32 ELR 10075 | Environmental Law Reporter | copyright © 2002 | All rights reserved

Regulatory Innovation: Lessons Learned From EPA's Project XL and Three Minnesota Project XL Pilots

Carol G. Wiessner, formerly a staff attorney for the Minnesota Center for Environmental Advocacy (MCEA), is currently a consultant to the MCEA on the MCEA/Koch Pine Bend Refinery Collaborative Project. Ms. Wiessner's education includes University of Minnesota, B.A. 1981, Hamline University School of Law, J.D. 1987. The author would like to thank Al Innes and Lee Paddock who provided her with valuable comments upon reviewing draft versions. She is also grateful to Don Geffen, Alfie Marcus, and Ken Sexton for the many hours of Project XL research group discussion meetings. While representatives from Andersen, 3M, and U.S. Filter reviewed draft versions for accuracy, any errors are the author's alone. Additionally, the views expressed in this Article are the author's and do not necessarily reflect those of the MCEA. Finally, Ms. Wiessner extends a big thanks to her family.

[32 ELR 10075]

A number of regulatory innovation efforts were initiated in the mid-1990s in response to a growing consensus that the existing regulatory system, by itself, was no longer sufficient to address new demands or environmental dilemmas unforeseen 30 years ago. Chief among the new challenges are the ever-increasing universe of regulated entities expanding government agencies' workloads and the vexing problems of nonpoint and areawide sources of pollution. The Minnesota Center for Environmental Advocacy (MCEA)¹ launched its "Regulatory Innovations Program" to participate in and analyze the effectiveness of experimental regulatory approaches aimed to deliver better environmental protection more efficiently. In particular, the MCEA set out to determine the merit of "Project XL"—a then-novel U.S. Environmental Protection Agency (EPA) program which had once been described as the "crown jewel" of the Clinton Administration's March 1995 policy report, Reinventing Environmental Regulation.²

EPA designed Project XL, short for eXcellence and Leadership, to provide regulatory flexibility in exchange for industry's commitment to achieve better environmental results than would have occurred otherwise from full compliance with all required regulations. On the same day that President William J. Clinton announced the first eight participants in Project XL, a number of environmental and public interest groups released a joint statement that included a set of key features deemed necessary to the success of Project XL. Chief among them were the requirements for achieving superior environmental results and stakeholder involvement by the local affected communities, workers, and other interested groups.³ The MCEA was among the many advocacy groups, ranging from large national organizations to small state groups, who were guardedly optimistic about EPA's new program.⁴

Two of the initial eight applicants selected for participation in Project XL were from Minnesota, the 3M Company (3M) and the Minnesota Pollution Control Agency (MPCA). In time, two other Minnesota companies would submit Project XL proposals to EPA.

The MCEA became a member of three separate XL stakeholder groups established for three Minnesota companies: 3M, Andersen Corporation (Andersen), and U.S. Filter Recovery Services (U.S. Filter).⁵ The MCEA is the only state group in the region, and perhaps the country, that has participated as a stakeholder in three XL pilots. The MCEA's analysis and observations provide a unique, state-based, environmental advocacy perspective to the national discussion over the effectiveness of Project XL and the direction of future regulatory innovation initiatives.⁶

I. Superior Environmental Performance, Regulatory Flexibility, and Stakeholder Involvement

A. Superior Environmental Performance

In this Article, the MCEA examines the three key elements of Project XL—superior environmental performance, regulatory flexibility, and stakeholder involvement. Of the eight criteria EPA uses to evaluate XL proposals, it is these three that define the Project XL program.⁷

[32 ELR 10076]

Through our experience the MCEA has learned that superior environmental performance is a concept much easier to agree upon in theory than it is to put into practice. Uncertainty emerged over the definition of superior environmental performance in a number of the early XL pilots.⁸ At times, the debate became contentious as the need to agree on details superceded general principles. We believe the primary obstacles preventing consensus on the term "superior environmental performance" were as follows.

. The Clinton White House "reinvention team" created Project XL too quickly and without the input from a broad range of Agency staff who would be responsible for implementing the program; moreover, the decision to describe the new program in broad, simple language, without guidance and explanation, led to differing views about the meaning of "superior environmental performance."

. Many who proposed XL pilot projects truly believed that EPA would, in effect, "throw out the rule book" and implement "outside-the-box" ideas as directed by the new regulatory reinvention policies pronounced by President Clinton and Vice President Al Gore.

. A surprising amount of willingness on the part of many participants to implement "outside the box" ideas (many relating to air emissions), despite the fact that policymakers have not satisfactorily resolved past regulatory reform issues in the area of air emissions trading policies that were sure to resurface in Project XL.

The MCEA's experience with the three Minnesota XL pilots have led us to believe the obstacles encountered over the meaning of superior environmental performance could have been avoided, or at least diminished, had EPA followed some simple steps we set out below for any agency initiating a regulatory innovation project.

. Invest adequate time to obtain input on new projects from staff at all different career levels, from all office locations and from various program areas, on issues they anticipate will arise during implementation, thereby enabling management to provide clear direction to staff should differences of opinion arise over the intent of new concepts or the meaning of specific language.

. Be ready agencywide to deliver new programs and fulfill new promises, to do otherwise will only unduly raise expectations and lead to frustration, which in turn will adversely affect participation and success.

. Identify which historically problematic issues may resurface in the context of a new program and recognize they will be no less difficult to resolve; therefore, be upfront with participants about these issues at the outset of a new program and stand ready to work out a solution, or alternatively, determine which issues will be off the discussion table entirely.

B. Regulatory Flexibility

While it was clear from the first announcement of Project XL that regulatory flexibility was the counterpart to superior environmental performance, oddly enough the term "regulatory flexibility" did not appear in EPA's initial list of eight criteria to be used in evaluating Project XL proposals. However, as the first round of Project XL applicants moved from the proposal stage to the project development stage, pressure continued to mount from nongovernmental organizations (NGOs) (in this instance environmental and public interest advocacy organizations) who feared that industry would "game the system" by taking advantage of Project XL in order to obtain large corporate benefits with minimal environmental gain. Thus, it became increasingly clear to EPA that some definition for regulatory flexibility—the driving factor for corporate participation in Project XL—must be provided.

In a second Federal Register notice modifying its guidance on Project XL, EPA requested XL applicants to articulate a link between the regulatory flexibility sought and the superior environmental performance anticipated.⁹ The Agency emphasized: "The closer the factual link between the requested flexibility and the anticipated environmental benefits, the more likely EPA is to approve the project."¹⁰ Many NGOs found the "linkage" between flexibility and environmental gain imperative to a successful proposal. From their perspective, Project XL would not be worth the time and commitment of resources unless a substantial pay-off in environmental improvements (such as air quality, water quality, etc.) could be guaranteed with strong certainty. EPA's refinement of "regulatory flexibility" was clearly an attempt by the Agency to make new XL pilots more acceptable to the NGOs, who had expressed dissatisfaction with the early XL proposals.

However, the MCEA has concluded that it is less important whether the linkage is direct or indirect; rather we believe the essential feature of "regulatory flexibility" lies in the transparent explanation and reporting of how the flexibility sought will result in an environmental gain. For example, we are less concerned whether EPA waives a requirement that will directly result in emission reductions, or whether it waives a requirement allowing the company to make changes anywhere in its facility and thereby indirectly resulting in emission reductions. The MCEA believes the [32 ELR 10077] top priority for project proposers, regulators, and stakeholders is to find the best environmental outcome, not just those with direct factual links. Accordingly, we believe it is absolutely critical that the flexibility sought and the expected environmental gains are articulated clearly in a straightforward and understandable manner so that all participants can determine the merit of the proposed XL project.

C. Stakeholder Involvement

The third essential element of Project XL, stakeholder involvement, has evolved from a brief statement to a fully developed EPA policy with an accompanying guidance document. As initially stated in the Clinton/Gore report, Reinventing Environmental Regulation, companies will be provided with flexibility to replace current requirements on the condition that the proposed "alternative strategy . . . enjoy[s] the support of the community surrounding the facility."¹¹ Shortly thereafter, in the Federal Register notice announcing Project XL, EPA described stakeholder support as one of eight criteria to be considered by the Agency in evaluating Project XL proposals.¹² EPA defined "stakeholders" as including "communities near the project," and also "local and state government, businesses, environmental and other public interest groups, or other similar entities."¹³ As Project XL matured with the experience gained from the original eight project proposals, so did the concept of stakeholder involvement. EPA held a number of roundtable discussions and also formed and consulted with a stakeholder group for the purpose of developing a Stakeholder Involvement Guide for Project Sponsors and Stakeholders.¹⁴ The MCEA believes the resulting EPA guide gives very good step-by-step information on how to form a stakeholder group and provides useful information about the roles and responsibilities of members, stakeholder expectations, and available resources. However, the EPA guide does not convey what the MCEA has found to be the most important aspect of the stakeholder involvement process—its accountability function.

From our experience, a stakeholder process that is open, transparent, and vibrant will foster greater accountability among all parties. We further believe that as accountability increases, so does the stakeholder group's potential for influencing the outcome of a project. We have determined that a stakeholder group's role in bringing about greater accountability is accomplished primarily in three ways:

. Through its ability to hold the project proposer, e.g., a company, responsible for meeting both enforceable and voluntary commitments and goals, not in the capability of its members to influence technical details.

. Through its ability to hold federal and state regulatory agencies responsible for staying on a reasonable schedule and for communicating the government's concerns to the public in clear, understandable terms without confusing technical and legal jargon.

. Through its ability to transfer some responsibility to individuals and organizations in the community for getting involved and becoming part of the solution, rather than acquiescing to outcomes determined by regulatory agencies and others outside their local community.

Our experience with the three Minnesota XL pilots has demonstrated to us the important role played by both the "direct stakeholders," those individuals who make up the XL stakeholder group for the individual XL pilots, and the "commentors," those interested parties (that may be either locally or nationally based) providing input to the pilot, but who are not involved intensively. Additionally, the MCEA believes that the most successful stakeholder groups are those whose members represent a fair balance of expertise, interest, and viewpoints—including disparate views about the company proposing the project. We recognize that it is a bold step for a company to purposefully solicit members for inclusion on a stakeholder group who have held views in opposition to the company in the past. However, if a company's proposal is truly meritorious, the MCEA contends that it will stand up to rigorous scrutiny and, as a result, will become even stronger through its ability to generate support throughout the community. Accordingly, the composition of a stakeholder group can have a tremendous influence on a company's ability to build trust within its community and to obtain genuine support for an XL proposal or other regulatory innovation initiative.

II. Minnesota's Three Project XL Pilots

This Article also contains an in-depth examination of the three Minnesota XL pilots. For each XL pilot we begin by providing a description of the facility and an overview of the company's XL proposal. Next, we set out the concerns raised and, where possible, how those concerns were resolved, along with the potential environmental benefits of the XL proposal. We conclude with some specific observations about each XL pilot that we believe are transferable to the Project XL program in general.

