![[logo] US EPA](../gif/logo_epaseal.gif){kind=logo}
Clarification of Project XL's Operating Principles
The following is a copy of a letter, dated 23 February 1996, from John Fogarty, of EPA's Office of Enforcement and Compliance Assistance (OECA), to Tim Mohin, of Intel. The letter clarifies certain issues raised in OECA's memorandum, dated 2 October 1995, discussing enforcement principles for XL projects.
This letter follows up on the issues raised in your letter of February 6, 1996, regarding the enforcement principles for Project XL, and which we discussed in several telephone conversations both before and after that date. Specifically, we discussed Intel's concerns about the necessity for compliance with the terms and conditions of XL projects, the duration of an experimental XL project, and also about the need for the Agency to ensure that health, safety, and the environment are adequately protected.
Based on our conversations, I am convinced that the confusion regarding the purpose and intent of certain passages contained in OECA's October 2, 1995, Operating Principles memorandum has, for the most part, been clarified. For your convenience, and in preparation for our meeting next week, I have summarized these below:
Use of the term "Violation" in the Operating Principles: As we discussed, the Agency's starting point is the May 23, 1995, Federal Register notice soliciting proposals for Project XL. The notice first raised the issue that the very design of XL projects might result in the failure to comply with one or more environmental requirements, and that some kind of "enforcement relief" would be required. The Operating Principles' use of the term "violation" in this context was not intended as a description of XL project, but to identify those elements of an XL project which, but for the existence of a legally enforceable mechanism, would be considered a violation of an otherwise applicable requirement. Having identified those elements of a project for which some kind of "enforcement relief" was necessary, the Operating Principles expressed a clear preference for the use of a mechanism which would legally establish the XL project's requirements in lieu of or as substitutes for existing requirements.
In such circumstances there is certainly no "violation" at issue - there is simply a legally enforceable and defensible mechanism which contains the alternative requirement(s) of the XL project. This is clearly the approach preferred by the Agency and, we expect, most XL project sponsors. Accordingly, EPA has always intended, as stated in your letter, "that Project XL agreements will be structured in a way that would comply with statutory requirements…"
Project Duration: Again, as summarized in your letter, it appears that the uncertainty regarding the Agency's intent regarding the duration of XL projects has been largely eliminated. However, the manner in which your letter articulates this issue appears to vary from the Agency's approach - although based on our more detailed telephone discussions about this issue I am inclined to believe there is no substantive difference.
As we discussed, at some point an XL project will end, and this must be provided for in the Final Project Agreement. We must recognize that these are experimental pilot projects which are intended to test different approaches to achieving superior environmental protection. Where an XL project is successful, there may be resulting statutory or regulatory changes which will build upon the lessons learned in the experiment. But there is no way to determine or prejudge what those changes might be, or that any changes made will necessarily result in the same environmental benefits as those piloted at an XL facility. Consequently, we have never intended XL projects to be open-ended endeavors that would continue indefinitely.
The directions in the Operating Principles is that the matter of project duration and termination must be addressed in the Final Project Agreement for the participating facility(ies). These provisions necessarily must be tailored to fit the unique circumstances of each project, and must additionally contemplate the possibility of project success and project failure. There is, of course, a broad range of options for how a Final Project Agreement should best deal with project duration and termination issues. For example, a project could be established for a set period of time, establish a process for periodic review and optional renewal, modification, etc.
In crafting the duration and termination provisions for particular XL projects, the Agency is mindful that, at least in some circumstances, the implementation of XL projects could require substantial capital outlays. By the same token, these projects could result in lower operating costs than would be expected under compliance with existing requirements. Where all parties to the agreement acknowledge that continuation is in the best interests of all concerned, that agreement may form the basis for extending or renewing the project.
Therefore, I understand your letter to accurately reflect the intent of the Operating Principles that a Final Project Agreement should ideally contain provisions specifying the duration of the project, and if appropriate include provisions for periodic review, renewal, modification, or other mutually agreeable action.
Reservations for Imminent Hazards or Unanticipated Health Threats: When we discussed this issue earlier, we focused on the apparent vagueness of the phrasing regarding the Agency's obligation to respond to situations in which an XL project presents an unacceptable "threat to human health or the environment." This reservation is intended to address situations where, despite the good faith efforts and determination of all involved, an XL project is presenting unexpected risks or is producing unforeseen consequences. The directive of the Operating Principles is to ensure that such matters are responded to appropriately, even if those health or environment threats fall short of an imminent hazard. In circumstances where unforeseen and unintended threats are the result of an XL project, the Agency has an unavoidable obligation to ensure that the situation is corrected.
The principle that prompt action to correct such situations is particularly crucial in the context of Project XL: because XL is intended to achieve superior environmental results, it would serve no useful purpose to leave uncorrected a situation in which a project is providing inferior environmental results - and especially where the level of protection of human health and the environment is less than that which is provided by existing standards.
The nature of the corrective action was not articulated in the Operating Principles, chiefly because it was our intent that Final Project Agreements should in the first instance contain mutually acceptable provisions for addressing project failure or unanticipated adverse consequences, and that in any event the nature of the response would depend upon the nature of the unintended or unexpected threat. In this respect, it is worth noting that we did not intend that the Agency's "response" in such situations to solely refer to the initiation of an enforcement action. Even absent such provisions in a Final Project Agreement, as you indicated in your letter, we would hope that a project sponsor would promptly remedy such situations without resort to a formal procedure. However, in the final analysis, the Agency cannot abrogate or limit its obligation to ensure that minimal standards of environmental protection are maintained; hence, the necessity of such a reservation.
Suffice it to say that it was not our intent in the Operating Principles to signal that the Agency would not honor agreements negotiated under Project XL, or to overturn them based on vague criteria. A key element for the success of Project XL is the development of a mutual sense of trust that each party to the Final Project Agreement will act in a responsible manner when faced with difficult choices. I fully expect that the continuing dialogue we have initiated in Project XL, and in our other reinvention and regulatory reform efforts, will server this end. Please feel free to call me at 202-564-8865 if you wish to discuss this or any other enforcement-related issue for Project XL.