Reinventing the Environmental Protection Agency
and EPA's Water Programs

Claudia Copeland
Specialist in Environmental Policy
Environment and Natural Resources Policy Division

March 22, 1996

96-283 ENR

SUMMARY

The Environmental Protection Agency (EPA) has been at the center of many of the Administration's recent efforts to reinvent government, to create a government that works better and costs less. Some of EPA's projects are intended to fix problem areas in the implementation of current law; others are intended to set future directions. Many of the reforms and program initiatives underway at EPA will directly affect EPA's other governmental partners, especially states.

This report highlights a number of the ongoing activities that are having impacts on this partnership and groups such activities in three categories:

• - a new Performance Partnership System between EPA and states,
• - agencywide initiatives that focus on industry but which will necessarily affect states, and
• - activities in the water quality program that involve federal-state issues, as well as overall policy direction. These include working with stakeholders to develop recommendations towards implementing urban, municipal wet weather pollution control programs with a minimum of regulatory burden, and revised guidance for the nonpoint source management program to give states more flexibility.

EPA's initiatives are, in part, a response to budgetary pressures and the need to be more efficient. The agency also is responding to pressures from the Congress to reform the way it does business and the realization that Congress may change the agency, if it fails to change itself. Some say that the types of changes are logical next steps in the evolution of environmental programs and the Administration's government reinvention efforts. Others say that what is occurring is a sea change in policy without clear prospects that environmental benefits will result. Whether the direction and pace of EPA's administrative reforms will satisfy critics of environmental laws and of the agency's implementation remains to be seen.

The significance of many of these activities, whether one considers agencywide initiatives such as the Performance Partnership System or program-specific reforms, is difficult to assess in these early stages. Most participants are enthusiastic about the changes in process affecting the EPA-state partnership. That view is not universally held, however. There are concerns about how some of the broad initiatives will be implemented and about if, in EPA's enthusiasm for state flexibility and reduced federal oversight, support for core elements of environmental protection programs will disappear.

CONTENTS

INTRODUCTION
-- Background - Reinventing Government and EPA
NATIONAL ENVIRONMENTAL PERFORMANCE PARTNERSHIP SYSTEM
-- Performance Partnership Grants
REGULATORY PARTNERSHIPS
-- Common Sense Initiative
-- Project XL
-- Industry Sector Assistance and Small Business
-- Compliance
-- Improving Permitting Programs
WATER QUALITY PROGRAM ACTIVITIES
DISCUSSION AND VIEWS OF STAKEHOLDERS
CONCLUSION

INTRODUCTION

For more than three years, the federal government, its agencies and departments, has been proposing and pursuing a great many initiatives intended to reinvent government, to create a government that works better and costs less, as Vice President Gore's National Performance Review report declared in 1993. (1) The initiatives embody several themes: eliminating regulatory overkill, using market mechanisms to solve problems, encouraging efficiency and innovation, and empowering state and local governments. As much as any other, the Environmental Protection Agency (EPA) has engaged itself in these efforts which began before the changes in Congress that occurred when Republicans gained the majority in both chambers following the 1994 elections. At the same time, the impetus for EPA to change itself was further encouraged by those election results, which many interpreted as a signal by voters for Congress to roll back federal environmental and other regulatory laws.

Environmental programs rely on a functioning partnership between levels of government. One writer refers to this as a "single stream of governance" in which "each level is related to the other, each needs the other." (2) Thus, both purposefully and inevitably, the reforms and program initiatives underway at EPA will directly affect EPA's other governmental partners, especially states.

This report highlights a number of the ongoing activities that are having impacts on this partnership and groups such activities in three categories:

• - a new Performance Partnership System between EPA and states,
• - agencywide initiatives that focus on industry but which will necessarily affect states, and
• - activities in the clean water program that involve federal-state issues and reflect a devolution to states (transfer of powers and authorities from the federal government to states) and regulatory reform initiatives in specific terms.

The report discusses the water quality program because it is representative of the agency's overall changes in approach. Many of the water program initiatives reflect EPA's emphasis on addressing environmental problems from a holistic, ecosystem-based perspective, focusing on priority problems within watersheds. Further, these activities are taking place within the framework of implementing the Clean Water Act, last amended in 1987 and currently being implemented by EPA, states and cities, and industry. Although the House passed legislation in May to revise the Act, to make it more flexible and less prescriptive, it is uncertain whether the 104th Congress will pass that measure, which is opposed by the Administration, or even a less comprehensive bill. (3) Legislative activity has not advanced in the Senate, leading many to wonder if and when Congress will reauthorize the Act. Nonetheless, implementation of current law continues, and the report describes a number of water program reforms being pursued independent of possible legislative action this year. Some are intended to fix problem areas in the implementation of current law; others are intended to set future directions.