A. 3M—Adhesive Products Manufacturer—Hutchinson, Minnesota

Although 3M withdrew its Project XL proposal and an XL permit was not issued for the facility, EPA and others were able to glean some success from this otherwise failed innovation experiment. EPA found that lessons learned from the 3M pilot were useful in its effort to reengineer the XL program by helping to clarify and further define "superior environmental performance." Another success for the Agency, and also manufacturers, was a modification to a Clean Air Act (CAA) regulation allowing magnetic tape coating facilities an alternative compliance option for the control of hazardous air pollutants (HAPs).¹⁵ Conversely, some within the local environmental community acknowledged success when Project XL negotiations between 3M and EPA fell [32 ELR 10078] apart.¹⁶ In their opinion, the company was more than likely gaming the system with its XL proposal.¹⁷ Furthermore, some environmental groups asserted that 3M's proposal did not even demonstrate superior environmental performance and they were concerned that public health and the environment would suffer under an XL permit.¹⁸

From the MCEA's perspective, the failure of the 3M Hutchinson pilot delivered a devastating blow to regulatory innovation efforts in Minnesota. The inability of 3M, a corporate giant in Minnesota, to obtain an XL permit sent a chilling message throughout the business community, ultimately wiping out all but two other corporate XL proposals.¹⁹ Not only did the 3M XL pilot come at a great cost, as participants representing 3M, the MPCA, and stakeholders spent thousands of hours developing an XL permit,²⁰ it resulted in an opportunity lost. Throughout the entire 3M XL process, the MCEA maintained that as long as there were adequate safeguards in place to protect human and environmental health, it was worth the risk to operate outside the box by allowing the company flexible options to state and federal requirements. In return, we believed the public and the environment would benefit from the significant features—some never before imagined—in the new XL permit. Some of those features included: greater transparency in environmental reporting and compliance through the Internet; enhanced stakeholder involvement; a commitment to keep toxic air emissions at, or below, health risk values set by the Minnesota Department of Health; an ability to track emissions based on product output; and the use of an environmental management system (EMS) that incorporated aggressive source reduction and pollution prevention goals and objectives along with third-party audits.²¹

After months of negotiating proposals and counter-proposals, 3M concluded it must "shelve the Project XL experiment at 3M Hutchinson" due to "business considerations . . . dictated by operational and timing [factors]."²² Although it was 3M that formally withdrew from Project XL, the pilot was actually brought to closure by decisions made by both 3M and EPA. Ultimately, the company and the Agency drew parallel lines in the sand that neither was willing to cross. In sum, 3M wanted EPA to give it credit for past voluntary pollution control and also wanted its XL permit to be approved through the promulgation of a site-specific rule.²³ Furthermore, 3M was unwilling to agree to an enforceable guarantee of "superior environmental performance" as defined by EPA.²⁴ 3M feared the Agency could construe the XL project as in noncompliance even though facility emissions were below baseline levels established in the permit and far below current applicable rules.²⁵ From 3M's perspective this potentially risky scenario would, in effect, require the facility to operate under a dual regulatory system—meeting requirements under Project XL and, at the same time, meeting obligations under the current command-and-control regulations—thus defeating the purpose of producing cost savings and paperwork reduction.²⁶

EPA, however, wanted "a guarantee that protections from all pollutants under the [CAA] would be met"²⁷ and was unwilling to trade "future performance against voluntary controls taken prior to the start of Project XL" at 3M Hutchinson.²⁸ While EPA had an unlimited time frame within which to negotiate, business needs did not allow 3M that same luxury. Thus at an impasse, with the clock ticking and the Hutchinson plant in need of a permit to get its products to market, the 3M Project XL experiment came to a close.

The 3M Hutchinson case clearly demonstrates the difficulty of proposing a new program with broad and sweeping change that the Agency was not ready to implement. The failure to reach agreement for the 3M XL pilot was also undeniable proof that past unresolved issues, e.g., how to account for voluntary pollution control, are no easier to solve when packaged differently, e.g., in a Project XL pilot, and thus it is worth the time and effort to determine at the outset of an innovation effort which issues can be agreed upon and which issues must be tabled.

B. Andersen Corporation—Window and Patio Door Manufacturer—Bayport, Minnesota

The XL pilot for Andersen Corporation proves that the slow pace of Project XL continues to be one of its greatest shortcomings despite EPA's efforts to improve its internal decisionmaking process.²⁹ For example, by the time the XL permit will be issued to Andersen, which is expected to occur in the summer of 2001, it will have taken over four years. The delay caused by EPA is largely due to the fact that consideration and development of XL projects involve at least [32 ELR 10079] five different organizations within the Agency alone.³⁰ Within each of those offices are staff members, middle managers, and senior managers, all of whom bring their own values and program imperatives to the Project XL review process.³¹ Thus, the internal review process at EPA is very time-consuming and staff-intensive, and this is without factoring in disagreements that can arise internally with a controversial issue.

However, the slowness of Project XL cannot be attributed entirely to the Agency. Delay caused by Andersen and other project proposers is based on their tentativeness to be fully candid in providing information to the state and federal agencies involved for fear of unfavorable regulatory repercussions.³² The MCEA found that the failure to efficiently issue Project XL permits arose from the many years of operating under the command-and-control system. Accordingly, it has been difficult for the XL participants involved to overcome old habits and years of mistrust and adjust to a new way of conducting environmental regulatory business.

The Andersen pilot also proved that XL projects of limited scope have a better chance of success because they are likely to be more acceptable to EPA. In comparison to 3M's out-of-the box XL proposal, Andersen's was at the perimeter of the regulatory box. Whereas 3M originally sought flexibility from numerous regulatory requirements, Andersen ultimately sought relief from only two federal rules.³³ Still, to the stakeholders participating in the Andersen XL pilot, the length of time involved to bring the Final Project Agreement (FPA) and XL permit to completion seems disproportionate to the limited regulatory relief requested. Moreover, the Andersen pilot demonstrated that of all the federal environmental regulations, it was by far most difficult and time-consuming to seek relief from rules implementing the CAA.

The Andersen XL pilot confirmed the MCEA's observation that even though EPA solicited outside-the-box innovations, it was not ready to implement anything much beyond what was already allowed under the current regulatory system. Although President Clinton described Project XL as a program "designed to put the focus back where it should be—on progress, not process; on families and businesses, not government," the MCEA's experience with the Andersen XL pilot demonstrates, to the contrary, that Project XL is very much focused on process and government.³⁴

The MCEA contends that Project XL would be more successful if EPA put less focus on government process and more emphasis on holding participating XL entities "to a higher standard of accountability for demonstrating project results."³⁵ The MCEA believes that reporting environmental emissions and performance data in a transparent and easily accessible format is one method by which a company can demonstrate and reaffirm its responsibility to the local community and the public at large. For example, the MCEA collaborated with Koch Petroleum Group to develop a user-friendly website where environmental emissions and performance data are posted for its Minnesota refinery.³⁶ The MCEA believes transparent reporting will lead to pollution reductions, thereby achieving superior environmental performance.

C. U.S. Filter Recovery Systems—Hazardous Waste Recycling Facility—Roseville, Minnesota

The U.S. Filter XL pilot also exemplifies the protracted nature of Project XL. In this case, however, the time-consuming process was a major factor causing the company to scale back its XL proposal. Originally, U.S. Filter had proposed two specific waste management-related projects—one involving water recovery and reuse, and a second involving the recovery of hydrochloric acid. The second project was scrapped because the primary customer slated for participation in the hydrochloric acid recovery project decided to purchase its own treatment equipment rather than wait out the XL process. Thus, with the largest potential customer no longer in need of U.S. Filter's services, the hydrochloric acid recovery project became uneconomical and the company dropped it from further consideration. Admittedly, there are numerous factors that can cause XL proposals to change substantially from the initial stage to final approval; however, in the U.S. Filter pilot timing was a critical component and EPA's inability to respond more quickly led to waning enthusiasm for Project XL at the company.

Initially, EPA expressed concern about the composition of U.S. Filter's XL stakeholder group due to the noticeable absence of local residents.³⁷ Despite the company's efforts to engage local residents in its Project XL pilot, attracting members to participate in the stakeholder group was problematic. The company is just one of many facilities located in an industrial park, and unlike either 3M or Andersen it maintains a low profile within the community. Moreover, U.S. Filter's XL proposal was not perceived as threatening or at all controversial, accordingly interest was low among residents of the community. Conversely, it generated a great deal of interest among government agencies that have the delegated authority to run the metropolitan counties' hazardous waste programs. Through our experience with the U.S. Filter Project XL pilot we have learned that the make up of a stakeholder group can vary considerably depending upon several factors such as location of the facility; whether controversial issues are involved; level of interest from local residents; and the particular environmental media involved, i.e., air, water, hazardous waste, or solid waste. Thus, not all stakeholder groups will be alike in composition. Just because local resident representation is low does not mean that the stakeholder group is improper or will be unsuccessful. The MCEA has found that despite minimal [32 ELR 10080] participation from local residents, under certain circumstances a stakeholder group can still function effectively provided it is comprised of a variety of affected interests, the process remains open to the public, and information about the project is easily available in clear and understandable terms.

Another lesson learned from the U.S. Filter XL pilot is that good communication among all participants is essential to the efficiency and overall success of Project XL. For example, U.S. Filter was dismayed to find out—only three months before the FPA was signed—that EPA would only approve the company's proposal if it were limited to U.S. Filter's Minnesota customers.³⁸ U.S. Filter claimed it was the company's understanding all along that its XL project would be national in scope, thereby allowing it to accept waste from any of its approved customers, not just those in Minnesota.³⁹ However, in initial comments on the U.S. Filter proposal, EPA raised a concern about the "open-ended list of potential customers" noting that no names of the businesses were provided.⁴⁰ EPA suggested that the company designate a finite number of firms for initial participation in the pilot "prior to expanding the idea to the whole state."⁴¹ These facts demonstrate an unfortunate misunderstanding about a fundamental aspect of the proposal that persisted until the "eleventh hour." The MCEA concludes that better communication among the parties as to the essential facts of this XL proposal would have prevented an outcome marked with frustration and discouragement.⁴²

III. General Conclusions

The MCEA's experience as a participant in the three Minnesota XL pilots has provided us with insight from the "trenches," and thus has formed the basis for our conclusions and recommendations for Project XL and future reinvention efforts.

By definition, experiments will not always yield anticipated results, as was the case with 3M, but that fact alone should not preclude regulatory agencies from conducting innovation efforts. However, it is not practical or even reasonable to assume that a regulatory innovation project will be successful if, from the outset, there is not a general consensus to initiate the project from a diverse group of persons having a stake in the project's outcome. Most importantly, state regulatory innovation efforts ought to be part of an overall strategy designed to achieve specific environmental outcomes, and that strategy—along with regular updates on progress in achieving outcomes—must be communicated to the public in a user-friendly manner and available on the agency's website.

EPA stated that "Project XL offers . . . environmental leaders . . . a tremendous opportunity to 'think outside the box' of our current regulatory system and to find solutions to obstacles that limit environmental performance."⁴³ Through Project XL, EPA was looking "for leaders in the regulated and environmental communities to identify and develop dramatically different approaches to protecting the environment."⁴⁴ From the MCEA's experience with Project XL, the solutions and approaches under the XL banner are still tied to, and in some instances completely inside, the regulatory box. Unfortunately, Project XL did not deliver all that it promised. XL suffered from the Clinton Administration's incompatible desires that it be both a provocative "outside-the-box experiment" while at the same time meeting goals and responsibilities established by the current regulatory system.

While Project XL has been and will likely continue to be a workable option for some companies by providing incremental changes to our current regulatory structure, XL is not the program that will deliver cutting-edge solutions. From our experience, we believe there is a need to develop a second-generation environmental system that takes the attributes of Project XL to a new level that is truly beyond the regulatory box. The MCEA therefore supports the concept described by the Aspen Institute in A Call to Action to Build a Performance-Based Environmental Management System. The new system is built upon such characteristics as environmental performance-based standards, full transparency, pollution prevention, robust EMS, third-party auditing, full-cost accounting, and life-cycle analysis.⁴⁵ Although Project XL is not the EPA program that will catapult us into a second-generation environmental system, it has taught us many valuable lessons that should serve us well as we address the new challenges of environmental regulation in the 21st century.

