A few years ago, Mary Gade realized that managers of small businesses in Illinois were scared to death of being severely punished for accidentally violating complicated environmental laws. These managers were so scared, in fact, that they often didn't want to ask for the state's help in fixing their environmental problems. Gade thought that was a shame, and as the director of the Illinois Environmental Protection Agency, she was in a position to do something about it. In 1995, Gade set up Clean Break, a program that offers small businesses help in complying with environmental regulations and relief from penalties, provided they fix their problems within a reasonable time.
Gade also felt that contaminated industrial sites in Illinois were taking too long to redevelop. The cleanup standards were unrealistically strict, and developers were afraid that if they took the trouble to clean up a site, they not only would have to waste money chasing the last stray molecule of pollution but could be sued by a future user of the property for contamination they didn't even cause. Many sites were abandoned or remained perpetually undeveloped. In 1993, the Illinois EPA created a set of flexible cleanup standards and limited liability releases that have made possible the voluntary redevelopment of hundreds of contaminated sites.
Gade, who worked for the U.S. EPA for 13 years before heading the Illinois EPA, stresses that these kinds of imaginative initiatives would have been impossible at the federal level. "States are particularly well positioned" for experimentation, she says. "We make great laboratories." Gade adds that the U.S. EPA may no longer be the best place to make many sorts of environmental decisions. "The federal government is not being as helpful and constructive as they could be," she says, and "the environmental management system of this country, after 30 years, is ready for a major rethinking and overhaul."
Environmental regulation is undergoing a sea change in the United States. The old environmental vision, shaped in the 1960s and '70s, was crisis-driven. It distrusted markets, property, and the private sector, and so punishment rather than cooperation was the preferred method for getting people to comply with the law. It assumed that environmental problems and conditions were pretty much the same everywhere and accordingly called for one-size-fits-all regulations mandating acceptable technologies and approved cleanup methods. The regulations were written by government experts, and it was taken for granted that environmental problems would be solved through the public sector. Furthermore, the prevailing wisdom said the states were incompetent regulators who would strike cozy deals with evil polluters and "race to the bottom," cutting environmental standards to attract businesses. Federal regulators were the ones wearing the white hats.
The new vision of environmental regulation stresses problem-solving instead of punishment. It seeks flexibility in compliance methods so that companies can choose the cheapest way of achieving a given level of environmental quality, instead of having to adopt a single prescribed method. It views the private sector as a necessary partner in environmental improvement. And it tries to bring decision-making authority to the lowest level where it makes sense--so that local problems can have local solutions, state problems can have state solutions, and national problems can have national solutions.
Over the past few years, several states have begun to implement reforms embodying these principles. Their experiences contradict the race-to-the-bottom theory, which does not allow for the possibility that state-driven environmental protection could achieve superior results at lower cost, with less regulation and less intrusiveness. These are some of their stories.
"Brownfields" of Dreams
"Superfund," says Jim Seif, secretary of the Pennsylvania Department of Environmental Protection (DEP), "is the least effective federal environmental statute in history." Seif is referring to the federal law dealing with hazardous site cleanup, officially called the Comprehensive Environmental Response, Compensation, and Liability Act. Superfund was enacted in 1980, in the wake of the Love Canal scare. Today it is widely criticized for making cleanups needlessly expensive and time-consuming, for engendering unnecessary litigation, and for making it almost impossible to return a contaminated site to productive use.
Fortunately, the Superfund program applies only to the sites classified by the federal government as most contaminated. For the remaining sites, known as "brownfields," the Pennsylvania DEP developed the Land Recycling Program, which was authorized by state legislation passed in 1995. The program standardizes cleanup procedures, so owners and potential developers know exactly how much cleanup is necessary. It sets realistic goals--unlike Superfund, which established what Seif describes as "Garden of Eden" standards, "a practice which, of course, produced no cleanups" because of the prohibitive expense. Pennsylvania grants liability releases to owners, developers, and financial institutions that are otherwise reluctant to clean up properties for fear that they will be sued by future owners. And it provides some funding assistance, though most of the cleanups are conducted at private expense.