Background - Reinventing Government and EPA

In recent years there have been increasing numbers of calls to fundamentally reform the Nation's environmental policies, coming especially from the Administration itself.

• - In 1993 the Administration's first report of the National Performance Review addressed some of its recommendations for reinventing government to EPA, including a recommendation to consolidate categorical environmental management grants into a block grant, streamline permit programs, emphasize pollution prevention, and encourage market-based mechanisms such as pollution trading systems or fees on pollution. (4)
• - Following the 1993 government-wide proposals, the Administration developed detailed regulatory reform recommendations for specific agencies. In March 1995 the President, Vice President and EPA Administrator announced a set of 25 reforms for EPA to improve current programs and serve as building blocks for the future. (5) The reforms identified two action tracks: those targeted to fixing problems with today's regulatory programs, and those designed to develop innovative alternatives to the current regulatory system. They include a 25% reduction in paperwork, compliance incentives for small businesses and communities, incentives for auditing, flexible funding for states and tribes, multimedia permitting, and refocusing regulation on highest risks. EPA said that most could be accomplished administratively, without legislative authorization.
• - A February 1996 draft report of the President's Council on Sustainable Development concerns integrating flexible environmental protection policies with economic growth. (6) The draft report says that the current environmental regulatory structure should be changed to provide greater flexibility to achieve environmental goals, while considering costs and social factors. The council consists of representatives of industry, environmental and citizen groups, and labor and was established by a 1993 executive order to advise the President on issues of sustainable development.

Reform proposals have come from outside the executive branch, as well. In 1995 the National Academy of Public Administration issued a report requested by congressional appropriators suggesting that the agency needs a more flexible, integrated statutory structure, should make better use of risk and cost information to rank priorities, and should give states more decisionmaking authority. (7) Building on the NSPA report and other ideas, the Center for Strategic and International Studies has recently initiated a project called Enterprise for the Environment (E4E). It seeks to build a consensus for systemic environmental management reform, to be implemented by Congress and the Administration in 1997. (8) And in Congress, various aspects of legislative and regulatory reinvention have been highlighted in authorization and appropriation bills affecting EPA, especially in the 104th Congress, which has sought to cut back both the agency's budget and its regulatory activities.

In response, since 1992 EPA has been pursuing a great many initiatives intended to change the way that environmental programs are managed in this country. The initiatives embody several themes apparent in the regulatory reform recommendations: pollution prevention, sound science, environmental accountability, incorporation of environmental justice, ecosystem approaches, partnerships with states and other stakeholders, and internal organizational reinvention. The organizing principle of many of the initiatives is ecosystem-based environmental protection which focuses on geographically-targeted or community-based approaches to solving environmental problems. The goal of EPA's ecosystem protection efforts is to protect. maintain, and restore the ecological integrity of the nation's lands and waters by moving toward a "place-driven" focus. Places, according to EPA, can be defined on a species or community basis, on a hydrologic/geophysical basis (e.g., watersheds), or on a climatological basis (e.g., airsheds). EPA describes these efforts as part of the government's efforts to reinvent the agency by building a consensus among stakeholders, with community involvement and more flexibility, while addressing entire ecosystems.

In developing these initiatives, EPA clearly is responding to pressures and signals of several other types, as well. These include budgetary pressures on EPA and all parts of the federal government to be more efficient and do more with less. They also include pressures from the Congress to reform the way EPA does business and realization that Congress may change the agency, if EPA fails to change itself. To the extent that EPA demonstrates that it can voluntarily change its programs, it may forestall more severe legislative reforms that agency officials consider damaging to environmental protection efforts.

NATIONAL ENVIRONMENTAL PERFORMANCE PARTNERSHIP SYSTEM

National environmental programs have traditionally been based on a partnership arrangement between EPA and states under which the federal government establishes national goals and standards, oversees state plans and provides technical guidance, and maintains a strong role in enforcement; states may be delegated all or part of the responsibility for day-to-day implementation, including standard setting, permit issuance, and enforcement. From time to time the intergovernmental arrangements have been viewed by one or another of the participants as more of a burden than a partnership of shared responsibilities. For more than a decade, state and local governments have sought relief from costly, inflexible federal regulations and relief from what they consider burdensome detailed oversight by federal authorities. At the same time, the capacity and commitment of states to vigorously implement environmental programs -- which varied widely 25 years ago -- has increased greatly, to the point that both EPA and states have sought changes in the partnership.

