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Minnesota Pollution Control Agency (MPCA)
Progress Report
Advising, Monitoring, and
Evaluating a Minnesota Pollution Control
Agency Pilot Project for Flexible, Multi-media
Permitting
Professor Alfred A. Marcus and Dr. Donald
A. Geffen
Strategic Management Research Center of
the Carlson School of Management, University of Minnesota
Professor Ken Sexton
School of Public Health, University of
Minnesota
Dr. Brett A. Smith
Environmental Consultant and Conservation
Chair, North Star Chapter of the Sierra Club
Progress Report
for the period June 15, 1996 -- October
31, 1996
WORK STATUS AND PROGRESS
During this period, the Pilot Project has continued
to be in the shaping phase. The Minnesota Pollution Control Agency (MPCA)
and 3M, with considerable input from the MPCA's multi-stakeholder group
which we helped form, agreed to an XL permit and Final Project Agreement
that went on public notice at the end of May. The EPA, however, found
many features of the proposed permit to which it could not agree. As
a result, the 3M/XL project, the first of several XL projects being
developed by the MPCA, has been delayed by negotiations which have attempted
to resolve the differences between 3M and MPCA, on the one hand, and
the EPA, on the other. At several times, during this reporting period,
negotiations have appeared to collapse only to have been revived for
one more last effort.
As our charge is to advise, monitor, and
evaluate the MPCA Project XL, we have closely followed these events.
As facilitators of the multi-stakeholder group, we have called together
the group many times, kept it in touch with regard to developments,
obtained and transferred its advice to the MPCA and when relevant to
3M and the EPA, organized meetings with the MPCA, and participated in
some of the important meetings between the MPCA and 3M, and between
the MPCA, 3M, and the EPA. On a number of occasions, we have been asked
to speak at these meetings and to provide the parties with our assessments.
At other points in time, we have written our points of views and have
distributed them to the relevent parties. Meanwhile, we also have continued
to carefully and closely monitor and document the process of trying
to form this agreement between the MPCA, 3M, and the EPA. We have collected
all documents about which we know, have continued to interview and survey
the relevant participants, and have started to organize our analysis
into a coherent body of issues unresolved and lessons learned that can
be shared with the EPA, MPCA, 3M, and the broader community of interested
parties.
As negotiations have proceeded through
the many stages, the 3M/XL Project has taken on great national significance
as a pioneering effort to determine whether the XL as a whole can succeed.
With one minor exception, it has been the farthest along of any XL Project
nationally and it is being carefully watched and scrutinized by the
media, environmentalists, and businesses throughout the country. Our
participation in nearly all the events of 3M/XL, our close contact with
the participants, and our careful documentation of what has taken place
from the beginning places us, in our view, in an extraordinarily good
position to evaluate as objectively as is possible the successes in
reaching provisional agreement, the issues that then arose as implementation
blockage points, the alternatives for resolving these issues, the transferability
of the lessons that can be learned to other cases, and the types of
action that can be taken by various parties from the MPCA to 3M, the
EPA, and Congress to assure that future initiatives of this nature can
succeed. As a bold experiment in regulatory reform, which XL continues
to be, its ultimate usefulness depends not on whether one project or
another moves forward but on careful documentation, objective and disinterested
analysis, on understanding and broad dissemination of information about
it, on assessment of the issues that have not been resolved, and on
the options that can be taken in the future to permit XL and XL-like
projects to succeed in ways that are beneficial to the environment,
to companies with demonstrated outstanding environmental performance
records, and to the economy.
Our activities continue to be divided into
two separate, though not unrelated parts. One is our participation as
facilitators (Geffen and Marcus) and as members (Sexton and Smith) of
the Pilot Project [Stakeholder] Committee (PPC) which is acting as a
multi-stakeholder group advising, monitoring, and evaluating XL for
the MPCA. The other part involves our monitoring and analyzing as disinterested
researchers the Pilot Project as it unfolds.
Most of the meetings during this reporting period were devoted to a close and careful effort to absorb, examine, and understand the many serious objections to the 3M permit that EPA raised. Communication among PPC members and between PPC members, the MPCA, EPA, and 3M has been constant. This communication has occurred via e-mail, telephone discussions, and briefing notes both formal and informal. We have faxed documents and comments and received documents and comments to which we have subsequently responded. We have kept careful records of these exchanges and in addition to hard copies of the actual documents we have detailed notes of the many meetings in which we have attended. This documentary evidence will be invaluable as we turn now to the task of assessing the 3M XL Project and learning lessons. We have been organizing the documentary record and will be capable of writing a comprehensive history of the 3M XL Project which should advance our collective understanding of how best to carry out similar projects in the future.