In contrast with Superfund, the DEP tries to avoid prescribing the specific technology to be used in the cleanup, instead only saying how clean the site should be. While the Pennsylvania program is still prescriptive in some areas, the regulations are by and large based on actual environmental and health risks, encouraging businesses to develop innovative cleanup methods. Instead of requiring the complete elimination of chemicals left by commercial activity, the state sets acceptable levels based on established risks to human health and the environment, taking into account the intended use of the property. (Residential sites, for example, have to be cleaner than industrial sites.) As one DEP official puts it, "We have kind of taken a novel approach in Pennsylvania, trying to base our cleanup program on sound science."
Previous state law held current owners responsible for cleanup, even if prior owners were responsible for the contamination; as a result, it was sometimes more cost effective to abandon a site than to restore it. The Land Recycling Program releases owners or developers of a site from liability associated with their cleanup, as long as the work is done according to specified standards and procedures. State grants or low-interest loans can cover up to 75 percent of the cost of completing an environmental study and implementing a cleanup plan. Once the property has been cleaned up, the DEP releases the landowner from state liability, and state law provides protection from citizens' suits.
One of the highest-profile properties to be redeveloped under the program is the 160-acre site of a shuttered plant owned by Bethlehem Steel. In February 1996 the company signed a partnership agreement with the Smithsonian Institution to establish the National Museum of Industrial History on the plant site, which is being tested for the presence of heavy metals and other materials associated with steelmaking. The first stages of the project--sampling the soil and monitoring the ground water to determine what sort of cleanup is necessary--are mostly completed. The company expects that not much cleanup will be required beyond tearing down buildings and removing debris. Some soil might have to be removed, but more drastic methods, such as pumping and treating ground water or putting in large underground walls to isolate it, are not expected to be necessary.
Once the cleanup is finished, any residual contamination shouldn't pose any health problems because the property will be covered with clean soil, parking lots, and buildings. The museum, which is expected to open in 2001, will be part of a larger education and entertainment complex. "It's been said that Pennsylvania has the most progressive brownfields law in the country," writes Hank Barnette, chairman and CEO of Bethlehem Steel. "Certainly, this is making possible the revitalization of our site in Bethlehem that might otherwise have had a very limited future."
Direct comparisons between Superfund and the state program are tricky, since they cover different types of sites. But in the brief existence of the Land Recycling Program, more than 300 sites have been enrolled and 100 have been cleaned up, while over the last 16 years the Superfund program has worked on 33 of 103 sites in Pennsylvania, and just 10 of these have been removed from the list.
Pennsylvania officials were therefore annoyed at recent federal efforts to limit the scope of state brownfield cleanup programs. One obstacle to cleanups was that no matter what the state guaranteed, the federal government could decide that a site needed additional work under Superfund. To avoid this problem, some states have signed "memoranda of agreement" (MOA) with the U.S. EPA, essentially stating that if a site enters the state cleanup program the feds will leave it alone. In September 1997, the U.S. EPA released a guidance document severely restricting the conditions under which it would sign an MOA: The more flexible a state tried to be in its efforts to get sites cleaned up quickly, the less likely it was to get an MOA. State regulators called the new federal guidelines overly prescriptive and unnecessarily intrusive.
Last November, under intense criticism from state environmental officials, the U.S. EPA withdrew the guidance document, but it has yet to develop a policy of encouraging state experimentation with brownfield cleanup programs. To many state officials, the best federal policy on the matter would be to butt out. "We think that the federal government needs to basically stay out of state business when it relates to brownfields and cleanup programs," says Jim Snyder, director of the Bureau of Land Recycling and Waste Management at the Pennsylvania DEP. The feds "see themselves as being Big Brother and Big Sister to the states, and the states are not interested in that."
In Search of XL-ence
Roger Kanerva, an environmental policy adviser with the Illinois EPA, bristles at the mention of the letters XL. "Please don't use the XL word," he admonishes. "We are not fans of XL." He rolls his eyes and shakes his head.
Project XL is a U.S. EPA program for companies with "XL-ent" environmental performance. Introduced by the White House in 1995 as an "enforcement experiment," it was designed to provide an alternative to the standard system of one-size-fits-all regulations. In theory, facilities that showed they could attain superior environmental results would be granted more flexible permit conditions. The EPA would refrain from punishing violations if a participating facility was acting in good faith.
