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Letter from Tom Zosel to Lisa Friedman

August 28, 1995

Lisa Friedman, Esquire
Associate General Counsel
U.S. Environmental Protection Agency
401 M Street, SW
Washington, DC 20460

Re: Statutory Authority for Project XL

Dear Lisa:

Following up on our meeting last month, I have enclosed, for your consideration, a summary of the legal authority available to EPA and state governments to implement the Project XL program. This summary is in the form of suggested components of the preamble to a final rule.

As we discussed in our meeting, we believe that the authority to implement the Project XL program is share among EPA, the states, and to some extent, local governments. Consequently, a successful Project XL program necessarily requires a cooperative approach involving each level of government and, of course, the owners and operators of Project XL facilities. The permit approval procedures we have outlined in the enclosed summary are premised upon a sustained cooperative and coordinated effort.

Finally, I would like to emphasize once again that 3M and other potential Project XL permit applicants are troubled by an implementation approach that relies on consent decrees or any other form of the government's "enforcement discretion." Neither the Project XL program nor individual Project XL permits should be considered as operating in 'violation of environmental law. On the contrary, we strongly believe that the performance of facilities in this program will be "beyond compliance" of emission limits and will provide numerous additional environmental benefits.

Thank you for your consideration of our suggestions. If you have any questions or need additional information, please let me know.

Thomas W. Zosel
Manager, Environmental Initiatives
Building 41-01-05



c: Mr. A. J. Donelson, 3M Washington
Mr. David Gardiner, EPA
Mr. Keith Laughlin, The White House
Dr. David Sonstegard, 3M St. Paul

Suggested Preamble Excepts for Inclusion in a U.S. Environmental Protection Agency Final Rule Governing Project XL Permit Program and Permit Authority


The President's initiatives to reinvest government and reduce unnecessary paperwork in regulatory activities are particularly relevant to environmental regulations. Over the past 25 years such regulations have been instrumental in causing dramatic reductions in emissions to the Nation's air and water and in improving hazardous waste management. It is evident, however, that progress in pollution control and reduction can be accelerated through various improvements to a regulatory infrastructure that has developed into a highly complex -- and frequently confusing -- regulatory code. It is the Agency's belief that the environmental benefits achieved over the past 25 years can be consolidated and frequently enhanced through more simplified and cost effective regulatory controls.

In large measure this objective can be accomplished without enactment of additional legislation. To varying degrees, the key environmental statutes -- specifically, the Clean Water Act, the Clean Air Act and the Solid Waste Disposal Act -- confer authority on EPA and the states to exercise flexibility in regulatory controls to achieve the statutes' principal purpose, namely pollution reduction. By this Action, EPA, in cooperation with state and local government, intends to exercise this authority. The first initiative in this program is the Project XL permit program. This program's central policy goals are to (1) eliminate unnecessary paperwork requirements; (2) encourage significant reductions in air and water emissions via the issuance of permits that allow facilities maximum flexibility in meeting emission limits; and (3) research, development and implement innovative methods of achieving pollution prevention.

As stated above, sufficient legislative authority already exists for the creation and implementation of the Project XL permit program. An explanation of this authority and the procedures necessary to implement it are set forth below:

Clean Water Act

EPA's policy of encouraging states to administer the Project XL program is consistent with Congress' explicit endorsement of the right and responsibility of states to prevent, reduce or eliminate pollution. See 42 U.S.C. 1251(b). Congress' policy is manifested in its decision to place responsibility for permit program implementation on the states and to pledge federal "technical services and financial aid to State and interstate agencies and municipalities in connection with the prevention, reduction and elimination of pollution." 42 U.S.C. 1251(b). Implicit in that endorsement is the recognition that states will adopt different approaches in achieving the goals and standards mandated by the federal Clean Water Act. EPA has previously recognized that states in implementing a permit program under the Clean Water Act "need not implement provisions identical to" the federal provisions. 40 C.F.R. 123.25.

