an emission-moni-
                    toring policy calling for CEM installation and use where feasible.
                    According to the policy, if it is technically feasible, CEMS should be
                    required in all new facility permits, operating permits, and resolutions
                    of enforcement actions, including consent decreesand administrative
                    orders. The policy states that CEMS should be used to ensure continuous
                    compliance of sourcesin both attainment and nonattainment areas. The
                    policy also points out that at least five states-Indiana, Ohio, Penn-
                    sylvania, Tennessee,and Washington-already have well-developed
                    emission-monitoring programs, and that EPA'S review of these programs
                    has shown CEMS to be valuable tools for ensuring compliance. EPA states
                    in its policy that it is committed to using CEM data in assessingfacility
                    However, EPA has not fully followed through in implementing its policy,
                    citing resource limitations and higher priority activities. For example,
                    EPA'S Stationary SourceCompliance Division Deputy Director pointed
                    out that funding for compliance activities has declined 35 percent (in
                    noninflationary adjusted dollars) since 1979, while the major stationary
                    source population has grown from about 23,000 to over 30,000 sources
                    in the sametime period. Although EPA'S air program work force has
                    remained about the samesize nationally, compliance program staffing
                    has been reduced by 14 percent, from 339 to 293 staff, since 1980. He
                    also pointed out that, while these reductions were taking place, even
                    minimally acceptableinspections have becomemore complex and time-
                    consuming, often taking 60 percent more time than previously required.
                    In addition, efforts expended on a host of new problems such as
                    asbestos,air toxics, radon, hazardous and municipal waste incineration,
                    and smaller sourcesof vocs have taken ever increasing amounts of
                    inspectors’ time.
                    Thus, while EPA has the authority to require CEMS at a broad range of
                    sources,according to the Deputy Director, the Stationary SourceCompli-
                    ance Division’s limited available resourceshave forced headquarters
                    managersto make difficult choices,effectively making EPA efforts to
                    require more extensive use of CEMS a lower priority. The National CEM
                    Coordinator explained that, in order to issue regulations requiring CEMS
                    at a broad range of sources,the Stationary SourceCompliance Division

                    Page 27                                 GAO/RCJXHO-165 Air Pollution Violations
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Regulations Needed to Require Greater
Emission Monitor Use at Major
stationary sources

would need to validate the various measurementmethods involved,
develop quality control and quality assurancemethods and manuals,
develop and propose regulations for each industry affected, answer and
incorporate commentson the proposed regulations, and then promulgate
final regulations. The Deputy Director explained that undertaking these
activities is not possible with their current staffing if they are to also
continue compliance and enforcement actions at sourcesand address
new and emerging environmental issues.Consistent with the Deputy
Director’s statements, EPA'S 1984 ComGmce Monitoring Strategy for
Major Stationary Sourcespoints out that without additi&.l res&rces,
EPA’S air compliance program cannot addressboth the need for CEMS        and
the need to capture previously unregulated smaller sourcesof harmful
pollutants such as vocs, or to effectively control asbestosdemolition and
renovation projects. EPA decided the latter was a higher priority need.

While resourcesand work load are legitimate factors, EPA continues to
approve and fund state and local inspection programs that make little
use of CEMS. In 1988, EPA, and state and local agenciesconducted over
37,000 inspections. Furthermore, EPA has been slow to ensure that state
and local programs comply with the Agency’s 1976 regulation requiring
them to incorporate CEMprovisions in any SIP revisions after that date.
For example, two states in EPA Region III-Maryland and West Vir-
ginia-have had SIPS approved without CEMprovisions becauseCEMS
have not been a high priority consistently over the years, according to
EPA Region III officials. EPA Region IV officials explained that inconsis-
tent guidance and direction from EPA headquarters over the years
regarding the need for adequate CEM provisions in state SIPS had also
causedthem to question the Agency’s commitment to CEMS as a detection
method. Consequently, they told us in June 1988 that their regional
approach to CEMS had largely been one of assistancerather than leader-
ship. They explained that if a state or local agency solicited their help in
establishing an active CEM program, they would work with them in doing
so. Otherwise, it was not a priority.
In addition, headquarters officials told us that EPA has not developed a
strategy for promoting CEMS at more facilities, nor do they have a plan
for validating existing CEM technology and measurementmethods-two
critical first steps to regulatory use of CEM data in enforcing emission
limits. Furthermore, in both 1988 and 1989, EPA reduced funding for its
CEM program, according to the National CEM Coordinator. Even an EPA-

Page 28                                  GAO/RCED-!bO-165Air Pollution Violations
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                       Emimion Monitor Use at Major
                       Stationary Sources

                       contracted study found that lack of managementsupport and commit-
                       ment to the CEMprogram has seriously hampered its implementation.
                       Specific problems identified in this 1988 report4 included the

                       lack of or inconsistent responsesto Regional initiatives and inquiries, failure to pro-
                       vide training and in-house technical support, and failure to resolve important data
                       quality problems for the CDS/CEMSsubset. Recent EPApolicies and program priori-
                       ties have in somecasesbeen inconsistent with continued support of CEMSprogram
                       implementation. In a least one Region, a decision to discontinue GEMS-related
                       efforts was reportedly made in response to commentsfrom a visiting OAQPS[Office
                       of Air Quality Planning and Standards] Headquarters representative that the
                       Agency was moving away from the NSPSprogram.