We have appended to this progress report an example of some of the documents we have helped compose as participants in the project. The first letter, addressed to Dave Sonstegard, Staff Vice President for 3M Environmental Technology and Safety Services, Fred Hanson of the EPA, and Andrew Ronchak, XL Coordinator for the Minnesota Pollution Control Agency, discusses at some length the key features of the XL permit/FPA agreed to by 3M and MPCA and the process by which this agreement was reached. Copies of the letter were sent to a large number of people involved with Project XL (see the list of individuals to whom copies were sent).
Reaching Consensus Among Diverse Stakeholders. These letters were unanimously endorsed by the stakeholder group (the PPC) whose activities we facilitated. The PPC was composed of two environmental advocates, three environmental managers from leading companies in Minnesota, two environmental engineering consultants, an expert in environmental law from a prestigious Minnesota law firm, the head of environmental enforcement in the state's Attorney General's Office, and a Professor of Public Health at the University of Minnesota. The analysis and views found in the letters were informed and knowledgeable as they emanated from this very high level, experienced group of people form diverse sectors of the economy and society. This group of savvy environmental veterans from many sectors used its collective wisdom to unite behind a common viewpoint about Project XL-3M. This feat was not an easy accomplishment, given the diversity of the participants, but it is indicative of the consensus building process at the stakeholder level which we believe we have started to understand how to perfect during the course of our participation in Project XL. Indeed, one of the members of the PPC has been awarded a small grant from the Minnesota Office of Environmental Assistance to work with us to document and analyze the stakeholder process and to learn the appropriate lessons. This analysis and understanding will be just one of the important results that will arise from the efforts we so far have made in this project.
Understanding Different Interpretations of Superior Environmental Performance. In its first letter the PPC explained its role in deriving criteria to measure superior environmental performance (SEP) at the 3M Hutchinson facility when it operates under its XL permit. These criteria were essentially adopted in their entirety into the discussion of SEP in the Final Project Agreement (FPA). The stakeholder group believed that it was very important to define the concept of superior environmental performance in terms of a broad, comprehensive overview of the facility's environmental performance and not by a narrow, source by source approach that would be overly prescriptive and restrictive and thereby act as a disincentive to pollution prevention efforts.
As the issue of SEP became a major sticking point as the negotiations proceeded, we believe we are in a very good position to analyze this issue in depth and provide an informative and balanced discussion of the opposing views about SEP, admittedly a slippery term. We appreciate and can understand that SEP invites many interpretations and in our research we will trace the evolution of the term from its inception through its complex and rich development in formal legal documents and in the informal discussions of meetings in which we have observed the term used.
The PPC pointed to several other innovative features contained in the 3M XL permit and FPA. As well as stressing the unprecedented role of a multi-stakeholder group in fashioning the agreement and providing public assurance that the agreement will be kept by 3M and the MPCA, the PPC noted that the 3M XL agreement was an experiment and that no experiment is risk free. It warned that by modifying the agreement to make it more prescriptive in an attempt to guarantee superior environmental performance, the EPA might diminish the value of the experiment considerably in addition to greatly reducing incentives for pollution prevention (P2) that the PPC believed was an important feature of the agreement.
Developing an Innovative Legal Enforcement Mechanism. In particular, we have been impressed with EPA's efforts to develop an innovative enforcement mechanism to allow Project XL-3M to happen. The exact legal mechanism to use with regard to Project XL was another major sticking point that impeded the parties from reaching final agreement. 3M was reluctant to accept enforcement discretion and argued for site-specific rule making. Documenting and discussing this legal issue along with the role of stakeholders and the meaning of SEP will be an important goal of the research efforts we now are undertaking to learn the lessons and assess what has taken place.
Understanding Partnership Formation. The PPC composed a second letter, this time addressed to Carol Browner, in an effort to get the 3M XL project back on track. A copy of this letter is also enclosed. As in the first letter, the PPC explains its support for the agreement reached by 3M and the MPCA. The PPC lists nine features of the agreement that it believes make the agreement worth implementing. In the research we have undertaken we will make a full effort to document and explain all of the accomplishments and limitations. We will discuss important process issues that will be helpful to people who in the future will be carrying out Project XL-type efforts. In particular, we will emphasize how to bring parties together early to exchange points of view and reach common understandings and how difficult this is when so many parties are involved (local pollution control agencies with expertise in different environmental media, the EPA again with this different expertise and functions, the regional and national EPA offices, companies with diverse media expertise and different cultures at headquarters and at manufacturing facilities, and the stakeholders divided along local, state-wide, and national grounds).
Continued Participation in Other MPCA Project XL Efforts. The PPC had a meeting in mid-June to discuss the XL proposal by U.S. Filter and the potential proposal by Anderson Windows. The committee also discussed its role during these and subsequent XL projects. We are hopeful that some of these projects will begin and that lessons will be effectively learned from XL-3M.