The Clean Water Act's fundamental objective is to restore and maintain the chemical, physical and biological integrity of the Nation's waters. 42 U.S.C. 1251(a). To carry out this overarching goal Congress clearly expressed its intent to confer authority on states to implement permit programs and to "encourage the drastic minimization of paperwork and interagency decision procedures...so as to prevent unnecessary delays at all levels of government." 42 U.S.C. 1251(f). Project XL is designed, in large measure, to encourage facilities to carry out these twin objectives. In EPA's view, there is nothing incompatible about environmental protection, efficient permit administration and productivity. Thus to the extent that EPA has previously interpreted the Clean Water Act as precluding flexibility in permit administration in exchange for improvements in overall environmental protection, such interpretations are hereby modified to allow for the issuance of Project XL permits.

It has also been EPA's policy to preclude a state from "making one [CWA regulatory] requirement more lenient as a tradeoff for making another requirement more stringent." 40 C.F.R. 123.25. The Agency believes that this view, if rigidly followed, would undermine some of the fundamental objectives of the Project XL program by precluding, for example, permits which obtain tangible environmental benefits (e.g., pollution reduction) in return for permit flexibility on procedural matters. EPA does not believe that with respect to Project XL permits such a rigid interpretation is compelled by any fair reading of the Clean Water Act.

Clean Air Act

In enacting the Clean Air Act, Congress issued certain "Congressional findings" including the finding "that air pollution prevention (that is the reduction or elimination, through any measures, of the amount of pollutants produced or created at the source) and air pollution control at its source is the primary responsibility of States and local governments." 42 U.S.C. 7401(a)(3). Moreover, "a primary goal" of the Act "is to encourage or otherwise promote reasonable Federal, State and local governmental actions...for pollution prevention." 42 U.S.C. 7401(c). According to the Clean Air Act's Declaration of Purpose, a fundamental role of the federal government is to "provide Federal technical services and financial aid to State and local agencies in connection with the development and execution of their prevention and control programs. 42 U.S.C. 7401(b)(3).

To implement these objectives, Congress specifically directed EPA to "establish a national research and development program for the prevention and control of air pollution." 42 U.S.C. 7403(a). In carrying out this program EPA is obligated, inter alia, to:

_ "promote the coordination and acceleration of...experiments [and] demonstrations...relating to the...prevention, and control of air pollution." 42 U.S.C. 7403(a)(1)

_ "encourage, cooperate with, and render technical services and provide financial assistance to air pollution control agencies [and other public and private entities] in the conduct of...[pollution prevention and control] activities." 42 U.S.C. 7403(a)(2).

Congress also conferred on the Agency detailed authority for various activities relating to the pollution prevention research and development program. 42 U.S.C. 7403(b). This provision authorizes:

There can be no doubt that the expansive scope of section 103 of the Clean Air Act encompasses a wide variety of research and development projects promoting air pollution prevention, including the Project XL program. Consequently, the Agency believes it is fully authorized to (1) issue Clean Air Act permits to facilities that meet Project XL criteria; (2) enter into contracts or other agreements with states and local governments for the purpose of issuing permits to Project XL facilities and structuring enforcement authority concerning such facilities; and (3) waiving procedural or paperwork Clean Air Act requirements to facilitate any pollution prevention or control activities carried out by states, local government or industrial entities.

Authority for state governments in implementing pollution prevention and control activities is similarly flexible. The Clean Air Act's design for state implementation plans clearly avoids a "command and control" approach, relying instead on the general obligation that each plan satisfy basic statutory requirements and performance goals. Under section 111(c) a state may develop and submit to the Administrator a procedure for implementing and enforcing standards for new sources. If the Administrator determines that the state procedure is "adequate" the Administrator will delegate the authority to implement and enforce such standards to the state. Clearly, the threshold of 'adequacy" affords considerable latitude in constructing such procedures. Thus, in the context of Project XL programs, EPA intends to assure states that procedures satisfying this basic criterion of adequacy will be granted maximum flexibility to carry out the Project XL objectives.