Clean Air Act          In an effort to control acid rain, the administration’s proposed amend-
Amendments Recognize   ments to the Clean Air Act recognizethe value of CEMSand would
                       require their use by the most significant contributors to the nation’s acid
Value of CEMs          rain problems. More specifically, under SenateBill S.1630,opacity, so2,
                       NO,, and volumetric flow monitors would be required at 111 of the
                       nation’s largest coal-fired electric utilities within 36 months of enact-
                       ment, and at another 800 to 1,000 of the nation’s largest major indus-
                       trial sourceswithin 6 years of enactment, according to EPA.While these
                       proposals are a step in the right direction, they include somefacilities
                       that already have monitors installed and stop short of legislating the
                       extensive use of CEMSalready called for in existing EPApolicy. According
                       to senior EPAcompliance officials, CEMSare technologically feasible and
                       economically viable at an estimated 10,000 major stationary sourcesand
                       could enhancethe likelihood of detecting violations at these sourcessub-
                       stantially over current practices.

                       Despite the significant detection potential of CEMS,becauseof cited
                       resource limitations, EPAofficials said that they will continue to rely pri-
                       marily on their encouragementof state and local agenciesto develop CEM
                       programs, but will not be able to require their broader use under federal
                       regulations. According to senior compliance program managers,while
                       EPAhas the authority to require broader use of CEMS,their installation
                       and use beyond the sourcesalready identified in the proposed legislation
                       will continue to be slow.

                       Major stationary sourcesare one of the biggest contributors to our
Conclusions            nation’s air pollution problems. These facilities are responsible for

                       4Status of EPARegional

                       Page 29                                        GAO/RCED-90-166 Air Pollution Violations
                 chapter 2
                 Regulatlona Needed to Require Greater
                 Rmlmlon Monitor Urn at Major
                 Stationary Sources

                 nearly 40 percent of the nation’s total emissionsof criteria pollutants.
                 EPAhas sought, through regulations, permit requirements, and its review
                 and approval of SIPS,to control major stationary sourceemissions.How-
                 ever, ensuring compliance at major sourceshas been, and continues to
                 be, a significant problem.

                 GEMSrepresent a significant    improvement in ensuring that major sources
                 comply with emission requirements. The concernsabout CEMSthat
                 existed in the past-reliability and cost-have been eliminated or
                 reduced and, in our opinion, do not remain an impediment to their wide-
                 spread installation and use. Further, in contrast to traditional inspec-
                 tions, the use of monitors provides solid evidenceof a facility’s emission
                 levels and whether it complies with permit conditions. CEMSprovide far
                 more coverageof facility operations than do inspections and can detect
                 violations that inspectors cannot.
                 EPA'sefforts   to expand the use of CEMSat existing stationary sources,
                 however, have been inadequate. Although EPA'Spolicy for encouraging
                 the use of CEMSis a strong acknowledgementof the benefits of this tech-
                 nology, installation of this equipment will not occur on a widespread
                 basis until it is required by EPA.This is becauseonce CEMSare installed,
                 major sourcesthat are not operating within their permit limits face a
                 much greater likelihood of detection. However, the regulations neededto
                 transfer this policy into requirements have not been forthcoming. In our
                 view, regulations that (1) establish criteria for determining where CEMS
                 are technologically and economically feasible and (2) require CEMuse in
                 all situations where these criteria are met would significantly increase
                 the use of this technology.
                 The proposed Clean Air Act Amendments would increasethe number of
                 facilities required to install and use CEMS.The amendments,if enacted,
                 would mandate the use of monitors at approximately 1,100 facilities.
                 However, on the basis of EPA'Sestimate that CEMSare feasible at about
                 10,000 facilities, considerably greater use can and should be made of
                 CEMSin light of the continued air pollution problems.

                 In order to more effectively implement EPA'Semission-monitoring policy
Recommendation   and achieve more widespread monitor use, we recommendthat the
                 Administrator, EPA,promulgate regulations that (1) establish clear cri-
         *       teria for determining where CEMSare feasible for major stationary
                 sourcesand (2) require CEMinstallation and use at all major sources
                 meeting these criteria.

