Regulatory Reinvention and Project XL: Does the Emperor Have Any Clothes?

Rena I. Steinzor

Rena I. Steinzor is an Associate Professor and Director of the Environmental Law Clinic at the University of Maryland Law School. She is a 1976 graduate of the Columbia Law School. She is grateful for the advice provided by Robert Percival, David Hyman, Linda Greer, and Christopher van Loben Sels and the research assistance provided by Elana Cohen. Any mistakes in facts or analysis are, of course, the exclusive responsibility of the author.

[26 ELR 10527]

Project XL is built on the simple premise that in many cases companies know their business a whole lot better than the government does; that they understand how best to reduce their own pollution; that we will all benefit if private enterprise brings its energy, its innovation, its creativity to the task of reducing pollution ….

President Clinton¹

If it isn't illegal, it isn't XL.

Motto of EPA staff²

The 1994 Republican electoral revolution crystallized and accelerated a trend in environmental policymaking that began at the beginning of the decade: "reinventing" the ways that the U.S. Environmental Protection Agency (EPA) does business. The Clinton Administration's decision to offer its own alternatives to more radical efforts suggested by congressional Republicans means that the methods and goals of reinvention will dominate the debate for the foreseeable future, and that the various work groups, pilot projects, scholarly reviews, and legislative proposals now involve virtually all of the interests affected by EPA's programs and legal authority.³

Among the most widely publicized reinvention initiatives is Project XL, developed by EPA in response to industry and municipal demands for greater regulatory flexibility. Hailed by the President and Vice President at a press conference on November 3, 1995, Project XL—standing for "excellence and leadership"—now involves four distinct initiatives: one focused on large manufacturing companies; a second designed for "industry-wide" or "sector-based" projects; a third involving federal agencies; and a fourth emphasizing local government, "community-based" initiatives.⁴ This Dialogue discusses the first and best-developed initiative, the so-called facilities XL.⁵

The Dialogue argues that the concept of site-specific alternative compliance plans has the potential to make regulation more efficient and effective if implemented within the framework of strong "baseline" standards designed to protect human health and the environment and to treat industrial competitors fairly. Unfortunately, Project XL is damaging the reputation of site-specific, industrial self-regulation⁶ in the short term; further eroding public trust in government; undermining EPA efforts to control and [26 ELR 10528] prevent pollution; and erecting barriers to competition in some of our more important industries.

The Dialogue urges several reforms of the Project, including a definition of superior environmental performance that would determine the acceptability ofall projects, standardized disclosure of the key assumptions underlying project proposals, a prohibition on cross-media and cross-pollutant emissions trading without clearly demonstrated environmental benefits, a better process for public participation, and the maintenance of rigorous enforcement as protection against noncompliance with site-specific plans.

The Rationale for Project XL

Project XL offers companies the opportunity to seek waivers from existing regulatory requirements in exchange for their commitment to achieve improvements in environmental quality through innovative changes in their manufacturing processes or practices. From industry's perspective, the Project provides three major benefits: saving money on compliance with existing regulation, achieving rapid review of alternative compliance plans, and winning freedom from constant reevaluation of pollution control strategies so that companies can respond to competitive challenges in national and international markets.

As implemented to date, a central theme of Project XL is the replacement of "command-and-control" requirements that limit emissions to specific media (air, water, and land) with facility-wide "bubbles" and "caps" that allow companies to trade emissions among pollutants and among media. For example, a company might propose increasing its total emissions of volatile organic compounds above the levels allowed in existing permits in exchange for reductions in emissions of sulfur dioxide or nitrogen oxide below permit limits. Or it might propose trading air emissions of a class of chemicals for water emissions of the same or a different class.

EPA made a determination at the outset of the Project not to establish any firm standards, baselines, or limits on either the substance or the process for developing XL proposals. Review by federal and state regulators familiar with the manufacturing practices, available technologies, and permit conditions at issue in the proposals has been erratic, and conducted in an atmosphere of significant political pressure to "fast-track" project approvals. In theory, Project XL requires a site-specific process for building consensus among affected stakeholders. But EPA has delegated responsibility for this process to project proponents without suggesting any guidelines for how to conduct it, with the result that in most cases public participation has been cursory and ineffective.

Before undertaking a critical analysis of Project XL, it is important to recognize the contribution of a September 1995 Dialogue, authored by William Pedersen, that commented on the site-specific approach now under trial in Project XL.⁷ In suggesting a framework for site-specific experimentation with regulatory reinvention, Pedersen, one of the industrial community's more effective advocates, wrote that

maintaining public confidence in industry control efforts during the shift to a new environmental protection system is at the heart of these proposals. Both for that reason, and simply to make sure that this innovative new approach actually works, it is essential … that the local community be a party to any [site-specific emission] cap …; that all caps be established through full notice-and-comment proceedings, based on full disclosure of their underlying assumptions and rules; that reliable quantification measures be put in place to make sure that releases in fact do not increase and that progress in pollution prevention can be measured; and that violation of the cap's terms be accountable both through government enforcement action and through citizen suits.⁸

Project XL, as implemented, flaunts many of these principles. The gap between theory and practice is therefore a problem not just for disgruntled members of the environmental community and other citizen activists. While it is fashionable these days to deride anyone who voices strong objections to reinvention initiatives as a defender of the supposedly discredited era of command-and-control regulation, dispassionate discussion of the drawbacks of such initiatives is overdue and may well lead to more credible innovation.⁹

The issues raised by Project XL fall into three distinct but related categories: (1) the substance of individual proposals; (2) the process for public participation; and (3) the legal issues raised by EPA efforts to implement the program. Both the problems and recommendations for reform in each area are profoundly affected by what is done in the others. The absence of uniform substantive standards for judging the merits of projects places extreme pressure on the public process for evaluating them. Conversely, if the basis for evaluating the merits of a project were better and more transparent, stakeholder "buy-in" could be achieved more easily. In the absence of justifiable substance and an inclusive, equitable process, Project XL faces legal difficulties that could derail it in the months and years to come.

The Substance

Project XL gives responsible companies and other regulated parties the flexibility to replace the requirements of the current system with their own alternative strategies to achieve bottom-line environmental results. We believe that XL projects can be the building blocks for a new performance-based environmental management system for the 21st Century.

David Gardiner¹⁰

[26 ELR 10529]

We believe there are two general approaches under Project XL. In one approach the applicant company seeks to reduce the capital and operative costs for pollution control. In the second approach, applicant companies seek to improve their competitive ability by gaining flexibility and reducing transactional and time-related costs.

Minnesota Mining and Manufacturing Company (3M) Project XL Proposal¹¹

Pollution prevention is preferable to end-of-pipe controls …. Air pollutants captured in industrial smokestacks and deposited in landfills can contribute to groundwater pollution; stripping toxic chemicals out of groundwater, and combusting solid and hazardous wastes, can contribute to air pollution. Pollution prevention techniques are especially promising because they donot move pollutants from one environmental medium to another, as is often the case with end-of-pipe controls. Rather, the pollutants are not generated in the first place.