In May 1995, after 2 years of discussion, EPA and states entered into a formal agreement intended to fundamentally redesign that relationship and to improve the federal-state partnership on environmental protection.(9) The agreement envisions a new system of gauging environmental performance by measuring environmental improvement according to new environmental and business performance indicators and moving away from traditional accounting of the number of permits issued or enforcement actions taken. Both states and EPA reportedly view this program as the primary vehicle for achieving devolution of environmental protection programs from the federal government to states. Hence, much effort and prestige are being invested by the participants to ensure its success.

The performance partnership system will be embodied in individual agreements negotiated between states and EPA regional offices. This new direction is intended to allow states more authority to set priorities and tailor implementation. At the same time, EPA agrees to allow states greater flexibility to achieve results and reduce oversight of those state environmental programs that demonstrate exceptional performance. The new system would replace annual workplans negotiated between EPA and states with partnership agreements that reflect state priorities and eliminate much of the bureaucracy of the traditional agreement process. States will have freer rein to pick their own goals and shift resources to priority problems.

EPA has signed partnership agreements with five states (Colorado, Illinois, Delaware, Utah, and New Jersey). At least 12 others are likely to sign up during 1996. During FY1997, all states will participate.

A new General Accounting Office (GAO) report(10) reviews experimental programs in Massachusetts, New Jersey, and New York to coordinate implementation of media-specific programs. As GAO notes, environmental programs have traditionally been designed to control pollution discharged to a specific medium -- air, water, or land. The experimental programs described by GAO are alternative environmental management approaches intended -- within the limits of current laws -- to encourage pollution prevention, reduce compliance costs to industry, and make environmental programs more efficient. Massachusetts is using multimedia, facility-wide inspections. New Jersey is using facility-wide permits. New York is coordinating the state's own regulatory activities and targeting this coordination at 400 of the most polluting facilities in the state. GAO says it is too early to assess the effectiveness of these three efforts to integrate environmental management, but that there have been some successes along with troubles working with a media-specific regulatory structure and the constraints of EPA's current media-specific grants program.

Performance Partnership Grants

One element of the partnership program is a more flexible approach to state environmental grants, through block grants to be called Performance Partnership Grants, in lieu of traditional categorical grants for air, water, hazardous waste, etc. Consolidated grants are intended to reduce administrative burdens and improve environmental performance by allowing states and tribes to target funds to meet their specific needs. The objective of partnership grants is to focus on results which are oriented to community needs, rather than on regulatory inputs and micromanagement. EPA believes that the major benefit will be to improve the ability of states and tribes to integrate their environmental programs.

The Administration's 1993 National Performance Review recommended consolidating environmental management grants, and subsequently President Clinton's FY1996 budget request proposed a block grant to consolidate up to 12 existing media-specific grants. It was one of several performance partnership grant consolidations proposed in the FY1996 budget specifically to implement the Administration's reinventing government initiative.

Initially, the Administration believed that environmental grant consolidation could be accomplished administratively and that action by Congress was not required. However, EPA officials subsequently concluded that authorizing legislation would be required, because the partnership grants would redistribute funds currently obligated to a variety of environmental programs. Draft legislation was expected to be transmitted to Congress, but this has not occurred. The Administration renewed its request for consolidated environmental grants in the FY1997 budget and also proposed to give states more flexibility to move funds between clean water and drinking water infrastructure projects, if Congress enacts legislation setting up a drinking water state assistance program.

Through the appropriations process, Congress has endorsed environmental performance partnership grants: the conference report on H.R. 2099, providing funding for EPA for FY1996 (H.Rept. 104-253), approved the Administration's request and created a new account titled State and Tribal Assistance Grants which includes $658 million for state environmental block grants. However, President Clinton vetoed this legislation in December 1995, and EPA operated under a series of continuing resolutions which did not specifically authorize the agency to distribute grants to states under a consolidated approach. EPA and states believe it is likely that, if Congress enacts a full-year appropriations bill for the remainder of FY1996 which succeeds the short-term continuing resolutions, that bill will contain authorization for performance partnership grants.

Anticipating congressional approval of the performance partnership grant request, in late 1995 EPA issued guidance for states and tribes on how the consolidated grant program will be implemented.(11) EPA attempted to respond to states' criticism that an earlier draft version of the guidance was overly complex. EPA also is evaluating agency and federal grant regulations which might impose undue burdens on state participants in the performance partnership system, including, for example, detailed program planning and reporting requirements that traditionally accompany federal grants. EPA is considering issuing a waiver or class-deviation rule for some of its own rules which might be identified as impediments to the partnership system. The agency is likely to face greater difficulty in securing revision of government-wide grant rules, where they are determined to be a problem.

