Lucent Technologies

Letter from Polakowski to Lund

July 22, 1997

Lisa Lund
Deputy Assistant Administrator for Project XL
Office of Policy, Planning and Evaluation
United States Environmental Protection Agency
401 M St. SW
Washington, DC 20460

Dear Lisa:

Following up as we promised on our June 30, 1997, correspondence, this letter adds information about our expanded project and begins providing all the detailed information requested since June 30 by Al Morris regarding certain old and new elements of our XL project. We are extremely excited about the expanded scope of this project and what it can mean to a new environmental paradigm, as well as to solving many of the issues that have been present in all previous XL projects. We very much look forward to your comments and questions at our July 29 meeting, and to working productively and cooperatively with EPA.

Project XL offers businesses, environmentalists and communities several important benefits that are not available and/or are far more difficult to achieve in other demonstration programs or through the normal system of environmental regulation:

The vehicle to allow progressive environmental managers to experiment, to test or demonstrate concepts that tell regulators, businesses, environmentalists and the community how a new environmental paradigm might function;

Incentives to create, with stakeholders, programs that achieve superior environmental performance (SEP); and,

Efficiencies and flexibilities A "flexibility" requires some deviation from an existing regulation. An "efficiency" is an element that requires no deviation from existing regulations, but can be more important, in terms of cost savings and environmental performance, than a flexibility. An efficiency may simply require a change in practice, but those identified for this project are as critical, or more critical, than any flexibility. While some efficiencies may be accomplished without XL, Project XL provides by far the quickest, most efficient path to their implementation. Indeed, without XL's overarching mandate for creativity it is likely most of the efficiencies could not be achieved, and, therefore, most of the SEP programs would not be achieved. that offer both immediate cost savings and long term incentives to achieve SEP.

In a project's use of these benefits, you have said that each XL project must advance the "state-of-the-art", that is, for example, demonstrate a new management tool, process improvement, or SEP capability. Past XL projects have achieved superior performance in specific media at individual facilities. They have tested limited flexibilities in these facilities as a way to contribute to the march toward a new environmental management paradigm. The Microelectronics project seeks to move far beyond these limited models to test a business-wide continuous improvement approach that is more holistic (dealing with regulated and non-regulated processes and substances), more transparent and more inclusive. It operates on both the business-wide (Microelectronics) level and the facility specific level, which allows the immediate transferability of SEP programs across all facilities. Additionally, it encourages more ambitious goals, set at the business-wide level in conjunction with regulators and the community, than would be achieved under a facility-by-facility approach. It then allows Microelectronics to find the most efficient methods, across all facilities, to achieve these goals.

In our June 30 letter, the Lucent Technologies Microelectronics Division ("Microelectronics") proposed an enhanced and expanded project that uses all XL's benefits, would not be workable without XL and substantially advances the "state-of-the-art" while testing a number of concepts critical to a new environmental management paradigm. Specifically, the Microelectronics XL project would:

Build upon and expand, rather than repeat, past XL experiments Past XL projects dealt in some depth with emissions caps and other air and media-specific issues. While the Microelectronics EMS may in the future find it beneficial to deal with some of the same issues, the enhanced and expanded proposal seeks to test new and different concepts, particularly those related to regulatory efficiencies in both process and substance.;

Go far beyond other projects by addressing directly the most important problems of past XL projects Microelectronics has reviewed community comments from past XL projects, addressing in the enhanced project not just these, but also the most important of the common criticisms of XL, not necessarily expressed in comments, that have arisen from small and large business groups., and test not just new concepts but an entirely new environmental regulatory approach;

Provide EPA and associated forums, such as the Multi-State Working Group, valuable information about environmental management systems (EMS) and how they might contribute to environmental management in the 21^st Century;

Achieve more diverse superior performance elements, not just one time but on a continuous improvement basis; and,

Provide Microelectronics critical efficiencies as well as flexibilities that would improve our business performance even as we improve our environmental performance.