This Article is based upon the MCEA's involvement with the three Minnesota Project XL pilots. It is written in separate parts. The first part provides some background on regulatory reinvention efforts at the national level, and then describes those reform activities simultaneously occurring in Minnesota. The second part examines the three most important criteria used by EPA to evaluate Project XL proposals: superior environmental performance, regulatory flexibility and stakeholder involvement. The third part covers the Minnesota XL pilots; it is comprised of subparts that individually examine the 3M, Andersen, and U.S. Filter XL projects. Each subpart contains a brief description of the facility, the products manufactured, and the pollutants emitted. Next, each subpart provides an overview of the company's Project XL proposal, followed by a summary of the potential environmental benefits and major issues of concern rising from each of the proposals. Finally, the last part concludes with the MCEA's findings and recommendations which we believe [32 ELR 10081] form the basis for sound regulatory innovation policy, and ultimately, successful results.

IV. Background on Regulatory Reinvention Efforts

While the environmental regulatory system created in the 1970s and 1980s successfully brought about dramatic reductions in pollution, by the 1990s it was evident that the old regime was not well suited to new environmental issues and challenges. This is because the context for environmental management and regulation had begun to shift.

Originally, environmental concerns were narrowly focused on large, individual industrial point sources. As the years past, environmental concerns broadened to encompass the emissions released by small and medium sized facilities. Additionally, pollution caused by nonpoint (or areawide) sources emerged as a new challenge. Thus, by the early 1990s the number of regulated facilities had increased dramatically, and a once modest amount of regulated pollutants had grown to include hundreds of chemicals. Another observable change since the 1970s has been corporate America's increasing attention to environmental management. Many companies began instituting environmental management policies, programs, and auditing functions into regular business practice during the 1990s.⁴⁶

Accordingly, recognition of the imperfections with our nation's system of environmental protection spurred numerous discussions and publications about reforming governmental regulations—specifically those regulations promulgated by EPA.⁴⁷ Ironically, discussions about reforming EPA began not long after the Agency was created.⁴⁸ Only recently, however, have regulatory reform efforts taken such a stronghold—in the regulatory and political arenas.

In an effort to respond to this growing concern over the inadequacies of the current regulatory system President Clinton appointed Vice President Gore in March 1993 to head up a new initiative on governmental reform. The intent of this new initiative, "Reinventing Government: National Performance Review," was to demonstrate the Clinton Administration's commitment to streamlining government and improving efficiency and productivity.⁴⁹ Accordingly, EPA moved quickly to develop an internal reinvention effort establishing a leadership team and numerous workgroups.⁵⁰ Out of this process came a number of reinvention ideas such as streamlining permits, increasing flexibility to local governments, establishing a blueprint for environmental justice, and increasing private sector partnerships.⁵¹

In addition to the Clinton Administration, the newly elected Republicans who gained control of the U.S. Congress in 1994 under the leadership of Speaker of the House Newt Gingrich, had been clamoring for government reform and made it a central feature of their party's political agenda—the Republican Contract With America. Thus, with the political forces in motion, many ventured down a "new" road called regulatory reinvention as our nation turned the corner on the last half of the 1990s and began preparing for a new century and the new millennium.⁵²

A. Regulatory Reinvention Efforts at the National Level

As the context for environmental management and regulation began to shift, along with it came a willingness from many in the regulated, government, and NGO sectors to be responsive to those changes. Thus, the period between 1993 and 1996 spawned numerous roundtable, multi-stakeholder meetings where groups collectively examined and exchanged ideas for improving the existing regulatory system. What follows is a sampling of prominent regulatory reform initiatives that took place at the national level during that time period.

In 1993, President Clinton created the President's Council on Sustainable Development (PCSD) whose mission was to advise the president and forge consensus on innovative economic, environmental, and social policies and strategies through the work of a diverse 25-member panel made up of leaders from business, government, and nonprofit organizations.⁵³ After 6 years, and more than 40 public meetings and workshops in communities around the country, the PCSD submitted its third and final report to President Clinton in which it recommended 140 actions to improve our economy, protect our environment, and improve our quality of life. Among its many findings the final report addresses environmental management in the 21st century, [32 ELR 10082] highlighting the importance of corporate environmental responsibility and an environmental system that is "goal-, performance- and information-driven."⁵⁴

Also in 1993, the Aspen Institute launched its "Series on the Environment" for the purpose of engaging leaders from government, business, national environmental, and other public interest organizations in a dialogue about innovative EMS.⁵⁵ Over the course of 3 years this educational nonprofit organization convened numerous meetings involving people from over 100 organizations. As a result, the participants arrived at a shared vision, constructed a set of principles, and designed a parallel system for environmental protection known as "the Alternative Path."⁵⁶ The Aspen Institute participants viewed the Alternative Path not as a replacement for the current regulatory system, but as a supplement to it and available for candidates willing to demonstrate their commitment and ability to manage their companies for environmental excellence.⁵⁷ The four features central to the Alternative Path are superior environmental performance; principles for stakeholder involvement; pollution prevention and continuous improvement; and the changing role of regulators.⁵⁸

In 1994, EPA launched the Common Sense Initiative (CSI) for the purpose of taking a multi-dimensional approach to environmental management of a whole industry sector.⁵⁹ In contrast to the traditionally separate treatment for emission releases to air, water, and land, the CSI's integrated approach recognized that releases to one medium can have an impact on others.⁶⁰ The CSI was also unique in using a consensus-based, multi-stakeholder advisory committee process to develop industry-specific recommendations for EPA (one subcommittee for each of the six industry sectors chosen).⁶¹ The theory behind the cooperative approach was to avoid gridlock that had so often plagued progress due to the adversarial nature of the traditional regulatory system.⁶² Through the CSI, participants were collaborating to find solutions that, in essence, would make our environmental laws and policies "cleaner, cheaper and smarter."⁶³

In 1996, William Ruckelshaus (who twice served as EPA's Administrator) served as chairman of the Enterprise for the Environment (E4E), yet another regulatory reform initiative comprised of government, business, and public interest leaders.⁶⁴ The E4E members met over a two-year period to evaluate current regulatory practices and make recommendations for improvements.⁶⁵ This group concluded that a better environmental protection system is one that utilizes performance-based standards, but allows for flexible approaches in meeting standards; relies on high-quality environmental information; demands accountability through transparent reporting; and increases the use of economic incentives to promote continual environmental improvement.⁶⁶ Additionally, E4E members agreed that a better environmental system needs a strong stewardship ethic from the private sector.⁶⁷ However, E4E members cautioned that change must occur in an evolutionary, not revolutionary, manner for two reasons. First, incremental change is more conducive to trust building and second, no one was confident enough about how to build this new system, let alone adopt it immediately.⁶⁸

A final example of an early 1990s' reform effort was the development of self-audit policies and the adoption of state audit-privilege laws.⁶⁹ These policies and laws were created to enable an industry to self-police its regulatory compliance, and in some instances obtain immunity or mitigated penalties for disclosing and promptly correcting violations.⁷⁰ All of the above are examples of efforts spawned in the early to mid-1990s in an effort to move beyond the traditional command-and-control system of regulations created in the 1970s, and toward a second-generation environmental protection system capable of addressing a whole host of issues for which the law was ill-equipped to handle.

1. Origins of EPA's "Project XL"

Project XL was developed by a group of about 25 EPA staff along with White House staff as one of several alternative performance-based strategies designed to test the building blocks for a new environmental regulatory system.⁷¹ These alternative strategies were among the 25 "High Priority Actions" found in the report, Reinventing Environmental Regulation, [32 ELR 10083] issued by the president and vice president in March 1995. The concept for Project XL was likely the result of ideas coming from within EPA, primarily from its Office of Policy, Planning, and Evaluation (OPPE), and also from ideas generated by the many national regulatory reinvention efforts, in particular the Aspen Dialogue.⁷² Additionally, the Administration's report (and thus Project XL) was in large part a response to the 1994 election that changed the political landscape by giving Republicans control of the Congress for the first time in years. Within the first 100 days of the new Congress, the Republicans introduced a number of bills to fulfill promises made in their campaign platform, known as "the Contract With America," in a unified effort "to end government that is too big, too intrusive and too easy with the public's money."⁷³

In recognition of the public's interest in reform, the president rhetorically asked the nation in his January 1995 State of the Union Address: "Do we need more common sense and fairness in our regulations? You bet we do."⁷⁴ However, he did not mean reform without boundaries. As the president stated in Reinventing Environmental Regulation, "we will oppose those who would undercut protection of the public health and the environment under the guise of regulatory relief," and that "[regulatory] flexibility is not a codeword for loophole."⁷⁵ President Clinton expressed his willingness "to work with the new Congress whenever possible, but . . . not go backwards. Reinvention yes, rollback, no."⁷⁶

Despite the fact that the president had made common sense government a focal point of his first two years in office, this new political climate put increasing pressure on the Clinton Administration for a Democratic response to end big government. At the time, the Administration's most prominent regulatory reform effort was EPA's CSI.⁷⁷ However, the CSI was still a relatively new program, and due to the breadth of this undertaking, results were years away. The CSI alone could not effectively counter the mounting Republican pressure for reform. A more instantaneous and comprehensive solution was needed. The White House answered with Reinventing Environmental Regulation. Its ambitious agenda was designed to please industry, environmentalists, and the American public by offering both improvements to the current regulatory system and building blocks for a new system.

The most notable of the alternative strategies was Project XL.⁷⁸ As described in Reinventing Environmental Regulation, EPA "will provide a limited number of responsible companies the opportunity to demonstrate excellence and leadership."⁷⁹ Under Project XL, a select group of companies would be given flexibility to implement alternative strategies as a substitute for current regulatory requirements in order to obtain environmental goals beyond what the law requires, provided they meet five conditions:

(a) The alternative strategies must produce environmental performance superior to that which would be achieved by full compliance with current laws and regulations;

(b) The alternative strategies must be "transparent" so that citizens can examine assumptions and track progress toward meeting promised results;

(c) The alternative strategies must not create worker safety or environmental justice problems;

(d) The alternative strategies must enjoy the support of the community surrounding the facility; and

(e) The alternative strategy must be enforceable.⁸⁰

Project XL was not intended to be the new environmental regulatory compliance structure, such as the "Alternative Path" envisioned by the Aspen Dialogue. Rather, the Clinton Administration believed that the knowledge gained from Project XL—as an experiment—would help to create a new environmental regulatory system for the next century.⁸¹ EPA also believed Project XL would benefit the current system by incorporating lessons learned from site-specific pilots into rules or programs that could have broad impact affecting numerous facilities.⁸² An additional advantage of Project XL, according to some policymakers, was the hope that XL would prompt regulators to more frequently utilize those options already available under existing laws.⁸³ Their hope was based on a belief that there is already a great potential for flexible applications of current law, but because most regulators tend to apply the law in customary or familiar ways, alternative strategies (with potentially better outcomes) go untapped.⁸⁴

2. EPA Publishes Its First Guidance on Project XL

In the May 23, 1995, Federal Register, EPA published its first public notice on Project XL announcing the project and soliciting proposals and comments. The Agency set a goal of undertaking 50 pilot projects over a 2-year period that would allow alternative strategies to replace or modify specific regulations, provided they achieve superior environmental performance. The notice also set forth eight criteria for evaluating Project XL proposals.⁸⁵

(1) environmental results;

(2) cost savings and paperwork reduction;

(3) stakeholder support;

(4) innovation/multimedia pollution prevention;

(5) transferability;

(6) feasibility;

(7) monitoring, reporting, and evaluation; and

(8) no shifting of risk burden.

