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Soliciting XL Project Proposals

Federal Register Notice


Regulatory Reinvention (XL) Pilot Projects
[Federal Register: May 23, 1995 (Volume 60, Number 99)] [Notices]
[Page 27282-27291]
AGENCY:Environmental Protection Agency (EPA)
ACTION:Solicitation of Proposals and Request for Comment.


EPA is announcing a set of actions to give regulated sources the flexibility to develop alternative strategies that will replace or modify specific regulatory requirements on the condition that they produce greater environmental benefits. This document a nnounces three of EPA's regulatory reinvention pilot programs: Project XL for facilities; industry-wide or sector based XL projects; and XL projects dealing with government agencies regulated by EPA. EPA invites private and public entities or groups o f entities regulated by EPA under its various statutory authorities to submit proposals in these areas. Proposals for a fourth area -- community-based XL projects -- will be accepted at a later time. This document also invites interested members of the public to comment on all aspects of these programs. The document responds to President Clinton's announcement, contained in the March 16, 1995, document Reinventing Environmental Regulation, that EPA would implement pilot programs to develop innovative a lternatives to the current regulatory system.

EPA has set a goal of implementing a total of fifty projects in the four areas. Each project will involve the exercise of regulatory flexibility by EPA in exchange for a commitment on the part of the regulated entity to achieve better environmental resul ts than would have been attained through full compliance with all applicable regulations. This program will be undertaken in full partnership with the states. These pilots complement EPA's ongoing regulatory reinvention activities including the Common S ense Initiative and the Environmental Leadership Program. This summer, EPA will select up to six project proposals to begin the development of a final project agreement. Final Project Agreements for the remaining pilots will be based on EPA's learning e xperience on the initial projects.

The document includes background information on the programs; a description of the programs; their relationship to other regulatory reinvention activities; the criteria, process, and timing for the selection of projects; an invitation for public comment ; and the Information Collection Request document required by the Paperwork Reduction Act.

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The period for submission of proposals will begin upon EPA's announcement in the Federal Register that clearance has been obtained under the Paperwork Reduction Act, allowing EPA to accept proposals. This will be an open solicitation with no set end date , and project proponents may submit more than one project proposal. The period for comment on all aspects of the programs will begin with publication of this document and extend for thirty days. The period for comment on the attached Information Collect ion Request will begin with the publication of this document and extend for ten days.


Project proposals and all comments should be sent to: Regulatory Reinvention Pilot Projects, FRL-5197-9, Water Docket, Mail Code 4101, US EPA, 401 M Street, S.W., Washington, DC, 20460. The docket accepts no faxes. In addition to providing general in formation about the proposed project, project proponents are encouraged to comment on the relationship of their proposals to the criteria for project selection described in this notice. Proponents of projects are invited, but by no means required, to sub mit other useful materials in paper or other audio/visual or electronic formats.

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For further information contact:

Jon Kessler, Office of Policy, Planning and Evaluation; United States Environmental Protection Agency; West Tower 1013; 401 M Street, S.W.; Mail Code 2111; Washington, DC, 20460. The telephone number for the Office is (202) 260-4034. The facsimile number is (202) 401-6637.

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Supplementary information


Over the last two years, the Environmental Protection Agency has charted a course designed to demonstrate that environmental goals can best be achieved by providing regulatory and policy flexibility while maintaining accountability, that flexibility can a lso provide greater protection at a lower cost , that better decisions result from a collaborative process with people working together and that environmental solutions are often achieved by focusing efforts at the facility or place where protection is be ing sought. EPA has found that allowing facilities, communities and other entities to explore non-traditional pollution control solutions can result in regulated entities achieving environmental protection results beyond those anticipated by current regu lations or policies. Often these alternative approaches can produce cheaper, more efficient results as well.

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Description of the programs

On March 16, 1995, the President announced as part of his National Performance Review regulatory reinvention initiative that EPA would develop a set of pilot projects which provide the flexibility to test alternative strategies to achieve environmental go als. The initiative will give a limited number of regulated entities an opportunity to demonstrate excellence and leadership. They will be given the flexibility to develop alternative strategies that will replace or modify specific regulatory requiremen ts on the condition that they produce greater environmental benefits. In exchange for greater flexibility, regulated entities will be held to a higher standard of accountability for demonstrating project results. This Federal Register Notice is a solic itation for pilot project proposals in the three general areas: industry-wide projects; facility based projects (Project XL); and government agency projects. Proposals are invited from groups of firms in an industry, individual regulated entities, and g overnment agencies regulated by EPA.