We have worked very hard with EPA, the states and stakeholders over the past two years and in recent weeks to achieve our 1997 Objectives & Targets as promised and enhance and expand our project based upon feedback from all participants and the knowledge gained from successful XL projects. Because we have a great deal to cover in the time allotted to our meeting, and because we wish to use valuable time as efficiently as possible, we will be providing you all the meeting documents in draft form as they are completed over the next week. They will include:

Summary description of the expanded and enhanced project, including the key elements and a one pager on what this project will do for the environment;

List of critical concepts to be tested. These are the concepts which build upon past XL projects and help move us toward a new paradigm;

List of initial The Microelectronics business-wide EMS, which has been part of XL since its beginning, has begun its second cycle. Cycles are each a year long. Each cycle identifies new or continuously improving flexibilities, efficiencies and SEP opportunities. The opportunities that would be identified in the enhanced FPA for the expanded project are simply those identified in the first EMS planning cycle. efficiencies and flexibilities requested;

List of initial SEP opportunities, commitments and/or achievements at the Group level The list to be provided covers SEP at the Group, or business, level. Alone, these are significant and are comparable to or exceed other XL projects. As the facility -specific (facility) SEP elements come in as scheduled at the end of August, these will be added. Together, they far exceed previous XL projects. provided in a format comparable to past XL FPAs;

List of past XL weaknesses or criticisms addressed by the expanded Microelectronics project;

Comparison matrix of the Microelectronics project with past XL FPAs; and,

Draft work scope to complete the FPA in a form substantially ready for community comment by November 1, 1997.

Note that the expanded scope has been developed because of feedback from EPA, state regulators and stakeholders during our FPA development process, our review of potential efficiencies and flexibilities, and as the result of your important challenge to "take the XL process one step forward toward a new paradigm." So you will be aware now of a few of the elements of the expanded project, they include:

Microelectronics will propose that its XL project determine during implementation whether an EMS can become the single, formal environmental document (the term "permit" may be relevant, but probably is not sufficiently inclusive) for Microelectronics and its domestic and international facilities The Microelectronics facilities include: Allentown, PA; Bangkok, Thailand; Breinigsville, PA; Madrid, Spain; Malmesbury, England; Matamoros, Mexico; Mesquite (Dallas), TX; Orlando, FL; Reading, PA; Singapore.. This likely will require, among many other issues, that Microelectronics, EPA, the states and stakeholders through the LEAGs consider and test during project implementation the following:

1. The use of the EMS "Objectives & Targets" as environmental management standards. The Objectives & Targets would implement legal requirements (Federal, state and local) by incorporation, as well as numerous environmental management and worker safety programs which are not covered by any regulation or requirement and which constitute SEP.

2. The consolidation of all "permits" under the present environmental management system into a single review and approval of the annual Microelectronics E&S Assurance Plan, as generated by the EMS and completed in July.

3. The integration of regulatory agencies and stakeholders (through the LEAGs) into the routine identification of Significant Aspects, the development of Objectives & Targets to manage those Significant Aspects, and the E&S Assurance Plan that implements the Objectives & Targets.

4. New accountability, reporting and, potentially, enforcement This issue relates to the FPA "enforceability" question that has been raised in several projects, such as Intel's. models which would be important if an EMS is to be the formal environmental management document.

5. A system for continuously improving SEP opportunities, through the Objectives & Targets, in a manner that integrates product and manufacturing process design, and facility upgrade and expansion cycles to improve environmental protection and generate significant cost savings.

6. A streamlined system for allowing common sense flexibilities agreed upon by regulators, Microelectronics and stakeholders to be identified and implemented during each EMS cycle in an efficient and environmentally protective manner.

7. A system for allowing the implementation of new Federal standards or regulations to be integrated more efficiently into product and manufacturing process design, and facility upgrade and expansion cycles to improve both environmental protection and dramatically reduce the cost of implementing new standards and/or regulations.

Where possible, efficiencies and flexibilities will be identified in the expanded program and during FPA development (e.g., those required to begin integrating permit renewals into the EMS structure). However, other flexibilities may become apparent as the new concepts are being tested, or consolidations are being implemented. Microelectronics will propose that in the FPA a structure be established to allow streamlined consideration of these efficiencies and/or flexibilities. This by itself is an efficiency which goes directly to the heart of most business criticisms of XL.

Because all facility-specific and Microelectronics Objectives & Targets will become part of the project, and because regulators will participate in the meetings which develop Objectives & Targets, all Microelectronics facilities, whether domestic or international, will by reference be incorporated into the project. For brevity's sake, the detailed Group Objectives & Targets are not included in this letter (they will arrive Thursday). Note that the facility-specific Objectives & Targets alone are far more comprehensive than the elements of any past XL FPA, numbering more than a hundred.

