Jump to main content.

Project XL Logo

Minnesota Pollution Control Agency (MPCA)

Advising, Monitoring, and Evaluating a Minnesota Pollution Control Agency Pilot Project for
Flexible, Multi-media Permitting

Professor Alfred A. Marcus
Strategic Management Research Center (SMRC)
Carlson School of Management, University of Minnesota

Dr. Donald A. Geffen
Fellow and Independent Consultant
Strategic Management Research Center Program
in Environment, Energy, and Safety

Professor Ken Sexton
School of Public Health, University of Minnesota

Dr. Brett A. Smith
Environmental Consultant and Conservation Chairperson, Minnesota chapter of the Sierra Club
and member of the National Sierra Club's Conservation Governance Committee


ABSTRACT

We have been asked by the Minnesota Pollution Control Agency (MPCA) to participate in a pilot program to explore the benefits of flexible, multi-media permitting. The MPCA has asked us to advise in the shaping and implementation of the pilots, to monitor their progress, and to measure and analyze their outcomes. Specific facilities of three companies from widely different industries will be granted, through negotiations, multi-media permits designed to give plant managers the flexibility to achieve compliance goals in the most productive manner they chose. In addition to enhanced flexibility, this permitting approach promises to reduce transaction costs and diminish administrative burdens in exchange for the participating facilities decreasing their regulated emissions beyond that required for compliance. This alternative approach to environmental regulation promises to provide the benefits of increased environmental protection at lower cost to society, creating a win-win situation for the environment and the economy.

We expect this flexible permit approach to both lower barriers and provide incentives for innovative pollution prevention solutions. The opportunities for cost savings offered by this alternative regulatory process will foster changes in the organizational "technology" of the company that will enhance the ability of operational staff to implement innovative approaches to reduce the environmental impacts of their manufacturing and increase competitiveness.

The Common Sense Initiative for the Iron and Steel Industry intends to follow the progress of this pilot very closely and have chosen this pilot project to be part of their work plan.

Our roles and goals in this experiement will be: to maximize the incentives for pollution prevention in the permits negotiated, to make the pilots as broadly applicable to other industries as possible, to observe how each facility goes about satisfying the requirements of its permit, and to measure the economic and environmental advantages of the new approach. We will determine the extent to which pollution prevention (P2) solutions are adopted at the test facilities and what changes, if any, should be made before expanding the program to other companies and industries. We will verify, as an independent, multi-stakeholder group, that compliance requirements have been met and determine the nature and extent of individual chemical emissions. We will examine the management and organizational responses to the flexible multi-media permits at both the corporate and plant levels and try to measure the cost savings enjoyed by the company that resulted from this regulatory approach and the potential cost savings to the MPCA. Finally, we will work in constant consultation with responsible officials from the air, water, and hazardous waste divisions of the MPCA and monitor the inter-media problems that develop during the pilot project.

Our work will be done in coordination with an ongoing P2 Dialogue that we are facilitating under the auspices of the Joyce Foundation. This prestigous, multi-stakeholder group has been examining the regulatory and corporate barriers to pollution prevention. The MPCA Pilot Project originated out of our dialogue which had been proposing various incentives to promote P2. Participants of the P2 Dialogue will be a valuable resource to provide advice and to garner support among stakeholders.

PROJECT NARRATIVE

1. Project Description

The initiative we propose to further in this project is granting companies flexible, multi-media permits in exchange for their moving beyond the terms of compliance in existing environmental regulations. The Minnesota Pollution Control Agency (MPCA) is planning to conduct 3 to 4 permitting pilots as an experiment to test the benefits of this approach. We have been asked by the Agency to participate in this program to advise in the shaping and implementation of the pilots, to monitor their progress, and to measure and analyze their outcomes. Specific facilities of three companies from widely different industries will be granted, through negotiations, multi-media permits designed to give plant managers the flexibility to achieve compliance goals in the most productive manner they chose. In addition to enhanced flexibility, this permitting approach promises to reduce transaction costs and diminish administrative burdens. In exchange for these benefits, the participating facilities must agree to reduce their emissions beyond that required by compliance by amounts that are deemed suitable for that industry.

Incentives for Innovative Pollution Prevention. We believe that this alternative approach to environmental regulation promises to provide the benefits of increased environmental protection at lower cost to society, creating a win-win situation for the environment and the economy. By offering plant engineers greater flexibility to meet compliance requirements and by freeing up resources through lowered transaction and administrative costs, we expect this flexible permit approach to lower considerable barriers to and to provide considerable incentives for innovative pollution prevention solutions. We also believe that this flexible permit approach will get the attention of top management within the participating companies. This will foster changes in the organizational "technology" of the company that will enhance the ability of operational staff to implement innovative approaches to reduce the environmental impacts of their manufacturing and at the same time increase its competitive position.

The Common Sense Initiative for the Iron and Steel Industry intends to follow the progress of this pilot very closely and have chosen this pilot project to be part of their work plan.