Research Work Progress
Interviews of Key Project Participants
Our interviews of key Project XL participants continued and remains a core part of our program to monitor and evaluate the process of creating and implementing an XL permit and to monitor and evaluate the performance of and any changes within the organizations involved. These interviews are also an important component of the data we are gathering in order to develop an accurate history of the project. We have continued to interview key members of the XL team at the MPCA and have broadened our inquiry to include team members that will be working on other XL projects in Minnesota. We have conducted in depth interviews of three key individuals at 3M that are intimately involved in the design and planning of the Hutchinson Facility XL permit and have gained valuable insights into how 3M has viewed this experiment in regulatory innovation.
Dr. Geffen and Professor Marcus also spent a day in Chicago, July 23, 1996, interviewing five members of the XL team at EPA Region V. These interviews were extremely fruitful and have lead to a better understanding of EPA's perceptions of problems that have developed while attempting to reach a final agreement for the 3M permit. We are now in the process of expanding our interviews of the U.S. EPA to include key players in Washington, DC. We are arranging interviews with XL team members from the Office of Policy, Planning, and Evaluation, the Office of General Council, the Office of Air and Radiation, and the Office of Solid and Hazardous Waste. Interviews are also planned with Fred Hanson, Katie McGinty, and, hopefully, Carol Browner. Additional interviews of key actors at the Office of Air Quality Planning and Standards at Research Triangle will also be scheduled. These interviews in Washington and Raleigh/Durham will be more extensive than originally envisioned by our research plan because the focus of the negotiations between MPCA and EPA has moved from Region V to EPA Headquarters. The interviews will be conducted by Dr. Geffen with the assistance of Alan Miller, Professor of Environmental Law at the University of Maryland. Professor Miller has been involved with our multi-stakeholder dialogue in Minnesota from the beginning and will assisting Dr. Geffen with the aid of funding from the Joyce Foundation who has been supporting the multi-stakeholder effort in our state. Professor Miller was also recently appointed to the Panel of the National Academy of Public Administration which has a Congressional mandate to examine and evaluate regulatory reform experiments through out the county, including Project XL.
Surveys of Participants and Interested Parties in Government and Industry
As reported in our previous Progress Report, we have designed a survey to enable us to learn about the opinions of and expectations for Project XL-Minnesota among the key participants, other participants, and interested parties from government, industry, and other stakeholder groups. A copy of the survey was attached to our earlier report.
The survey was designed to learn about the respondents' level of involvement in XL, understanding of the goals of Project XL, and their opinions of these goals. The survey asks for the respondents' expectations of success for XL in a number of areas. Respondents are also asked their views of the role of stakeholders in this project. Included in the survey are questions pertaining to getting other companies to participate in Project XL and about the degree of support for XL among people in government: the U.S. EPA, the Minnesota Legislature, and the MPCA.
We ask the respondents their views of the authority and competence of the MPCA to carry out the project and of the potential influence that various external conditions would have on the project's success such as the legacy and history of past policies, changing economic conditions, changes in public opinion, and changes in political conditions.
Last time we reported that we had surveyed 39 individuals that were direct participants in the 3M Project XL: members of the 3M and MPCA XL teams and members of the 3M and MPCA stakeholder groups. (Remember that 3M has a stakeholder group composed, primarily, of citizens living and/or working in the Hutchinson area. The MPCA stakeholder group, with which we are working, represents state wide key business, environmentalist, government, and academic viewpoints). A more careful analysis and discussion of the results will be made at a later dale but it suffices to say that this group, all intimately associated with the project, expressed a great deal of support and enthusiasm for XL. This survey was completed several months before the breakdown in negotiations and before there was any clear recognition of the problems the parties would have in getting EPA approval for the agreement being forged. We intend to survey this same group a second time in order to track the changing perceptions of Project XL and to find out about the lessons learned.
In addition to the above survey of direct XL participants, almost 400 surveys were mailed to individuals that were gleaned, primarily, from MPCA mailing lists of people that regularly receive information about the state's environmental regulations. This list includes about 80 individuals affiliated with roughly 70 different companies that operate in our region, 30 of which are large organizations. The survey was also mailed to staff at 14 trade associations, to over 70 people working for city, county, and state governments and agencies. The mailing list included about 40 environmental engineering consultants and about 20 attorneys. Surveys were sent to employees or volunteers representing over 12 environmental organizations in the state. Surveys were mailed to health care providers, insurance providers, and to at least 11 people affiliated with newspapers, TV stations, and trade journals. Over 40 mailings were sent to individuals receiving MPCA up-dates on environmental regulations but who did not give any affiliation. Surveys were even sent to 13 Indian organizations and governments affected by environmental regulations.