Following EPA's solicitation for proposals, Project XL became the vehicle for 3M's regulatory innovation beyond-compliance [32 ELR 10084] permitting concept, which the company developed with the intent it would lead to new federal legislation and a new environmental permitting approach. The MPCA also began immediately to develop a Project XL proposal whereby it sought to obtain delegation from EPA to implement a reinvention initiative on a statewide basis. Elsewhere around the country other corporations, from small to large, began to outline Project XL proposals.

3. Project XL's First Pilots Announced

At a formal ceremony on November 3, 1995, President Clinton announced the first eight Project XL pilot proposals accepted by EPA. Included among them were two Minnesota proposals, one from the MPCA and the other from 3M that covered manufacturing plants in three locations Hutchinson, Minnesota; Bedford, Illinois; and Camarillo, California. The other XL proposals accepted were from Anheuser-Busch, AT&T, HADCO, Intel Corporation, Merck Company, and the South Coast Air Quality Management District.⁸⁶

In his remarks, the president stated that "Project XL is built on the simple premise that in many cases companies know their business a whole lot better than the government does; [and] that they understand how best to reduce their own pollution."⁸⁷

He acknowledged that through Project XL the Administration was giving industry an opportunity to be regulated in "a better, more sensible, less bureaucratic, more hassle-free way."⁸⁸ President Clinton described Project XL as a program that "gives our companies the freedom to meet tough pollution standards in ways that make sense to them, instead of following a government rule book."⁸⁹ The president went on to analogize Project XL to a high-jump competition in which the government sets the bar for the purpose of ensuring a healthy environment, and then the company, instead of jumping over it in the prescribed way according to the rule book can "figure out how to jump over it in any way—the old way, a new way, a different way, forward or backward—all you have to do is jump over the bar. Then you make the grade."⁹⁰

Nationally, the corporate response to Project XL was optimistic and welcoming. The chief executive officers from companies submitting Project XL applications applauded EPA for its effort to bring about a new paradigm in environmental management—one that was more flexible and innovative, less costly, based on common sense, and would result in a more sustainable environment.⁹¹ Likewise in Minnesota, the response to Project XL was enthusiastic and eager to begin implementation. Gov. Arne H. Carlson (R-Minn.) called it a "win-win scenario" for easing the regulatory burden on industry while at the same time increasing environmental protection.⁹² The MPCA was very anxious to initiate Project XL, and according to the commissioner it was "ready to run with this project."⁹³

Yet it was not all accolades for Project XL; a number of environmental and public interest organizations had expressed only cautious optimism for the success of EPA's newest innovation program.⁹⁴ At the time, a number of these groups were participants in EPA's CSI. It was their position that the multi-stakeholder process of dialogue forged within the CSI could be "severely undermined by Project XL" if applicants were allowed regulatory relief without describing in detail how they would meet EPA's eight criteria for XL, plus assure stakeholder accountability and oversight, and prevent any shifting of the risk burden to minority populations.⁹⁵ It was feared that Project XL could become an "escape hatch" from public accountability and principles of environmental justice for those companies currently dissatisfied with the CSI process.⁹⁶

Despite skepticism from environmental organizations, at the outset of Project XL many observers found great promise in XL and thought it increasingly likely that these experimental pilot projects would eventually evolve into a new legal framework, thereby changing the way industries meet federal environmental mandates.

B. Regulatory Reinvention Efforts in Minnesota

1. Minnesota's Regulatory Innovation Efforts Before Project XL

a. The MPCA's Plantwide Applicability Limit (PAL) Permit for 3M's St. Paul Tape Manufacturing Plant

The MPCA had for some time been engaged in its own efforts to make the state's environmental regulations more efficient, responsive, user-friendly, and less costly. In 1993, the MPCA issued a facilitywide air emissions permit to 3M for its tape manufacturing plant in St. Paul, Minnesota. The permit included a PAL that capped total volatile organic compound (VOC) emissions from the facility at 4,600 tons per year.⁹⁷ This amount was 50% less than the plant's actual emissions in 1991 that were approximately 10,000 tons per year.⁹⁸ The resulting environmental benefits from the permit [32 ELR 10085] included a decrease in VOC pollution and an enhanced emissions tracking and monitoring system that could more quickly determine noncompliance and, therefore, expedite corrective action.⁹⁹

The PAL permit provided 3M with precedent-setting operational flexibility to make several categories of changes without undergoing permit modification requirements, provided the plant's VOC emissions did not exceed the cap.¹⁰⁰ According to the MPCA, the PAL permit saved the agency over 700 hours of staff time and saved 3M over 1,530 hours that would otherwise have been devoted to preparing permit modification applications and other administrative work.¹⁰¹ For 3M, this time savings meant the company could get its products to market more quickly, a huge advantage over the often lengthy permit modification process.¹⁰² A key reason for the success and acceptance of the 3M PAL permit was that the MPCA did not request the waiver of any federal laws or regulations, but rather, it utilized a nontraditional—and therefore innovative—approach allowed by the CAA to issue this permit.¹⁰³

b. The MPCA's Agreement With the Printing Industry of Minnesota (PIM)

In 1993, the MPCA signed an agreement with the PIM, a 300-member statewide trade association. The agreement allowed the MPCA to use its enforcement discretion to reduce fines and penalties if the print shops themselves found violations and corrected them expeditiously.¹⁰⁴ As part of the agreement with the MPCA, the PIM promised to promote compliance with environmental regulations, using environmental audits—whereby a PIM auditor would evaluate the printer shop's total environmental, safety, and health operations.¹⁰⁵ If the PIM's auditor finds any violations the company prepares a corrective plan that is "enforced" by the PIM's auditor. Many of the policies developed under the MPCA's agreement with the PIM are now found in the state's Environmental Improvement Act (discussed below), a law that broadens the auditing concept beyond the printing industry.

c. The MPCA's Environmental Auditing Program

In early 1995, the Minnesota Legislature passed the Environmental Improvement Act in an effort to obtain better compliance with environmental regulations by allowing companies to self-police their activities and avoid punishment if violations were discovered but corrected swiftly and in good faith.¹⁰⁶ An additional motivation behind Minnesota's law was to deflect pressure coming from a national movement in support of "audit privilege and immunity" legislation.¹⁰⁷ As passed in other states, these laws granted companies immunity from prosecution for violations uncovered during the course of an audit.¹⁰⁸ Minnesota's intent was to develop a reasonable audit program—one that would protect privacy rights of the participant companies, yet not go so far as to designate audit reports strictly privileged material that neither the public nor agencies would have a right to obtain.

Although Minnesota adopted its law before EPA's guidance policy on audits was finalized, it was similar to the Agency's in that companies who find, report, and correct their violations will most often get their fines reduced or waived.¹⁰⁹ The Minnesota law requires companies participating in the program to submit summaries of their audits to the MPCA.¹¹⁰ The summaries, which contain brief descriptions of any violations found, are available to the public.¹¹¹ The complete audit reports are protected from public access by law, but the state may utilize the full reports if needed for a formal investigation or prosecution.¹¹²

The focus of the Minnesota Audit Program has, to date, been on small businesses such as auto repair and auto body shops.¹¹³ The law began as a four-year pilot program for two reasons: (1) to test out the MPCA's commitment to this new approach; and (2) to put participants on notice that the audit program and all its privileges would end if companies abused the public trust established through this law.¹¹⁴ In 1999, the Minnesota Legislature authorized the continuation of the Audit Program as a permanent program along with some additional changes to make it more compatible withEPA's Environmental Audit Program.¹¹⁵

d. The Pollution Prevention (P2) Dialogue and the MPCA's Innovations Pilot

In 1994, the Universities of Minnesota and Maryland, together with the Minnesota Environmental Initiative, started the "[P2] Dialogue."¹¹⁶ The P2 Dialogue established a forum for discussing innovative ideas for regulatory change. Participants in the P2 Dialogue included members of the regulated community, government officials and staff, academics, scientists, environmentalists, and other environmental [32 ELR 10086] experts. The participants shared the common belief that a healthy environment and a healthy economy are compatible goals, and all agreed that more emphasis must be placed on providing rewards and incentives for good environmental management practices.¹¹⁷

After monthly meetings over the course of a year, the P2 Dialogue reached a general consensus on basic policy recommendations and a set of actions to be taken by government, industry, and others. The P2 Dialogue considered many of its proposed recommendations to be "outside the usual regulatory paradigm."¹¹⁸ For example, the P2 Dialogue encouraged actions to establish performance-based environmental regulations; provide greater flexibility in meeting environmental standards; provide rewards and incentives for effective environmental management practices, and scale incentives and rewards to favor source reduction; promote design-for-the-environment, life-cycle assessment, and environmental accounting systems; recognize, through lower premiums and lending rates, that effective EMS lower environmental liabilities; and develop stakeholder dialogues with community groups and others.¹¹⁹

In order to test some of the P2 Dialogue's ideas and to build off the previously issued 3M PAL permit, the MPCA proposed to conduct a series of three to four permitting pilot projects.¹²⁰ The MPCA recognized it would need the support and approval of both EPA Region V and EPA Head-quarters in order to implement the innovative permitting pilots. In a March 15, 1995, memorandum to the Deputy Regional Administrator of EPA Region V, the MPCA requested that it approve the pilot project concept as worthwhile to pursue under the joint strategic planning efforts involving Region V and Region V states.¹²¹ Coincidentally, the next day President Clinton released his report Reinventing Environmental Regulation containing the Project XL reinvention program. Two months later, EPA formally announced Project XL in the Federal Register along with a solicitation for proposals. Conveniently, the MPCA believed that Project XL would be an ideal vehicle for its regulatory innovation pilot projects.

2. Minnesota Regulatory Innovation Efforts Following EPA's XL Announcement

Because implementation of a regulatory innovations pilot in Minnesota, such as Project XL, would most likely involve varying or waiving state and/or federal rules, the MPCA promptly drafted a legislative initiative that would authorize the MPCA to waive state rules under specific circumstances and also to participate in EPA's Project XL program. The MPCA was eager to get a bill passed quickly and with consensus, thus it sought input from business and environmental groups at the beginning of the legislative session. Environmentalists, however, raised concerns with the draft bill on the following topics: stakeholder involvement; consensus-based decisionmaking; technical assistance; incentives for source reduction; protection of sensitive lands (e.g., wetlands); emissions of bioaccumulative, persistent pollutants; and environmental review and pollution prevention laws and regulations.¹²² Most of these issues were satisfactorily resolved by informal negotiation resulting in modifications to the draft bill.