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Penalty Amounts Not Sufficient to
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                  Failure to comply with emission requirements can result not only in
                  additional air pollution, but can also be of economicbenefit to major sta-
                  tionary sources.To deter such noncompliance,the Clean Air Act con-
                  tains penalty authority that allows enforcement officials to
                  administratively assessnoncompliancepenalties sufficient to remove
                  any economicbenefit a violator can gain from failing to comply with the
                  act’s requirements. EPAhas also established a civil penalty settlement
                  policy used in its civil litigations that requires agency attorneys to
                  accept only those settlement offers that are calculated to offset the eco-
                  nomic benefit violators obtain through noncompliance.
                  State and local programs, however, which handled over 80 percent of
                  the enforcement actions in fiscal year 1989, have not been required to
                  seek economicbenefit penalties. These state enforcement programs
                  operate under state law as embodied in the various SIPS,not under the
                  administrative penalty provisions embodied in the Clean Air Act or the
                  EPAcivil penalty settlement policy, and EPAhas not insisted through the
                  SIP approval processthat states commit themselvesto imposing eco-
                  nomic benefit penalties. As a result, penalties imposed on significant vio-
                  lators--EPA’s highest enforcement priority-were often not sufficient to
                  remove the economicbenefit of noncompliance.Specifically,

              l   fewer than half of the significant violators in fiscal years 1988 and 1989
                  paid cash penalties and
              l   when cash penalties were assessed,the penalties often were not based
                  on the violator’s economicbenefit.
                  Further, although EPAcan seek to impose its own penalties in those
                  instances where state and local penalties are inadequate, it has seldom
                  acted to collect additional moneys becauseit views its own enforcement
                  processas cumbersomeand too resource-intensive.
                  To help EPAtake enforcement actions more efficiently, proposed amend-
                  ments to the Clean Air Act contain provisions that grant EPAadditional
                  administrative penalty authority for enforcing air pollution violations.
                  However, EPAstill needsto clarify its authority over state and local
                  agencies’enforcement actions to ensure that fair and equitable penalties
                  are consistently imposed, including taking action in state and local cases
                  where penalties are not sufficient. Otherwise, sourcesthat comply will
                  continue to be at an economicdisadvantage to those that do not.

                  Page 31                                 GAO/RCEB90-166 Air Pollution Violations
                        Chapter 3
                        Penalty Amounts Not Sufficient to
                        Deter Violations

                        Failure to comply with emission requirements can result in significant
Economic Benefit        economicbenefit to major stationary sources.Among other things, these
Penalties Established   facilities can reap dollar savings by (1) not purchasing pollution control
to Promote              equipment or maintaining equipment already in use, (2) using less
                        expensive but higher polluting raw materials, (3) not changing their pro-
Compliance              duction processes,or (4) not applying for a permit to conduct operations
                        controlled under the Clean Air Act. For example, according to a 1986
                        industry study of emission control technology, steel drum manufac-
                        turers and reconditioners could save from $240,000 to $530,000 per
                        plant in annualized costs by not purchasing the equipment neededto
                        control voc emissions.

                        To addresssuch financial disincentives to compliance, the 1977 Amend-
                        ments to the Clean Air Act gave EPA administrative authority to impose
                        substantial cash penalties for pollution control violations. Section 120 of
                        the act provided EPA with administrative authority to make a finding of
                        noncompliance and assesscash penalties against noncomplying firms
                        sufficient to remove any economicbenefit derived from the violation.
                        The intent of this provision was to forestall noncompliancewith the
                        act’s requirements by removing the economicadvantage to be gained by
                        postponing investment in pollution control. At the sametime, the Con-
                        gressincreasedthe civil penalties that can be imposed under section 113
                        of the act and expressedan intent that court-imposed civil penalties “be
                        assessedin amounts which are adequate to assurecompliance will
                        result, rather than permitting continued noncomplianceto be economi-
                        cally profitable.”
                        EPA established regulations for imposing economicbenefit penalties that
                        are consistent with the intent of section 120. In 1984, EPA also developed
                        the Clean Air Act Stationary SourceCivil Penalty Policy which requires,
                        among other things, that when EPA settles an enforcement lawsuit out of
                        court, all such EPA settlements seekto remove the economicbenefit
                        derived by not complying with the act’s requirements.’ This civil penalty
                        settlement policy provides that, except in extraordinary circumstances,
                        “the lowest possible settlement penalty will be the calculated economic
                        benefit of noncompliance.” The policy directs that delayed and/or
                        avoided expenses,such as the costs of control and monitoring equip-
                        ment, modifications to production processes,operation and mainte-
                        nance, and the employment and training of pollution control personnel,

                        ‘The EPApolicy doesnot restrict the decisiona judge might render if a particular caseshould go to
                        trial, and the economicbenefit that may be calculatedis subjectto the statutory maximumof $26,000
                        per day of violation.

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                                           be included in the calculation of economicbenefit. Furthermore, the civil
                                           penalty settlement policy provides that additional amounts be obtained,
                                           if warranted, to reflect the gravity or seriousnessof the violation.