We received a good response to this survey and are in the process of analyzing it. We note that almost 25% of the people surveyed responded that they knew nothing about Project XL. Since this also represents 61% of the total number of surveys returned (or 79 out of a total of 130 returned -- a response rate of about 35%), this indicates that about half of the people with a strong interest in environmental regulations had no knowledge of Project XL. A large number of those respondents, however, expressed an interest in learning more about it. These surveys, however, were completed before newspaper articles about the problems with the 3M project appeared in the Minnesota and St. Paul newspapers.
Some preliminary analysis has been done of the 51 responses we received from people that knew enough about Project XL to fill out the survey but it is premature to present anything beyond a few general impressions. Even among these 51 respondents with some knowledge of XL, by looking at the answers to the questions 3, 4, and 5, we see that relatively few claimed to know very much about the project. There was strong approval, nevertheless, for the general goals of the project with over 70% approving fairly strong and only one expressing any disapproval. Over 90% of those responding felt that to some degree XL would provide companies with greater flexibility than they would have under current regulations and over 60% believed that rather strongly. Similar support was found for the statement that Project XL would lead to a better way of environmental protection than provided by command and control methods. There also seemed to be a fair amount of optimism that many of the goals of the project could be achieved.
Writing a History of Minnesota's Project XL
As we have said, we are in position, because of the rich data sources we have accumulated, to write a comprehensive analytical history of Project XL, which will fulfill the EPA contract objectives of both monitoring and evaluating this effort. Chris Buelow, a Master's Degree student at the School of Public Policy at Duke University, worked as a summer intern at the MPCA in Andy Ronchak's office. She has done a partial history of XL events in Minnesota through July of 1996. Professor Marcus is serving as an adviser on her Master's thesis, which will delve more deeply into XL developments. We also have hired Kimberly McDonald as a Research Assistant for the second year of the research project. Ms. McDonald is obtaining both her law degree at the University of Minnesota Law School and a Master's degree in public policy at the Humphrey Institute of Public Affairs, also at the University. Her initial focus is on helping us develop the history. She has received copies of all the relevant documents we possess and has been organizing them so that we can proceed. Our initial focus, as we have suggested earlier in this progress report, will be on the role of stakeholders, the controversy around the meaning of superior environmental performance, the issue of finding an appropriate legal mechanism, and the coordination efforts of so many diverse actors in the various organizations that were key players. Chris Buelow and Kim McDonald have been sharing documents and other information sources in an effort to help us write the comprehensive history. Besides the above, there are many other important topics that will be addressed in the history. We intend to write piecemeal on a topic-by-topic basis and disseminate our findings in a timely fashion one-at-a-time rather than wait till we have exhausted all the Project XL issues that could be covered in comprehensive analysis.
DIFFICULTIES ENCOUNTERED
Since we had expected the 3M project to have been in the implementation phase by now, our research time table has been set back. In addition, other proposals for participation in the MPCA XL Pilot Program have been delayed as participants wait for the outcome of the 3M negotiations.
Working with the MPCA's stakeholder group, the PPC
Very few problems have been encountered in the relationship between the PPC and the MPCA. Representatives of the PPC were able to attend several key meetings of the XL teams from 3M, MPCA, and the EPA. The views of the PPC were sought and presented at these meetings. 3M XL team members were clearly nervous about the presence on the stakeholder group of two environmental advocates. We believe that this problem is largely behind us.
There is a feeling among PPC members that the EPA could develop closer ties to us. We have played an important role in developing the 3M XL permit and Final Project Agreement and will play an important role in the monitoring the implementing of the agreement.
An additional problem that has surfaced, regarding the stakeholder group, concerns the Minnesota XL Project's relationship to the national environmental advocacy groups. The Natural Resource Defense council (NRDC) has shown the most interest in Project XL and only recently began focusing on the 3M XL project when the preliminary permit agreement was put on public notice in late May. Since then, the two environmentalists on the PPC have been maintaining communication links with NRDC by means of periodic telephone conference calls. The press of other business and the fact that NRDC did not participate in the permit development and learning process along with 3M, MPCA, and the PPC made it difficult to explain to NRDC the full nature of the agreement and why it had gained environmentalists' support.
Interviewing key participants
We had reported last time that their busy schedules had made it difficult for us to arrange interviews of some key personnel at 3M. Interviews with most of these individuals on our interview list have been done. Completing this first round of interviews and conducting a second round of interviews have been delayed because of the difficulties 3M has encountered in getting EPA approval for the XL permit agreement. We believe that this difficult period is over and that we will be able to continue the interview process.
The interviews of EPA Region V XL team members went well. We had scheduled six people to interview and only one failed to appear. EPA staff were open and cooperative. As indicated we are now in the process of scheduling interviews of EPA staff in Washington, DC and at Air Quality Planning and Standards in Raleigh/Durham.