For two seemingly irresolvable issues: (1) ensuring environmental protection; and (2) using a consensus process for decisionmaking, a creative solution was ultimately agreed upon by the environmental groups and the MPCA. The result was a unique "Letter of Commitment" to three environmental organizations signed by then-MPCA Commissioner Chuck Williams committing to: (1) no increase in bioaccumulative, persistent pollutants from Project XL permittees, nor waivers of ordinances aimed to protect shorelands, wetlands, or floodplains; and (2) the use of a full consensus-based decisionmaking process for one or two Project XL pilots.¹²³ Thus, the MPCA obtained consensus on the proposed bill. Thereafter, the Minnesota Environmental Regulatory Innovations Act was passed by the legislature and signed into law by Governor Carlson on April 3, 1996.¹²⁴

The Environmental Regulatory Innovations Act gives the MPCA the authority to establish and implement a Minnesota XL permit project. An additional purpose of the Act is to issue and analyze the effectiveness of these new permits that are meant to reduce levels of pollution below that which is required by law, and are also meant to provide for greater flexibility in facility operations than is required by law.¹²⁵ The Act sets out 10 policy goals for enhancing environmental protection through innovative regulatory methods.¹²⁶ Most of the goals are also reflected in the eight minimum criteria that the MPCA must find are met prior to the selection of participants for a pilot or the issuance of a Project XL permit.¹²⁷ These criteria are:

(1) The permit facilitates pollution prevention and source reduction activities by the facility and results in significantly lower overall levels of pollution from the facility, its customers, or suppliers than would otherwise be required by applicable laws, without: (i) increasing the negative impact on the environment, local community, worker health and safety; or (ii) transferring pollution into the product;

(2) The pollution prevention, source reduction, or other pollution reduction goals are verifiable;

(3) The pollution limits contained in the permit are verifiable and enforceable;

[32 ELR 10087]

(4) The stakeholder group has been involved through a decisionmaking process that seeks consensus in the design of the permit and will have the opportunity for continued involvement in the implementation and evaluation of it;

(5) The permittee agrees to make available information that it gives the agency about the XL project, except information that is nonpublic under Chapter 13 or confidential under § 116.075, to the stakeholder group in a format that is easily understood;

(6) The permittee agrees to provide an assessment of the success of the project in reducing the time and money spent at the facility on paperwork and other administrative tasks that do not directly benefit the environment;

(7) The permittee, the pollution control agency, and other state and local agencies are likely to expend less time and resources over the long term to administer the Minnesota XL permit than other types of permits; and

(8) The project is not inconsistent with the federal government's Project XL guidance of any other federal laws governing the Project XL program.¹²⁸

These eight criteria are similar to the criteria used by EPA to evaluate Project XL proposals, but contain more specificity. In addition to meeting these eight criteria, and prior to selecting a participant or issuing an XL permit, the law also requires the MPCA to find that the Minnesota XL permit meets at least 1 or more of the 11 listed "additional criteria."¹²⁹

(1) The permit allows the facility owner or operator as much operational flexibility as can be reasonably provided consistent with the need to achieve the anticipated pollution reduction and ensure the verifiability and enforceability of the permit's pollution limits;

(2) The permit provides facilitywide pollution limits where practical, verifiable, and enforceable;

(3) The permit regulates air, water, and land pollution effects, direct and indirect;

(4) The permit encourages pollution prevention or source reduction;

(5) The permit encourages innovation in the design, production, distribution, use, reuse, recycling, or disposal of a product such that air, water, and land pollution impacts are minimized over the life cycle of a product;

(6) The permit reduces the emission of nontoxic pollutants regulated under applicable law;

(7) The permit reduces indoor chemical exposure, water use, or energy use;

(8) The permit minimizes transfer, direct and indirect, of pollution between air, water, and land;

(9) The regulatory techniques employed in the permit have potential application to other permittees;

(10) The permittee agrees to measure and demonstrate the success of the Minnesota XL permit in addition to the assessment in subdivision 2, clause (6), such as tracking pollution prevention incentives and initiatives or using surveys to measure any attitudinal changes by facility personnel or the public; and/or

(11) The permit is a multi-agency under subdivision 4.

The Environmental Regulatory Innovations Act also enables the Minnesota XL permit to include variances or waivers of regulations of other state and local agencies if it is reasonable to do so, provided that the other agencies give their approval and also sign the permit.¹³⁰ In addition, in deciding whether to allow a variance, the MPCA must:

Apply the substantive standard for granting a variance applicable to the state rule, local ordinance or local regulation being varied; or, the MPCA must find that the variance either; (1) promotes the reduction in overall levels of pollution beyond that which is required by law, or (2) reduces administrative burden on state and local agencies or permittee, provided that alternative monitoring, testing, notification, record keeping or reporting requirements will provide the information needed by the state and local agency to ensure compliance.¹³¹

The Environmental Regulatory Innovations Act does not, however, allow the MPCA to vary the requirements of the Minnesota Environmental Policy Act within an XL permit.¹³² Thus, the environmental regulations covering the preparation of an environmental impact statement or an environmental assessment worksheet cannot be waived by the Minnesota XL permitting process.¹³³ Nor can an XL permittee forego the requirements of the Minnesota Pollution Prevention Act unless a satisfactory alternative is specified.¹³⁴ The Pollution Prevention Act, among other things, requires facilities to develop toxic pollution prevention plans that must remain at the facility, and to submit annual progress reports to the MPCA summarizing the objectives of the plan and the progress made toward meeting the plan's objectives. Unlike the plans, progress reports are available to the public.¹³⁵

The Environmental Regulatory Innovations Act also states that the MPCA commissioner shall ensure that a stakeholder group is established for each XL permit that includes members representing a diversity of stakeholders from the local community but does not exclude other stakeholders.¹³⁶ Moreover, the commissioner shall ensure that a decisionmaking process that seeks consensus is in place, and that reasonable technical assistance is provided to facilitate the stakeholders' understanding of the XL permit in the areas of design, implementation, and evaluation.¹³⁷

Revocation of a Minnesota XL permit by the MPCA can result if requested by the permittee, or if the agency finds any of the following:

(1) The permittee is in significant noncompliance with the Minnesota XL permit or with applicable law;

[32 ELR 10088]

(2) The permittee is not able, or has shown a lack of willingness, to comply with pollution reduction deadlines in the Minnesota XL permit;

(3) The permitted facility or activity endangers human health or the environment and the danger cannot be removed by an amendment to the Minnesota XL permit; or

(4) After proper notification and a reasonable amount of time has passed, the permittee has not satisfactorily addressed a substantive issue raised by a majority of members of the stakeholder group.¹³⁸

Furthermore, permits issued under the Environmental Regulatory Innovations Act are to be enforced pursuant to standard procedures as established for all other permits according to Minnesota law.¹³⁹ Judicial review is available to any person aggrieved by a final decision of the agency in accordance with the Minnesota Administrative Procedures Act.¹⁴⁰

Finally, the Act also required the commissioner of the Pollution Control Agency to report to the legislature in January 1998 on the implementation of the project, the environmental results of the project, and to provide any recommendations for future legislation.¹⁴¹ No changes were recommended to the Minnesota Legislature in the commissioner's 1998 report because the XL permit anticipated for the 3M Hutchinson facility was not issued, and, accordingly, there were no environmental results from the pilot.¹⁴² Ironically, since the Act's passage in 1996, the MPCA has yet to issue its first Minnesota XL permit.¹⁴³ Thus, it is still premature to arrive at any quantitative conclusions as to the effectiveness of the Act in reducing pollution. However, based on the MCEA's experience with the three Minnesota Project XL pilots, we provide some qualitative recommendations for effective state regulatory innovation initiatives later in this Article.

3. 3M's Beyond-Compliance Legislation

3M's success in obtaining a flexible PAL permit for its St. Paul tape manufacturing plant led its environmental division to develop a comprehensive proposal called "the Beyond Compliance Emission Reduction Act of 1995" for which they hoped to find a congressional author.¹⁴⁴ 3M's principal purpose in drafting this federal legislative proposal was to:

Create environmental improvements far beyond those required by existing environmental regulations and, simultaneously, reduce the transactional and time costs associated with those regulations. The Beyond Compliance Emissions Reduction Act uses the existing statutes as a foundation and allows facilities which operate substantially beyond the requirements of those statutes to move to a performance based system of operation.¹⁴⁵

3M designed the legislation to be a "voluntary alternative" that provides "flexibility and simplified procedures" through a multimedia beyond-compliance permit governing air and water emissions and hazardous waste management.¹⁴⁶ The beyond-compliance permit would assure compliance through a variety of mechanisms, among them compliance audits, community participation, civil and criminal penalties for violations, and citizen suits.¹⁴⁷ What follows is a brief overview of some of the key features of 3M's proposal for beyond-compliance legislation. The beyond-compliance concepts are important to an understanding of the incongruity that arose between 3M and EPA as the parties tried to reach agreement, albeit unsuccessfully, on the 3M Hutchinson XL permit that is discussed later in this Article.

The beyond-compliance permit centers on the establishment of emissions caps that substitute for the most significant permit requirements of the CAA, the Clean Water Act (CWA), and the Resource Conservation and Recovery Act (RCRA).¹⁴⁸ In contrast to the technology-based standards of the existing statutes and regulations, the beyond-compliance permit is a performance-based system that uses plantwide, pollutant-specific emission caps.¹⁴⁹ The caps are established for a facility's "predominant media" (that which has the greatest impact on the environment) by calculating the aggregate allowable emissions pursuant to existing law using the facility's annual production rate for any of the three previous calendar years. Then that amount is reduced by 25% (or 20% for each media if a facility chooses to "double cap" both its water and air emissions).¹⁵⁰

It is important to point out that under 3M's beyond-compliance permit the emissions cap for the predominant media is based upon allowable emission levels, i.e., that which the facility is allowed to emit by law, as opposed to what it actually emits; whereas the cap for nonpredominant media emissions is based upon actual aggregate emission levels when the facility is operating in compliance with all applicable environmental controls.¹⁵¹ Another significant feature of the beyond-compliance permit is the recognition of a facility's past performance, which, if significant, would qualify it for participation in the permitting program.¹⁵² Thus, facilities that have already achieved a reduction in actual aggregate emissions of 50% or more below the aggregate allowable emission levels may, under a beyond-compliance permit, elect a predominant media cap equal to the facility's actual emissions.¹⁵³

Additionally, the Beyond Compliance Emissions Reduction Act requires a participating state's governor to appoint a [32 ELR 10089] local advisory council (LAC) comprised of stakeholders in the local community.¹⁵⁴ The LAC shall serve an advisory role, providing comments on a facility's permit application and draft beyond-compliance permit.¹⁵⁵ Furthermore, the Beyond Compliance Emissions Reductions Act requires a facility to prepare two plans: a beyond-compliance plan, which is a pollution prevention planning document that also requires the submittal of annual reports describing progress toward meeting pollution prevention goals; and a community relations plan that addresses any significant adverse effects on the community from operation of the facility (as determined through a demographic survey and consultation with the LAC) and procedures to inform the community of any significant noncompliance.¹⁵⁶

In late 1994, 3M began floating its beyond-compliance legislative proposal to members of Congress, and then subsequently explored the idea of a permitting pilot with the MPCA. In early 1995, 3M presented its beyond-compliance legislative proposal to the P2 Dialogue with the hope that the dialogue group, in conjunction with the MPCA, could help to develop a pilot project for flexible permitting in Minnesota, especially if national legislation did not pass.

3M's presentation spawned much discussion among P2 Dialogue participants, most notably about the pollution prevention aspects of the legislation.¹⁵⁷ Some P2 Dialogue participants were concerned that although the preparation of a pollution prevention plan was included in 3M's beyond-compliance legislation, permittees were not required to demonstrate any particular percent of pollution prevented.¹⁵⁸ It was the MPCA's position that removing barriers and providing for more flexibility was the best way to create more incentive for environmental improvement. The MPCA was less concerned with the means, i.e., pollution prevention or control options, used to accomplish this improvement and asserted that this decision should be up to the company.¹⁵⁹ The P2 Dialogue, however, strongly believed that pollution prevention measures should be prioritized over control options.¹⁶⁰ Subsequently, the P2 Dialogue formed a subcommittee, known as the Pilot Project Committee, to review, study, and advise the MPCA on 3M's beyond-compliance permit proposal as well as other flexible permitting pilot projects.