3M, which makes a wide range of consumer products, medical supplies, and manufacturing materials, applied to the XL program for plants in Minnesota, Illinois, and California. The Illinois EPA supported the Illinois part of the effort and worked with 3M to get the XL project approved. U.S. EPA approval for the XL program was contingent on "superior" environmental performance, but the standard turned out to be a moving target. "What you thought was superior before," Kanerva recalls, "suddenly [wasn't]. We were always one step behind their new definition of how wonderful your project had to be." For instance, while "superior" started out meaning "better than required by existing laws," it ended up meaning "better than the company was performing already"--which penalized companies like 3M, which were already performing substantially better than laws required. Finally, 3M dropped out of the XL program. Frustrated with the vagueness and inconsistency of the federal criteria, the Illinois EPA refused to participate further.
Other companies that have explored the XL program have had experiences similar to 3M's. Part of the problem seems to be the U.S. EPA's inflexibility. The Environmental Council of the States, which represents state environmental agencies, charged that the U.S. EPA mishandled the project by adopting "rigid criteria…in the eleventh hour" and by not allowing a larger role for the states. But even if federal regulators wanted to be flexible, the laws wouldn't give companies much leeway to pursue innovative approaches. Regardless of whether the U.S. EPA punishes a violation, a private individual could always sue over a company's statutory violations.
Disappointed with the XL program, the Illinois EPA prepared its own Environmental Management System (EMS) legislation, which was signed into law in June 1996. The statute gave the agency five years, from 1996 to 2001, to enter into agreements with companies that want to try out new ways of complying with regulatory requirements. This pilot EMS program is open to companies that seek to streamline their permitting procedures or adopt "innovative environmental measures." The Illinois EPA insists that a company's EMS emphasize actual environmental performance, focus on pollution prevention, and guarantee extensive consultation with community groups and leaders. "For this program," says the Illinois EPA, "the most important ingredient is the desire of a regulated entity to chart its own course for environmental progress and to be fully accountable for its performance."
The program is voluntary: No company must join, and the Illinois EPA is not bound to enter into an agreement with any company. The fact that a company chooses to participate means that the agreement makes sense for the company, and the fact that the Illinois EPA agrees means that it expects environmental improvements. The agency doesn't require that the potential for improvement be demonstrated beyond a doubt, which is what stymied the XL program. It reserves the right to approve interesting, innovative projects that might lead to significant environmental benefits.
3M was the first company to negotiate an EMS agreement with the state. The agreement would require 3M to set a waste reduction goal for its adhesive tape factory in Bedford Park and to measure its progress toward that goal. It would lower the ceiling on 3M's emissions while giving the company more flexibility in its day-to-day operations. To avoid problems with the U.S. EPA, the agreement does not address any issues of federal law or permitting.
State officials expect to finalize the agreement with 3M by the end of the summer. Tom Zosel, 3M's manager of environmental initiatives, says the company is optimistic about the arrangement: "We get some operational flexibility, we get better relations with the local community, and the agency gets more information and oversight on our facilities in a way that is less regulatory and less command-and-control. We're making commitments on what we're going to achieve that are better than what the regulations require."
The Illinois EPA hopes to approve a few dozen EMS agreements over the next five years and use the experience to develop new regulations. This learn-by-doing strategy contrasts sharply with the federal approach, which Kanerva describes as a "one-size-fits-all, cookie-cutter, do-it-our-way-or-take-the-highway type of thing." As the Illinois EPA's Bharat Mathur puts it, "One of the reasons XL didn't work is because, typically, when we do something new, there is this great desire to put it into regulation, rules, and guidance. And that's where it gets sticky, because you cannot accommodate all new, emerging situations into rules and guidance right off the bat."
"I'm not a warm and fuzzy person," says Jim Morgester, compliance division chief for the Air Resources Board at the California EPA. "I am a dyed-in-the-wool enforcement type. I have a military background." But while Morgester was brought up on enforcement, he sees it as a tool, not as an end in itself.