PRELIMINARY OBSERVATIONS
Since none of the potential Minnesota XL projects have been approved, we remain in the shaping phase of the projects. Some preliminary ideas and plans have been developed by U.S. Filter and Anderson Windows and considerable interest has been growing in the Owatanna community that is pursuing a multi-company regional XL project. The ongoing problems with the 3M project, however, have slowed down these developments considerably. We present below preliminary analysis. The reader must bear in mind that this is by no means our final conclusion and that our views will surely be modified as we explore the views and perceptions of the EPA XL teams in Washington and Research Triangle Park.
The Ping-Pong Partnership
The Minnesota Pollution Control Agency, 3M, and the EPA (perhaps more accurately the White House and the EPA's Office of Policy Planning and Evaluation) had all been independently developing new ideas for creating a more flexible approach to environmental regulation of industry. As a result, all three parties to the negotiations, based on their own ideas, had somewhat different conceptions of what Project XL really was. In the case of 3M, MPCA and its stakeholder group, however, this problem of starting with different notions of Project XL was ameliorated by the fact that some of the members of the 3M and MPCA XL teams and all of the members of the PPC participated in a year long multi-stakeholder dialogue (which Marcus and Geffen organized) that developed recommendations for providing greater incentives for organizations to solve their environmental problems by employing pollution prevention methods. Among these recommendations were a series of suggestions for regulatory reform that resonated with the goals of the Project XL. The dialogue believed that these regulatory changes would make it easier for manufacturers to adopt P2 solutions. Since both 3M and the MPCA participated in this dialogue, there was considerable cross fertilization of ideas. Another benefit of this was that 3M, MPCA, and the PPC, were well down the "learning curve" of regulatory innovation. This early interaction and exchange of ideas among 3M, MPCA, and the stakeholder group formed a basis for finding common ground and agreement on an XL permit. EPA, not having participated in the dialogue, could not benefit from this process and Region V's partnership role in the design of the XL permit was not sufficient to enable it to fully catch up.
None of the parties involved, however, could completely work out in advance how to create a successful process for reaching what was a five party agreement (3M, 3M's stakeholder group, MPCA, its stakeholder group, and EPA). This situation was to be expected, considering how new the approach was. This difficulty was exacerbated, however, by the fact that EPA did not make it entirely clear to MPCA and 3M as to the kinds of regulatory innovations it would consider nor of how it could get the many different interests, objectives, and responsibilities within the EPA to agree on particular Final Project Agreements (FPAs). Thus, what occurred in the 3M XL project was what we would call a Ping-Pong partnership that manifested itself in a series of Ping-Pong negotiations.
MPCA started with two premises that, in the end, led to difficulties. The first premise was that by choosing MPCA as an XL participant, EPA had essentially delegated authority to develop XL permits to the state agency. The second premise was that the starting point of each project would be to have the participating organization present a first draft or outline of the kind of permit and FPA it envisioned. In other words the Ping-Pong ball was in 3M's hands to serve first. Please note that this is a Ping-Pong table with many sides.
Armed with very few concrete guidelines for what an acceptable FPA would be to both MPCA and EPA, to say nothing of the stakeholders, 3M developed a first draft that gave the basic features of the kind of permit it would like. This permit, however, relied too much on trust by the regulating agencies and the stakeholder groups that 3M would indeed continue to protect the environment under the flexible XL permit to the degree it had under its conventional permit. 3M's initial draft permit -- called a "covenant," which covered all of its emissions from the Hutchinson facility for 10 years -- was less than 20 pages long.
Nevertheless, as a first step, 3M's proposal was probably as reasonable an approach as any. The problem was, however, that expectations among 3M's XL team rose because the freedom they had been given to develop an "ideal" XL permit led them to believe that they would be allowed to operate with a degree of freedom that, in the end, proved to be overly optimistic. The Ping-Pong ball then passed over to the MPCA's side and so on. As negotiations progressed, the MPCA and the PPC sought more information and additional requirements were imposed on 3M to provide the necessary assurance to MPCA and the PPC. 3M staff had a growing sense of disappointment as the permit agreement became less and less "ideal" from their perspective. As 3M saw it, why engage in this process if it was rapidly becoming as cumbersome, if not more so, than prevailing regulations?
