Environmental Protection: EPA's and States' Efforts to 'Reinvent' Environmental Regulation

Published by the Government Accountability Office on 1997-11-04.

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

                   United States General Accounting Office

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

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

                   EPA’s and States’ Efforts to
                   “Reinvent” Environmental
                   Statement of Peter F. Guerrero, Director,
                   Environmental Protection Issues,
                   Resources, Community, and Economic
                   Development Division

Mr. Chairman and Members of the Subcommittee:

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

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

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

 ECOS is a national nonpartisan, nonprofit association of state and territorial environmental
 Environmental Protection: Challenges Facing EPA’s Efforts to Reinvent Environmental Regulation
(GAO/RCED-97-155, July 2, 1997).

Page 1                                                                            GAO/T-RCED-98-33
                 may be fully addressed only after EPA and ECOS have had experience
                 implementing the agreement.

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

             •   Many key stakeholders in the reinvention process have expressed concern
                 over the large number of complex and demanding initiatives now being
                 undertaken—as well as confusion over the underlying purpose of some of
                 the agency’s major initiatives.
             •   EPA has had difficulty achieving “buy-in” among the agency’s rank and file,
                 who have grown accustomed to a regulatory structure that has largely
                 been in place throughout the agency’s 27-year history.
             •   The agency has had difficulty achieving agreement among external
                 stakeholders (including federal and state regulators and representatives of
                 industry and environmental organizations) in a number of its reinvention
                 efforts, particularly when stakeholders perceive that unanimous
                 agreement is required before progress can be made.
             •   EPA has an uneven record in evaluating the success of many of its
                 initiatives. Evaluation is needed not only to show EPA management what
                 does and does not work but also to provide convincing evidence to
                 external stakeholders that an alternative regulatory strategy is worth

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

                 Since the early 1970s, EPA’s organization and approach toward
Background       environmental regulation have mirrored the statutes that authorize the
                 agency’s programs. These statutes generally assign pollution control
                 responsibilities according to the regulated environmental medium (such as
                 water or air) or the category of pollutant (such as pesticides or other
                 chemical substances). As a result, the statutes have led to the creation of
                 individual EPA program offices that focus on reducing pollution within the
                 particular environmental medium for which each office has

                 Page 2                                                      GAO/T-RCED-98-33
responsibility—rather than on reducing overall pollutant discharges.
Among other problems, this structure has made it difficult for the agency
to base its priorities on an assessment of risk across all environmental
problems and to take into account the cost and feasibility of various
approaches. The agency’s traditional approach toward environmental
regulation has also been criticized as precluding innovative and more
cost-effective ways to reduce pollution and as being inflexible in dealing
with other stakeholders in the regulatory process, such as states and
regulated entities.

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

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

EPA and state officials agree that early reinvention efforts were hampered
by disagreements and misunderstandings over EPA’s and the states’ roles in
developing and implementing reinvention projects. These differences
centered around issues such as how much flexibility the states have to
negotiate and approve reinvention projects and how to include
stakeholders in negotiations. These differences came to a head in
February 1997, when EPA temporarily withdrew from negotiations, begun
in November 1996, on a proposal jointly prepared by ECOS and EPA
outlining a framework for EPA and the states to promote and implement
regulatory reinvention efforts. Among other things, the proposal was

Page 3                                                      GAO/T-RCED-98-33
                     intended to “establish guiding principles for reinvention and an efficient
                     process that is receptive to innovation proposals” and “improve
                     decision-making between states and EPA on innovation proposals,
                     emphasizing clear lines of communication, decision authority,
                     accountability, and timeliness.” EPA and ECOS subsequently renewed

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

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

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

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

                     Smarter Approaches: To reinvent environmental regulation, regulators
                     must be willing to change the way [they] traditionally look at

                     Page 4                                                      GAO/T-RCED-98-33
                           environmental problems and be receptive to innovative, common sense

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

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

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

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

Process to Select and      The draft agreement states that “where procedures currently exist,
Review Project Proposals   innovation proposals should be handled through normal EPA/state program
                           activities or other ongoing reinvention activities.” Such ongoing
                           reinvention activities would include, for example, Project XL3 and the
                           Common Sense Initiative.4

                            Under Project XL (which stands for Excellence and Leadership), EPA allows companies to test
                           innovative ways of achieving environmental protection at both the facility and the community levels if
                           they can demonstrate that the proposed changes will yield superior environmental performance. This
                           requires applicants to achieve results that exceed the level of environmental performance that would
                           have occurred without XL.
                            The Common Sense Initiative is an effort by EPA to bring together government officials at all levels,
                           environmentalists, and industry leaders to create industry-by-industry strategies that will work toward
                           “cleaner, cheaper, and smarter” ways to achieve environmental protection through consensus-based
                           decision-making. CSI is similar to Project XL in that both initiatives attempt to reduce pollution in the
                           most cost-effective manner.