Shortly after 3M's presentation to the P2 Dialogue the Clinton Administration announced Project XL. 3M saw Project XL as an excellent opportunity to implement a beyond-compliance permit. Thus, taking its own beyond-compliance concepts, 3M drafted an application to fit EPA's criteria for admittance into Project XL. The 3M Project XL proposal covered three different tape manufacturing plants located in Hutchinson, Minnesota; Camarillo, California; and Bedford Park, Illinois.¹⁶¹

4. The MPCA's Project XL Proposal and Efforts to Negotiate a Memorandum of Understanding (MOU)

In addition to 3M, the MPCA also submitted an XL proposal that was accepted by EPA in the initial round of XL applications. Minnesota was the only state regulatory agency to submit an XL proposal.¹⁶² The MPCA sought permission from EPA "to undertake one state project consisting of three to five pilot projects under . . . 'Project XL.'"¹⁶³ The MPCA specifically requested authority from EPA to lead Project XL in Minnesota, citing the Federal Register notice that described EPA's "decentralized or franchising approach to the implementation of pilot programs."¹⁶⁴ The concept of delegation was an important component of the MPCA's XL proposal. EPA had already delegated authority to the MPCA to run other federal programs such as, Superfund, hazardous waste, and air operating permits.¹⁶⁵ Thus, the MPCA's experience and confidence in successfully implementing these programs resulted in its preference to lead XL, rather than play an auxiliary role to EPA during Project XL negotiations with Minnesota industries.¹⁶⁶

To bolster its XL proposal, the MPCA reiterated what it had stated three months earlier in a memorandum to the Deputy Administrator at EPA Region V (requesting approval for an innovative permitting pilot program) noting that it:

Has been working on beyond-compliance/innovative approaches to permitting since 1992, well before the Project XL concept was developed [and that it] believes Project XL provides a vehicle for the expeditious implementation of these projects.¹⁶⁷

As an example, the MPCA described the 1993 flexible PAL permit it issued to 3M for its St. Paul tape manufacturing facility. Under Project XL, the MPCA hoped to develop additional "innovative, multi-media permits building off the flexible [3M] air permit."¹⁶⁸ As stated in its proposal, the MPCA already had a commitment from 3M to begin work on a flexible permit for its Hutchinson, Minnesota, facility, and the MPCA was evaluating a possible project with U.S. Filter for its hazardous waste recycling facility in Roseville, Minnesota. The state agency's proposal also described how it intended to meet EPA's eight Project XL criteria, what the expected benefits would be to the various participants, and [32 ELR 10090] the independent oversight and evaluation of the project by a diverse stakeholder group and University of Minnesota researchers.¹⁶⁹ Additionally, the MPCA hoped that with EPA's delegation under Project XL, the length of time from permit development to issuance would be shortened from the almost nine months it took to issue the 3M PAL permit.¹⁷⁰

Upon EPA's acceptance of the MPCA Project XL proposal, the EPA Administrator for Region V stated:

Once again [Minnesota is] in the vanguard of innovative environmental protection efforts . . . . Region V stands ready to assist and support MPCA's pilot program to provide appropriate regulatory relief where it will achieve greater environmental benefits.¹⁷¹

Immediately, the MPCA and EPA Region V began work on an MOU to detail the state's role and responsibilities for carrying out Project XL pilots in Minnesota.¹⁷² However, by early 1996, efforts to reach agreement on a workable MOU were put on hold due to federal government shutdowns and the state agency's need to shift staff resources to the 3M Hutchinson XL pilot.¹⁷³ After devoting a year's time to developing the 3M XL permit, only to reach an impasse resulting in the company's withdrawal from XL, the MPCA staff grew increasingly skeptical about the agency's ability to successfully implement Project XL in Minnesota. The MPCA's dim outlook was not improved by EPA's April 1997 revisions to Project XL. Although the revisions were designed to add clarity to the XL program, from the MPCA's perspective they would only increase federal oversight and control, thereby limiting the state's ability to experiment with regulatory innovations. Thus, the MPCA and EPA Region V agreed to table any further discussions about completing an MOU for an indeterminate time.¹⁷⁴

In early 1999, after it became quite certain to the MPCA that EPA Headquarters and Region V would soon approve the final project agreement for the Andersen XL pilot, the MPCA and Region V reopened discussions over the MOU for the 3M Hutchinson XL pilot. The first issue to decide was whether it was reasonable to continue work on the MOU as originally drafted, or even a new version, given all that had transpired. Thereafter, the two agencies discussed whether they could develop a framework for an MOU that would be of any benefit to either party. According to the MPCA, for the MOU to be effective it had to ensure that state staff resources would be reduced. To that end, the MPCA requested the authority from EPA to determine whether a pilot project applicant met the federal requirement for superior environmental performance. Yet by mid-2000, Region V failed to satisfactorily address the MPCA's key concerns—the authority to determine superior environmental performance and reduced staff time in developing pilot projects.¹⁷⁵ Thus, after almost five years, the state agency formally withdrew its 1995 Project XL proposal.¹⁷⁶

The failure to develop a workable MOU after almost five years is an unacceptable outcome. The MPCA's June 1995 XL proposal was unequivocal in its request for delegated authority from EPA to lead Project XL in Minnesota. Based on this premise, EPA accepted the MPCA's proposal in November 1995. To an outside observer, this result is illogical. The MPCA Project XL proposal was anything but, in the words of President Clinton, "common-sense government," nor did it "put the focus back . . . on progress, not process."¹⁷⁷ Unfortunately, Minnesota's inability to implement an experimental, environmental permitting pilot project is testament to the fact that Project XL was unable to deliver all that it promised when it was launched five years ago. The reasons for Project XL's lackluster accomplishments are discussed in depth below in the next part of this Article.

V. Project XL: A Crown Jewel or Costume Jewelry? A Look at Project XL's Key Criteria

The MCEA's participation in the three Minnesota XL pilots has enabled us to assess the effectiveness of Project XL as a national program. What follows is our analysis of superior environmental performance, regulatory flexibility, and stakeholder involvement, the three key criteria of Project XL. We also examine how these criteria have influenced the Minnesota XL pilots and how the 3M XL pilot shaped subsequent EPA guidance and policy on Project XL.

Of the eight criteria from EPA's original list, the first three have overshadowed all the others in terms of importance: environmental results (superior environmental performance), cost savings and paperwork reduction (regulatory flexibility), and stakeholder support.¹⁷⁸ EPA did not, at the outset, rank its evaluation criteria in order of importance. However, as Project XL moved forward, and as proposals were submitted and considered, it became increasingly clear that certain criterion carried greater weight than others. In fact, in a subsequent EPA notice of modification to Project XL, the Agency itself recognized that "while all of these criteria are still important, the first three actually define Project XL."¹⁷⁹

A. Superior Environmental Performance (SEP)

The importance of achieving "environmental results," the criterion that was soon dubbed "superior environmental performance," was never questioned by any of the XL participants. Everyone understood that obtaining better environmental results was at the core of Project XL. But as XL applicants moved into the project development stage disagreement arose over how SEP would be defined and measured for individual projects, and, thus, SEP became a contentious issue. The MCEA believes this can be attributed to three main factors: (1) the hurried and incomplete fashion [32 ELR 10091] with which Project XL was put together by the Clinton Administration; (2) some early Clinton Administration announcements that were taken literally by project applicants; and (3) an irrational belief on the part of many participants that Project XL—an "outside-the-box" theory—could be put into practice relatively easily, given the number of years EPA struggled with CAA reform initiatives involving emissions trading (or bubble) policies that were sure to arise in the context of Project XL. What follows is a close look at how each of these factors contributed to the discord that developed over the meaning of SEP. Additionally, the MCEA describes the influence these three factors had on Minnesota's Project XL pilots.

1. Project XL—A Policy Developed Quickly, Without Detail

Project XL was a program quickly stitched together over a short period of time by a group of EPA and White House staff for inclusion in the Administration's report, Reinventing Environmental Regulation.¹⁸⁰ The March 1995 report created by this group set forth a "comprehensive set of 25 High Priority Actions that will substantially improve the existing regulatory system."¹⁸¹ The urgency to reinvent environmental regulation as expeditiously as possible was mainly due to pressure coming from congressional Republicans who sought a regulatory rollback that would drastically reduce the number of environmental regulations.¹⁸² While most of the other ideas found in Reinventing Environmental Regulation remained on paper, EPA dedicated staff and resources to Project XL, thereby elevating its profile and status. Thus, in just two months, Project XL went from a one-page description in the Clinton/Gore report, to a formal EPA announcement and solicitation in the May 23, 1995, Federal Register. Remarkably, just over five months later, the president ceremoniously welcomed eight new pilots aboard Project XL, a program that became known as the flagship of EPA's reinvention effort.¹⁸³

The fact that Project XL went from a concept to a formal program, and ultimately to implementation, so quickly was the cause of many problems that surfaced as work began on the individual Project XL pilots. The group from the White House and EPA who developed XL recognized that "it raises a number of complex issues (for example, how to, measure environmental results and how to establish an environmental baseline)."¹⁸⁴ Likely due to time constraints, the group chose not to address the complexities; rather, they determined these issues could be worked out in the implementation process given the experimental nature of XL as a pilot project.¹⁸⁵ Thus, EPA only provided a big picture view of what outcomes it intended for Project XL and did not establish clear goals, objectives, or details (from either a management or technical perspective) for Project XL prior to its launch.

With hindsight, EPA has come to recognize that it should have more clearly delineated its intentions for Project XL at the outset of this initiative.¹⁸⁶ Also, EPA's uncharacteristic, open-ended proposal invited projects that raised questions for which the Agency had no well-defined answers.¹⁸⁷ The most difficult issues were those pertaining to a determination of SEP. Yet answers from EPA were needed prior to approving or implementing Project XL permits, and, therefore, achieving consensus on the 3M Hutchinson pilot became increasingly difficult.

The MCEA believes that the 3M Hutchinson pilot failed primarily because EPA's inability to provide clear, unified, and timely answers clashed with 3M's predetermined positions on many of these difficult issues (as detailed in 3M's beyond-compliance permitting concept). Four months after 3M formally withdrew its Project XL proposal, the key stakeholders (3M, EPA, the MPCA, and a number of members from the statewide stakeholder group) met to discuss the lessons learned from the 3M XL pilot. The following list of questions presented formidable barriers to agreement and approval of an XL permit for 3M Hutchinson precisely because no firm answers existed during the negotiation period.¹⁸⁸

. What are EPA's goals and expectations for Project XL?

. Do all parties share the same goals and expectations?

. Is Project XL the "alternative path" technique for environmental permitting?

. What is the right management structure for this program, internally for EPA and its Regions, and externally as EPA interacts with XL applicants and other stakeholders?

. What is the appropriate role for the state regulatory agency?

. What exactly is the role of stakeholders in the XL process?

. How is SEP defined and measured?

. How is an emissions baseline calculated?

. Can previous voluntary reductions be considered in the baseline?

. How are yet-to-be-written rules accounted for in projecting SEP in years ahead?

. What is the legal mechanism for a Project XL permit?

Despite the fact that these questions were not resolved during negotiations over the 3M XL permit, the 3M experience was instrumental in bringing to light these issues, and in so doing it prompted EPA to further define Project XL. As a result, the Agency issued new guidance policies and reengineered its XL program in order to clarify its policy objectives, definitions, and many details. In particular, with regard to SEP, EPA has established a two-tier definition containing [32 ELR 10092] both quantitative and qualitative benchmarks. EPA's clarification of XL has provided subsequent XL applicants, including Andersen and U.S. Filter in Minnesota, with a more defined program. As would be expected, EPA's more detailed Project XL guidance has resulted in XL proposals and FPAs that contain greater detail.¹⁸⁹ However, for the Minnesota XL pilots EPA's greater definition of Project XL has not resulted in greater efficiency in permitting because so many of the questions are tied to the current command-and-control system, and, thus, the answers do not harmonize well with innovative (or outside-the-box) regulatory strategies.

