KEYNOTE ADDRESS

E. Donald Elliott

Assistant Administrator and General Counsel, U.S. Environmental Protection Agency. Professor of Law, Yale Law School (on leave of absence).

The views expressed are those of the author personally and not necessarily those of the Environmental Protection Agency, the U.S. government or any other organization or group. The author wishes to express his appreciation to Judith Gleason, EPA's Associate Administrator for State and Regional Affairs at the time of this speech, and her staff for their able assistance. Of course, responsibility for the errors that remain is the author's.

[22 ELR 10010]

How to improve the federal/state "partnership" in the environmental area is a difficult subject. Despite my best attempts to devise simple solutions with resolving power, the situation is not amenable to easy fixes.

A consensus is developing that the concept of a "partnership" in the federal/state relationship on the environment is probably misleading, and in fact, this way of thinking about the relationship may even contribute to the problem. The relationship is not one among equal "partners." Rather, Congress has clearly established different roles for EPA and the states. Until we have a more realistic view of the relationship, we will not begin to improve its nature. So let us think of it not as a partnership, but rather as a working joint venture relationship. Some have suggested that we should think of the relationship in terms of client/contractor or principal/agent.

Whatever the nomenclature, Congress has indicated that under its direction, EPA should define goals, objectives and ground rules. Increasingly, the primary role of implementing these goals falls to the states. This division of roles creates obvious difficulties, and that is what I want to discuss.

I will look at EPA-state relationships in four stages. The first is where we have been: the early nature of the EPA-state relationship when the federal/state environmental regulatory issues first arose. Many changes have taken place since 1970, and they make up the second stage. Many of our problems derive in part from continuing to think about the EPA-state relationship in 1970 terms. The third stage is composed of approaches we at EPA are now taking to improve the nature of the relationship; that is the difficult part. The final stage is a look at the future.

1. Where We Have Been.

Around 1970, when the environmental business first was developing, the basic model for the EPA/state relationship was derived from the Nixon Administration concept of "cooperative federalism." Cynics writing about this policy have described it as a way for the federal government — which at that point already faced a deficit — to spend money "off budget" by setting requirements that would have to be implemented by other entities.

In the early 1970s, many of the state agencies having responsibility to implement newly-passed statutes were just being created to perform the designated function. Where they did exist, many were technically weak and under-funded. A sense of the nature of the relationship at that time was issuance of the original set of state implementation plans (SIPs). EPA promulgated a series of rules of thumb or emission factors indicating what EPA thought a powerplant or other type of source could do by way of controls. A large number of states that adopted their own initial SIPs at all (as opposed to defaulting to the federal system) did so based on the EPA-promulgated emission factors. The state-level infrastructure was too weak to implement the difficult tasks thrust upon the states by the federal government. It also is fair to say that in at least some states there was less than great enthusiasm for the role of protector of the environment.

2. Changes Since the 1970s.

These images of the states as recalcitrant partners, not fully capable of assuming the burdens that the federal government had thrust upon them, however, were more valid in the early 1970s than today. Tremendous change has taken place, with maturation and a shifting of the balance.

Our way of conceptualizing the relationship, however, has not always kept pace with this changing reality. In many areas today, particular state agencies are as sophisticated, if not more so, than EPA in their approaches to environmental problems. In many policy areas, the states are taking a leadership role. Yet these changes are not uniform. An important issue that remains is the nature of differences among states and how we at EPA should cope with them.

In the aggregate, we can see hard evidence of the changes, through the statistics reflecting expenditures. Well over 80 percent of today's total governmental expenditures on the environment occur at the state and local levels. Congressional Budget Office calculations for 1987 indicated that local governments were spending about $ 33 billion annually on environmental programs, states were spending about $ 2 billion and EPA, about $ 5 billion.

These figures require some adjustment, since some EPA expenditures are included in the form of grants to state programs. Nonetheless, the figures generally are consistent with a shift in capacity toward the states. Less than half of what states are spending on implementation of environmental programs is in the form of EPA grants; the percentage varies from area to area and has diminished substantially. In 1982, about 76 percent of state spending originated in the form of EPA grants. By 1986 that figure had dropped to 40 percent.