Microelectronics will request that new consolidated reporting programs, to be developed both during FPA finalization (a list is being prepared) and during project implementation (e.g., Form "R"), be integrated into program.

Microelectronics committed during the current XL phase to include product and process design personnel in the EMS process. This is so reflected in the present draft of the FPA and is a significant advance over past XL projects. Microelectronics will propose development of a pollution prevention/DfE process for the integration of new standards and regulations into the design of products and processes. This may anticipate and design certain flexibilities for the schedules of standard/regulation implementation so compliance can be integrated efficiently into product and process design cycles. Because, in all cases, such an approach can substantially reduce compliance costs, and greatly enhance pollution prevention, it likely will reduce opposition to continuous environmental improvement and speed overall implementation of new standards or regulations.

Please note that in the expanded project, Microelectronics is working with the states to include state level elements that mirror the broader national elements. For example, a system for consolidating local and state permits will be proposed.

Beyond the major programmatic expansions, which are the elements that truly advance the goals of XL, Microelectronics, working with the states and the LEAGs, will propose certain specific flexibilities and SEP opportunities. Among many are:

SEP results every bit as significant and specific as other XL projects in recycling, water conservation, waste reduction and other areas. The form of these commitments will mirror what is present in other signed FPAs. For example, one SEP point which would be included in the FPA would be the Objective & Target, "Eliminate the need for consumption of 50% of 1996 IC/Opto. annual water usage by year end 2002". Air flexibilities likely will not be requested as part of this EMS cycle, though air SEP programs (e.g., VOC reductions) likely will arise during review of facility-specific Objectives & Targets and would be included during FPA finalization as part of the package.

The mandatory transferability of applicable Group level SEP programs across all Microelectronics facilities, without additional processes or delays (e.g., like transferring the Chandler SEP programs immediately to all Intel facilities resulting in a logarithmic magnification of environmental benefits).

A SEP program to be included in the FPA that addresses the pollution prevention/DfE issues that have been raised consistently by national NGO's, including NRDC. This would begin with Life Cycle Analyses of two Microelectronics product families by 2Q FY98.

A SEP program to be included in the FPA brings worker safety issues into the program by setting an Objective & Target of reducing the lost workday rate caused by chemical and other accidents by 30% over 1996. This has been a key concern of environmentalists in earlier XL projects, and has not been addressed to date.

A SEP and flexibility in de-listing certain wastewater treatment plant sludge, so classified only because of the presence of de minimis amounts of a listed waste, in exchange for waste minimization programs to reduce the total volume of sludge generated.

A significant SEP and efficiency/flexibility in the consolidated continuous improvement permit.

An efficiency that establishes a process for streamlining the integration of new flexibilities into the consolidated continuous improvement permit in future years.

A flexibility in NPDES discharge concentration requirements in exchange for lower total stream loadings to allow for dramatically improved water recycling.

Flexibility to allow consolidated reporting in exchange for more current reporting, report formats more easily understood by the community, and a significantly enhanced Internet reporting and community participation system.

A SEP program plan for reducing non-process CFC's as part of the continuous improvement permit;

Development of continuous improvement indicators, Intel developed an air factor for its XL project for a single facility. Microelectronics may choose to use a similar criterion, but it would apply not just to a single facility, but the entire Microelectronics. As importantly, during implementation of the project, the FPA would have Microelectronics exploring, in conjunction with regulators and stakeholders (through the LEAGs), a series of other continuous improvement indicators (e.g., water, waste, conservation, supplier performance). which will encourage and enhance the process of achieving SEP normally in our business operations (and improve SEP measurement) in exchange for work on a system that would facilitate integration of future new regulations into facility upgrade/expansion cycles.

A SEP commitment to reducing greenhouse gases (not presently required) of 135,000 mt/year, achieved primarily by pollution prevention/DfE techniques not end of pipe solutions, as well as other SEP opportunities, in exchange for the efficiencies afforded by continuous improvement permits.