                                           Becausethe act is structured as a federal/state partnership for the con-
Economic Benefit                           trol of air pollution, state and local agenciesare authorized to carry out
Penalties Not Imposed                      enforcement activities against violators, including major stationary
by State and Local                         source violators. In fiscal year 1989, state and local agencieshandled
                                           over 80 percent of the enforcement actions against stationary sources.
Programs                                   These activities are required to be performed in accordancewith EPA-
                                           approved SIPS, which establish the requirements that authorized state
                                           and local programs must adhere to in order to avoid the act’s sanctions
                                           and obtain federal funding.
                                           However, EPA has not required authorized state and local programs to
                                           calculate or impose economicbenefit penalties to correct violations. The
                                           last major revisions to SIPS were in 1982-about 2 years before EPA final-
                                           ized its Stationary SourceCivil Penalty Policy. Although EPA has the
                                           authority to call for unscheduledSIP revisions whenever it is apparent
                                           that attainment is in jeopardy, and although individual SIPS have been
                                           acted upon during the intervening years, EPA has not required state and
                                           local officials to revise their SIPS to upgrade administrative penalty pro-
                                           visions to recover economicbenefit. As a result, state and local pro-
                                           grams often do not impose cash penalties and at other times impose
                                           penalties that do not remove the economicbenefit of noncompliance.EPA
                                           data for fiscal years 1988 and 1989 show that over half of the signifi-
                                           cant violators-54 percent-identified by state and local programs paid
                                           no cash penalties. Table 3.1 summarizesthe penalties assessedin state
                                           and local enforcement actions in these years.
Table 3.1: Resolution of State and Local
Enforcement Actions for Significant                                                   1998 cases     1989 cases     Total cases
Violator Cases, Fiscal Years 1988 and      Type of resolution                       Number Percent Number Percent Number Percent
1989                                       Cases resolved with cash
                                           penalty assessed                            183      37     336         53        519                46
                                           Cases resolved with no cash
                                           penalty assessed                           315       63    300          47        615                54
                                           Total cases resolved                       498      100    636         100     1,134            100

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    Our review of eight state and local programs found that none regularly
    sought to recover economicbenefit penalties. Three of the eight pro-
    grams used EPA'S civil penalty settlement policy occasionally as a refer-
    encein assessingbut not collecting fines, four programs did not consider
    economicbenefits in imposing cash penalties, and one program-Ari-
    zona’s-did not have the authority to enforce civil penalties against vio-
    lators, according to Arizona Office of Air Quality officials. In order to
    assessmonetary penalties for violations in Arizona, criminal charges
    must be brought by the state attorney general’s office, and the case
    must be tried in criminal court. Otherwise, the state program can only
    issue violation notices, which carry no monetary penalties.
    Our review of enforcement actions in the eight programs included cases
    that were resolved without penalties to remove the economicbenefit of
    noncompliance.As shown in the following three examples, although the
    severity of the violations varied, violations that appear to have econom-
    ically benefitted the violator were settled with either no cash penalty
    assessedor, when cash penalties were imposed, no economicbenefit
l A North Carolina facility emitting particulate@ and vocs from the
  annual production of about 30,000 tons of pipe (1) violated its permit
  limits for particulate emissions5 times between 1984 and 1988, with 1
  inspection observing opacity emissionsat nearly 100 percent-almost 5
  times above its limit of 20 percent, (2) conducted pipe grinding and fit-
  ting operations without a permit, and (3) used noncompliant paint coat-
  ings that exceededvoc emission levels by 13 percent. Local program
  officials acknowledged that the firm may have benefitted financially
  from the avoided and delayed cost of timely compliance, but the eco-
  nomic benefit was not calculated by the local agency and no penalty was
  assessed.According to the manager of the local agency’sAir Quality
  Branch, the firm agreed in July 1988-nearly 5 years after problems
  were first discovered-to do a better job of operating and maintaining
  its control equipment, not operate any new processeswithout a permit,
  and have its paint reformulated to meet the standard.
. A major refinery located in an ozonenonattainment area in California
  was cited for 10 violations of voc emissionsstandards in 1986 and 1987,
  resulting from defective tank seals,failure to use proper seals,and
  leaking valves. At the time of our review, three of the violations were
  resolved with no cash penalty and four were resolved for a total penalty
  of $1,300. The remaining three violations were still unresolved at the

    “Particulatcs include dust, dirt, soot,smoke,and liquid dropletsemittedinto the air.