EPA Science Advisory Board¹²

The Problems

As with so many EPA programs, to understand the rationale—and the resulting flaws—of Project XL, it is necessary to get a clear picture of its institutional genesis. The Project was designed and is being implemented by EPA staff assigned to the Office of Policy, Planning, and Evaluation (OPPE). The decision to confer this responsibility on a staff steeped in the abstract theory and rhetoric of reinvention, but lacking any independent regulatory authority of its own, was undoubtedly intended to protect the Project from being sandbagged by turf-conscious, career program and enforcement staff. The resulting trade off is troubling and potentially destructive. The Project XL staff has a demonstrable commitment to innovation and experimentation, but it lacks the technical expertise and experience necessary to foresee the substantive problems posed by industry proposals. Its performance is measured by how fast it gets projects up and running.¹³ Judging from lengthy delays in the project approval process, the Project staff is having increasing difficulty in obtaining approval from the EPA program staff and state and tribal regulators it must coordinate.¹⁴ The concerns of program staff, especially at headquarters, are undoubtedly exacerbated by the fact that Project XL delegates most decisionmaking to EPA regional offices and state and tribal regulators.

These difficulties are compoundedby EPA's decision to foster industrial creativity by refraining from establishing any firm guidelines regarding the content of project proposals beyond the deceptively simple formulation that projects must "achieve environmental performance that is superior to what would be achieved through compliance with current and reasonably anticipated future regulation."¹⁵ The Federal Register notice launching the facilities XL establishes only the most general criteria for evaluating project proposals, including such unassailable but vague goals as achieving better environmental results; reducing costs and paperwork; and developing "new," "innovative," and "transferable" pollution prevention and control strategies.¹⁶ Neither the notice nor subsequent EPA staff guidance attempts to define a "baseline" for determining superior performance, to ask companies to quantify the benefits of improvements they plan to make, or to require companies to demonstrate that the regulatory exemptions they seek will not cause greater damage to the environment.¹⁷

The predictable result is that Project XL has become a regulatory free-for-all, with companies requesting lengthy lists of unrelated exemptions in exchange for environmental "improvements." One of the more egregious examples is a draft final project agreement prepared by Weyerhaeuser, Inc. for its Flint River facility in Oglethorpe, Georgia.¹⁸ Appendix Three of this document is a 10-page list of specific regulatory exemptions requested by the company, including such items as a prohibition on the future collection of state and local user [26 ELR 10530] fees assessed on water discharges and the disposal of solid waste, an exemption from the "'No Free Liquids' requirement for landfilled materials," and the elimination of the plant's Spill Control and Countermeasure Plan.¹⁹ These requests are particularly startling because the gist of the Weyerhaeuser proposal is a facility-wide bubble that involves trading air and water emissions.²⁰ On March 28, 1996, EPA Region 4 staff assigned to review the proposal submitted comments to Weyerhaeuser questioning many of these exemptions because "at this time, staff does not feel comfortable that they could explain the net environmental benefits of the [Minimum Impact Manufacturing proposal] versus the tradeoffs or exemptions being requested by Weyerhaeuser."²¹

A second example is the regulatory relief granted in a draft final project agreement and state permit prepared for a 3M manufacturing plant in Hutchinson, Minnesota.²² Once again, the gist of that proposal is a facility-wide cap on air emissions, in particular volatile organic compounds and hazardous air pollutants, and the two documents contain substantial modifications to current and future permitting requirements under the Clean Air Act.²³ But the documents also offer relief from a series of other regulations, including requirements governing hazardous waste management and storage, stormwater runoff, and emergency release reporting.²⁴ In lieu of complying with these requirements, 3M will develop an internal self-assessment process called the "Environmental Management System."²⁵ Among other things, the system will "assure that the material handling, incident and emergency response and training procedures at the facility are similar to [state] procedures."²⁶ The draft permit does not define the term "similar to." Further, the draft permit stipulates that emergency releases of hazardous air pollutants and volatile organic compounds in any amount will not be reportable to state and federal agencies under the draft permit so long as the amount of the release remains within the limits of the annual facility-wide cap.²⁷

Of course, it is entirely possible that the worst examples of unwarranted exemptions will be eliminated from the proposals by the time they are approved in final form by federal, state, and tribal regulators. The examples cited here, and throughout the Dialogue, reflect papers EPA has made available to the general public, and some additional documents provided to the author through other sources, when this Dialogue went to press at the end of August 1996. However, even if some of these problems are ultimately rectified, other exemptions may be granted without substantive justification, because companies feel free to submit lengthy "wish lists," which will not receive rigorous and effective review by regulators and public interest stakeholders.

A second major problem is that Project XL proposals frequently define environmental "improvement" as cross-pollutant trades within a facility-wide—or even broader—emissions "cap."²⁸ Rather than comparing before and after emissions of the same pollutants, the proposals require EPA, [26 ELR 10531] state and tribal regulators, and public interest stakeholders to evaluate the implications of trading decreased emissions of one aggregate class of pollutants (e.g., volatile organic compounds) for increased emissions of another class of pollutants (e.g., sulfur dioxide and nitrogen oxide).²⁹ Not only is it difficult to qualitatively evaluate such exchanges, but by aggregating pollutants into classes, the proposals allow the companies to change the composition of those classes over time, increasing the amount of the most toxic individual chemicals in relation to more benign substances. Other proposals require evaluation of emissions trades between media, achieving lower air emissions in exchange for higher releases into surface water or land.³⁰ In most cases, overall emissions are traded rather than substantially reduced, and the claim that the proposal represents an improvement depends on the far from self-evident conclusion that decreasing emissions in one chemical category or one medium will produce a sufficient benefit to justify increasing emissions in another category or medium.³¹

This unrestricted flexibility, applied without reliable scientific information regarding the implications of such trade offs, raises two real dangers. First, EPA's overextended and underfinanced program staff could lose control of these initiatives, allowing significant environmental damage, especially if the site-specific approaches set a precedent for broader, even industry-wide, application. Second, exemptions granted to individual XL project proponents could cause anticompetitive effects by freeing some companies from significant environmental compliance costs while continuing to impose those costs on their competitors. Ironically, these effects would be offset if innovative approaches were applied on an industry-wide basis, but at this point in Project XL's development, it is far from clear whether expansion of its experiments is desirable or will happen. What is clear is that EPA has not yet recognized these implications and is giving them short shrift in its evaluation of proposals.

Although the absence of information about likely environmental effects is an extremely important deficiency that undermines meaningful analysis by either regulators or public interest representatives, the issue at the heart of Project XL's substantive failures is EPA's ambivalence about defining the baseline for measuring environmental improvement. In the absence of an EPA standard—or even a range of acceptable options—companies may define baselines as improvements over actual emissions, improvements over allowable emissions, or improvements over expected future emissions if a plant expands.³² Each approach poses distinct problems for the environment.

While a decrease in actual emissions appears on its face to be the most straightforward and fair approach, this approach could allow some serious abuses if a facility is very old, does not use state-of-the-art pollution control technology, and is producing pollutants that EPA is on the verge of controlling more stringently. Measuring improvement as a decrease in the emissions that are allowable under existing permits poses similar but even more severe problems. Such permits may have been written permissively years ago, may no longer represent the average performance within an industry, and may be about to expire, requiring the application of updated and more stringent regulatory requirements. Finally, a baseline that allows a company to measure improvement against anticipated emissions when a facility expands would authorize increased pollution without the compensating benefits of expanded industrial production if the expansion does not materialize.