This general pattern is reflected in clean air expenditures. In the early 1980s, roughly half of state expenditures came in the form of grants, and today grants account for 40-45 percent of state expenditures.

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In enforcement, the comparison is even more striking: about 70 percent of environmental enforcement cases are brought by the states: about 55 percent in administrative proceedings and another 12 or 13 percent in civil actions. EPA provides only about 30 percent of the enforcement cases.

When you look at a measure such as the numbers of inspections conducted, the balance is even more stark. The numbers for fiscal 1988 reflect that over 200,000 inspections were being performed by the states. EPA performs 10,000, and its contractors perform another 12,000. The states are performing 90 percent of the inspections.

3. Re-Thinking Today's Relationship.

These changes make a powerful case for re-thinking today's working relationship. While EPA often takes the lead in setting and defining policy, primary implementation responsibility increasingly falls to the states.

While that may come as no surprise, the full implications of the changing nature of this relationship are not fully perceived. In 1983, an EPA task force studied the state/federal relationship. The task force concluded that, at that time, EPA still had an "antiquated self concept" of its relationship to the states and that EPA needed to recognize that the states had become the primary implementers of national policies.¹ To a certain extent, those statements remain true today.

A good deal of friction and potential for conflict are inherently built into a policy system in which one of the parties has the luxury of taking the lead in developing policies that somebody else has the responsibility to implement and to fund. These conflicts, which to a degree are inherent in the system design, are exacerbated by several particular friction points.

The first is that unfortunately sometimes the states are largely excluded from policy development. Certainly, there are some avenues for state comment and associations that allow for a modicum of state participation. But many in the states believe that those who hold primary responsibility for implementing policy should have a larger role in helping to determine what a sound policy should be.

Some of the credit or blame for this tension EPA shares with Congress. Many of the statutes that EPA implements are very detailed. These are called "agency forcing" statutes. They preclude the ability to allow for state policy formulation participation. A good example is the Hazardous and Solid Waste Act Amendments of 1984 (HSWA), which significantly deprived EPA of discretion and flexibility.

A second friction point is what is referred to at EPA as "oversight": the review of state plans and actions by EPA regions and headquarters. State frustrations with the EPA oversight process revolve around three factors. The first is, from the state point of view, a lack of broad perspective by EPA. States sometimes claim that the agency perhaps pays more attention to details than to overall policy objectives. The second factor is delay; an enormous period of time passes during the process. The third and related problem is what appears from the state level to be the problem of "late hits." A late hit occurs when EPA review occurs after an extended period of time and raises new issues. This leaves the state asking, "why didn't you tell us this 24 months ago when we could have done something about it more easily?"

These managerial problems are difficult to rectify. Nonetheless, EPA is taking a number of steps to improve our working relationship with the states. Hank Habicht, our Deputy Administrator, is a leader in this area. He has frequently reminded us about the need not to appear arbitrary in our dealings with others.

A key step Administrator Reilly and Hank Habicht have taken is to combine our Offices of Regional Operations and State & Local Affairs under Associate Administrator Judy Gleason. This will enable us to see the relationship with the states and the dealings with the regions as one problem, not separate problems. Judy's office is a constant advocate within the agency for a greater sensitivity to the regional perspective, implementation questions and the issues arising in dealings with states and with Indian tribes. Every time a problem arises, she is there to remind us to view the effects of our decisions on the states and the regions.

In policy development, Hank Habicht is particularly sensitive to the need to involve states more fully at an early stage in the process, before the comment period. The Ground Water Task Force is one example of this; another example is the task force that we are forming to deal with implementation of the new Clean Air Act.

Not only does this enhance the relationship with the states, but it also will lead to improved EPA policies. At the core of this change is the idea that the people who are developing the policies and goals need the information and sensitivity about how they will play out in practice.

We also are trying to address the friction that results when we impose requirements on the states without providing the resources to deal with them. That is a perpetual problem. One example of increased sensitivity to this problem is the permit program under the Clean Air Act. This proposed program is traceable at least in part to Bill Pedersen's 1981 article in the Pennsylvania Law Review.²

An important aspect of that program will involve creating a system of permit fees. If the Act passes in the version that passed the Senate, it will have the effect of placing about $ 300 million into the hands of state programs to build the kind of infrastructure necessary for implementation of the Act. Efforts such as these can make the relationship work much better.