These projects will require the participation of state and tribal regulatory agencies. In most cases, these agencies are full partners with EPA as they implement EPA programs that have been delegated to them. EPA is taking a decentralized or franchising approach to the implementation of pilot programs. Under this approach, individual projects will be managed in most cases by the units of government that are best suited to address the issues raised by the projects. These may be state or tribal environm ental agencies that are co-regulators with EPA, EPA headquarters or regional offices. As they develop project proposals, project proponents should coordinate with and gain the support of their state and tribal environmental agencies that have regulatory responsibility within the scope of the project. In addition to their role as co-regulators, these same agencies, as well as other local government agencies, are major stakeholders in the management of environmental quality. As such, their support for pr oject proposals should be sought in any case.

Selection and participation in the program will proceed as indicated in the flow chart that follows. EPA expects that there will be competition among project proponents for acceptance into the program. The first stage in the process begins with the publ ication of this notice. Those who have projects meeting the listed criteria are encouraged to submit initial project proposals. EPA will then review submissions to select those that do most to advance the purposes of this program. An internal review pr ocess has been established to evaluate proposals submitted in response to this notice. This group, consisting of representatives of state and tribal environmental agencies as well as EPA's headquarters and regional offices, will screen all proposals, con sidering the criteria described in this notice and recommend proposals for further development. The group may also seek additional comment from relevant local environmental officials.

Based on the recommendations of the review group, EPA will invite particular project proponents to join with state or tribal environmental agencies, as well as other co-regulators, to develop a Final Project Agreement. EPA will encourage project proponen ts at this stage to incorporate their project plans into the overall strategic plan of the business entity. In any case, the responsibility for developing detailed project plans that address the program criteria will be with the project proponents. Only the signing of a Final Project Agreement will constitute the selection of a pilot as a full fledged pilot project. Parties to the Final Project Agreement should include at least EPA, project proponents, state or tribal environmental agencies, as well as other co-regulators. These agreements will deal with project specific issues such as legal authority for project implementation, provision for regulatory flexibility for pilots, public involvement, specific commitments to environmental progress, expecte d environmental results, enforceability, etc. Each Final Project Agreement should clearly set forth objective, specific requirements that the subject facility or facilities have agreed to meet. EPA anticipates that the Agreements will be structured so th at any enforcement relief EPA has provided with respect to applicable regulatory requirements will be conditioned on the facilities' compliance with the specified requirements. EPA invites project proponents to include, in their proposals, suggestions fo r additional or alternative approaches to enforcing these requirements. Unless otherwise agreed to by both EPA and the proponent, the time to negotiate and sign a Final Project Agreement should be limited to six months from the date of initial project ac ceptance. The final phase of the program involves implementation, monitoring and evaluation of the agreement terms.

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EPA will hold a series of state and regional workshops to provide additional information on the programs and on project proposal development.

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Data Quality Issues

To demonstrate that an alternative environmental management strategy is more effective than existing and reasonably foreseeable future regulatory requirements, project proponents should estimate both the baseline result from these requirements and the env ironmental results from the alternative strategy for their specific projects. These estimates are likely to be uncertain due to scientific and/or engineering questions as well as to interpretations of future applicable regulatory requirements. An import ant element of the Final Project Agreement will be an explicit statement concerning what data and analyses are needed to make these findings. The Final Project Agreement will be based on the learning experience EPA has with the projects it initially sele cts.

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Project Examples

Consistent with EPA's objective to develop and demonstrate more flexible environmental management strategies, EPA intends to be flexible in entertaining proposals pursuant to this notice. In evaluating proposals, EPA will consider the selection criteria included in this notice. EPA also encourages proponents of proposals to be creative in suggesting alternative strategies and new forms of flexibility. To help stimulate such creativity, we provide the following guidance for the three different types of p ilot projects. These examples are intended to be illustrative only; EPA encourages the submission of other types of projects that address the selection criteria and that have the strong prospect of producing "cleaner, cheaper, smarter" results compared to the current system.

Facility-based XL projects

National environmental requirements may not always be the best solution to environmental problems. Substantial cost savings can sometimes be realized, and environmental quality enhanced, through more flexible approaches involving pollution prevention. P ilot projects focused on individual facilities should test alternatives to current environmental management approaches driven by compliance with existing regulations. Taking account of facility-specific circumstances, the overall objective should be to de vise and test more flexible approaches that result in both better environmental results and reduced compliance costs.

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Industry-wide XL projects

The many regulations affecting an industry are often promulgated piecemeal over a long period of time rather than as a comprehensive environmental program. In many cases, national regulations apply relatively uniform requirements to many industries with very different environmental and economic characteristics. Pilot projects addressing these problems might take many forms. One example is the approach taken in The Netherlands, where overall environmental performance objectives and emission reduction targ ets for entire industries are negotiated between trade associations and the government, followed by enforceable facility-specific agreements to implement the industry-wide goals. Such projects might take the form of combining all federal (and possibly sta te) requirements for an industry into a single, integrated Final Project Agreement. Sector-based and place-based strategies might be combined in a project that focused on a number of facilities in the same or related industries within a given geographic r egion or ecosystem. Projects might propose development of enforceable "best management practices" for pollution prevention or pilot the application of upcoming ISO 14000 voluntary environmental standards within a specific industry sector. EPA also encoura ges projects that combine an industry-wide component with facility-specific pilots to test the industry-wide strategy being developed.