A SEP proposal to create a substantive supplier performance and assistance program that not only informs a new environmental paradigm, but provides a substantial precedent for extending solid environmental performance goals to companies that would otherwise not be required to move toward such goals. Microelectronics also will propose specifically to explore partnering with one supplier during implementation in a way that tests the fundamental goal of all alternative path management, which is the directing of environmental protection resources to the task that produces the greatest environmental progress. This was the fundamental point that achieved consensus among industry and environmental organizations during the Aspen process and led to the XL concept. It is that, as stated in The Aspen Institute's report "The Alternative Path-A Cleaner, Cheaper Way to Protect & Enhance the Environment", the nation should direct its resources to where it can achieve "the biggest environmental bang for the buck." If the right supplier can be found, which remains to be seen, this may allow a test of "performance goal trading" among facilities of different companies (though within the same media and same ecosystem). During FPA finalization, Microelectronics will work with regulators and the appropriate LEAG first to identify the right characteristics for a facility match that would allow such a partnership, and then to implement the partnership. To avoid unnecessary complexity, if any trade is identified, it will be only in one medium (e.g., air, water) and then only for two facilities in the same airshed or watershed. Despite the importance of this concept in the creation of XL, no XL project has attempted this, though "mentoring" is included in the Intel FPA (Microelectronics will build upon any Intel experience).

A SEP and flexibility/efficiency that would identify methods for using an EMS to make more efficient the process of integrating changes in the regulatory environment (e.g., new laws, new regulations). A critical aspect of an EMS is its ability to anticipate and respond quickly and substantively to regulatory changes. It allows the company to plan for future reductions in a cost effective manner. A case in point is the passage of HB 3919 in Texas which calls for voluntary reductions from NO_x sources which had previously been grandfathered. Lucent will use the EMS cycle presently underway to evaluate whether and how a voluntary NO_x reduction program that will reach regulatory guidelines should be integrated into the Mesquite facility's 1999 Objectives & Targets.

Finally, EPA representatives indicated some confusion regarding our position on certain legal issues related to the Interim Participation Agreement. We had hoped these issues were clarified in our June 30 letter. We will restate our position here since we do not wish to let anything interfere with the discussion of the precedent setting expansion to be proposed on the 29^th or the substantive benefits to the environment and Microelectronics that this proposal clearly provides.

It is our continuing belief that, except in the case of criminal actions, a new environmental management paradigm, particularly one that involves regulators in the operations of an EMS and development of its Objectives and Targets and Environmental Protection Plans, should develop enforcement models that are restorative in nature, and focus on enhanced environmental progress, not punishment. We believe such a system will dramatically increase compliance, encourage beyond compliance actions and reduce the need for enforcement actions at both large and small businesses. These are goals we all seek.

That said, let us be crystal clear. The Interim Participation Agreement with EPA has expired and we are wiping the slate on this issue clean. As noted in our June 30 letter, our enhanced and expanded program deals structurally rather than legally with our concerns.

Civil enforcement will need to be considered, most likely during FPA finalization, as it pertains to the concept of the proposed continuous improvement permit (e.g., the "enforceability" of FPAs). We believe there will be opportunities to significantly advance the environmental protection goals that civil enforcement actions are intended to support, and set precedents that will improve compliance throughout industry.

We would urge EPA to consider creative options. However, if EPA wishes to continue under the precedent established in XL to date, EPA has determined that FPAs are non-enforceable. Even in XL, enforcement of violations that would otherwise be violations under an existing law or regulation are enforced using traditional methods. that is your decision and we will accept it.

It is our view that we must move forward on a project whose benefits and challenges are clearly significant and we should not allow any peripheral issue to get in the way of that effort.

We appreciate very much the opportunity to meet with you on the 29^th and look forward to providing the meeting materials in advance. We sincerely hope that we can move forward creatively with you after the 29^th on what we believe is the most exciting, creative and comprehensive of any XL project to come forward to date.

Sincerely,
LUCENT TECHNOLOGIES MICROELECTRONICS DIVISION

Debra Sabatini Hennelly
Corporate Counsel

Ted Polakowski
E&S Officer & Manager

cc: Chuck Fox, Office of Reinvention
Tom Maslany, Region III
Bob Barkanic, State of Pennsylvania
Andrew Neblett, State of Texas
Erik Meyers, Environmental Law Institute

Lucent Technologies

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