Morgester regulates businesses that generate air emissions, including gas stations, dry cleaners, auto repair shops, paint manufacturers, and furniture factories. Several years ago, he found that only 60 percent of the businesses inspected by the Air Resources Board were staying within emission limits, handling volatile chemicals properly, and completing required paperwork. His goal was to get that number up to 95 percent. The main reason for the widespread failure to follow the law, he concluded, was that people couldn't understand the law. Environmental rules and regulations, he points out, are written by technical people whose terminology is difficult to understand, and then rewritten by attorneys in their own language, with politicians looking over their shoulders and second-guessing the outcome. The result, he says, is "not intelligible to a lot of people."
"I don't care about being nice," Morgester insists. "I care about getting people to comply, and I will use whatever it takes. If I thought that if I put half the population in jail I could get what I wanted, that would be fine by me. But that doesn't work." He divides businesses into three groups: big companies that understand the regulations and can afford environmental auditors; smaller businesses that want to do the right thing but don't have the resources to figure out what that is; and those who, "even if they knew what the right thing was, weren't going to do it anyhow." He adds, "I would rather spend my traditional law enforcement resources on the third class, because it's easier for me socially and politically to bust the bad guys." For the others, he says, an educational approach makes more sense.
California's Compliance Assistance Program was developed in 1988, before such programs had become popular nationwide. For technically knowledgeable managers, Cal/EPA offers a set of blue three-ring binders ("blue books") that contain complete compliance information for a given type of equipment or category of business. For line workers, the program offers nontechnical, comic-book-style information, which is sometimes published in Spanish or Korean as well as English, depending on the type of business involved.
The self-inspection handbook for the dry cleaning industry shows green drums labeled "Waste" with voice bubbles saying "Store and label properly." "And seal tight," proclaim large yellow block letters across the rest of the picture. The handbook includes sample checklists where workers can enter how many pounds of clothes were in each load and keep a service and repair log for the equipment. "Use these…to help prevent a notice of violation," a large talking iron says.
There's a Spanish-language version of the inspection manual for auto repair shops, which tells shop owners about all the different government agencies with the power to regulate them, from fire departments to OSHA to local pollution-control districts. While reminding them that "¡Las violaciones son costosas!" (Violations are costly!), the manual shows pictures of unsealed solvent containers, open paint cans, and soiled rags exposed to the air, all of which result in the emission of volatile organic compounds, which contribute to smog.
Since Cal/EPA introduced training and literature for gas stations in the late 1980s, the compliance-assistance program has gradually expanded to cover other sources of emissions. From 1988 through early September 1997, the program distributed roughly 27,000 blue books and 584,000 comic books. The effort to make regulations understandable seems to be having an impact. In the early 1990s, Cal/EPA studies showed that about half of all businesses that use solvents failed to follow the applicable regulations (designed to limit the release of harmful chemicals into the environment). The agency found that the technical manuals and comic books cut noncompliance rates within each industry by 50 percent to 60 percent within a year of their introduction into that industry. By using vapor recovery handbooks, one major gasoline retailer reduced emission-related violations by more than 70 percent over an eight-month period.
Such figures do not tell us whether there were corresponding improvements in the environment and, if so, whether they were worth the cost involved. But regulators such as Morgester argue, reasonably enough, that it's not their job to judge the wisdom of the environmental goals set by policy makers.
There are other limits to compliance assistance. Because of the high turnover rate in industry, Cal/EPA's efforts must be ongoing to be effective. New employees have to be trained, or the habits that foster compliance fall by the wayside. And traditional environmentalists argue, not without reason, that while a regime of strict punishment may seem unfair to small businesses that break the rules unintentionally, it deters sloppiness as well as deliberate violations. Business people who are scared of regulators may be scared enough to take extra precautions and avoid mistakes. It is possible to imagine an environmental agency that is too fixated on compliance assistance, to the point where it ignores important problems that require enforcement. And it is the threat of penalties that often drives businesses to the compliance-assistance program in the first place.