Congress' emphasis on flexibility is underscored by provisions enacted by Congress to promote and implement innovative solutions to air pollution. For example, section 111(j) authorizes the Administrator, with the consent of the Governor of a State, to waive standards of performance for stationary sources in order to "encourage the use of an innovative technological system or systems of continuous emission reduction." The criteria for such waivers makes clear that Congress intended to afford the Administrator and the Governor wide latitude in approving alternative approaches to emissions control and reduction. Thus, among the principal criteria for training a waiver is that "the proposed system will not cause or contribute to an unreasonable risk to public, health, welfare, or safety..." Project XL, as it relates to facilities with innovative solutions to air pollution, fits perfectly the flexible regulatory approach envisioned by Congress in enacting section 111(j). Consequently, EPA intends to exercise, in coordination with the Governors of states with Project XL facilities, the waiver authority conferred by this section.

Under section 112(l) (concerning state programs for controlling hazardous air pollutants) each state is authorized to develop and submit implementation and enforcement programs. Although such state programs may not be less stringent than the federal program, they may differ from federal requirements provided that the state requirements result in equivalent or better overall emission reductions. See, e.g., EPA memorandum from J.S. Seitz to D. Howekamp, p. 2 (June 26, 1995). (copy attached).

The structure of this provision (together with other key components of the SIP scheme) confers broad discretion on both EPA and the states to develop flexible regulatory programs to achieve this Congressionally mandated objective.

Solid Waste Disposal Act

Congress in enacting the Solid Waste Disposal Act established "the national policy of the United States that...the generation of hazardous waste is to be reduced or eliminated as expeditiously as possible." 42 U.S.C. 6902(b). Thus, one key object of the Act is to "minimize the generation of hazardous waste...by encouraging process substitution, materials recovery, properly conducted recycling and reuse..." 42 U.S.C. 6902(a)(6).

As compared to the regulatory authority under the Clean Air and Clean Water Acts, significantly less explicit authority exists under the Solid Waste Disposal Act for flexibility in permits governing the storage, treatment and disposal of hazardous waste. However, existing regulations do provide authority for the Agency to grant variances from regulation of waste on a case-by-case basis. See 40 CFR 260.22; 40 CFR 260.,30-31; and 40 CFR 260.40-41. To the extent that petitions for waivers or revisions to rules effect changes that (1) assure the protection of human health and the environment; (2) are submitted or supported by state and local governments; and (3) promote the success of the pollution reduction goals of the Project XL program, the Agency will expeditiously review and approve such petitions. In addition, the Agency will consider other regulatory approaches to assure that Project XL permits addressing hazardous waste management issues are afforded adequate flexibility.

Procedures for Issuance of Project XL Permits

Any state intending to implement a Project XL permit program shall submit to the Administrator a petition requesting authorization to issue permits to Project XL facilities. Such petition shall include the following:

(1) Copies of all existing proposed Project XL permits, approved or preliminarily approved by the state, demonstrating, inter alia, that the facility's level of air and/or water emissions will be less than allowable emissions under existing Clean Water Act and Clean Air Act permits and the facility's management of hazardous waste will be protective of human health and the environment. All permits shall contain the text of contract language assuring the permittee's full cooperation in evaluating the success of the Project XL program;

(2) Certification from the State that any revisions to state law needed to approve Project XL permits have been adopted. Such certification shall set forth, where appropriate, the Project XL permit program's compliance with sections 306(c), 308(c) and 402(b) of the Clean Water Act, sections 111(g)(4), 111(j) and 112(l)(1) of the Clean Air Act, and sections 3006(c) and 3009 of the Solid Waste Disposal Act; and

(3) A draft Memorandum of Agreement ("MOA") between the State and the Administrator setting forth (a) the procedures and authority for facility inspection 9b) enforcement authority (c) procedures for coordination with the Administrator and the appropriate EPA Regional Administrator on potential Project XL policy issues.

Following receipt and publication of these documents in the Federal Register (which shall provide a 30 day comment period) the Administrator shall promptly enter into a MOA with the petitioning state and shall take all necessary steps to delegate to the State the authority to issue Project XL permits.

Project XL permit applications need not conform to any particular format. However, all permit application must address the specific modifications in regulatory or permit requirements to be incorporated into a Project XL permit; the method or system for tracking emissions; the method or system for assuring compliance with permit terms; the facility's level of effort dedicated to ensuring successful implementation of the permit; and the procedures for "stakeholder" participation in the Project XL process, including providing information to the community concerning emissions tracking. EPA will provide technical assistance to the owners and operators of facilities interested in applying for a Project XL permit.

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