Most states are very enthusiastic about the new direction for federal-state environmental protection, both in the general term of performance partnership agreements and consolidated grants. Among environmental groups, however, there is concern. Some perceive that the partnerships will mean a shift away from tough enforcement towards cooperative compliance which could result in relaxed controls on polluters. Concern has been expressed, too, about how environmental improvements will be measured and evaluated in order to judge whether improvements continue. They also seek assurance that EPA will keep a backup regulatory stick sufficient to ensure that states will not backslide.

REGULATORY PARTNERSHIPS

Agencywide, EPA is developing reinvention and regulatory reforms intended to apply more common sense and economical approaches to environmental regulation of industry. The Administration characterizes these activities as regulatory partnerships, equivalent to the federal-state performance partnerships, and they have a similar objective of focusing on environmental results rather than on complying with regulatory red tape. These evolving activities will affect states, which have responsibility for day-to-day implementation of national environmental programs, as much as they will affect individual businesses.

Common Sense Initiative

The Common Sense Initiative (CSI) is the centerpiece of EPA's reinvention activities. Its goal is to create solutions to environmental problems that are cleaner for the environment and cheaper for industry and taxpayers. Six industry sectors have been identified (automobile manufacturing, computers and electronics, iron and steel, metal finishing, petroleum refining, and printing) and corresponding task groups established to debate and restructure environmental requirements based on industry sectors, rather than pollutant by pollutant or media by media. The task groups, or subcommittees, are dealing with six broad topics: reviewing regulations, encouraging pollution prevention, streamlining reporting, improving compliance, streamlining permitting, and examining environmental technology (especially incentives for innovation). Begun in 1993, it is a long term effort with no specific schedule or goal, but represents a fundamental change in the direction of the Agency's efforts to protect the environment and public health. (12)

CSI has links to specific regulatory projects. In December 1993 EPA proposed a multimedia "cluster rule" for the pulp and paper industry, the first effort to simultaneously place limits on an industry's air emissions and wastewater discharges. Controversies about details of the proposal and its cost have delayed issuance of a final rule, which is not expected before mid-1996.

The CSI process has encountered criticism from some environmental and community groups. They have complained that the multistakeholder discussions are government dominated and industry driven. Because of disputes over who should participate, these groups complain of being underrepresented and unable to impact the discussions. Early this year the groups began working on an alternative to CSI, one focusing on grassroots, community-based approaches to achieving pollution prevention, and in February environmental justice representatives resigned from CSI in order to focus on alternatives. EPA Officials believe that the groups' concerns are misplaced, and they are attempting to regain the support of environmental justice groups. (13) Approval and implementation of CSI projects will depend partly on community-based endorsement of specifics yet to emerge. Some participants believe it will be difficult to demonstrate broad consensus on CSI projects if groups are excluded or choose to not participate, so that resulting discussions are perceived to be too narrowly focused.

Project XL

Related to CSI is Project XL ("Excellence and Leadership") which will give selected entities the opportunity to demonstrate innovations to meet environmental goals outside of the current command-and-control regulatory framework. Where CSI is organized by industrial sector, Project XL takes a facility-specific approach to reform. Project XL builds on an earlier agency-industry innovation study of an Amoco oil refinery at Yorktown, Virginia, which also evaluated alternative pollution prevention and compliance strategies to achieve better overall environmental performance.(14)

EPA's goal for Project XL is to have about 50 projects underway in 4 program areas: facilities, industry sectors, government agencies, and communities. As of mid-February, 12 projects have been tentatively approved, meaning the participants and EPA are negotiating enforceable project agreements, a process expected to result in agreements for the first group of participants by April or May. Nine of the 12 chosen projects are from companies; 3 are from state or local environmental agencies. Among them, one company plans to achieve better-than-mandated control of air, land, and water pollution at a facility now under construction. Another has pledged to exceed required pollution reduction goals through a comprehensive permit for air, water, and waste which will simplify the company's reporting and paperwork burden. A local government environmental agency proposes to work with area companies to reduce air pollution from commuting trips. About a dozen other proposals are being evaluated, and EPA expects to receive more Project XL proposals in the future.

Industry Sector Assistance and Small Business Compliance

In another industry-focused project, EPA has issued comprehensive technical and environmental profiles (sector notebooks) of 18 industries to help develop industry-based assistance strategies for improving overall compliance at less cost. The 18 include, for example, dry cleaning, pulp and paper, inorganic chemicals, and transportation equipment cleaning and were chosen on the basis of such factors as overall economic and environmental impact and similarity of manufacturing processes across facilities nationwide. Further, EPA has created four compliance assistance centers (for printing, metal finishing, auto repair, and small farms) to provide businesses with "one-stop shopping" for information they need about applicable regulations, as well as about pollution prevention opportunities.