The alternative to Ping-Pong, of course is to develop a closer partnership from the beginning so that all the participants have a better understanding of the goals and constraints that shape each side's position. In the case of an innovative agreement like Project XL, there are both the written aspects and unwritten understandings and assumptions. All of the parties from the beginning have to be involved in forming these unwritten understandings and assumptions for the deal to reach its ideal levels of being both beneficial for the environment and for the economy. If certain parties stand outside the process and do not enter into the discussion early so that they play no role in this informal process, then they are bound to come at the agreement with a different mindset. At the outset of the XL permit design process, different perspectives are inevitable and, perhaps, even useful. Assumptions many kinds have to be built into the agreement and to achieve greater realism in these assumptions, many of a very technical kind, diverse expertise and perspectives have to be brought to bear early. Otherwise, opposition is inevitable and a breakdown in negotiating any but the simplest agreements extremely likely.
The process of reaching agreements is one of repeated iterations until consensus is reached. A "perfect" agreement can never be achieved since, in addition to the different interests and goals the various sides may have, there are simply too many uncertainties involved. What the parties are aiming for is as reasonable as possible a result and the willingness to work together in trust to achieve that type of result. Trust comes from people at all levels from different organizations working together to solve problems. It comes from putting aside parochial organizational interests for the sake of a higher goal and being given the freedom by parent organizations to, in effect, belong to a new and separate virtual organization for the duration of the project.
This virtual organization with a relatively cohesive identity and working style was only gradually formed among the Minnesota participants, that is the MPCA, 3M, MPCA's stakeholder group (the PPC), and to a lesser extent 3M's stakeholder group in Hutchinson. It was quite difficult for each of these bodies to function in this manner. MPCA, for instance, had to learn to coordinate staff from diverse media areas (air, water, hazardous wastes, etc.) who previously had not worked together and had little expertise in each other's areas. 3M had similar problems with coordinating its environmental staff. It also had the problem of coordination between its environmental staff at headquarters and the people at Hutchinson who actually would carry out the permit once it was accepted. It was no easy feat, as we have indicated, to forge consensus among our stakeholder group, the PPC, composed as it was of such diverse environmental and business interests. Despite these difficulties, strong working relationships among all the parties involved in Minnesota did develop. They developed to the point when we surveyed these parties last spring there was almost universal enthusiasm for Project XL-3M and for what had been accomplished. There was great optimism that a breakthrough in regulation had occurred that would be a model not only for Minnesota but for the nation.
While EPA participated in weekly and, at times, even semi-weekly telephone conference calls with MPCA, this was no substitute for the many complex interactions that were taking place among the various XL participants in Minnesota. Though removed from what was happening in Minnesota, EPA at the same time was holding intense internal discussions about its own views and approaches to XL. These simultaneous but separate discussions, the one in Minnesota and the other at EPA, which occurred over a period of more than 6 critical months (December 1995 to May 1996) created a breach that has been nearly impossible to bridge. The emerging perspective from EPA was not well-known to the parties in Minnesota and the Minnesota perspective was not well-known to EPA.
EPA's environmental expertise could have been beneficial to the parties in Minnesota had it been applied early since the problems of drafting an innovative and complex multi-media permit were quite formidable from a technical point of view. Instead, the parties stood on opposite sides of the Ping-Pong table exchanging nothing of substance for a critical 6 month time slot during which period positions hardened.
As a "Ping-Pong partner," Region V EPA's role in the initial development of the XL agreement was hampered for several reasons. There was some uncertainty at Region V as to what was an acceptable FPA and what wasn't. There were no existing models and EPA headquarters, though it tried to develop specific guidelines, especially regarding what was meant by superior environmental performance (SEP), did not have the benefit of precedent about how to do so. In addition headquarters was not completely clear in what it stated in its different policy pronouncements. MPCA and 3M on their part, because of the experimental nature of XL, did not take these guidelines as seriously as they would have had this been a conventional permit. Both MPCA and 3M emphasized that part of Project XL's innovative character was being less tightly restricted by government fiats. MPCA believed that its delegated authority to fashion XL projects in Minnesota (all other approved XL proposals in the country were for specific facilities or for a group of facilities of a specific company) gave the Minnesota agency broad discretion in designing the permit and FPA for the 3M facility. This belief on MPCA's part made it difficult for MPCA to develop a strong partnership relationship with EPA Region V XL team members. 3M also believed that MPCA had greater delegated authority than it had in actuality.
Problems developed when Region V requested data from MPCA and 3M, data that 3M readily made available to MPCA. MPCA and 3M interpreted this as an intrusion on MPCA's authority to lead the XL program in the state and a sign that Region V lacked confidence in MPCA's ability to carry out the project well. Region V, located in Chicago, was handicapped by distance. Occasional conference calls with MPCA and with MPCA and 3M were a poor substitute for face to face, lengthier meetings. The latter eventually did take place but much later in the process, and by then it was too late. The positions of the two sides were so far apart as to make agreement very difficult. The debate was not just about allowable VOC emissions but it was about such matters as ultimately what was more important the environment or the economy. The sense that there could be win-win solutions quickly slipped from grasp. These fundamental differences had high emotional content and widened the gulf rather than bridged it.