    Page 34                                                GAO/RCED-!bO-166     Air Pollution   Violations
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                             Deter violations

                             time of our review. No calculation of economicbenefit was performed,
                             although enforcement records show that the violations resulted from
                             preventable operational failures and were not the result of equipment
                             breakdown or malfunction.
                           . A major drum-reconditioning facility in North Carolina, producing about
                             900 reconditioned steel drums daily, emitted excessvocs into a voc
                             nonattainment area from 1980 to 1986 in violation of EPA regulations.
                             This facility failed to install required control equipment by July 1980
                             and, when discovered in 1986, was using paints that emitted vocs 57
                             percent above the standard set for coating steel drums. Negotiations
                             with the facility to resolve the violations took over 2 years, resulting in
                             a penalty of $15,000. No calculation of economicbenefit was performed,
                             but the local air program director told us that this penalty amount was
                             consistent with historical amounts for other violations in the local area.

                             These penalties, however, may not approach the benefit the violator
                             obtained nor serve as a deterrent to future violations. At our request,
                             the EPA headquarters official responsible for the economicbenefit pro-
                             gram calculated the estimated economicbenefit for the violation at the
                             drum-reconditioning facility discussedabove. According to his estimate,
                             the economicbenefit the firm derived was over $231,000-about 15
                             times larger than the $15,000 fine imposed. Furthermore, in this situa-
                             tion, the size of the penalty may not have deterred future violations.
                             During a June 1988 inspection- 2 months after paying the $15,000 pen-
                             alty-this facility was found conducting unpermitted operations and
                             had noncompliant materials on-site that would emit excessvoc

                             EPA’S Office of the Inspector General has also found that penalties are
                             insufficient. In a March 1988 report on EPA RegionV and the states of
                             Michigan and Wisconsin,the Inspector General reported that penalties
                             are largely basedon what EPA and state regulators believe they can
                             obtain from the company rather than the economicbenefit. The report
                             further stated that most collected penalties did not recover the savings
                             the violator received from delayed and/or avoided costs and that cases
                             were found with no support as to how the penalty was calculated.

State and Local              State and local agenciesgenerally seekto use their enforcement actions
Enforcement Philosophies     to securea source’sfuture cooperation rather than to penalize past vio-
                             lations. Someofficials from state and local programs we contacted told
Differ From EPA’s            us that their penalties are often directed toward getting the attention of

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                           Penalty   Amounts   Not Sufficient to
                           Deter Violationa

                           the violating facility’s management,including threats of adversepub-
                           licity, rather than removing the economicbenefit of noncompliance,
                           They said their programs attempt to achieve compliance by working
                           cooperatively with facility owners and operators to correct the causeof
                           the violation, in lieu of assessingpenalties. For example, the Chief of
                           North Carolina’s Air Quality Section said that their approach doesnot
                           include calculating, assessing,or collecting penalties using economicben-
                           efit as the meansof deterrence.
                           Similarly, one local program official said that compliance, rather than
                           penalizing violators to remove the economicbenefit of noncompliance,is
                           the goal of his program. His goal is compliance through field presence
                           and technical assistanceto those firms having pollution control
                           problems. He also said that other concernsmust be consideredin
                           imposing penalties for violations, one of which is the financial impact of
                           the penalty on the violating facilities, He expressedconcern that placing
                           economicbenefit penalties on significant violators could put facilities in
                           his area at a competitive disadvantage relative to facilities in other
                           areas that do not impose such penalties.

                           According to somestate and local officials, penalties need only be large
                           enough to get the attention of facility management.As a result, they
                           said their enforcement philosophies will continue to emphasizecompli-
                           ance through field presence,technical assistance,and fines on a case-by-

                               could increase cash penalties if, through its review and approval of
EPA Has Made Little        EPA
                           SIPS, it were to require state and local enforcement agenciesto adopt
Effort to Increase         penalty policies similar to the section 120 regulations and, in situations
Penalties                  where the state and local agenciesdo not obtain economicbenefit penal-
                           ties, by initiating its own action to impose a penalty. However, EPA has
                           been reluctant to specify that state and local programs seek economic
                           benefit penalties becausethe Agency is uncertain of its authority to do
                           so. Further, EPA’S ability to otherwise influence state and local programs’
                           penalties is viewed as limited becauseof the time, expense,and
                           resourcesrequired to initiate its own enforcement actions.

EPA Reluctant to Require   EPA officials said that they have been reluctant to mandate that author-
Programs to Adhere to      ized programs commit themselvesto imposing economicbenefit penal-
                           ties. According to these officials, requiring programs to follow EPA’S civil
Penalty Policy             penalty settlement policy on recovering economicbenefit’could be

                           Page 36                                  GAO/RCED-90-165 Air Pollution Violations
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Penaky Amounta      Not Suf’flcient   to
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viewed as an infringement on the states’ authority to operate their own
programs. This could result in the states giving programs back to the
federal government to operate rather than complying with enforcement
standards basedon EPA’S economicbenefit regulations and the related
civil penalty settlement policy. EPA compliance officials pointed out that
in 1984, EPA attempted to get state and local programs to adopt EPA’S
policy, but terminated this effort in 1986 after failing to reach con-
sensuswith the State and Territorial Air Pollution Program Administra-
tors and the Association of Local Air Pollution Control Officials-
associationswhich represent state and local air pollution control offi-
cials. Since 1986, EPA has not attempted any similar efforts.
EPA compliance officials also said they are unsure of the Agency’s
authority to require authorized programs to upgrade their penalty poli-
cies. They pointed out that state and local programs implement state
laws. Consequently, for state and local programs to be required to
impose economicbenefit penalties, state laws would have to be
amended,and the EPA officials were uncertain of their authority to
require this. EPA’S earlier attempt led them to believe that states would
not be willing to amend their laws to conform to a more stringent pen-
alty policy unless such conformance was specifically required as part of
the act.