Recently EPA established a Common Sense Compliance Program of incentives for small businesses to help them correct environmental problems without fear of a penalty, provide a six-month grace period to correct problems, and waive fines for first-time violators that make a good faith effort to comply. This program expands on an earlier EPA policy under the Clean Air Act to provide compliance incentives for small businesses. (15)

Improving Permitting Programs

EPA created a Permits Improvement Team in July 1994 to examine all of the Agency's permitting programs (air, water, and hazardous waste) and identify how they can be improved. The team consists of EPA, state, tribal, and local government officials and is co-chaired by the EPA Assistant Administrator for Solid Waste & Emergency Response and the Region II Administrator. One output of the team is an inventory of EPA/state permit improvement initiatives.

Early in 1996 the group completed an extensive set of recommendations concerning EPA's overall permitting approach and program-specific issues. (16) Overall, the team recommends a revised permitting approach called "public performance-based permitting, or P3." It would consist of two elements: establishing a defined level of performance to be achieved by permittees, and giving the public necessary information to monitor both the permitting process and ongoing compliance of permitted facilities. For the water program, the team recommends items such as expanding use of general permits for industrial dischargers where feasible and including language in stormwater permits that emphasizes pollution prevention. The full set of recommendations is expected to undergo wide public review and comment by state and local governments, environmental groups, and the regulated community.

The Permits Improvement Team also identified several proposed projects for FY1996, such as preparing as a pilot project a permit-by-rule for de minimis water discharges that would not require individual facility permits or any reporting. This project responds to concerns of many states that they lack resources to write and enforce permits for all dischargers and interest in minimizing permit burdens on small sources. The outcome of final FY1996 budget decisions for EPA, still being considered by Congress, will determine if the agency has enough resources to go forward with the proposed projects.

WATER QUALITY PROGRAM ACTIVITIES

Beyond agencywide activities intended to redefine and reinvent environmental protection efforts, most of the individual EPA program offices are pursuing reinvention projects and initiatives. Many are either in response to state concerns about redefining the federal-state partnership or will significantly involve states, as primary day-to-day implementors of national environmental programs.

EPA's water quality program is representative of efforts to foster devolution and reinvention of government. Agency officials and interest groups recognize that, after 25 years of implementing national environmental programs, much progress towards environmental goals has been achieved, primarily through control of large industrial sources, with the result that nonpoint sources now dominate water quality problems in most areas. Many believe that remaining problems are better addressed through new approaches in place of traditional "command and control" regulation focused on large industrial pollution sources. In the water quality program, recent initiatives start from a watershed approach which acknowledges that water quality goals in many areas of the country will not be achieved if water quality managers focus solely on controlling pollution from discrete point sources, as in the past. Rather, remaining water quality problems require attention to diffuse as well as discrete pollution sources managed on the basis of specific geographic areas defined by natural or hydrologic features, instead of political boundaries.

The watershed or ecosystem approach endorsed by EPA examines all of the environmental issues and aspects of the ecosystem and involves key government, citizen and other local stakeholders in developing solutions. In contrast with past areawide planning efforts (such as the "208 program" which attempted to prioritize watershed waste management projects), the current approach is more community-based than top-down in emphasis and is intended to be a process for addressing problems by involving key government, citizen and other user groups as full partners in developing solution. Some of the earlier planning efforts also examined watershed areas. They tended to focus primarily on producing a plan but yielded little implementation.

During the 103rd Congress, the Administration proposed a Clean Water Initiative which embodied elements of watershed or ecosystem management: geographic targeting, priority setting, focus on wet weather/diffuse sources of pollution, and stakeholder involvement in decisionmaking. Congress has not acted on legislative changes to reflect the Administration's specific Clean Water Initiative, but the Agency is now pursuing many of the concepts administratively using existing authority to achieve regulatory reform and flexibility. In January, Assistant Administrator Robert Perciasepe released a national water program agenda for 1996-1997 built on a framework of common sense, place-based water programs, improved wet weather flow controls, and improved involvement with tribal water quality programs. (17)

Traditional regulatory programs that focused on industrial and municipal dischargers have achieved measurable progress in controlling pollution from those sources. Now, however, the largest remaining threats to water quality are believed to be diffuse, wet weather flows, including agricultural runoff, combined sewer overflows, urban stormwater, and sanitary sewer overflows. The major focus of EPA's water program is to address wet weather pollution, using existing Clean Water Act tools and new initiatives, as well.

Using a Federal Advisory Committee, EPA is working with stakeholders to develop recommendations to coordinate implementation of urban, municipal wet weather water pollution control programs with a minimum of regulatory burden. One subcommittee is assisting EPA in developing Phase II of the national stormwater program for small sources, as required by the Clean Water Act. The 1987 amendments to the Act directed EPA to implement a permit program for stormwater discharges from industries and municipalities. Phase I focused on larger stormwater discharges. The advisory committee is helping EPA identify options to manage stormwater discharges in small cities, which are not yet covered by regulations.