The failure to define "baseline" is especially dangerous in the context of cross-media and cross-pollutant trading, given the dearth of reliable science regarding the long-term implications of such exchanges. To fill this gap, EPA's staff is considering whether to allow companies to do risk assessments as a substitute for more comprehensive analysis of potential environmental effects.³³ Such assessments would measure the direct effects of certain emissions on people who live or work in the community surrounding the facility, but would not evaluate the damage emissions cause to ecosystems, their propensity to bioaccumulate, or their adverse impact on the entire geographical area affected by the facility.³⁴ Accepting such limited analysis in lieu of the more comprehensive considerations that typically underlie existing regulations effectively turns the clock back to a period when we did not even attempt to evaluate the long-term synergistic effects of pollution on all aspects of the environment.

[26 ELR 10532]

For years, commentators have urged EPA to undertake a more sophisticated analysis of the adverse effects of chemical mixtures on the environment by developing regulation on a cross-media basis.³⁵ There is no intrinsic reason that Project XL cannot provide a forum for experimenting with cross-media regulation or, for that matter, the innovative approach of allowing companies to trade emissions across media or pollutant categories. But in the absence of scientific data that such trades will improve the overall quality of public health and the environment, experimentation is likely to produce some very bad results.

Recommendations for Reform

Project XL should adopt a threshold definition of environmental improvement that includes four basic principles. First, projects should achieve real pollution prevention, defined as reductions in actual emissions of pollutants controlled under existing regulations, unless a compelling case can be made that an increase is justified by very significant reductions in other, potentially more harmful releases. At a minimum, projects should limit emissions to levels that would be achieved using relevant technology-based standards unless a compelling case can be made that an increase above those levels is justified by significant offsetting environmental benefits. When a project allows future construction to produce emissions, it should base that decision on an objective analysis of the emission levels that could be achieved using state-of-the-art pollution prevention and control technology at the specific facility and should not grant caps above those limits. Caps based on future construction should not apply unless the construction actually occurs. Both existing and reasonably anticipated regulatory requirements should be applied in either instance.

Second, pollutants should not be aggregated into classes for purposes of measuring such reductions. Such aggregation allows companies to change the "mix" of individual pollutants at will. On the other hand, if a company can lower emissions of a pollutant more cost effectively in a currently unregulated area of its operations, and it wishes to trade those reductions for an increase in emissions under its existing permit, it should be allowed to do so as long as the overall level of emissions is reduced.

Third, project proponents should assume the burden of developing sufficient scientific evidence that cross-media and cross-pollutant emission trading is desirable. Risk assessments limited to the human population in the communities that adjoin the facility should not substitute for more comprehensive analysis of the effect of such trades on the regional, national, and even global environment, especially in cases where EPA plans to apply Project XL facility results more broadly.

Fourth, in all cases companies should be required to demonstrate that regulatory exemptions will not cause greater damage to the environment and public health than the improvements offered by the proposal.

Given the scientific uncertainty that plagues the "cutting edge" innovation envisioned by Project XL, it is crucial that final project agreements commit federal, state, and tribal regulators for a limited period of time—the presumption should be five years—especially in areas where research regarding adverse effects and technology are expected to develop quickly.³⁶ Companies understandably view the long-term certainty of alternative, site-specific compliance plans as a major advantage of participating in the program. But they should not expect such benefits to be conferred indefinitely, in effect protecting them from regulatory developments that will apply to their competitors and that may be necessary to protect the environment and public health from newly discovered hazards.

Finally, regulatory review of projects that may have broad applicability should include the EPA program staff responsible for drafting industry-wide standards and rules. Delegating the resolution of issues that have clear national importance to regional, state, and tribal regulators only postpones an evaluation of their implications.

The Process

It is the responsibility of the project sponsor to give [outside stakeholder] groups the opportunity to participate.

David Gardiner³⁷

There is a significant difference between advocacy for humans and effective representation of human interests in very technical and legally obfuscated initiatives. Specifically, the multimedia thrust requires at the very least a means of determining synergistic cumulative risk …. I ask you, "how can we participate in a permitting project in the blind?" … "How many lawyers, engineers, epidemiologists and public health workers will we have to assist our constituencies in the negotiations on these flexible permits?"

Ely Dorsey³⁸

The Problems

From the outset, EPA has maintained that it will consider "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"as an "important factor" in the decision to approve projects.³⁹ It has defined "local" stakeholders ambiguously to include "communities near the project, local or state governments, businesses, environmental and other public interest groups, or other similar entities."⁴⁰

EPA requires public participation in Project XL for practical, legal, and principled reasons. An open process, if well-run, would protect both EPA and the company's reputations, forestalling charges that a secret sweetheart deal [26 ELR 10533] with "polluters" has been negotiated. Further, as explained below, unless legislation is enacted authorizing Project XL experimentation, the projects are vulnerable to citizen suits charging that they allow ongoing violations of existing regulatory standards. By establishing a stable, broad-based consensus with public interest representatives, EPA and the companies may be able to prevent such challenges. Lastly, EPA's leadership is committed—at least theoretically—to the principled notion that the participation of public interest stakeholders will produce a better result.

Despite EPA's avowed commitment to stakeholder involvement, EPA's staff has been equally adamant that running the process remains the exclusive responsibility of the company submitting a proposal.⁴¹ In effect, then, EPA has charged the companies with responsibility for involving local stakeholders without clearly defining who those stakeholders might be or establishing basic guidelines for accomplishing meaningful participation as proposals are developed.

Predictably, the quality of public participation has become one of the most controversial aspects of EPA's implementation of the Project, prompting protests by environmentalists at both the national and local levels. The national environmental community issued a terse "joint statement" on November 3, 1995, conditionally supporting the "careful implementation" of Project XL and demanding an "effective" stakeholder process that operates by "broad consensus" and "provides for participation by local affected communities and workers and by other groups with interests in the environmental, health and community issues affected by the proposed project."⁴² In the intervening months, representatives of this group have met repeatedly with EPA officials to express deep concern about the stakeholder process underway, or not underway, at several approved Project XL sites.⁴³ On July 1, 1996, the Natural Resources Defense Council (NRDC) sent EPA and White House officials a letter threatening to withdraw its support for the Project, stating flatly that

the stakeholder processes to date have not been based on balanced, consensus-based decision making. Neither EPA nor the project sponsors have succeeded in creating an open and inclusive process that provides for full participation by community stakeholders. In fact, EPA has made it clear that companies are not required to build consensus with the community to win EPA's support.⁴⁴

There are four fundamental and closely related problems with EPA's approach. First, because EPA has not established substantive standards for judging the environmental improvements that will be achieved by proposals and has not set limits on the regulatory exemptions that may be requested, Project XL places much of the onus on "stakeholder involvement" to ensure that the public interest is protected.⁴⁵ The more flexibility industry is given to depart from existing requirements, the more important it becomes that alternative strategies are negotiated through a tripartite process that includes equally matched representatives of industry, regulators, and public interest groups.⁴⁶ In the absence of a carefully balanced tripartite process, site-specific self-regulation has the potential to undermine EPA's credibility and cause real environmental damage.