Turning now to approaches to the most difficult of areas: oversight. Many of our problems in oversight and review of state plans and actions are traceable to a shortage of federal resources. Presently, for example, we have less than one full-time employee devoted to reviewing RCRA plans in the General Counsel's Office.

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But more resources will not necessarily solve this problem. Our decisions need to be more thoughtful and explicit. The resources available to government in a time of huge deficits are never going to allow us to do everything that we might like to do.

Rather than doing everything only partially, we need to set priorities, and do well that which we choose to do. This is not to suggest that we should cease to review state plans. These reviews are not discretionary, but are imposed on us by statute in most instances, and I am not suggesting that we shirk our responsibilities under the statute.

What I am suggesting is that in deciding the level of detail of review of a plan, we should make explicit management decisions about where we get the most benefit for the limited resources that we can devote to the environment. We especially need to recognize the adverse consequences of delaying decisions as a means of coping with resource consequences.

I am tempted to paraphrase Albert Camus's line that not making a decision is also a decision. Making a decision to put off a matter until next week or next month is also a decision. We must resist the tendency to do just that.

In another change, we recently announced a new policy of deferring to the judgment of our Regional Counsel on questions of local and state law. This begins to create a new attitude, but it is not sufficient. We are struggling to convey the notion that we want to give priority in reviewing state plans for substantial or consequential deviations from the requirements of federal law.

One of the straws in the wind about a new federal/state relationship is a provision in the amendments to the Clean Air Act on the House side that would eliminate the federal veto over individual permit decisions.³ It would force EPA to refrain from reviewing individual state decisions and instead limit us to evaluating the adequacy of the state air program or the SIP as a whole. While the Administration is not supporting this proposal, it does raise a significant question about the most effective level of detail in the EPA review process to meet environmental goals — which is the ultimate measure of our success.

4. The Future of the Relationship.

I see two major challenges to the state/federal relationship in the future. First is a variation of the continuing question about the proper role of states and the federal government. No longer, however, does this focus so much on implementation. Rather, in policy development, this challenge is called the "NIMBY" phenomenon or the preemption problem, depending on which way you look at it.

In the U.S., we have a hierarchy of institutions with coordinate authority to regulate, and increasingly different approaches to regulation are developing. In siting municipal solid waste disposal facilities, hazardous waste, and incinerators, there will be a continuing question about what power relatively smaller decisionmaking entities, be they local or state governments, should have to set policies that are more stringent than national policies.

These questions are coming to a head in cases like the Alabama waste case, in which the federal government recently filed an amicus brief.⁴ While sympathetic to the state's policy goals in the case, the brief takes the position that the state's action was unconstitutional under the Commerce clause.

This tension suggests the difficulty of problems in this area. We will be struggling to sort them out for decades to come.

The second challege to the relationship in the future is the changing nature of what we mean by environmental implementation. To date, our conception of environmental regulation has depended largely on setting emission limitations of one sort or another. We have a variety of different ways to regulate by using environmental standard-setting, but generally they are set at an acceptable level of pollution through a "command and control" system where legal orders form the model. The orders can apply generally, as generic rule-making, or specifically, as with a permit. But in most instances, the government is defining the acceptable level of emissions.

As pollution prevention and sustainable development continue to gain ground as the new philosophy for environmental protection, we will shift to the use of incentive systems to encourage both companies and individuals to rethink their practices so that less pollution is generated in the first instance.

What EPA means by pollution prevention is the substitution of an inherently less polluting way of producing a good or service. The acid rain training system in the Administration's proposed Clean Air Act amendments is the harbinger of things to come in dealing with pollution problems.

Market-based systems of incentives will become increasingly prominent, not only because they usually are more cost-effective, but also because many of the problems in the decades ahead will involve large numbers of very small sources.⁵ These small sources will be difficult to regulate through traditional implementation techniques.

Another way to put it is that at some point we may exceed the capacity of the legal system to deal with pollution problems raised by a huge number of small sources through models based on bureaucracy and legal orders. The nature of implementation at the state and federal levels will be transformed as we move increasingly toward a philosophy of pollution prevention. This transformation will entail more incentives and less case-by-case "command and control."