Another subcommittee is evaluating options to deal with sanitary sewer overflows (SSOs) in urban areas. SSOs are discharges of raw sewage that occur when a sewer system is overwhelmed, generally due to increased water flows or structural, operational, or maintenance problems. This subcommittee is helping EPA refine an enforcement policy and develop a national approach for controlling SSOs. Previously, EPA used a similar stakeholder group to develop a national policy on combined sewer overflows (CSOs) issued in April 1994. CSOs differ from SSOs in that they are overflows from sewers designed to carry both sanitary wastes and rainwater. State and local governments are involved in all of these activities.

EPA revised guidance for the nonpoint source program and Clean Water Act section 319 grants for FY1997 and future years to eliminate the competitive grant program and give states more flexibility to implement these programs under a more streamlined framework. The guidance outlines nine key elements to be reflected in state programs (e.g., strong partnerships with stakeholders, explicit short and long terms goals for protecting surface and ground waters). States that meet the nine criteria can be designated as leadership or Tier I states, making them eligible for incentives such as multi-year grants, reduced amount and frequency of reporting, and self-assessment by states themselves. These incentives contrast with the previous program approach, in which states which did not meet particular requirements received less EPA grant money.

EPA recently released a policy statement to encourage effluent trading in watersheds. (18) Effluent trading is intended by EPA to be an innovative way for stakeholders to develop more common sense, market-based solutions to water quality problems in watersheds. A discharger that can reduce pollution below the minimum required to meet water quality standards can trade or sell its excess reductions to others in the watershed. This creates an economic incentive for dischargers to go beyond minimum pollution reduction and encourages pollution prevention.

The guidance identifies a range of trading alternatives, including intra-plant trades, point source/point source trades, point/nonpoint source trades, and trades between nonpoint sources. Watershed-based trading will be implemented on a voluntary basis under existing CWA authorities. States, responsible for water quality standards in all states and for permit issuance in the majority of jurisdictions, will be greatly involved if effluent trading moves beyond the 17 experimental projects discussed or underway so far. The Administration's Clean Water Initiative and recent legislative proposals offer some incentives for effluent trading, which is allowable under current law, but no program or grant incentives are authorized in the CWA.

More generally, EPA is developing or pursuing other administrative reforms that would affect state management of water quality programs, such as reducing reporting imposed on regulatory agencies and permittees based on good performance, an upcoming review of the water quality standards program to enhance water quality management on a watershed basis, and developing guidance for assessing risks at a watershed ecosystem level.

DISCUSSION AND VIEWS OF STAKEHOLDERS

It is apparent that a great many program initiatives are occurring at EPA and in the water program specifically, so that, even if Congress does not pass Clean Water Act amendments soon, change is underway. Some say that the types of changes are logical next steps in the evolution of environmental programs and the Administration's efforts to reinvent government. Others say that what is occurring is a sea change in policy without clear prospects that environmental benefits will result. Whether the direction and pace of EPA's administrative reforms will satisfy critics of the environmental laws and of the agency's implementation remains to be seen. Likewise, it is possible that some reform initiatives supported by EPA and stakeholder groups could be stalled by a lack of legislative endorsement from the Congress.

The significance of many of these activities, whether one considers agencywide initiatives such as the Performance Partnership System or program-specific reforms, is difficult to assess in these early stages. Most participants are enthusiastic about the changes in process affecting the EPA-state partnership. That view is not universally held, however. There are concerns about how some of the broad initiatives will be implemented and about if, in EPA's enthusiasm for state flexibility and reduced federal oversight, support for core elements of environmental protection programs will disappear.

States' Views. States for the most part endorse the general direction and concepts behind the reinvention and performance partnership initiatives. Some, however, have concerns about implementation. Virtually all states worry about having adequate resources from federal or their own sources to fund their activities, particularly as they assume enhanced day-to-day responsibilities. State-collected permit fees generally cover only a portion of states' administrative costs and in most cases would have to be raised to politically unacceptable levels in order to cover additional management tasks. Along with more responsibility and more work, states would like to see more financial support, but prospects for additional federal funding are dim. Many seek assurance that EPA's commitment to a changed federal-state relationship is sincere and lasting and will not return to past practice of detailed federal oversight, either as a result of the passage of time or differential implementation by separate EPA regional offices. At the program level in many states, there also is concern over the potential for intensified competition between environmental programs (water versus air quality, for example) and the potential that some will be defunded and eliminated as a result of block grants.