2. Project XL—A Literal Interpretation of "Throwing Out the Rule Book"

In addition to the hurried and incomplete manner in which XL was created, another factor that had an impact on the interpretation and application of SEP was the literal meaning many attributed to the Administration's statements about Project XL. For instance, President Clinton in his remarks on Nov. 3, 1995, described XL as analogous to a high-jump competition in which the government sets the "bar" to ensure a healthy environment, and then the company, instead of jumping over it in the prescribed way according to the rule book, can "figure out how to jump over it in any way—the old way, a new way, a different way, forward or backward—all you have to do is jump over the bar. Then you make the grade."¹⁹⁰

The premise was, continued the president, that "in many cases companies know their business a whole lot better than the government does."¹⁹¹ One year later, Vice President Gore described Project XL as an example of one of the Clinton Administration's reform efforts where the government "throws away the rule book altogether" and does what makes sense.¹⁹² The vice president's stated concept of Project XL was consistent with remarks he made two years earlier where he insisted, "we have to move beyond our current command-and-control regulatory system to a new paradigm that rewards creativity and risk-taking and strives for efficiency through innovation."¹⁹³

Furthermore, when EPA stated in the Federal Register that project proposers had to "be able to achieve environmental performance superior to what would be achieved through compliance with current and reasonably anticipated future regulation,"¹⁹⁴ many interpreted "current regulation" as that which was required, or "allowed" by law. While this may seem inconsequential to the average person, to a company—for example 3M—that in 1995 had an "allowable emission limit" of 32,903 tons per year for VOCs in its permit, but actually emitted 2,300 tons of VOCs that year, there is a tremendous difference in the meaning of these two terms.¹⁹⁵

When Project XL was originally announced, 3M, Andersen, and U.S. Filter all took the Administration's words verbatim that Project XL was truly an "out-side-the-box" experiment in regulatory policy and permitting. 3M and Andersen interpreted "current regulation" as meaning the amount of pollutants they are allowed to emit by law. Accordingly, both companies believed that the voluntary emission reductions they made prior to XL bringing both companies far below their "allowable emissions" should be accounted for in an overall assessment of a demonstration of SEP. All three Minnesota companies took EPA literally when it asked for innovative, out-side-the-box thinking and at points were stunned to get comments back from EPA that, in essence, said "we didn't mean that innovative."

EPA's hedging on what was acceptable, combined with 3M's decision to pull out of XL, was a determining factor for many Minnesota companies, who once thought XL looked promising, but thereafter thought it far too risky and expensive to participate in the program.¹⁹⁶ Some felt that if 3M, a corporate giant in Minnesota, was unsuccessful in obtaining an XL permit, it would be an unreasonable use of resources for their company to submit an XL proposal when the outcome was so uncertain.

3. Project XL—An Irrational Belief That an "Outside-the-Box" Theory Could Be Put Into Practice Relatively Easily, Given EPA's Past Reform Attempts With Its Emissions Trading (or Bubble) Policy

A third factor that played a role in the debate over SEP was, to a great extent, premised on what the MCEA perceived as an irrational belief on the part of many involved with Project XL that "outside-the-box" theories could be put in to practice relatively easily through the XL reform initiative. Remarkably, there were numerous participants who believed new ideas and changes could be implemented in the context of this experimental pilot project, despite EPA's inability to resolve perpetual issues of regulatory reform. As far back as the mid-1980s, EPA has been grappling with efforts to improve its approach to environmental regulation, which had been criticized as inflexible and unreceptive to innovative and cost-effective solutions to pollution.¹⁹⁷

A striking similarity exists between the issues that have arisen with Project XL and the contentious issues that have swirled around emissions trading (or bubble) policies utilized in implementing the CAA over the past 20 years.¹⁹⁸ Like Project XL today, emissions trading policies have been [32 ELR 10093] promoted by EPA as a way to "save money, encourage innovation, remedy weaknesses of existing regulatory programs, speed compliance, and meet the ambitious pollution control objectives of the [CAA]."¹⁹⁹ The following passage from the preface to Richard Liroff's report entitled, Reforming Air Pollution Regulation: The Toil and Trouble With EPA's Bubble is as applicable today about Project XL as it was in 1986 about emissions trading, one need only substitute one program for the other. It reads:

While appealing on its face . . . emissions trading has proven to be quite controversial, and those promoting it within EPA have had to struggle to keep it alive. The fight over emissions trading illustrates why it can be so difficult to change regulatory policy, why reforms that seem promising on their face can be quite hard to put into practice, and why reforms, like so many government programs, do not always deliver what they promise.²⁰⁰

In his report, Liroff also discussed two differing philosophies on society's responsibility for air pollution control that are equally applicable to Project XL: "command minimalists" and "command expansionists."²⁰¹ To summarize briefly, the minimalists are those who see flaws in our current regulatory system and therefore are willing to provide states with considerable flexibility in the development of pollution control strategies. They favor establishing definite parameters within which industry can freely operate. Members of this group generally include EPA staff from the regulatory reform programs and representatives of business and trade associations.

The expansionists, on the other hand, agree that our current system is flawed and recognize that flexibility may provide a remedy; however, they remain wary of industry's motive for using flexible options. The expansionists, therefore, believe that the rules governing flexibility must be fairly strict in order to prevent industry from "gaming" regulators, that is, exploiting flexibility. Additionally, expansionists tend to oppose rewarding companies for emissions reductions that "would have occurred anyway," i.e., without the flexibility, for business purposes. Furthermore, their support for emission reductions is reserved for new decreases in "actual" amounts of pollution released. Expansionists view any downward adjustment in a facility's "allowable" emission limits as merely a "paper reduction." Finally, the expansionists are less willing to assign states greater authority to develop and implement reform strategies. Members of this group generally include EPA staff from the media specific offices, e.g., Air & Radiation, enforcement office, and members of national environmental organizations.²⁰²

This description of the two philosophical camps is relevant to the debate over Project XL, and in particular the 3M Hutchinson proposal, as these same factions tangled over a number of issues concerning the Project XL proposal, such as how to determine an emissions baseline; what credit, if any, to allow for previous emission reductions; the significance of allowable versus actual emission releases, skepticism over computer modeling assumptions, how to avoid "backsliding," and the precedent setting versus the experimental nature of the pilot. With many of these issues unresolved in the context of the emissions trading and new source review programs, it is not surprising that the same issues—only packaged differently as Project XL—would cause stumbling blocks. Moreover, some of the same organizations, agency divisions, and individuals who have been involved in the ongoing emissions trading debate are also involved with Project XL.²⁰³

For the national NGOs,²⁰⁴ the most significant concern, and the one that still persists, centers on the meaning of SEP. Since Project XL's announcement, the NGOs' position has been supportive of projects that clearly show how the regulatory flexibility requested is necessary to implement innovation measures that, in turn, will produce a greater environmental benefit.²⁰⁵ However, many organizations expressed their disappointment with the first XL proposals submitted to EPA because in their estimation the SEP was insufficient.²⁰⁶ According to the Natural Resources Defense Council, Inc. (NRDC), "all but one of the proposals it evaluated would have resulted in some increase in emissions in exchange for other reductions or other actions.²⁰⁷ The NRDC claimed that "in most cases, the proposed environmental benefits are token or questionable improvements on the status quo under the current regulatory scheme."²⁰⁸ The NRDC's comments on Project XL, and the 3M Hutchinson pilot in particular, are consistent with the command expansionist philosophy described by Liroff.

The NRDC was also the group that discovered flaws in a number of emission trades proposed in the 1980s by EPA, but that were thereafter withdrawn by the Agency.²⁰⁹ It is worthwhile to revisit two of those cases, one involving a Sohio fuel terminal and the other a BFGoodrich plant. These cases show us that many of the issues troublesome to Project XL are not new, but rather have persisted for many years. Moreover, these examples also reveal that the lack of trust and the sense of wariness on the part of NGOs toward EPA's Project XL initiative can be traced back to the Agency's emissions trading policy.

The first case, involving a Sohio fuel terminal in Ohio, was significant because EPA claimed the company's emissions trade would result in an "overall decrease in VOC emissions." However, the NRDC demonstrated that the decrease was only a "paper credit" and that the facility's actual emissions would increase.²¹⁰ The NRDC argued that the emission credits that Sohio was to receive from EPA were not based on a new effort, but from previous actions to control emissions. Therefore, the NRDC argued, the baseline from which the Agency determined emission reductions should not be the allowable emission levels, but rather its actual emission levels, which would factor in past actions to [32 ELR 10094] control emissions.²¹¹ Furthermore, the NRDC criticized the fact that Sohio would be able to forego identified control options that could reduce actual emissions below current levels.²¹²

The second case involved a BFGoodrich chemical plant, also in Ohio, for which EPA had proposed the approval of an emissions trade that would, in effect, place a bubble over the plant and result in a net decrease in particulate emissions.²¹³ The NRDC opposed the bubble and argued that the baseline for calculating credits was too lenient, and also that any reductions would occur only on paper while the actual emissions remained constant.²¹⁴ In response, EPA reversed its position and made the plant's actual emissions the baseline from which it would calculate emission reduction credits, and subsequently disapproved the BFGoodrich bubble.²¹⁵

The national environmental groups who found inaccuracies in a number of EPA's proposed bubbles perceived them to be nothing more than taking credit for previous reduction requirements and squandering opportunities to achieve reductions in actual emissions, thus amounting to industry "gamesmanship" by manipulating the weaknesses of the current regulatory system.²¹⁶ Moreover, in the early 1980s, EPA's claims with respect to reductions in emissions from bubbles were in many cases misleading, which also rankled the environmentalists.²¹⁷ As one observer put it, EPA's figures for reductions in emissions "only tell part of the story" and "can easily be misinterpreted," for they may merely represent administrative recognition of previous emission control measures, and do not reflect any new efforts to reduce actual emissions.²¹⁸ As a result, EPA's emissions trading program suffered from a credibility problem.²¹⁹

To remedy this lack of trust, one commentor called upon the Agency to institute a "truth in trading" program in order to provide a transparent understanding of what the trades actually accomplish.²²⁰ Some specific recommendations included explicitly distinguishing changes resulting in allowable emission levels from reductions in actual emissions; clearly delineating compliance methods and accomplishments; and, when reporting on the environmental and compliance benefits of emissions trades, differentiating between actual and allowable reductions and varying forms of compliance, or withhold any statements about the benefits of trades.²²¹

Given the NRDC's past involvement and concerns with emissions trading, it should have been no surprise that the NRDC would be critical of the 3M Hutchinson XL proposal for not resulting in actual emission reductions.²²² However, there are important differences between the Sohio and BFGoodrich emissions trading cases of the past and the 3M Hutchinson Project XL pilot. Some of the state environmental group participants in the 3M XL case did not have the same historical experience with emissions trading as did the NRDC, thus the local perspective was different from that of the national group.²²³ Moreover, the participants in the 3M pilot were keenly aware that the proposed VOC cap on the Hutchinson facility was an amount greater than the facility's actual emissions for the previous year, but less than its regulatory allowable limit.²²⁴ To many in the 3M pilot, the greatest interest and concern was not in the plant's gross emissions, but rather in the experimental nature of tracking those emissions as tied to product output over time in order to test the hypothesis so many had been arguing over for so long: will regulatory flexibility foster, and result in, more efficient, innovative, cost-effective methods of operation while still attaining, or surpassing, environmental standards and goals?