Second, EPA has not required companies to disclose a standardized set of comprehensive—and comprehensible—information about their projects and the proposals typically omit information essential to allow regulators and the public to evaluate their merits, especially data on their likely effect on the environment and public health.⁴⁷

[26 ELR 10534]

Third, in the absence of ground rules for facilitating and mediating public participation, many proposals omit a meaningful process entirely. Perhaps the most egregious example is a proposal developed by the HADCO Corporation for its facilities in New Hampshire that would delist a wastewater treatment sludge now categorized as a hazardous waste under the Resource Conservation and Recovery Act, allowing the sludge to be shipped directly to a recycling facility in Canada, rather than to a hazardous waste treatment facility in Pennsylvania.⁴⁸ Under the heading Stakeholder Support, the proposal states:

No active support of this proposal from various stakeholders has been sought. However, we expect that communities between New Hampshire and Pennsylvania would welcome not having WWT sludge hauled back and forth through their states prior to recycling. We do not anticipate community concern with direct shipment of these wastes to Canada for recycling, but will certainly consider outreach efforts that may be appropriate.⁴⁹

Several other proponents of approved proposals apparently believe that they can meet the public participation requirement by accumulating endorsement letters from a few outside groups or public officials, rather than by establishing an ongoing negotiation process involving the active participation of representative public interest stakeholders.⁵⁰

Finally, EPA does not commit its own resources, and does not require industry to commit resources, to providing independent technical assistance to public interest stakeholders so that they can meaningfully participate in the debate over the highly technical issues involved in determining which regulatory exemptions to grant, evaluating what environmental benefits will be achieved, and predicting what adverse effects might be condoned in the project.⁵¹ Without adequate technical support, most local community representatives have great difficulty evaluating the longterm implications of a proposal, and are certainly not equipped to play the role traditionally played by government regulators when industry-wide standards are drafted. This problem will assume major proportions if the precedents set in individual projects are applied more broadly. In effect, EPA will have turned the rulemaking process on its head, developing national standards at the local level and severely disadvantaging environmentalists.⁵²

Recommendations for Reform

EPA staff and industry representatives active in the development of Project XL have vigorously championed the idea that companies must be free to suggest unlimited exemptions from existing regulatory requirements in their search for better solutions.⁵³ The complexity of evaluating proposals that depart radically from existing standards may motivate both groups to revisit this threshold assumption. But unless this assumption is revised, the Project's credibility may well depend on the Project's ability to justify [26 ELR 10535] such departures by achieving consensus support from representative stakeholder groups.

Stakeholder groups should be selected either by EPA or neutral, third-party facilitators and should include representatives of every constituency that will be affected by the project, including national and local environmentalists, the facility's workforce, other civic groups, and local elected officials. Allowing industry to hand-pick its own group of potential critics will only sabotage the reputation of the process.

EPA should develop standardized instructions for the information that must be disclosed in proposals, including detailed data on the levels of actual, allowable, and to-be-achieved emissions; the tangible benefits the proposal will achieve; and the potential adverse consequences of the exemptions it entails. Companies should be required to respond promptly to reasonable data requests from other stakeholders in the negotiating group and from federal, state, and tribal regulators.

Stakeholders representing the public interest must receive adequate funding from EPA or project proponents to support an independent technical review. Without funds to pay independent technical experts, effective stakeholder participation is undermined in all but the rare case where qualified environmental professionals with appropriate expertise are able to participate as citizens.

Finally, there is the difficult and controversial issue of giving local community groups, municipal officials, labor representatives, public health experts, and environmentalists the right to veto—and not just vote on—a project. Under heavy pressure from industry, EPA has not crossed this line, and it is probably true that requiring consensus in absolute terms would kill industry interest in Project XL.⁵⁴ Further, it is difficult to justify an absolute consensus rule in purely democratic terms because stakeholder groups making complex, technical decisions within a specified time period can never be a perfect reflection of the public will.

But acknowledging the consequences of prescribing consensus and abandoning consensus as a goal are two very different propositions. The ground rules for the XL public participation process should require that the stakeholder group make extensive efforts to achieve consensus, facilitated, if at all possible, by professional mediators. EPA should prohibit the adoption of rules that disadvantage any given constituency (e.g., the establishment of subcommittees within the larger group when there is an inadequate number of public interest stakeholders to cover those deliberations). If consensus ultimately fails, dissenting stakeholders should be allowed to file "minority reports" explaining their substantive objections for consideration by federal, state, and tribal regulators who would retain final authority to accept or reject proposals. The presence or absence of consensus should heavily influence the regulators' decision, but not determine it in the absence of compelling substantive concerns about the environmental effects of the proposal.

The Law

In all cases in which an XL project will necessarily involve the violation of applicable regulatory or statutory requirements, those requirements and violations should be specifically identified on a facility-by-facility basis, and if necessary to advance the project a precise statement of the scope of the Agency's exercise of enforcement discretion should be included in the final project agreement ….

Steven A. Herman⁵⁵

Enforcement discretion as a primary mechanism for implementing XL projects has important weaknesses. These stem from the fact that enforcement discretion does not actually authorize a project under statute, but instead merely bars EPA from taking enforcement action for whatever departures from statute are contemplated by the terms of the project. Discretion does not prevent citizens, whether concerned environmentalists, self-interested competitors, or bounty-hunting attorneys, from bringing suit at any time to force such action…. Vulnerability to frivolous citizen suits concerns the companies, the Congress, and the Agency's leadership ….

Unnamed EPA Project XL staff member⁵⁶

The Problem

The true source of Project XL's multiple legal problems is not, as many people contend, the absence of legislation giving EPA the authority to approve site-specific agreements, although legislation might overcome these problems, at least temporarily. Rather, Project XL is vulnerable as a legal matter because of its dual commitment to fostering site-specific experimentation and developing "transferable" models for regulatory change.⁵⁷ When combined with a weak public participation process and the absence of standards for evaluating the substance of proposals, the possibility that the precedents set in individual projects will be applied industry-wide raises very high stakes for regulators, environmentalists, and citizen groups.⁵⁸ In retrospect, [26 ELR 10536] EPA and industry might have been far better off had EPA persuaded the White House to give it time to experiment with a few low-profile projects before launching Project XL as a national "reinvention" initiative. It is unlikely, however, that this particular spilled milk can ever be put back into the bottle. For better or worse, Project XL is likely to remain a high-profile national effort.

Correctly perceiving that national and local environmentalists are restive about Project XL's precedent-setting potential, industrial participants have developed their own set of anxieties, chief among them that they will be vulnerable to citizen suits designed to force them back into compliance with existing regulations even after they have made the substantial investment necessary to accomplish their innovative compliance alternatives.⁵⁹ Many have suggested that legislation authorizing EPA to waive regulatory requirements for XL projects may be the only way out of this dilemma.⁶⁰ However, given the difficulty of getting the 104th Congress and the Clinton Administration to reach agreement on environmental policy, EPA has been struggling to develop solutions within the constraints of its existing legal authority.