                           Page 5                                                                             GAO/T-RCED-98-33
                    Those proposals that do not fit into an existing reinvention effort can be
                    handled by an optional process outlined in the agreement. Acknowledging
                    that “the most challenging regulatory innovation proposals have been
                    difficult to address,” the agreement says that the process provides an
                    option “which states may use to get timely decisions on innovation
                    proposals.” It establishes a management framework that identifies the
                    steps to be taken in developing and reviewing innovation proposals; the
                    decisionmakers for each step in the process; and the procedures for
                    communicating decisions. The optional process also requires a 3-month
                    time frame within which EPA must decide whether to approve a project.

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

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

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

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

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

Measuring Success   The draft agreement also stresses the importance of measuring both the
                    success of the decision-making process outlined in the agreement and the
                    success of individual innovation projects. In addition, the agreement
                    acknowledges that developing useful measures is challenging. To help
                    measure the success of the decision-making process, EPA and the states
                    plan to collect a variety of information, including (1) the number and
                    quality of innovation projects proposed, (2) the number and quality of

                    Page 6                                                      GAO/T-RCED-98-33
                     innovations implemented, (3) the timeliness of the actions taken in the
                     process, (4) the number of proposals appealed, and (5) the speed with
                     which information about successful innovations is disseminated to other
                     states. To measure the success of individual project proposals, the
                     agreement stresses that common criteria must be used by both EPA and the
                     states to evaluate projects. The agreement refers to a separate, ongoing
                     effort by EPA and ECOS to develop core performance measures and suggests
                     that the proposed measures developed to date under this effort be used as
                     a starting point for evaluating projects initiated under the agreement.

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

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

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

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

                     Page 7                                                       GAO/T-RCED-98-33
•   Negotiators for EPA and ECOS debated the extent to which riskier projects
    should be held to higher environmental performance standards than other
    projects. EPA (and some states) argued that riskier projects should be held
    to a higher standard.

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

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

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

    Page 8                                                      GAO/T-RCED-98-33
                              As pointed out in our July 1997 report, a number of broader issues still
Broader Issues to             need to be effectively addressed if the agreement is to have its intended
Address If                    effect, and if, in the long run, environmental regulation is to be truly
Reinvention Efforts           “reinvented.”

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

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

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

                              Page 9                                                                            GAO/T-RCED-98-33
                          ensure that the specific objectives and expectations of continuing
                          initiatives are clear to stakeholders within and outside the agency. EPA
                          agreed with this recommendation.

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

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

                          Page 10                                                      GAO/T-RCED-98-33
                             clarifying the circumstances under which unanimous agreement is
                             required. EPA agreed with this recommendation.

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

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

Limitations of EPA’s         Measuring performance allows organizations to track their progress
Evaluation of Initiatives’   toward achieving their goals and gives managers crucial information
Effectiveness                needed to make organizational and management decisions. EPA has, in fact,
                             made some progress in measuring the effectiveness of its reinvention
                             initiatives. The agency’s Office of Enforcement and Compliance
                             Assurance, for example, has responded to the charge to measure the
                             results of its programs by implementing a comprehensive effort with
                             numerous stakeholders to identify innovative ways to measure
                             environmental compliance. If successful, the initiative (the “National

                             Page 11                                                     GAO/T-RCED-98-33
                             Performance Measures Strategy”) could facilitate the use of a broader
                             range of methods to engender compliance beyond the traditional
                             enforcement response that has been relied on so heavily until now.6

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

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

                             On the basis of our past evaluations, the results to date of EPA’s key
                             reinvention efforts, and our contacts with a variety of stakeholders for this
                             review, we concluded in our July 1997 report that constructive
                             modifications can be made under the current environmental statutory
                             framework. However, the framework does establish standards that lead to
                             many of the existing regulatory and behavioral practices the agency is
                             seeking to change. Consequently, as we and other organizations have

                              In a review requested by the House Committee on Commerce, GAO is presently examining how states
                             use alternative enforcement strategies and measure their success.
                              As noted earlier in this statement, the draft EPA-ECOS agreement does address the need to measure
                             both the success of the new decision-making process outlined under the agreement and the success of
                             individual innovation projects. According to the draft agreement, “Innovations must be based on
                             agreed-upon goals and objectives with results that can be reliably measured in order to enable
                             regulators and stakeholders to monitor progress, analyze results, and respond appropriately.”
                              Industry Incentives for Environmental Improvement: Evaluation of U.S. Federal Incentives, Resources
                             for the Future (Sept. 1996). This report is addressed to the Global Environmental Management
                             Initiative, a nonprofit organization of 21 leading corporations dedicated to helping businesses achieve
                             environmental, health, and safety excellence.

                             Page 12                                                                          GAO/T-RCED-98-33
           noted in the past, EPA will be limited in its ability to achieve major changes
           in environmental regulation within the legislative framework as presently
           constructed. EPA’s Deputy Administrator told us that the agency will
           reexamine this issue in light of the recommendations of a key advisory
           group (the Enterprise for the Environment) later this year.

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

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

(160417)   Page 13                                                        GAO/T-RCED-98-33
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