Morgester himself believes that the success of the compliance-assistance program depends on inspections, which encourage diligence. He stresses that too many people make a conceptual distinction between helping businesses understand the regulations and traditional enforcement efforts. "They go hand in hand," he says. The situation to avoid, says Morgester, is one where enforcement officers see their job as writing tickets and compliance-assistance people see their job as handing out blue books. Such programs foster tension between the two divisions, encouraging the belief that there are two competing and mutually exclusive philosophies at work within the agency.
"You have only one goal," Morgester says. "I want the emissions to the atmosphere to be reduced so that we get the benefit of the rules and regulations….And if I can get that by being kinder or gentler or nicer-smelling, by buying them lunch, if I had the resources, I would buy them lunch in a second. If I can get that by giving them a blue book, I would give them a blue book in a second. If I get that by giving them a notice of violation and threatening to put them in jail, I will do that in a second. But in the real world no one of those does the job."
While separation and conflict between enforcement and compliance assistance may be counterproductive, it is the approach that prevails at many environmental agencies, including the U.S. EPA. "You cannot and should not ever separate your compliance-assistance, warm-and-fuzzy people from your traditional law enforcement," says Morgester. "It's a big mistake. It does nothing but give you headaches, and you end up wasting resources."
Slippery Successes, Flexible Failures
The essence of innovations is that we don't know whether they will succeed. For a process of innovation to succeed, individual projects must be allowed to fail. And sometimes the definition of success is slippery. If regulatory goals are unreasonable (as they sometimes are), and an agency adopts more flexible ways of accomplishing those unreasonable goals, is that success? If one defines success as the best of all possible worlds, one is sure to be disappointed by both federal and state reforms.
But in the real world, where incrementalism is often the best we can get, even a more efficient way of accomplishing wrongheaded goals is an improvement. At any rate, if failure means environmental degradation--the infamous "race to the bottom"--the evidence suggests it's not likely. The experience with recent innovations in environmental policy indicates that the states are resilient enough to learn from their mistakes, bounce back from failures, and overcome the barriers that stand in the way of better environmental protection.
Many of these barriers are psychological: the attitude among local, state, or federal officials that "the way we've always done it" is the best or the only way. No one likes change, and people often have to be prodded in the right direction. That includes business people as well as regulators. "It's sort of funny," muses Mary Gade of the Illinois EPA. "It's not exactly as if people are flocking to our doors saying, `I can't wait to try something innovative.'" She recalls a senior executive from a company she regulated who said of a flexible compliance program, "I hate this! I want you to tell me what to do!"
Other barriers to innovation are technical, since some environmental variables are difficult or impossible to measure directly. One Nebraska regulator recalls the days of using "dust-ball buckets" to measure particulate matter. The agency would set out a bucket and, after 30 days, measure what was inside, amid the bugs and bird droppings. In an age of widespread, serious environmental problems, such inexactness was acceptable; everyone knew, broadly speaking, what the problems were, and the cost of refining environmental measures was high relative to the payoff. Nowadays, when many major problems have been solved and minor problems are harder to pinpoint, developing accurate performance measures is much more important.
But the barriers that loom largest in environmental policy are institutional, mainly growing out of the relationship between the states and the federal government. Ultimately, the devolution of environmental policy will require changes in federal law.
What functions should the U.S. EPA retain? In 1970, when the EPA was set up, one of the models suggested was the National Institutes of Health: a scientific agency in charge of setting standards, issuing bulletins, and conducting basic research, with the states actually running the programs. Instead, the EPA became a hands-on agency, running all the programs but delegating them under certain conditions to the states. Pennsylvania's Jim Seif believes a strong federal role was appropriate in the 1970s, when major environmental problems were just beginning to be addressed, but he says the time has come for a shift in authority to the states.
The U.S. EPA probably should continue to address environmental problems that affect several states, such as air pollution in the Midwest and Northeast or coordinating water-quality protection in the watersheds of rivers that border several states. It might also take on more of an international role, enter into more public-private partnerships, put more emphasis on scientific research, and encourage the development and transfer of pollution-reduction technology. "Those remain roles that would elude most states in terms of their focus and in terms of their budget," says Seif. "Issuing permits does not elude me. I do more of that than any EPA region….They don't need to occupy the field anymore."
Alexander Volokh (firstname.lastname@example.org) is a policy analyst at the Reason Public Policy Institute.