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XL projects for government agencies regulated by EPA

Government agencies, in the management of their facilities, have the same environmental responsibilities and face many of the same regulatory issues as private businesses. Agency-sponsored projects might test concepts with broad application in both publi c and private sector facilities. In seeking to comply with environmental statutes, however, government agencies also face unique obstacles and often have unique opportunities to innovate. Pilot projects in this category might address themselves to the u nique issues faced by government agencies, such as the optimization of environmental control strategies over the long term in the context of annual budgeting, or the ability to reduce overall compliance costs by controlling specific pollution sources out of reach of environmental regulators. Outside of the process described today, the Department of Defense and EPA are working to develop pilot projects at two to four DOD facilities. The DOD pilots will seek to define performance goals and create an optim al approach to achieve those goals, combining compliance with unique pollution prevention and technology resources available to DOD.

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Relationship of pilots to other reinvention efforts

The Common Sense Initiative was launched to move the Agency beyond the traditional medium by medium approach to environmental management to a systematic, sector based approach. Announced in July 1994, the CSI focuses on six industry sectors -- aut o manufacturing, computers and electronics, iron and steel, metal finishing, petroleum refining, and printing industries. Each is directed by a consensus-based multi-stakeholder advisory subcommittee. The Common Sense Initiative Council operates under t he Federal Advisory Committee Act (FACA). The purpose of CSI is to recommend changes in environmental regulations, statutes and programs that will result in cleaner, cheaper, and smarter outcomes. Such changes, when accepted and promulgated, will lead to permanent adjustments to current programs.

Each of the CSI sector-specific subcommittees is developing a plan covering a broad spectrum of activities including (but not limited to) regulations, pollution prevention, reporting requirements and public access to data, permitting, innovative complianc e assistance and enforcement, and innovative technology. In some cases, these plans will include projects that meet the criteria outlined today for regulatory reinvention pilots. Firms in CSI sectors are encouraged to develop XL projects. Project spons ors in CSI industries considering such pilot projects should work through CSI in order to develop their XL projects. This will enable them to take advantage of the substantial progress being made through CSI including established stakeholder committees, working relationships among stakeholders, and progress toward identifying common concerns. (Project sponsors in CSI industries should contact Vivian Daub, Interim Director, Common Sense Initiative, at (202) 260-7417).

The Environmental Leadership Program (ELP) grew out of a desire to test innovative compliance approaches such as third-party auditing. It is one of the means for streamlining compliance oversight as referenced in the Presidents March 16 announceme nt. ELP allows facilities to identify ways to streamline reporting requirements and reduce compliance inspections, without sacrificing environmental and public health protection. Facilities will use innovative management techniques such as environmental auditing and pollution prevention to reduce the burden of paperwork and inspections on the facilities, while enhancing compliance with existing environmental laws. At the completion of these one year pilot projects, the lessons learned from these projec ts will be applied to others.

ELP differs from the pilot projects being announced today in that today's pilot projects include flexibility from existing regulation in exchange for the attainment of environmental results beyond what would have been achieved through full compliance with those regulations. ELP projects, on the other hand, work to achieve improvements in environmental quality within existing regulatory requirements.

EPA expects that compliance-oriented ELP projects may include regulatory innovations, and that some projects conducted pursuant to today's notice will also address compliance systems. EPA welcomes Project XL proposals from ELP participants. (For informa tion on ELP contact Tai-Ming Chang, Director, Environmental Leadership Program, at (202) 564-5081).

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Legal mechanisms for pilot projects

EPA will seek to use a variety of administrative and compliance mechanisms to provide regulatory flexibility for final project agreements. Where a pilot project does not fully comply with one or more environmental requirements (e.g., where a facility doe s not fully attain a technology based emission or discharge standard but adopts a pollution prevention program or installs additional controls on other releases so as to achieve superior environmental results at the facility), EPA will use enforcement mec hanisms to facilitate the projects. These will be conditioned on the pilot project meeting requirements specified in the project plan. In particular circumstances, EPA may consider changes in underlying regulations, or may seek changes in underlying sta tutes. EPA recognizes that these questions raise issues of importance both to the Government and to potential participants in regulatory pilot projects. Applicants are invited to present EPA with proposed approaches tailored to provide the regulatory fl exibility for their pilot projects.