Initially, EPA's enforcement staff pledged to exercise "prosecutorial" discretion on a site-specific basis. This approach would involve EPA promising not to bring an enforcement action regarding the regulatory exemptions granted in final project agreements so long as the project fulfilled its alternative goals.⁶¹ Enforcement staff urged the regional office staff and state and tribal regulators who are responsible for negotiating and implementing final agreements to "specifically identify" the violations anticipated by the agreement and to further "specify the consequences of noncompliance with the terms of the agreement, and of the failure of the project to meet its objectives."⁶² However, because these commitments are limited to EPA enforcement action, they do not appear to have quelled industry anxiety about citizen suits.

Staff members in EPA's Office of Policy, Planning, and Evaluation have been especially anxious to respond to these concerns, at first suggesting that permit modifications or the issuance of new permits might address the issue.⁶³ More recently, EPA has begun to experiment with the concept of structuring regulatory exemptions as site-specific, notice-and-comment rulemakings that would act as a legal bar on subsequent citizen suits.⁶⁴

In the absence of fundamental reforms in the process and the substance of XL projects, the initiation of site-specific rulemakings has the potential to exacerbate all of the problems discussed above. In essence, site-specific rulemakings offer public interest representatives the sterile right to file written comments within 30 days as an alternative to meaningful public participation in developing the terms and conditions of final project agreements. The rulemaking alternative could easily eliminate the incentive for project proponents to secure a broad base of support. At the same time, however, site-specific rules will not necessarily resolve industry concerns because such rules will remain vulnerable to legal challenge on the basis that the hastily assembled record does not provide support for the exemptions EPA has decided to grant.

Recommendations for Reform

The best way to protect XL projects from legal challenge is to reform the process for stakeholder involvement in the development of final project agreements. A robust, inclusive, wisely run process is the only effective way to defuse resistance to new initiatives among those most likely to mount a successful legal challenge. To the extent that EPA can also improve the substance—and the transparency—of project proposals, site-specific negotiations are far more likely to be successful. As eager as the EPA policy planning staff appears to be to declare Project XL a success and to apply its methods in a broader context, it would be well-advised to play down the precedent-setting capacity of XL innovations until—and unless—the projects have proven successful.

If the most important goal of Project XL is to experiment freely with innovative new approaches, and a relatively fast process for developing final project agreements is believed to be important to that goal, EPA should reserve site-specific rulemakings for the most ambitious proposals. In no event should such rulemakings be seen as a way to finesse the substance or the process of proposals, securing rapid approval of bad ideas before public interest stakeholders have had an opportunity to understand the full implications of the experiment. Finally, it is extremely important that EPA not only commit itself to exercise enforcement discretion when companies comply with site-specific plans, but that it bring enforcement action rapidly in cases of significant noncompliance.

Conclusion

In its haste to respond to Republican proposals for regulatory reform, EPA began constructing a major alternative to existing [26 ELR 10537] regulation without a blueprint for resolving the most fundamental and predictable problems that inevitably arose. It is not too late to rescue this initiative. A lasting cure, however, cannot be patched together on an ad hoc, site-specific basis. Instead, EPA, Congress, industry, environmentalists, and other constituencies must take the time to develop a comprehensive plan that will allow Project XL to function more efficiently and fairly.

1. President William Clinton, Remarks on Project XL, at the Old Executive Office Building (Nov. 3, 1995) (transcript on file with author) [hereinafter Remarks by the President].

2. What's Up With Project XL—Week of 3/11/96, PROJECT XL UPDATE [hereinafter PROJECT XL UPDATE] (on file with author).

3. See, e.g., Regulatory Reinvention (XL) Pilot Projects, 60 Fed. Reg. 27282 (May 23, 1995) [hereinafter Regulatory Reinvention Pilot Projects]; Common Sense Initiative Council Federal Advisory Committee; Establishment, 59 Fed. Reg. 55117 (Nov. 3, 1994); U.S. EPA, SUSTAINABLE INDUSTRY, PROMOTING STRATEGIC ENVIRONMENTAL PROTECTION IN THE INDUSTRIAL SECTOR: PHASE 1 REPORT (1994); U.S. EPA, ENVIRONTMENTAL LEADERSHIP PROGRAM (1995); BILL CLINTON & AL GORE, REINVENTING ENVIRONMENTAL REGULATION (1995); NATIONAL ACADEMY OF PUB. ADMIN., SETTING PRIORITIES, GETTING RESULTS: A NEW DIRECTION FOR THE ENVIRONMENTAL PROTECTION AGENCY (1995); EPA: Ruckelshaus to Head Effort on New Agency Statutory Mission, Daily Env't Rep. (BNA), Mar. 1, 1996, at 41 (describing new regulatory reinvention project named "Enterprise for the Environment"); Stakeholder Involvement Remains Concern in Talks on Alternative Compliance Plans, 27 Env't Rep. (BNA) 229 (1996) [hereinafter Stakeholder Involvement] (describing negotiations over reinvention legislation called the "alternative path" by its proponents); Jonathan Lash & David T. Buzelli, Beyond Old-Style Regulation, J. COM. & COM., Feb. 28, 1995, at 8A.

4. Regulatory Reinvention Pilot Projects, supra note 3, at 27282.

5. The facilities XL has approved, for negotiation of final project agreements, a total of 13 proposals, including those submitted by (1) Anheuser Busch Co., (2) the Florida Department of Environmental Protection on behalf of the Jack M. Berry Corp., (3) HADCO Corp., (4) International Business Machines Corp., (5) the Intel Corporation, (6) Lucent Technologies Inc. (formerly part of AT&T), (7) Merck & Co., Inc., (8) the Minnesota Pollution Control Agency, (9) Molex Inc., (10) OSi Specialties, Inc., (11) Minnesota Mining and Manufacturing Company, (12) Union Carbide Corp., and (13) Weyerhaeuser, Inc. The Project XL Project Status Table (June 27, 1996) [hereinafter Project XL Table]. The June 27, 1996, version of the Table was the most recent version available as of the end of August 1996, when this Dialogue went to press. Copies of all the approved proposals and the Project XL Table are on file with author and are available from the Project XL Fax-on-Demand hotline at (202) 260-8590.

6. The term "self-regulation" is used here as it is used by political scientists and legal scholars to connote alternative compliance plans conceived by industry, as opposed to a process that omits government review or public involvement. See, e.g., IAN AYRES & JOHN BRAITHWAITE, RESPONSIVE REGULATION 101-32 (1992).

7. William F. Pedersen, Can Site-Specific Pollution Control Plans Furnish an Alternative to the Current Regulatory System and a Bridge to the New One?, 25 ELR 10486 (Sept. 1995).

8. Id. at 10488.

9. Even Pedersen seems to succumb to this ahistorical new theology:

For many years, the old system seemed impervious to criticism, as each new law added ever more elaborate branches to the regulatory thicket. But the 1994 election revealed that the old system was actually ready to collapse of its own weight. Since then, the old system has found almost no defenders, as politicians of all stripes have rushed to embrace or appear to embrace the need for change.

Id.

10. Letter from David Gardiner, Assistant Administrator, U.S. EPA, Office of Policy, Planning, and Evaluation (OPPE), to Colleagues 1 (May 25, 1995) (copy on file with author or available from the Project XL hotline at (202) 260-8590)).

11. Letter and Attachment from Thomas W. Zosel, Manager, Environmental Initiatives, 3M, on 3M Proposal Project XL, to U.S. EPA, at 3-4 of Attachment (July 13, 1996) [hereinafter 3M Proposal]. In fact, the two approaches are not mutually exclusive and most proposals combine them.