While many states are eager and capable of assuming responsibilities previously managed at the federal level, this is not true of all. The 1995 NAPA report discusses this point.(19)

All state governments have developed substantially greater capacity to address their own environmental problems and to manage EPA programs over the past two decades. A few states have as much technical capacity as EPA's regional office, or more, and have developed programs that are more effective than those required by federal law. Some states, however, have been slower to build their capacity and have shown little interest in assuming greater responsibilities.

One challenge for EPA, then, is to encourage state flexibility and devolution, rewarding high-performing states, but also to be prepared to enforce against, or assume day-to-day implementation responsibilities in, states that fail to meet national standards.

Environmentalists' Views. Other interest groups are more cautionary at this point, including some in the environmental community who wonder about the impact of shifting away from traditional measures of program performance and environmental improvement. Some say that, in the drive to pursue local priorities and goals, national standards and objectives could disappear. While federal priorities are on developing place-based initiatives, they are quite resource-intensive, and environmentalists are concerned that the baseline national water program elements such as water quality standards and industrial effluent guidelines will be shortchanged and underfunded. Environmentalists support many of the EPA initiatives, either conceptually or specifically (they are especially supportive of the stakeholder discussions on wet weather pollution problems), but note that the resource-intensive nature of CSI, Project XL and others appears to be drawing resources away from core program needs. If resources are limited, they say, EPA's list of priority projects should be shortened to focus on those with the most environmental benefit, such as streamlining the stormwater regulatory program.

Many in the environmental community are also concerned about the combined effects of budget cutting at federal and state levels. Program responsibilities are being turned over to the states, in the name of efficiency and reinvention at the federal level, but state budgets also are shrinking. These comments echo the states' own concerns about adequate resources, but environmentalists worry that the result at the state level could be no enforcement in some areas or inadequate implementation in others.

Environmentalists also have concerns with the performance partnership arrangements between EPA and states, particularly that citizen input is lacking. They argue that if federal oversight is to be reduced, along with decreased reporting by permittees and states, that flexibility should be balanced by more public scrutiny through enhanced citizen participation.

Business and Industry's Views. Industry is supporting and actively participating in the wide range of projects and initiatives at EPA. At the same time, industry groups are independently and voluntarily pursuing a number of nonregulatory initiatives, or private codes of practice, concerning environmental management systems and self-auditing. These private codes call upon firms to adopt broad new forms of environmental behavior, both to reflect public concerns about corporate environmental conduct and protect the environment more effectively. (20) Each requires companies to adopt environmental management systems, audit progress towards goals they set for themselves, and, to varying degrees, communicate to outside groups. None includes specific environmental performance standards that firms must meet, however. Examples of these voluntary practices include:

• - the Chemical Manufacturers Association's Responsible Care program, consisting of guiding principles and codes for member companies developed in response to public distrust of the chemical industry following accidents in Bhopal, India, and West Virginia in the mid-1980s;
• - the international environmental management standard, ISO 14000, to build consensus on environmental management standards among major manufacturing countries to facilitate international trade; and
• - the Coalition for Environmentally Responsible Economies' principles (CERES), intended to link corporate environmental practices with information provided to outsiders, particularly potential investors.

Private codes attempt to foster long-term changes in the way firms integrate environmental aims with other business objectives, in contrast with government regulation which focuses on standards to limit pollution, define technology performance, and specify waste management practices. Some see these industry initiatives as companions to EPA-administered voluntary pollution prevention programs, such as Project XL, and policies that promote voluntary activities by the regulated community, such as a 1995 policy to encourage corporate environmental self-audits and improve compliance while providing some protection against enforcement for violations reported as a result of audits. (21)

Some in industry express a degree of hesitation about regulatory reform and program devolution. Some industries, like states, fear that EPA will not fully shift responsibilities to states under the Performance Partnership System agreements but instead will retain enforcement and other authorities at the federal level, thus denying states the flexibility such agreements envision.

While most businesses applaud less regulation, more flexibility and site-specific decisionmaking, some also recognize that giving more discretion to states can result in industry facing a larger patchwork of laws which complicate a corporate environmental manager's agenda. It is interesting to recall that in the early 1970s many industrial interests (such as automobile manufacturers and chemical producers) favored a strong federal role in environmental policy, administered consistently, in preference to the administrative inefficiency of different requirements set separately by states. This concern was influential in Congress' deliberations on the 1970 Clean Air Act amendments and 1972 Clean Water Act amendments, when a strong federal role in environmental protection was clearly established.

CONCLUSION

What is far from clear is how environmental results will be measured and evaluated under these new systems of partnership and regulatory flexibility. Nor is it clear whether questions about assessing these initiatives are being asked while the activities are still being developed.