This is not to advocate abolition of the command-and-control system. That will not happen nor would it be desirable. It is much more likely that we will develop a hybrid system in which we set minimum acceptable levels on a health-based or technology-based basis, followed by incentives to do even better.

Nonetheless, many of the implementation issues that these incentive-based systems raise are new ones for us. We have some experience with conducting a trading system at EPA, but [22 ELR 10013] we face major new challenges in implementing it under the Clean Air Act. If, as I expect, incentive systems and pollution prevention are going to play major roles not only under the Air Act, but also in waste, water and other areas as well, all of us at state and federal levels will face a host of new questions.

5. Conclusion.

Let me leave you with two thoughts. First, it is important to keep in mind the ultimate goals. Much of what frustrates us in the state/federal relationship derives from a relationship that is probably best defined by Kafka. Kafka was a master bureaucrat. He described the problems that result when people focus not on the ultimate goals or on the global objectives, but rather only on narrow or local inputs. It will greatly improve our relationship to keep in mind the ultimate goal of the enterprise. This insight was captured in EPA's Earth Day slogan: "Think Globally, Act Locally."

Second, in the context of the EPA/state relationship, the watchword must be "communicate." We need to do a better job of communicating to the states what we're trying to accomplish. We also need to do a better job of listening to their concerns and taking those concerns into account in policy development. And we also need to do a better job of communicating inside EPA about the nature of our role.

The goal is to make real the punch line from the old joke — "I'm from the federal government and I'm here to help you".

DISCUSSION

PARTICIPANT: Increasingly, we view the states as capable of making decisions and generally accountable for them. But frequently after an enlightened decision by a delegated state, we find EPA second-guessing the state. How do practitioners deal with federal second-guessing of an enlightened state decision where the state was delegated to make the decisions?

ELLIOTT: If we are to assume that it is second-guessing, that the state decision is "enlightened" and that the decisionmaking has been delegated to the state, then I would have no answer. So, let us question one of the three premises of your query.

If we are doing our job properly, we should second-guess states only on decisions that have not been left by Congress to their discretion. We should base our decisions on EPA policies that have been either delegated to us to make or made by Congress.

One of the realities of the relationship is that in the same way that local or national officials sometimes like to be able to blame the courts for imposing unpopular decisions on them, the state has the luxury of doing what the local industry or environmental group wants while remaining secure in the knowledge that the national authorities will impose the national policy on them. You have to analyze these situations on a case-by-case basis rather than generalizing. EPA is not always wrong when it second-guesses state decisions.

On the other hand, the Administration has a genuine commitment to federalism and the principles it embodies. This commitment is reflected in President Bush's recently issued Executive Order on Federalism.⁶ In the Order, the Administration takes the position that a problem is not federal or appropriate for federal resolution simply because it is national in scope. So to the extent that the states are in fact making enlightened decisions, as your question pre-supposes, it would not be the goal of this Administration to mandate a uniform federal solution, except where we are required to do so by law.

PARTICIPANT: I am referring to a situation where the federal agency second-guesses the state decisions and we don't have an ability to confront the federal decisionmaker or to develop a good reviewable record as to the appropriateness of that action.

ELLIOTT: This question goes to the accountability of federal administrative agencies. In our constitutional system, the answer is two-fold. First, they are politically accountable on a generic policy level through their supervision within the Executive Branch and ultimately through the election of that Executive Branch. Second, they are accountable in specific cases through the judicial review power of the courts.

And if, as your question poses (contrary to fact, in my view), the courts are not giving you review of whether our decisions are arbitrary and capricious or according to law, then the flaw lies in the courts not performing their required function under the constitution.

PARTICIPANT: Do you believe EPA is shirking its responsibilities under the Clean Air Act's mandate to prepare Federal Implementation Plans (FIPs)?

ELLIOTT: No, I do not think there is any wincing from the difficult task of trying to achieve implementation. Some of the decisions that we have announced and will be announcing in the future make it clear that the Administration takes its obligations seriously under the law.