12. U.S. EPA SCIENCE ADVISORY BOARD, REDUCING RISK: SETTING PRIORITIES AND STRATEGIES FOR ENVIRONMENTAL PROTECTION, SAB-EC-90-021, 22 (1990).

13. EPA pledged to approve final project agreements within six months from initial project acceptance, but that arguably unrealistic deadline has already slipped to more than a year for proposals accepted in the initial round. Regulatory Reinvention Pilot Projects, supra note 3, at 27284. EPA also pledged to implement 50 pilot projects within the two years following its May 1995 Federal Register notice launching the Project. Id. at 27287. As of the end of August 1996, 13 facilities XL proposals had been tentatively accepted. Project XL Table, supra note 5.

14. EPA has stated:

EPA is taking a decentralized or "franchising" approach to the implementation of XL 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 environmental agencies that are co-regulators with EPA, EPA headquarters, or EPA regional offices.

Regulatory Reinvention Pilot Projects, supra note 3, at 27823.

15. Id. at 27287.

16. Id.

17. Id; see also Memorandum from David Gardiner, Assistant Administrator, U.S. EPA, OPPE, on Draft Principles for Development of Project XL Final Project Agreements 10-11 (Dec. 1, 1995) [hereinafter Draft XL Principles Memorandum] (copy on file with author and available from the Project XL Fax-on-Demand hotline at (202) 260-8590)):

A consideration of environmental performance first requires consideration of the unit of measure. This was not specifically defined in the Project XL Federal Register notice in order to encourage creativity on the part of project sponsors. Projects may seek to define environmental baselines in any number of ways, such as general environmental indicators, pollutant emissions, ambient concentrations, or human or ecosystem impacts…. Addressing the relevant question of what performance would be achieved … requires consideration of three factors: the historical performance of the facility; the allowable, or minimum environmental performance required of the facility; and the influence of underlying economic, technological or other trends or factors.

The Draft XL Principles Memorandum is the operative piece of EPA staff guidance that currently governs the Project, although it has never been issued in final form and states in its second paragraph that it is "not a rule book" and "should be considered a living document." Id. at 1.

18. Weyerhaeuser Flint River Operations/Project XL, Draft (Subject to Revision) Final Project Agreement (FPA) (Apr. 9, 1996) [hereinafter Draft Weyerhaeuser Final Project Agreement] (copy on file with author).

19. Id. at 18-21.

20. Letter and Attachment from Carl W. Geist Jr., Vice President, Weyerhaeuser, Inc., on Project XL, Regulatory Reinvention Pilot Project Proposal, Weyerhaeuser Pulp Paper and Packaging, Flint River Operations, Georgia, to Jon Kessler, XL Director, U.S. EPA, OPPE 2 [hereinafter Weyerhaeuser Proposal].

21. Letter and Comments from Michelle M. Glenn, WD Project XL Coordinator, Weyerhaeuser/Flint River Project Manager, U.S. EPA, Region 4, on Draft FPA Dated March 13, 1996, to Gary Risner, Weyerhaeuser, Inc. 2 (Mar. 13, 1996).

22. Minnesota XL-Final Project Agreement (FPA) between the Minnesota Pollution Control Agency, the U.S. EPA, and 3M (Draft May 29, 1996) [hereinafter Draft 3M Final Project Agreement] (copy on file with author); Minnesota Permit No. 96-01 (Draft July 17, 1996) [hereinafter Draft 3M Permit] (copy on file with author). EPA anticipates doing a site-specific rulemaking regarding this project so that the company is provided with legal protection against citizen suits under federal law. Draft 3M Final Project Agreement, supra, at 26. For a discussion of site-specific rulemakings, see infra note 64 and accompanying text.

23. Draft 3M Final Project Agreement, supra note 22, at 3, 5-6, 26; Draft 3M Permit, supra note 22, at 3-4.

24. Draft 3M Final Project Agreement, supra note 22, at 4-6, 27-28; Draft 3M Permit, supranote 22, at 4-7.

25. Draft 3M Permit, supra note 22, at 5.

26. Id. (emphasis added).

27. Id. at 8.

28. Five of the most prominent facilities XL proposals involve such approaches:

Merck proposes establishing a plant wide emission cap based on the actual total annual tonnage of regulated pollutants emitted before implementation of the project reductions. Merck would use any VOC [(volatile organic compound)], SO₂ [(sulfur dioxide)], NO_x [(nitrogen oxide)], and HCl [(hydrogen chloride)] reductions as pound-for-pound exchange to increase VOC emissions elsewhere in the plant as needed, while remaining under the plant wide cap.

Merck & Co., Inc., Project XL for Facilities Final Project Agreement Application, Stonewall Plant, Elkton, Va. (July 28, 1995) [hereinafter Merck Proposal].

The Minimum Impact Mill concept can be conceptualized in essence, as an environmental "bubble," around the entire facility, encompassing below—as well as above—ground impacts to multiple environmental media. The intent behind a Minimum Impact Mill is to have the boundaries of the "bubble" … shrink over time as the multi-media impacts are reduced ….

Weyerhaeuser Proposal, supra note 20, at 2.

The basic proposal focuses on the implementation of "Beyond Compliance" permits at three 3M manufacturing sites [located in] Camarillo, California, Bedford Park, Illinois, and Hutchinson, Minnesota. These "Beyond Compliance" permits would include emission caps which are significantly below the levels required by existing regulations. The limitations would be included in a multimedia permit that would allow the facilities appropriate flexibility to operate under the constraints of those emission limitations.

3M Proposal, supra note 11, at 1. "The proposed operating contract will be a multi-media approach that will focus on measurable environmental goals and will substitute for individual media permits." Letter and Attachment from Terrence J. McManus, Manager, Corporate Environmental Affairs, Intel Corp. on Facility-Based Project XL, Intel FAB 12, Intel Corp., Chandler, Ariz., to Regulatory Reinvention Pilot Projects, U.S. EPA 5 (June 30, 1993) [hereinafter Intel Proposal].

Utilizing Anheuser-Busch's Jacksonville, Florida brewery, convert from the existing single media permits to one multimedia agreement. Expand the boundary of the agreement to account for emissions from the Jacksonville water plant, Jacksonville Electric Authority (JEA) power plant, and from the wastewater treatment facilities …. Environmental results will be improved by expanding the bubble, establishing baseline emissions and a banking and trading system that encourage industry to minimize total community emissions.

Anheuser-Busch Co., Inc. Project XL Proposal 4-5 (July 20, 1995) [hereinafter Anheuser-Busch Proposal]. Copies of all of the above-referenced documents are on file with author or available from the Project XL hotline (202) 260-8590.

29. See, e.g., Merck Proposal, supra note 28.

30. See, e.g., Anheuser-Busch Proposal, supra note 28.

31. In a recent letter to EPA, the Natural Resources Defense Council (NRDC) charged:

Rather than demonstrate environmental leadership, in which real pollution prevention is applied to improve all aspects of a facility's performance, all but one of the proposals we have evaluated would increase emissions from one or more processes in exchange for other emission reductions or for some other action—for example, trading reductions in one pollutant for increases in other pollutants, or trading reductions from existing equipment for less stringent standards and increased emissions from new equipment.