One of our roles in this experiment will be to encourage the MPCA and pilot companies to maximize the incentives for innovation in the permits negotiated. We will then observe how each facility goes about satisfying the requirements of its permit and measure the economic and environmental advantages of the new approach. We will determine the extent to which pollution prevention (P2) solutions are adopted at the test facilities and what changes if any should be made before expanding the program to other companies and industries. We will verify, as an independent, multi-stakeholder group, that compliance requirements have been met and determine the nature and extent of individual chemical emissions. We are particularly interested in examining the management and organizational responses to the flexible multi-media permits at both the corporate and plant levels. We will try to measure the cost savings enjoyed by the company that resulted from this regulatory approach and the potential cost savings to the MPCA. Finally, we will work in constant consultation with responsible officials from the air, water, and hazardous waste divisions of the MPCA and monitor the inter-media problems that develop during the pilot project.

3M and U.S. Filter have agreed to participate in the project and the MPCA has been talking with Cleveland Cliffs which is expected to be the third company in the pilot. 3M represents a chemically based high technology company with an enormous variety of products that is constantly changing. Relying heavily on developing new products, the company places a premium value on getting its products to market rapidly and is in great need of the flexibility to make frequent changes at its manufacturing facilities in order to accomplish this. The experimental permit being considered for this pilot project provides the company with the flexibility it needs to compete. 3M has designated its manufacturing complex in Hutchinson, MN for the experiment. A single multi-media permit would cover both facilities at that site:  a plant producing magnetic media and an adjoining unit producing adhesive tape products. The probable basis for negotiations will be the "Beyond Compliance" legislation being proposed by 3M for consideration by the Congress. Air emissions is the predominant outlet for pollutants at Hutchinson and the company is proposing to reduce aggregate emissions for each regulated chemical by 25% below that required under the Clean Air Act and associated federal regulations including the newly promulgated magnetic media MACT standard. 3M wants to keep emissions to all other media at or below compliance levels. In exchange, the company wishes to gain regulatory flexibility including optional ways to deal with PSD. Note that 3M wil not only have the option to decide which production units at each plant should be targeted for the most reductions but to consider emission trade-offs between plants.

U.S. Filter's hazardous waste treatment facility in Roseville, MN. would be the second manufacturing site chosen for this pilot project. The Roseville plant receives waste from both foreign and domestic sources and has the capabilities, at the facility, for storage, treatment, recovery, and transfer of liquid, semisolid, and solid waste. The proposed pilot would expand the treatment and recycling of hazardous wastes that presently are not managed. U.S. Filter is also asking for flexibility in paperwork requirements that would enhance its capability to recycle back to its clients "etchant" materials that would otherwise require disposal. In this case permitting issues will focus on hazardous waste and water emissions and involve most heavily those divisions of the MPCA. U.S. Filter has, perhaps, more moderate but nevertheless important requirements for regulatory flexibility to respond to rapid changes in the advanced technologies with which it deals. In addition, the company has important supplier relationships with its customers, numbering in the hundreds. This feature will add another important element to the experiment as we examine the potential benefits of treating U.S. Filter and its customer as a single polluting unit and seeking the most cost effective way of reducing net harmful emissions from this production system.

Cleveland Cliffs, Inc., the most likely third company chosen for the pilot, will designate an iron ore treatment facility from among several it operates in Northern Minnesota. This example will provide a test of the benefits of flexibility and multi-media permitting for an industry producing a stable product with an, up-till-now, slowly changing technology. We expect that beyond compliance goals may be modest, in the short term at least. Changes in management and operations that make the company more open to incremental but continuous P2 improvements, induced by the flexible permit and the changed relationship between the manufacturer and regulator, may be the most important outcome of this particular pilot. If these regulatory changes, and others that may arise as a result of this experiment, lead to positive environmental benefits at this basic industry plant, it would indicate that their benefits are applicable to a broad range of industries indeed.

The Pollution Prevention (P2) Dialogue. Our role in and the impetus for this pilot project came out of a pollution prevention dialogue that we are conducting under the auspices of the Joyce Foundation. A collaboration consisting of the Strategic Management Research Center (SMRC) at the University of Minnesota, the Minnesota Environmental Initiative (MEI), and the Center for Global Change at the University of Maryland have brought together a multi-stakeholder dialogue group devoted to explore innovative and collaborative solutions to pollution prevention problems. Our specific focus has been to remove barriers to, and provide incentives for, pollution prevention by businesses. The P2 Dialogue is composed of representatives from Minnesota corporations and small businesses, environmental consultants from law and engineering, the State Legislature, the Attorney General's Office, the MPCA, the Office of Environmental Assistance (OEA), the Environmental Quality Board (EQB), environmental advocacy groups, and academia. The full list of participants is provided in Appendix A. It is worth noting that some members of the Dialogue are also participants in the CSI and the Presidents Council for Sustainable Development, giving us liaison to these national efforts.

The idea for the pilot project was originated by three participants in our P2 Dialogue -- Lisa Thorvig, Air Division Manager for the MPCA, and Tom Zosel and Dave Wefring of 3M, and was stimulated by several dialogue meetings that examined the barriers and solutions to P2 arising from governmental regulation and the nature of Minnesota businesses. With support from the Joyce Foundation, the P2 Dialogue is continuing to meet and will play an important advisory role in the pilot project. Funding by the Joyce Foundation and contributions of time from faculty members at the University of Minnesota constitutes a substantial leveraging of funds across the partnering organizations.