We found that EPA has not requested a legal ruling from EPA’S Office of
General Counselon this matter. EPA compliance officials said that such a
request could further impinge on their already deteriorating relationship
with many state and local programs and that a negative ruling from
EPA’S own counsel could place them in a worse position for interceding in
problem casesthan current practice allows.
In our view, however, EPA has the authority to require that SIPS be
revised to incorporate whatever enforcement procedures EPA deemsade-
quate, including the nondiscretionary imposition of economicbenefit
penalties for violations. Specifically, section 110 of the act sets out the
minimum requirements for the content of a SIP and chargesEPA with SIP
review and approval. According to this section, a SIP must include a pro-
gram to provide for the enforcement of emission limitations and neces-
sary assurancesthat the state will have adequate authority to carry out
the SIP. Additionally, section 172 of the act, which deals with nonattain-
ment areas,mandates that EPA ensure that SIPS include all the necessary
requirements to achieve and enforce compliance with the plan.

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                            Concernssuch as those that EPAofficials expressedhave been raised
                            before in the context of vehicle inspection and maintenance programs.
                            Although these programs were a sourceof much contention, the courts
                            ultimately held that states could be required to enact legislation to carry
                            out the Clean Air Act’s requirement to develop such programs or accept
                            the sanctions provided under the act. Under the sametheory, a state
                            could be required to seek and collect economicbenefit penalties for emis-
                            sions, permit, and other violations by stationary sources,

EPA Ability to Impose       EPA  is authorized to initiate a civil suit under section 113 of the act or an
Additional Penalties H18s   administrative action under section 120 to increasestate penalties. EPA
                            refers to this procedure as “overfiling.” Although sections 113 and 120
Been Limited                provide EPA with the legal authority to issue orders, commencecivil
                            actions, institute criminal proceedings,and assesseconomicbenefit pen-
                            alties, EPA compliance officials said their ability to remedy insufficient
                            state and local penalties is limited becauseeach of these sections cur-
                            rently has drawbacks that hamper EPA from ensuring that state and
                            local penalties are adequate.
                            In addition to other sanctions, section 113 authorizes EPA to seek court-
                            imposed penalties for air pollution violations. However, EPA compliance
                            officials contend that this is an expensive,time-consuming process,
                            sometimescosting more to prosecute than the eventual court-imposed
                            penalty. According to EPA'S Assistant Enforcement Counselfor Air
                            Enforcement and Compliance Monitoring, undertaking court action can
                            cost EPA from $50,000 to about $400,000 on civil actions it takes against
                            polluters, depending upon the complexity of the caseand whether the
                            caseactually goesto trial or is settled before a trial begins. He stressed
                            that EPA has no way of knowing which caseswill actually go to court, so
                             all casesmust be handled as if they will eventually end up before a
                            judge. Although overfiling, if successful,can have significant deterrent
                            effects, the high cost of using section 113 to overfile in large numbers of
                            caseswhere penalties are insufficient is impractical, according to the
                            Assistant Enforcement Counsel.The Chief of EPA'S Region IV Air Com-
                            pliance Branch concurred, noting that in somecases,EPA collects less
                            penalty money from overfiling in state and local casesthan it spendsin
                            taking the enforcement action. EPA cannot recoup its costs of litigation,
                             and all penalty money collected goesto the U.S. Treasury, not to EPA.
                            In contrast to section 113, section 120 authorizes EPA to assesseconomic
                            benefit penalties administratively and to avoid court action unless a
                            source appeals EPA'S administratively determined sanction. However,

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Penalty Amounts    Not Suffkient   to
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EPA views this provision of the act as having other problems which make
it undesirable to use in many cases.For example, section 120 doesnot
provide EPA with the ability to collect a penalty for any period of viola-
tion that occurs before EPA has officially notified the owner or operator
of the noncompliance, a limitation not found in section 113. Addition-
ally, the penalty calculation formula for section 120 was promulgated in
EPA regulations and requires collection of the full economicbenefit, pro-
viding little flexibility, according to EPA,for regulators to settle casesfor
less. Also, section 120 seeksto gain compliance through economicpenal-
ties alone and provides no ability to order compliance or to seek injunc-
tive relief. Although the act allows EPA to use section 113 and 120
together to achieve an appropriate remedy for a violation, EPA officials
said dual actions such as this are an extremely costly way to achieve
compliance, and thus such dual actions are officially discouragedby
EPA'S enforcement program guidance.