Letter from David G. Hawkins, Senior Attorney, and Chris van Loben Sels, Senior Project Analyst, NRDC, to Fred Hansen, Deputy Administrator, U.S. EPA, David Gardiner, Assistant Administrator, U.S. EPA, and Keith Laughlin, Associate Director, Council on Environmental Quality 1-2 (July 1, 1996) [hereinafter NRDC Letter] (copy on file with author).

32. Because only one final project agreement is available as this Dialogue goes to press and that project does not involve emissions reductions, it is impossible to draw any conclusions about what kinds of baselines EPA, state and tribal regulators, and other stakeholders will ultimately negotiate. However, EPA's staff has actively encouraged companies to choose any one of these possible alternatives. See Draft XL Principles Memorandum, supra note 17 and accompanying text.

33. Interview with Jon Kessler, Division Director, U.S. EPA, OPPE, in Washington, D.C. (July 17, 1996). Kessler said that EPA has commissioned two site-specific risk assessments from its own contractors and that project proponents are also performing their own analyses. However, he insisted that these risk assessments will only be used to evaluate the "benefits" projects could deliver and will not be determinative in final decisions to approve them.

34. Interview with Christopher van Loben Sels, Senior Project Analyst, NRDC, in Washington, D.C. (June 4, 1996) [hereinafter van Loben Sels Interview]. Van Loben Sels' comments were based on his review of a draft risk assessment prepared in connection with the 3M project in Minnesota. He had not had an opportunity to review EPA contractor assessments that had not yet been released. The 3M project specifies the performance of a "fence-line" assessment measuring the inhalation of air emissions by people in both the draft final project agreement and the draft state permit. See Draft 3M Final Project Agreement, supra note 22, at 9; Draft 3M Permit, supra note 22, at 3, 6.

35. See, e.g., Daniel J. Fiorino, Toward a New System of Environmental Regulation: The Case for an Industry Sector Approach, 26 ENVTL. L. 457 (1996) and sources cited therein.

36. Five years is the term of many permits under the Federal Water Pollution Control Act and Clean Air Act programs. It is also a reasonable time period to wait to see if regulatory changes have been made that would require modification of an XL agreement. Less time would defeat the purpose of giving industrial applicants regulatory certainty, while significantly more time would create too much of an incentive to avoid upcoming regulations by obtaining Project XL coverage for a facility or group of facilities.

37. Draft XL Principles Memorandum, supra note 17, at 6.

38. Memorandum from Ely Dorsey on Project XL Participation Limitations (Apr. 16, 1996) (copy on file with author). Dorsey is associated with the Northeast Environmental Justice Network and the Southern Organizing Committee for Economic & Social Justice.

39. Regulatory Reinvention Pilot Projects, supra note 3, at 27827.

40. Id. (emphasis added).

41. Draft XL Principles Memorandum, supra note 17, at 6.

42. Joint Statement from Citizens for a Better Environment, Communities for a Better Environment, Ecology Center of Ann Arbor, Environmental Action, Environmental Defense Fund, Environmental Justice Working Group, Friends of the Earth, Minnesota Center for Environmental Advocacy, National Environmental Law Center, National Wildlife Federation, Natural Resources Defense Council, New Mexico Environmental Law Center, People for Community Recovery, Santa Clara Center for Occupational Safety and Health, Sierra Club, Silicon Valley Toxics Coalition, Southern Organizing Committee, and U.S. Public Interest Research Group on Clinton Administration's Project XL Announcement 1 (Nov. 3, 1995) (copy on file with author).

43. Environmentalists Demand More Formal Consultation on Project XL, INSIDE EPA, Nov. 3, 1995, at 1; van Loben Sels Interview, supra note 34.

44. NRDC Letter, supra note 31, at 2. Similar concerns have been expressed at the local level, in the context of a proposal involving an Intel facility in Chandler, Arizona. In a letter dated April 16, 1995, a local stakeholder designated by the company, David Matusow, and Sanford Lewis, his "negotiation counsel" representing the Good Neighbor Project, criticized several aspects of the Intel-run "stakeholder involvement" process, including the exclusion of key interests such as representatives of the plant's workforce, the absence of funding for independent technical evaluation by the community, and Intel's withholding of important documents from community representatives. Letter from David Matusow, Local Stakeholder Panel Member, and Sanford Lewis, Negotiation Counsel, The Good Neighbor Project, to David Gardiner, Assistant Administrator, U.S. EPA, OPPE, and Felicia Marcus, Administrator, U.S. EPA, Region 9, at 1-2 (Apr. 16, 1996) (copy on file with author). According to Matusow, some of his concerns have since been addressed, in large measure due to the intervention of the mediator hired by Intel to run the process. Telephone Interview with David Matusow, Local Stakeholder Panel Member (June 13, 1996) [hereinafter Matusow Interview].

45. Regulatory Reinvention Projects, supra note 3, at 27287 ("Explicit definitions and measures of 'cleaner results' should be included in the project agreement negotiated among stakeholders.").

46. AYRES & BRAITHWAITE, supra note 6, at 54-98.

47. For example, NRDC staff recently raised the following questions about a proposal approved for a facility owned by Merck & Co., Inc., in Elkton, Virginia. The gist of the proposal is to establish a facility-wide emissions cap that would allow Merck to convert an onsite power plant from coal to natural gas, while receiving offsetting credits for emissions of volatile organic compounds from the main manufacturing facility. The NRDC staff wrote:

What changes in operations are anticipated (especially those anticipated to increase VOC emissions)? What specific equipment and timetables are provided for the powerhouse conversion? … What is the rationale for not requiring the powerhouse to meet BACT [(best available control technology)] levels of performance? … How has the facility—or how does the facility plan to—cut its emissions to air and water, especially emissions of chlorinated organics and hazardous air pollutants? … Why are 1992 and 1993 used as the baseline for the emission caps? What is the basis for these estimates (emissions factors, stack tests, continuous emission monitoring, etc.)? … What is the current allowable VOC emissions rate at the facility? … What specific emission limits, operating practices, monitoring, recordkeeping, reporting, and related requirements would be superseded … ?

Letter from Chris van Loben Sels, Senior Project Analyst, NRDC, to Christopher Knopes, U.S. EPA, OPPE 2 (May 20, 1996) (copy on file with author). In virtually every other XL facilities proposal accepted for further development by EPA, similarly crucial pieces of information are missing. While Merck and EPA may well respond to NRDC's questions, the fact that these basic pieces of information were omitted from this relatively well-developed proposal is disconcerting. It also illustrates the pitfalls of relying totally on public participation to elicit such information at sites where public interest stakeholders lack the technical expertise of the NRDC staff.

48. 42 U.S.C. § 6921, ELR STAT. RCRA § 3001.