2. Objectives

Principal Objectives:

  1. To help make this experiment in flexible, multi-media environmental regulation as productive as possible in achieving the following goals:
  2. maximize the incentives for pollution prevention

    		make the polots as broadly applicable to other industries as possible so that they can be reproduced and diffused.
  3. To determine the degree and the extent of the benefits resulting from the pilot and track what takes place at each of the participating companies. Particular attention will be paid to:
    		estimate the extent to which pollution prevention solutions have been implemented.

    		determine how legal, regulatory, managerial, technical, and other barriers to pilot success have been overcome.
  4. estimate the cost benefits enjoyed by the manufacturers as a result of the permitting process.

    		observe long term effects, that is whether pilot companies continue to make improvements once their beyond compliance goals are reached.
  5. To work towards making the pilot project, if successful, a permanent option for as many companies and industries as possible, both in Minnesota and nationally. In order to accomplish this, we will:

    		provide the MPCA and participating companies with the project team's and the P2 Dialogue's diverse expertise as a resource.
    		be a litmus test for potential public opposition and supply remedies for valid objections.
    		garner support among interested stakeholders.
    		prepare reports and develop a speakers program from members of the P2 Dialogue.
    		submit an article for publication in a leading business journal.

Subordinate Objectives:

  1. To develop an understanding and analysis of how management responds to the challenge of a changed regulatory structure and the opportunities presented by it.
  2. To develop an understanding and analysis of how production engineers at the pilot facilities respond to the opportunities for technological innovation presented by the flexible permits.

Anticipated Obstacles to Our Achieving These Goals:

3. Results or Benefits Expected

In discussing the benefits of this project we must distinguish between those coming from the MPCA Pilot Project itself and those coming from the principals participation in that project and for which funding is being requested. We shall primarily devote our discussion to the latter sum of benefits although a few comments first about the benefits of the pilot project itself must be made. The MPCA will proceed with this pilot whether or not the Principals and the P2 Dialogue participate. Valuable experience will be gained by the MPCA and the participating companies as to the advantages and drawbacks of an alternate, more flexible multi-media regulatory approach. They will learn whether or not we can attain environmetnal protection at lower cost and get some idea of how this was accomplished. Our conversations with several people at the MPCA indicate, however, that the agency does not possess the resources or expertise to fully assess, understand, and disseminate information about the results of their experiment. These officials argued that if the project is to lead to real positive change in the way we achieve our environmental goals, a more complete and informed analysis of the project by an independent multi-stakeholder group would be needed.

The benefits we expect to arise as a result of our efforts include the following:

Maximize incentives for pollution prevention (P2) in the permitting process.

The flexible permits envisioned by the MPCA have, in principle, built in several incentives for P2. However, the devil is in the details. The project principals and volunteers from the P2 Dialogue will participate in the permit negotiations to ensure that these incentives remain or are enhanced. We see as the main incentives offered by the pilot permits to be:

  1. The price the pilot companies will have to pay for obtaining a flexible permit is to agree to reduce their facility's aggregate emissions by some percentage below the level permitted by law. Many plants are now operating with pollution controls such that the cost of reducing emissions further by employing end-of-pipe technologies increases rapidly, prohibitively so. P2 approaches therefore, when feasible, become economically attractive. In other words, "beyond compliance" requirements will stimulate more P2. We want to help the MPCA set these beyond compliance limits at levels that are reasonable for each industry and yet will still encourage P2.
  2. The permits envisioned for the Pilot Project will only set limits on aggregate emissions to the air and water by the entire facility rather than requiring "best available control technology" for every production "unit" at the plant. This flexibility increases the options the manufacturer has for employing P2 solutions. The requirement that every unit at the plant meet emission standards often rules out innovative production process changes. Furthermore, since compliance in the experiment is to be assured by either instrumental monitoring or mass balance analyses, there is no need for using BACT end-of-pipe equipment to guarantee compliance. The notion that some part of a manufacturing facility may be "violating" emissions standards can easily give rise to public opposition, especially from environmental advocates or government officials and legislators. The principals, working with the P2 Dialogue, can raise public awareness to the benefits of this "violation" and gain the support of these stakeholder communities who are represented in the Dialogue.
  3. The experimental permits will be multi-media and will give the manufacturer a more integrated understanding of the facility's environmental problems. This should discourage, in many cases, end-of-pipe remedies that merely shift the problem from one media to another and encourage P2 solutions which reduce emissions to all media.
  4. By offering the opportunity of achieving environmental goals at lower cost, this pilot will get the attention of the pilot companies' top management team. If this alternate regulatory structure can change the role of the company's environmental managers and engineers from that of policeman to one of partners in production and operations, great long term environmental and economic benefits will accrue. The principals want to work to retain this benefit in the pilot and, by means of interviews, determine how successful this incentive has been to improve the relationship between top management and environmental management as well as between the latter and plant operators.

Help make the pilot as broadly