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Project Criteria

EPA will consider the following criteria in evaluating pilot project proposals:
1. Environmental results
Projects that are chosen should be able to achieve environmental performance that is superior to what would be achieved through compliance with current and reasonably anticipated future regulation. Cleaner results can be achieved directly through the environmental performance of the project or through the reinvestment of the cost savings from the project in activities that produce greater environmental results. Explicit definitions and measures of cleaner results should be included in the project ag reement negotiated among stakeholders.
2. Cost savings and paperwork reduction.
The project should produce cost savings or economic opportunity, and/or result in a decrease in paperwork burden.
3. Stakeholder support.
The extent to which project proponents have sought and achieved the support of parties that have a stake in the environmental impacts of the project is an important factor. Stakeholders may include communities near the project, local or state governm ents, businesses, environmental and other public interest groups, or other similar entities.
4. Innovation/Multi-Media Pollution Prevention.
EPA is looking for projects that test -innovative strategies for achieving environmental results. These strategies may include processes, technologies, or management practices. Projects should embody a systematic approach to environmental protection that tests alternatives to several regulatory requirements and/or affects more than one environmental medium. EPA has a preference for protecting the environment by preventing the generation of pollution rather than by controlling pollution once it has be en created. Pilot projects should reflect this preference.
5. Transferability.
The pilots are intended to test new approaches that could conceivably be incorporated into the Agency's programs or in other industries, or other facilities in the same industry. EPA is therefore most interested in pilot projects that test new appro aches that could one day be applied more broadly.
6. Feasibility.
The project should be technically and administratively feasible and the project proponents must have the financial capability to carry it out.
7. Monitoring, reporting and evaluation.
The project proponents should identify how to make information about the project, including performance data, available to stakeholders in a form that is easily understandable. Projects should have clear objectives and requirements that will be measu rable in order to allow EPA and the public to evaluate the success of the project and enforce its terms. Also, the project sponsor should be clear about the time frame within which results will be achievable.
8. Shifting of risk burden.
The project must be consistent with Executive Order 12898 on Environmental Justice. It must protect worker safety and ensure that no one is subjected to unjust or disproportionate environmental impacts.

EPA intends to work cooperatively with project proponents to develop and refine acceptable approaches. At the same time, the Agency must retain the ultimate authority to select projects based on a qualitative consideration of these criteria. Moreover, g iven the pilot nature of the programs proposed today and the limited number of slots, projects that satisfy many or all of the criteria may nonetheless not be selected if, in the Agency's judgment, other proposed projects better serve the objectives of th e program. Moreover, no person is required to submit a proposal or obtain approval as a condition of commencing or continuing a regulated activity. Accordingly, there will be no formal administrative review available for proposals that are not selected, n or does EPA believe there will be a right to judicial review.

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Timing for project selection

EPA intends to invite selected project proponents to negotiate final project agreements on a phased basis, with a small number of early selections followed by a period of project selection on a rolling basis. This su mmer, EPA plans to invite approximately six project proponents to begin the development of a Final Project Agreement. Beyond that date, project proponents will be invited to enter the next phase of the program on a rolling basis. EPA intends to select a nd initiate approximately 50 pilot projects within the next two years. Request for comment on aspects of program pilotsInterested members of the public are invited to comment on all aspects of the pilot project program. EPA requests specific comment on the legal mechanisms for implementing project agreements, and the data requirements for determining both existing enviro nmental baselines and the level of environmental quality that would result from the project agreement.

Paperwork reduction act

The information collection provisions in this notice, including the request for proposals, have been submitted for approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An Information Collection R equest document has been prepared by EPA (ICR No. 1749.01) and is attached as an appendix to this notice. Additional copies may be obtained from Sandy Farmer, Information Policy Branch; EPA, 401 M Street, S.W. (Mail Code 2136); Washington, DC 20460 or b y calling (202) 260-2740. These information collection provisions are not effective until OMB approves them and a notice of OMB approval containing the ICR control number is published in the FEDERAL REGISTER. EPA will announce by separate Federal Regist er notice when proposals may be submitted.

Public reporting burden for this collection of information is estimated to average 150 hours per application response, including: time for reviewing instructions; developing the proposal; reviewing the proposal through respondent management; and consu lting in some fashion with state or tribal co-regulatory agencies as encouraged in the solicitation. An additional 10 hours per respondent are estimated to be required of the state and tribal agencies consulted in the development of project proposals.

Send comments regarding the burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden to Chief, Information Policy Branch; EPA; 401 M Street, S.W. (Mail Code 2136); Washington, DC 20460; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503, marked Attention: Desk Officer for EPA. The period of comment for the Information Collection Request will begin with the publication of this noti ce and extend for ten days.

Fred J. Hansen

Deputy Administrator

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