49. Letter and Attachment from Lee R. Wilmot, Manager, Corporate Safety, Health, and Environmental Affairs, HADCO Corp., on Facility-Based Project XL Proposal, Enhanced Direct Recycling of Metal Bearing Sludge from Printed Wiring Board Manufacturing Wastewater Treatment, HADCO Corporation, Salem, NH, to Regulatory Reinvention Pilot Projects, U.S. EPA 6 (July 21, 1995). The proposal has been accepted for further development by EPA and is now under review by federal, regional, and state regulators. Ironically, HADCO's President, Andrew Lietz, was present at the White House announcement of Project XL and received the following acknowledgment from President Clinton:

And thank you, Andy Lietz. I thought you were going to start trying to sell your product up here. I must say I was even more impressed when you talked about how you invited us to visit in New Hampshire, New York and California. I thought, there's a man with a strategically placed company.

Remarks by the President, supra note 1, at 1.

50. See, e.g., Anheuser-Busch Proposal, supra note 28, at 7 ("Attached in Appendix D are letters from the State of Florida Department of Environmental Protection, Jacksonville Electric Authority, and the Jacksonville Regulatory Environmental Services Division, giving their tentative endorsement and support for the proposed Project XL pilot. We will be providing documentation of the support of additional stakeholders."); see also Letter and Attachment from Okey Tucker, Environmental Protection Manager, OSi Specialities, Inc., on Project XL Proposal OSi Specialties, Inc., Sistersville, WV, to EPA Regulatory Reinvention Pilot Projects 5 (Nov. 17, 1995) ("Based on past experiences we believe that the local communities and local agencies would be in full support of the project. OSI Specialties Inc. is currently describing this project to stakeholders, and anticipates indication of support being provided to EPA in the near future."). Copies of all the above-referenced documents are on file with author or available from the Project XL hotline at (202) 260-8590.

51. A well-run stakeholder process can consume enormous personal resources. For example, David Matusow, a software engineer and public interest stakeholder participating in the Intel Project XL negotiations in Chandler, Arizona, has spent several months attending twice-weekly, evening meetings that typically last for several hours. Matusow is not compensated for his time and has not received funding for technical assistance. Matusow Interview, supra note 44. This kind of commitment precludes the participation of large segments of the typical community, especially without technical support or compensation for the time spent away from job, home, and family.

52. Environmentalists and other public interest representatives by definition face a disadvantage in raising money to intervene in the regulatory process because individual citizens have less at stake and less resources to offer than individual regulated entities. The development of environmental law at the national level, through major legislation and industry-wide rules, has allowed public interest representatives to overcome these obstacles, ensuring that the public interest is represented. If the process is reversed, and environmentalists must participate in site-specific proceedings to forestall harmful regulatory changes of much broader application, their influence will be sharply diminished. See Richard B. Stewart, Pyramids of Sacrifice? Problems of Federalism in National Environmental Policy, 86 YALE L.J. 1196, 1213 (1977) (contending that federal environmental regulation is justified because national environmental groups—the only effective lobby for strong regulation—would be severely disadvantaged by decentralized decisionmaking).

53. Regulatory Reinvention Projects, supra note 3, at 27286 ("XL programs 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"); Pedersen, supra note 7, at 10486 ("This Dialogue argues that the cap proposals will not lead to basic reform unless their designers recognize that our current system not only controls major stationary sources inefficiently, but also devotes too large a share of its energy to controlling them"); Beth G. Ginsberg & Cynthia Cummis, EPA's Project XL: A Paradigm for Promising Regulatory Reform, 26 ELR 10059 (Feb. 1996). Ginsberg and Cummis write:

A consensus has emerged that both risk and cost-benefit analyses must be incorporated to a far greater degree to encourage a common-sense, more flexible approach to regulation…. Project XL has the potential to make truly revolutionary changes in the way companies are regulated in the United States. Once the program is in place, individual companies will create pilot projects from the bottom up that will be based on performance standards rather than the most stifling "one site fits all" technology based controls.

Id. at 10059-60.

54. Industry representatives have strongly opposed an absolute consensus requirement, viewing it as sacrificing their corporate autonomy and the resources it takes to develop an XL proposal to the whims of a single citizen participant with an unjustified axe to grind. Stakeholder Involvement, supra note 3, at 229.

55. Memorandum from Steven A. Herman, Assistant Administrator, U.S. EPA, Office of Enforcement and Compliance Assurance, on OECA's Operating Principles for Project XL Participants, to Administrator, Deputy Assistant Administrators, Assistant Administrators, General Counsel, Regional Administrators, Deputy Regional Administrators, Regional Counsel 6 (Oct. 2, 1995) [hereinafter XL Enforcement Memo] (on file with author and available from the Project XL Fax-on-Demand hotline at (202) 260-8590)).

56. PROJECT XL UPDATE, supra note 2, at 1.

57. The Federal Register notice launching the Project opined: "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 inpilot projects that test new approaches that could one day be applied more broadly." Regulatory Reinvention Pilot Projects, supra note 3, at 27282, 27287; see also John H. Cushman Jr., U.S. Seeking Options on Pollution Rules, Accord Is Near on Program Allowing Businesses to Devise Controls, N.Y. TIMES, May 26, 1996, at 11 (quoting EPA Administrator Carol M. Browner as saying "For companies who really are forward-thinking, this is absolutely the way to go…. I really do believe that in the next three to five years the agency will do a fair chunk of its work this way.").

58. One subtle tension raised by this dichotomy is that regional office staff and state and tribal regulators will have considerable authority to set precedents that could constrain EPA program staff at headquarters in developing national regulatory policies. For a discussion of decentralized decisionmaking and the "franchising" of XL projects, see supra note 14 and accompanying text.

59. Most of the national environmental laws authorize citizen suits for failure to comply with regulatory requirements. See, e.g., 33 U.S.C. § 1365(a), ELR STAT. FWPCA § 505(a) (Federal Water Pollution Control Act); 42 U.S.C. § 300j-8, ELR STAT. SDWA § 1449 (Safe Drinking Water Act); 42 U.S.C. § 6972, ELR STAT. RCRA § 7002 (Resources Conservation and Recovery Act); 42 U.S.C. § 7604, ELR STAT. CAA § 304 (Clean Air Act). An ELR Dialogue authored by an attorney who represents an XL industrial applicant and a member of the EPA staff administering the project expressed this concern as follows:

To protect XL participants, EPA and the participating entities will enter into written final agreements that specify the … requirements that are expected to be violated. Unfortunately, the agreements may not provide as much protection as participants would like … participants always run the risk of having environmentalists or local community members sue them for noncompliance with existing statutory or regulatory requirements while implementing XL projects.

Ginsberg & Cummis, supra note 53, at 10063.

60. Id.; see also Industry, Environmentalists Seek Deal on Alternative Compliance Bill, INSIDE EPA, Sept. 15, 1995, at 1, 12.

61. XL Enforcement Memo, supra note 55, at 6.

62. Id.

63. Draft XL Principles Memorandum, supra note 17, at 14.

64. PROJECT XL UPDATE, supra note 2, at 1; see also Draft 3M Final Project Agreement, supra note 22, at 26; Letter from Robin Moran, U.S. EPA, Region 3, Permit Programs Section, and Cecil Rodrigues, U.S. EPA, Region 3, Office of Regional Counsel, to Tedd Jett, P.E., Manager, Environmental Engineering, Merck & Co., Inc. 1-2 (June 20, 1996) (on file with author); EPA Developing Plan for Site-Specific Rules for XL Projects, INSIDE EPA, Apr. 12, 1996, at 1-2.