The committees of Congress indicated to Bill Reilly, Hank Habicht and me that they expect us to try to implement the law as it was written, whether or not we believe it is a good law, and to leave it to them to fix it if it needs fixing.

Two things are happening. First, under the present Clean Air Act, EPA believes that our remedies for non-attainment are so extreme and resource-intensive that we would like a panoply of sanctions that can be more effectively and more practically applied. We would like a range of responses to bring to bear.

My second concern goes to the substance of federal implementation plans. This involves the period of time over which it is practical to get some of the major metropolitan areas that fall quite short of national air quality standards into compliance. In certain non-attainment areas, like Los Angeles, we are talking about fundamental changes in technology, such as alternative fuels vehicles. Those kinds of changes, which are necessary to achieve real progress on air quality, cannot be accomplished on a three to five-year time horizon.

I recently attended a conference of academics at NYU on the question of air pollution and lessons from the past. Everyone agreed on one thing: that the fundamental changes needed cannot be stimulated within abbreviated time horizons.

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Thus, the Administration is not trying to abandon non-attainment goals, but also does not want to be unrealistic about the time horizons necessary to achieve our goals.

PARTICIPANT: The states, especially Texas, are tired of hearing EPA national and regional staffs tell the states that they may well indeed have a better idea but it just cannot be done that way. When can we expect to see some of the changes that you described here tonight?

ELLIOTT: That is difficult to answer. It depends somewhat on the context. In some areas, we have very detailed statutes that are as frustrating to us as they are to you. A fight is on-going over the nature of our environmental statutes and whether federal regulators can be trusted to exercise discretion, or whether Congress and congressional staffs ought to mandate specific requirements. That is an issue in the present Clean Air Act amendment debate.

We also have the problem of trying to change the EPA culture so that staff know the ultimate goals and that they should be assessing what they do in terms of those goals. Hank Habicht and Bill Reilly have been providing great leadership to our agency on its purposes and to keep our eyes on the ultimate goals of reducing environmental risks.⁷

As to Region VI specifically, a number of promising events have occurred. Region VI is a leader in bringing to our attention the need for changes. The memo that I recently sent to all the regional counsels advising that we will defer to regional interpretations of state law rather than second-guessing on issues of state constitutional law had its genesis in Region VI bringing that problem to our attention and asking us to do something about it.

Over time, states havelearned what is expected of them: the agency told them what to do and they did it. Without abandoning our obligation to enforce the law, we are trying to put the state/federal relationship into a more positive framework.

These are difficult issues with no easy solutions. It is a delicate balance.

PARTICIPANT: Would you articulate EPA's current Superfund policy? And would you discuss the possibility that at some point that program might be delegated to the states?

ELLIOTT: EPA policy with regard to Superfund, as explicitly articulated by Bill Reilly, is that in taking over the program, what was needed was not to criticize it, or debate changes to the statute, during the first two years of our tenure. We believed that EPA criticism would appear to be a backing away from the commitment to make the present law work.

Instead, we have made every effort to make the law as presently written work as best as it can, through extensive increases in funding, through the Superfund management review process, and through bringing in experienced people.

The numbers show that we are turning the program around. It is working more effectively. As time goes on, and our genuine commitment to make the law work is credible, then we will arrive at a point when it is appropriate to have a national reassessment of the law's structure. Such a reassessment is not likely to happen by 1992. When it does occur, the potential delegation of the program to the states is likely to be considered as well as many other ideas.

1. The EPA State-Federal Roles Task Force Report (1983) (available at the Environmental Protection Agency).

2. 129 U. PA. L. REV. 1059 (1981).

3. This provision, which was proposed as an amendment to H.R. 3030 during committee mark-up, ultimately was rejected.

4. See Nat'l Solid Wastes Management Ass'n v. Ala. Dept. of Environmental Management, 910 F.2d 713 (11th Cir. 1990).

5. Administrative Conference of the United States (ACUS) dialogue (4/23/90) (available in forthcoming issue of Yale Journal on Regulation).

6. 52 Fed. Reg. 41685 (1987).

7. See, e.g., W. Reilly, Remarks at the Meeting of the National Press Club (Sept. 26, 1990) (available at the Environmental Protection Agency Publications Division).