Again, a better approach would have been to have included Region V as an equal partner from the beginning, initially as part of a planning and development committee and perhaps, later, as part of an executive committee. In practice, this might have been very difficult to carry out unless the resources were available and/or the willingness to do so was very strong.
A consequence of the misunderstanding between 3M and MPCA on one side and EPA Region V on the other was that the Air Quality Division at Region V almost entirely pulled back from participation in the 3M project from the end of March to about mid-May. The Division head was upset over the failure of MPCA and 3M to share information with Region V Air Quality experts. In addition, 3M, interpreting Region V requests for more information as being overly burdensome, appealed to EPA (OPPE) in Washington. This action further alienated Air Quality in Region V. This breakdown in participation by Region V Air Quality experts during what was a crucial time for the negotiations was particularly unfortunate for, despite the Ping-Pong negotiating and the difficulties discussed above in partnering with Region V, our impression from our Region V interviews is that it was very likely that an agreement acceptable to 3M, MPCA, Region V, and stakeholders could have been achieved. A better understanding of each side's points of view was evolving and the potential for acceptable compromises was present.
It was probably inevitable, however, that Air Quality Planning and Standards in Research Triangle would have played a role in the negotiations. To fully understand this we will need to complete our interview of EPA XL teams in Washington and Raleigh/Durham. Our initial premise, supported by our interviews of EPA Region V and by private conversations, is that Research Triangle's role became more important when breakdown took place in involvement by Region V Air Quality. If Region V did not play a full partnership role in designing the 3M XL permit, Air Quality Headquarters in North Carolina had played no role at all up to that point.
Ping-Pong negotiations are difficult enough but to have new players enter the game in the middle multiplies the difficulties. Nor is it clear to what extent the Research Triangle permit and enforcement staffs had signed on to the premises and goals of Project XL. Their primary commitment was to maintain the integrity of the Clean Air Act for which they have been given statutory authority by Congress. The Clean Air Act has seen impressive development since first passed in 1970. Amendments in 1977 and in 1990 and a complex corpus of regulations led the air quality people at EPA, in consultation with the lawyers in the General Counsel's office and in Enforcement, to conclude that Project XL's very premises contradicted the letter and the spirit of existing law. The proposed 3M XL permit was "illegal" since it failed to conform to new source review requirements. Source-by-source technology (not performance) based requirements were necessary under law. Separate individual permits had to be negotiated for each new source at a facility. No deviations were permissible. Justification by reference to vague generalities like pollution prevention or overall superior environmental performance at the facility as-a-whole could not be used to get around what was clearly stated in statute and regulation. The President's call for regulatory experiments under Project XL did not supersede the law.
Many at EPA were concerned with the principle of equal protection under the law. They feared that Project XL would establish a precedent whereby each company would be in the position of expecting that it could negotiate for itself on a case-by-case basis a special permit, a permit that might be overly lenient and damaging to the environment. EPA, they argued, no matter what the President said in setting up Project XL, could not put itself in the vulnerable position of suit by environmental groups upset at what they perceived to be the weakening of the very foundation of environmental protection in the U.S.
Legal Issues On A Separate Track
Legal issues pertaining to how an XL permit could be implemented without being successfully challenged in the courts were present from the beginning. Our impression is that these problems were treated on a separate track and that major disagreements between the Minnesota teams and EPA were not fully recognized until late in the negotiating process. As indicated earlier, the Clean Air Act and its Amendments in particular posed a significant barrier to the acceptance by EPA of 3M's XL permit. EPA and Minnesota differed as to how strictly the CAA proscribed the way in which the requirements of the law had to be satisfied. Minnesota had passed legislation that empowered the MPCA to waive environmental laws and regulations in order to experiment with alternative approaches. Similar Federal authorizing legislation for EPA to do the same was not enacted or even proposed. It is clear that the process could have been improved if these legal problems had been more fully explored and included early on in the planning and design of the permit and FPA. A more complete analysis of this aspect of the project awaits our interviews of XL team members from the EPA's Office of General Council and our interviews with 3M and Minnesota Office of Attorney General lawyers.
Decision Making At EPA
Our last comment in this preliminary analysis of the 3M XL Project pertains to the decision making process at EPA. We presently have many more questions than we have answers. Is EPA in the process of instituting a fully developed, workable decision making process to approve XL projects so they can pass on to the implementation phase? How much authority does a Regional EPA office have to approve an XL permit? The Minnesota Pollution Control Agency writes thousands of conventional permits for industrial and other facilities. These are reviewed by staff at Region V, and, except for particularly troublesome cases, are routinely approved without in depth analysis. The authority to write environmental regulatory permits has been delegated to the state. Technically, EPA can overrule a decision by MPCA only by revoking that delegated authority. On the other hand the XL permits, or more precisely the Final Project Agreements, need the approval by EPA in Washington. Do all the Division at EPA (Air Quality, Solid Waste, Water Quality, OPPE, OGC, etc.) have to sign on to each XL FPA before it is approved? Can the process be modified so that EPA will approve any XL agreement automatically upon the recommendation of the Regional EPA headquarters in whose jurisdiction the permit lies? How will this process ultimately work?