It remains to be seen how policymakers will judge success or failure of the initiatives. Without articulation of how EPA and others will evaluate the efforts, there is little way of knowing if cost savings and efficiency will be valued more highly than environmental improvements, for example. If traditional performance measures such as stream miles that attain water quality standards give way to alternative measures such as number of innovative pilot programs begun by states, it is not clear how information will be generated to assess compliance with existing statutory requirements or environmental quality overall. Even today, monitoring systems and our ability to evaluate long term trends in environmental quality are poor. Unless agreement can be reached on outcome measurements as these initiatives are being developed, and unless such measurements are clearly understood by all, questions about their success in achieving environmental goals will continue. A related issue for policymakers may be whether there will be such flexibility and individual priority-setting among states that concerns develop, as they did in earlier times, about inconsistencies and uneven standards leading states, regions, or localities into economic competition based on the environmental rules they enforce.

One result of these activities, if they are fully implemented, may be less friction in the governmental system (between intergovernmental partners, between regulators and industry). Few would doubt that such a result is desirable, particularly if it proves to be compatible with continued pursuit of the goals and objectives of environmental laws.

Endnotes

1. Vice President Al Gore. From Red Tape to Results, Creating a Government that Works Better & Costs Less. Report of the National Performance Review. Washington, 1993. 168 p.

2. Lepkowski, Will. "Government seeks new balance in environmental protection." Chemical & Engineering News, Oct. 30, 1995. p. 44.

3. H.R. 961, the Clean Water Amendments of 1995. For further information, see Clean Water: Summary of H.R. 961, As Passed, CRS Report 95-427 ENR.

4. The three reports of the National Performance Review, issued in 1993, 1994, and 1995, are available on the Internet at http://www.npr.gov/homepage/viewl.html.

5. 'Reinventing Environmental Regulation' Clinton Administration Regulatory Reform Initiatives released Mar. 16, 1995 in Daily Environment Reporter, Mar.17, 1995, E 1 -E23.

6. Presidential panel recommends framework for reforming environmental regulations." Daily Environment Report, Feb. 13, 1996, AA1-AA2.

7. National Academy of Public Administrators. Setting Priorities, Getting Results, A New Direction for EPA. April 1995. 221 p.

8. Statement by William D. Ruckelshaus before the Senate Appropriations Committee Subcommittee on VA-HUD-Independent Agencies, Feb. 29, 1996.

9. "State-EPA accord dramatically scales back federal oversight." Inside E P.A. Special Report, June 5, 1995. 4 p. The text of the partnership agreement is provided.

10. U.S. General Accounting of fine. An Integrated Approach Could Reduce Pollution and Increase Regulatory Efficiency. GAO/RCED-96-41. January 1996. 18 p.

11. The text of this guidance is available online at this EPA Internet site:
http://earthl.epa.gov/docs/OWOW/PPG/ppgguide.html.

12. Further information is available at this EPA Internet site: http://www.epa.gov/CSI/CSI/.

13. Environmental justice stems from concern that minority populations and/or low-income populations bear a disproportionate amount of adverse health and environmental effects from pollution. For further information, see CRS Report 92-646 ENR, Environmental Equity.

14. Ginsberg, Beth S. and Cynthia Cummis. "EPA's Project XL: A Paradigm for Promising Regulatory Reform." Environmental Law Reporter, February 1996, 26 ELR 10059-10064. Further information is available at this EPA Internet site: http://www.epa.gov/ProjectXL/.

15. EPA has a similar small community environmental compliance assistance program which includes flexible enforcement policies. Information on the compliance assistance centers, compliance incentives for small businesses, and small community compliance programs is available on the Internet at http://www.epa.gov/docs/OECA/oedtrm.html.

16. "EPA 'Permits Improvement Team' floats sweeping new recommendations." Inside E.P.A. Weekly Report, vol. 17, no. 7, Feb. 16, 1996. pp. 1, 8-11.

17. Perciasepe, Robert. "National Water Program Agenda for the Future: 1996-1997." Memorandum to Employees of the National Water Program, Jan. 16, 1996. In Daily Environment Report, Jan. 17, 1996, E1-E12.

18. U.S. Environmental Protection Agency. "Effluent trading in watersheds policy statement." Federal Register, vol. 61, no. 28, Feb. 9, 1996, 4994-4996.

19. National Academy of Public Administrators, supra note 7, at 86.

20. Nash, Jennifer and John Ehrenfeld. "Code Green, Business Adopts Voluntary Environmental Standards." Environment, vol. 38, Jan./Feb. 1996. pp. 16-20, 36-45.

21. For further information, see CRS Report 95-817 ENR, Voluntary Programs to Reduce Pollution.