Becauseof the high cost, difficulty, and inflexibility of using their cur-
rent authorities to increasestate and local penalties, EPA overfiles rela-
tively infrequently. According to the Deputy Director, Stationary Source
Compliance Division, the air compliance program’s enforcement
resourcesare limited, and any EPA region is able to sustain casework on
only 12 to 15 enforcement actions a year, or a total of 120 to 150 casesa
year nationwide. Consequently, EPA headquarters and regional officials
told us they are able to overfile only in precedent-setting casesand those
where the initial penalties are grossly deficient. Region IV staff told us
that becauseso many penalties are deficient, a regional rule of thumb-
described in a March 1988 EPA Office of the Inspector General report on
Region IV as the “laugh test”- is used to determine which caseswill be
challenged. According to Region IV staff, a proposed penalty is not chal-
lenged if they do not laugh too loudly. A Region III enforcement official
told us that, while other judgmental factors may be considered,his
region also usesthe laugh test in deciding which penalty amounts to
Senior officials from EPA'S Stationary SourceCompliance Division and
the Associate Enforcement Counselfrom EPA'S Office of Enforcement
and Compliance Monitoring believe that EPA needsa flexible, easy to use
administrative penalty authority to improve the Agency’s ability to
overfile in caseswhere assessedpenalties are insufficient to recover the
economicbenefit the violator obtained and to deter future violations.
According to these officials, such authority could enable EPA to impose
economicbenefit penalties against polluters expeditiously, thereby

Page 39                                   GAO/RCED-90-156   Air Pollution   Violations

                         PenaltyAmounteNot Sufficientto

                         allowing it to more frequently increasestate and local agencies’penal-
                         ties when warranted and to get maximum deterrent effect from EPA’S
                         limited resources.Substantial resourceswould be saved and more cases
                         handled if EPAhad greater administrative penalty authority, according
                         to the Assistant Enforcement Counsel,who estimated that EPAwould be
                         able to close many casesfor approximately $1,000 to $25,000 each.

                         In June 1989, the administration announcedproposals for amending sec-
Proposed Changesto       tion 113 of the Clean Air Act, including providing EPAwith the authority
Clean Air Act May        to administratively penalize sourcesup to $200,000 for violations of the
Improve Penalties, but   act. Proposedsection 113(e) specifically requires the economicbenefit of
                         noncompliance to be consideredin determining the penalty amount and
Clearer Direction        also allows EPAto assesspenalties under section 120 back to the first
Needed                   provable date of the violation. In July and August 1989, legislation was
                         introduced in the House and Senateto carry out the President’s pro-
                         posa1s3Adoption and passageof these proposals appear to give EPAthe
                         enforcement tools and the desired flexibility and would negate limited
                         enforcement authority as a reason if penalties continue to be insufficient
                         to achieve deterrence.

                         The proposed revisions, however, do not addressthe issue of whether
                         state and local enforcement programs can be required to collect penal-
                         ties basedon the economicbenefit violators have obtained. According to
                         senior EPAcompliance officials, such legislative direction is neededto
                         changethe state and local agencies’practice of not adhering to EPA’S
                         civil penalty settlement policy. They pointed out that since the act
                         makes no specific reference to the issue of state and local penalties,
                         these agenciesare likely to contest any EPAeffort to require that eco-
                         nomic benefit penalties be imposed. The EPAofficials said that requiring
                         these groups to assesseconomicbenefit penalties appeared to be the
                         most appropriate and practical remedy because(1) state and local pro-
                         grams will continue to carry out most enforcement actions and (2) EPA’S
                         enforcement resourceswill continue to be limited for the foreseeable
                         future. The EPAofficials said that additional legislative authority and/or
                         direction would provide the necessaryleverage to compel state and local
                         programs to impose economicbenefit penalties.

                         3TheCleanAir Act Amendmentsof 1989was introducedaaH.R.3030in the Houseof Representa-
                         tives on July 27,1989,and asS.1490in the Senateon August 3,lQSQ.The Senatepassedits version
                         of the cleanair legislation,S.1630,on April 4,1990, and the Housepasseda revisedversion of H.R.
                         3030on May 23,1QQ0.