Conclusion: Fundamental Issues
In short, Project XL Minnesota has raised fundamental issues about regulation, regulatory reform, organizational processes, governmental decision making, business-government relations, and basic values. Our intent, in accord with mandate in this contract, is to continue to thoroughly research these issues, to analyze them in a balance manner, and to arrive at useful and helpful conclusions that will further the cause of creating a more effective and efficient system of environmental protection. We aim to start completing some of our Project XL research in the coming reporting period, to disseminate our findings broadly, and to provide useful guidance and advice to policy makers about ways in which environmental partnerships like XL can work.
ACTIVITIES ANTICIPATED FOR THE NEXT HALF YEAR
Working with the Pilot Project Committee (PPC)
Since the Minnesota Pollution Control Agency is determined to pursue experiments to find alternative approaches to environmental regulation whether or not it can gain approval from EPA under Project XL, the Pilot Project Committee (PPC) will continue to play an advisory role for the Agency. We expect the Committee to be involved with several projects during the next six months.
The 3M Hutchinson facility needs a permit and if it can not get approval for an XL permit, the MPCA will nevertheless design a permit allowed under current regulations but with several innovative features that were contained in the original XL permit and FPA agreed to by MPCA and 3M but not EPA. The PPC will review this permit and monitor and evaluate its implementation. Of course if the problems preventing an agreement on an XL permit for the facility can be resolved, the PPC would then play a monitoring and evaluating role of what would then be an XL project as originally planned.
The PPC will also be examining XL permit planning and design for U.S. Filter, Anderson Windows, and other MPCA XL projects, assuming they will be able to move forward. Again, if an XL agreement is not possible, MPCA may seek to provide some innovative features allowed under current regulations and the new Minnesota enabling legislation.
The PPC will spend some time looking back at the events of the past year and analyze this history for the purpose of recommending changes in the way future projects are carried out. The MPCA and the PPC will review their relationship and discuss what, if any, modifications in that relationship are needed to proceed on new projects. Because the 3M project was the first, members of the PPC put in an extraordinary amount of time working with MPCA. We do not expect the Committee to be able to volunteer quite so much of its time on subsequent projects.
Interviewing the key participants
Our interview program will continue with initial interviews with EPA staff in Washington and Raleigh/Durham planned for November. Our periodic interviews of MPCA and 3M XL team members will continue and the interview process will be extended to include participants in other Minnesota XL projects.
All these interviews will be written up in a fashion to completely represent the content of each interview. These reports are not exact transcripts, however, but are edited to organize the interviewees comments into a more coherent and structured format. These reports will provide an important component of the data we will use for our analysis of the project.
Surveys of Participants and Interested Parties in Government and Industry
We plan to complete our analysis of the survey during the next six months. This will include a statistical analysis of the responses that will include identifying any significant results that appear.
Writing a History of Project XL in Minnesota
We should complete our history outline of the initial phase of Project XL in Minnesota describing the development of the ideas for the project and the creation of the first XL permit and FPA. The timing of this depends, of course, on the actual completion of this unexpectedly prolonged first phase. In this phase of the historical analysis, we will focus on issues relating to stakeholder involvement, superior environmental performance, legal mechanisms for regulatory reform, and organizational issues in partnership formation.
CHANGES IN KEY PERSONNEL
No one has left the research team and there have been several additions. Kimberly McDonald has been hired as a Research Assistant to assist us in developing the project history and in the analysis of the public policy issues involved. Ms. McDonald is working toward a law degree at the University of Minnesota Law School and a Masters degree at the University's Humphrey Institute of Public Affairs. Her knowledge of law and public affairs will provide us with valuable expertise.
Carol Wiessner, Attorney, Minnesota Center for Environmental Advocacy, has received support from the Minnesota Office of Environmental Assistance to study the role of stakeholder groups in Project XL in Minnesota. While not directly supported by our grant, Ms. Wiessner's work will make an important contribution to our research efforts. Carol Wiessner is a member of the PPC.
Christine Buelow is studying for her Masters degree in environmental management and policy at Duke University. She worked on Project XL as an intern this summer at the Minnesota Pollution Control Agency. She will be working with Ms. McDonald in developing the history of Project XL in Minnesota and in the public policy analysis of it. Professor Marcus will be serving as an unofficial thesis advisor to Ms. Buelow.