                         Page40                                               GAO/RCED-!JO-165   Air Pollution       Violations
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              Penalty Amounts Not Sufficient to
              Deter Violations

              Both the Congressand EPA have recognizedthat one of the most impor-
Conclusions   tant actions that can be taken to control air pollution from major
              stationary sourcesis to penalize violators in amounts sufficient to elimi-
              nate the economicbenefit derived from the violation. Such penalties, if
              appropriately imposed, remove the economicand competitive advantage
              that the violator, through his actions, may have gained over facilities
              that complied with pollution control requirements. More importantly,
              economicbenefit penalties can serve as strong incentives to major
              stationary sourcesto ensure that proper measuresare taken to achieve
              and maintain compliance with pollution requirements and that viola-
              tions do not occur.
              However, state and local agencieshave not always appropriately
              imposed penalties against major stationary sources.BecauseEPA has not
              used the SIPS or any other vehicle available to it to get state and local
              programs to commit themselvesto economicbenefit penalties, signifi-
              cant violators have paid penalties that were not basedon the economic
              benefit derived and more than half of the violators have not paid any
              penalties at all. Further, the Agency has taken little action to overfile
              when penalties were inadequate. As a result, there appears to be little
              incentive for major sourcesto take all actions necessaryto maintain
              The proposed amendmentsto the Clean Air Act, if enacted, will provide
              an appropriate first step in solving this problem. Both the Senateand
              Housebills provide EPA with the authority to impose economicbenefit
              penalties administratively for violations back to the first provable date
              of the violation, This authority, if properly used, should allow EPA to
              overfile more efficiently in situations where insufficient penalties have
              been imposed by state and local programs and to better ensure that vio-
              lators do not profit from polluting.
              However, in the long run, the most effective method for ensuring that
              economicbenefit penalties are appropriately imposed and collected is to
              have such penalty practices be a part of all state and local air pollution
              enforcement programs. To achieve this, standards for assessingeco-
              nomic benefit penalties need to be included in each SIP. The consistent
              requirement for such penalties in all programs will best ensure that vio-
              lators are treated equally in all areas of the country and that firms that
              comply with air pollution controls are not placed at an economic

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                      Although we believe EPA has the authority to require that economicben-
                      efit penalties be imposed, we recognizethat EPA has to rely on state and
                      local programs with differing enforcement philosophies to identify pol-
                      luters and assesspenalties, and that requiring rigid adherenceto eco-
                      nomic benefit enforcement standards may strain EPA’S relationships
                      with these programs. However, EPA’S increased ability to overfile will, in
                      our opinion, also improve EPA’S ability to persuade state and local pro-
                      grams to impose penalties that reflect the economicbenefit that the vio-
                      lator obtained. Oncestate and local programs realize that EPA will act to
                      increase insufficient penalties- and that the federal government will
                      retain the additional penalty amounts- it is likely that the states will be
                      more willing to amend their SIPS to include economicbenefit penalty pro-
                      visions. Nevertheless,if EPA believes it needsgreater statutory leverage
                      in guiding state penalty practices, it should pursue additional legislative

                      Currently proposed amendmentsto the Clean Air Act contain provisions
Recommendationto      that provide EPA with administrative penalty authority that would
the Congress          enable it to take more expeditious actions to ensure that cash penalties
                      are appropriate. We support these proposals and recommendthat the
                      Congressinclude such penalty authority in final Clean Air Act

                      To better achieve the objective of ensuring that those who violate the
Recommendationsto     act’s requirements do not gain financially from their actions, we recom-
the Environmental     mend that the Adminstrator, EPA
Protection Agency   . use the enforcement authority available now and in the future under the
                      amendedClean Air Act to overfile to the maximum extent possible to
                      increaseinadequate state and local ,penaltiesand
                    . undertake efforts to include specific standards for assessingeconomic
                      benefit penalties in the next round of SIP revisions and, if necessaryand
                      desirable, seek specific legislative endorsementfor such action.

                      Page 42                                  GAO/RCED-W-166 Air Pollution Violations
Page 43   GAO/RCFDfMW56   Air Pollution   Violations
Appendix I

Major Contributors to This Report

                        Peter F. Guerrero, Associate Director
Resources,              William F. McGee,Assistant Director
Community, and          John R. Schulze,Assignment Manager
                        Philip G. Farah, Economist
Development Division,
Washington, D.C.
                        Margie Armen, Senior Attorney
Office of the General
Counsel, Washington,
                        Paul A. Latta, Regional ManagementRepresentative
Norfolk Regional        James R. Beusse,Evaluator-in-Charge
Office                  Robert E. Martin, Site Senior

San Francisco
Regional Office

(OOL1417)               Page 44                                 GAO/RCEDW-166   Air Pollution   Violations
Ordering   Infortttation

‘I’ht~ first. five copies of each GAO report are free. Additional copies
art’ J2 etch. Ordthrs should be sent to the following address, accom-
1)anied by a check or money order made out to the Superintendent,
of I)ocuments, when necessary. Orders for 100 or more copies to be
mailed to a single address are discouttt,ed 25 percent.

1J.S. General Accounting Office
I’.(). 130x fiO15
Gail hersburg, MD 20877

Ordt~rs may also be placed by calling   (202) 275-6241.
Chapter 1
                        Chapter 1

Figure 1.2: Continued

                        . .
                        Source: EPA.

                        Page 11        GAO/RCED-90-155 Air Pollution Violations