SEP was a lot easier to agree upon in theory, as most Project XL participants discovered, than it was to implement in an actual pilot. Disagreement over how to define and measure SEP stemmed from three factors: first, the hasty and incomplete manner in which Project XL was developed; second, initial Administration descriptions of XL that were taken all too literally; and finally, an illogical willingness to implement "outside-the-box" innovations despite years of wrangling over reform initiatives involving the very same issues.

B. Regulatory Flexibility: A Nexus With SEP

EPA's second criterion for evaluating Project XL was referred to in its original Federal Register notice as "cost savings and paperwork reduction," but has since been labeled "regulatory flexibility."²²⁵ Accordingly, EPA would evaluate XL proposals based on whether they could "produce cost savings or economic opportunity, and/or result in a decrease in paperwork burden."²²⁶

Additionally, in describing Project XL EPA stated that flexibility would be given to a limited number of regulated entities "to develop alternative strategies that will replace or modify specific regulatory requirements on the condition [the entities] produce greater environmental benefits."²²⁷ The EPA's notice went on to explain that, "in exchange for greater flexibility, regulated entities will be held to a higher standard of accountability for demonstrating project results," [32 ELR 10095] thus establishing a quid pro quo.²²⁸ This concept was not new, in fact participants in the Aspen Dialogue concurred that the quid pro quo was the key element in the "Alternative Path"—an alternative to the current regulatory system.²²⁹ The Apsen Institute participants agreed that superior environmental performance was required to "balance the uncertainty of a result inherent in a new, more flexible regulatory system."²³⁰

However, what was not stated or implied in the original EPA Project XL announcementwas the requirement to show a nexus between the flexibility sought and the SEP anticipated by the company. In the case of 3M, as discussions over the draft XL permit and the FPA continued, a concern arose over the seeming disparity between the amount of flexibility sought by the company and the expected environmental benefit.²³¹ To many NGOs the term "flexibility" had become shorthand for cutting corners and allowable adverse impacts on the environment.²³² The NGOs' growing anxiety, along with an increasing concern from EPA, led to both internal Agency meetings, and external roundtable meetings in order to clarify and further define the relationship between flexibility and SEP.²³³

As a result of EPA's experience with the initial round of XL proposals, including the 3M Hutchinson pilot, EPA published a modification to the Project XL program in April 1997.²³⁴ In this second notice the Agency stressed to prospective XL applicants the importance of articulating a strong link between SEP and regulatory flexibility.²³⁵ Specifically, EPA stated that "the closer the factual link between the flexibility and the anticipated environmental benefits, the more likely EPA is to approve the project."²³⁶ The Agency reinforced its new position by further stating that the tools, i.e., the legal options available to EPA that allow it to waive certain otherwise applicable regulations or requirements, such as alternative permits or site-specific rules, are the "strongest when tailored to be only as broad as needed for implementing the project terms."²³⁷

This new change had an impact on the Minnesota pilots. In describing how the companies will satisfy EPA's criteria for cost savings and paperwork reduction/regulatory flexibility there is a striking difference between 3M's approach and the proposals submitted by Andersen and U.S. Filter. 3M put its focus on how the company would obtain cost savings over the long-term (noting that its up-front costs had been significant) and how it would realize paperwork reduction.²³⁸ It did so by describing two areas—air permit amendments and combined reporting and recordkeeping—where it anticipated that regulatory consolidation would result in less burdensome administrative tasks.²³⁹ As a result, 3M hoped it would not only save costs, but also gain an economic opportunity by getting its products to the market faster.²⁴⁰

Following the April 1997 modifications to Project XL, Andersen's XL proposal, in contrast to 3M's, contained a section explaining the "link between environmental performance and flexibility."²⁴¹ Andersen stated that granting regulatory flexibility would enable the company to more easily transition to environmentally friendly products and processes.²⁴² Similarly, U.S. Filter's proposal described how its request for regulatory flexibility would be needed to increase the amount of recycling and recovery of hazardous waste.²⁴³ Thus, both Andersen and U.S. Filter made an effort to show the linkage between the flexibility sought and the intended environmental benefit.

EPA's emphasis on the link between regulatory flexibility and SEP is important because it highlights what the MCEA has come to believe is the most critical aspect of the criterion "regulatory flexibility," and that is transparent explanations of how the flexibility sought will result in an environmental gain. XL pilots that can demonstrate a direct—and therefore transparent—link between flexibility and SEP are more acceptable to NGOs and others who may be skeptical of an applicant's intent and ability to achieve environmental gain. An example of an obvious link is allowing the waiver of an emission requirement for a piece of pollution control equipment that, due to a process change, will result in reduced emissions from the smokestack to which the equipment is attached. This example can also be described as a narrow, or precise, application of the quid pro quo concept, fundamental to Project XL.

XL pilots that have an indirect—and therefore less transparent—linkage between the flexibility requested and the anticipated environmental gain are less acceptable, due to lack of clarity. An example of an indirect link is allowing the waiver of an emission requirement for a tank that will, due to capital expenditures saved, allow the company to invest resources in pollution prevention initiatives to reduce the overall toxicity of emissions facilitywide. This example can also be described as a broad application of the quid pro quo that, if not articulated clearly, could be misunderstood and therefore not well accepted by stakeholders.

[32 ELR 10096]

Thus, the top priority for XL proposers and regulators, and other stakeholders, must be to find the best environmental outcomes, not just those with a "close factual" or direct link between flexibility and superior environmental performance. The key to acceptable, and therefore successful, projects is a transparent explanation of how the flexibility sought will make environmental gains possible. Straightforward and understandable explanations will allow all participants to weigh the flexibility against the environmental benefits to determine a project's worthiness. Consequently, meritorious projects will stand up well to such scrutiny.

C. Stakeholder Influence and Input: Substantive Input or Window Dressing?

1. Background—Early Stakeholder Concerns

Almost from the moment Project XL was announced, there was skepticism as to the purpose and intent of XL from many in NGOs and public interest organizations who were, at the time, also participants in the CSI.²⁴⁴ Many NGOs believed that Project XL, with its largely undefined stakeholder involvement criteria, threatened to undermine the CSI-created process of dialogue among equal partners where agreement is reached by full consensus.²⁴⁵ The threat to the full consensus process, in which many NGO groups had invested a great deal of resources, was exacerbated by the fact that of the original eight XL proposals submitted to EPA, three were from the electronics industry—also a CSI sector.²⁴⁶ Thus, there was a pervasive feeling that some companies were using XL because it better fit the corporate idea of "regulatory reform" than the more time-consuming and stakeholder-intensive CSI process.²⁴⁷

Accordingly, a group of NGOs jointly voiced their concern to EPA that Project XL was becoming an "escape hatch" through which industry could obtain the desired regulatory relief, but without the requisite public accountability and adherence to principles of environmental justice, and, therefore, would "severely disable the development of trust and communication among CSI stakeholders."²⁴⁸ Moreover, the NGOs feared that these company-run stakeholder groups would be touted as examples of meaningful participation, when in fact they were mere window dressing on a corporate-friendly government program.²⁴⁹

Collectively, this group of NGOs urged the Clinton Administration to require, in addition to a company's Project XL proposal, that applicants submit a supplemental narrative to EPA answering a number of questions that the NGOs believed would add clarity in three key areas: "stakeholder support"; "monitoring, reporting, and evaluation"; and "shifting of risk burden and consistency with Executive Order No. 12898" (regarding environmental justice concerns).²⁵⁰ Furthermore, in a subsequent letter, these NGOs asserted to EPA that, among other issues, "CSI work groups need to be involved, on a consensus basis, in the review, selection, and oversight of the XL proposals originating in CSI sectors," and that EPA must agree to provide adequate resources to assure meaningful stakeholder involvement.²⁵¹

EPA responded to the NGOs' concern by distinguishing XL from the CSI effort. The Agency stated its resistance to the "cookie cutter" approach to any aspect of XL, "as this contradicts fundamental principles of reinvention on which XL is based."²⁵² The Agency explained that XL does not have to follow the same rules as the CSI because, unlike the CSI, it is not addressing whole industry sectors for the purpose of reaching consensus on national policy changes.²⁵³ The purpose of Project XL is "to test new performance based approaches to environmental management."²⁵⁴ Furthermore, data must be obtained first, and only then will results be evaluated in the contest of national policy changes.²⁵⁵ The Agency found it would not be productive, nor consistent with the CSI, to provide the CSI groups with formal authority to select or reject XL proposals. However, EPA promised to inform relevant CSI groups if the CSI industries submit XL proposals.²⁵⁶ Additionally, EPA agreed to forward the NGOs' list of questions on to all XL applicants, but it did not go so far as to require the XL applicants to submit a "supplemental narrative" in answer to the NGOs' questions as part of a company's XL proposal.²⁵⁷ As to the issue of resources, EPA assured the NGOs that the Agency would "work intensively to ensure adequate resources are made available to those who need them."²⁵⁸

2. Stakeholder Concerns—From Process to Substance

As time passed, and as the various XL stakeholder groups shifted the focus of their meetings from basic information and administrative/housekeeping issues to those concerning the actual terms and conditions of the XL permits and FPAs, the NGOs' focus also shifted. Whereas their preliminary [32 ELR 10097] concern was on the XL evaluation criteria and how they could provide input into the proposal selection process, the NGOs began turning their attention to other issues as well, such as the process of developing well-balanced stakeholder groups, the need for better information about the substance of individual XL pilots, the negotiation status of each pilot, and any Agency policy developments in the XL program.²⁵⁹ While the NGO groups recognized EPA's openness to informal information-sharing about the XL pilots, they were critical of EPA's failure to effectively engage the national NGOs in the design and implementation of the XL pilots—pilots intended to be national models with national policy implications.²⁶⁰

Upon reviewing the incoming XL proposals, the NGOs found none of them to be an "ongoing, open process in which community representatives, facility managers and workers use independent engineering and environmental expertise to pursue continuous improvement and pollution prevention."²⁶¹ Nor did the NGOs find the various stakeholder groups to be, on balance, consensus-based decision-making bodies.²⁶² The NGOs criticized EPA for not requiring Project XL applicants to build consensus and they chided both EPA and the project applicants for failing to create open and inclusive stakeholder processes.²⁶³ The NGOs stated disapprovingly that Project XL allowed companies to select whomever they desired for their stakeholder groups and that this resulted in cozy, hand-picked groups that were biased in favor of industry position and lacking any objectivity.²⁶⁴ Moreover, the NGOs added, the few environmentalists and workers who are members of these stakeholder groups are faced with an enormous amount of technical material to decipher and base their judgments upon, yet they lack the resources and independent technical expertise to assist them in this massive undertaking.²⁶⁵

EPA responded to NGO concerns both internally and externally. At an Agency conference on Project XL, among other topics, specific attention was given to national NGOs and the involvement of other stakeholders. The Agency acknowledged that the original Project XL announcement in the Federal Register left some important questions about the role of stakeholders unanswered. At the XL conference EPA staff presented 11 principles pertaining to stakeholder involvement based on the Agency's experience and observations thus far.²⁶⁶ Two of these principles were that: (1) the most valuable stakeholders to us are the people most directly impacted by the XL project; and (2) the clearer the expression of support from stakeholders, the more comfortable we are; for example, a stakeholder who signs an FPA provides a very clear expression of support.²⁶⁷

However, the Minnesota stakeholders involved in the 3M XL pilot felt as if EPA was oblivious to these two principles given the two separate stakeholder groups' support for the XL pilot.²⁶⁸

Notwithstanding the incongruity between EPA's stakeholder principles and their application in the 3M Hutchinson project, the Agency, shortly after its conference, began an evaluation of some of the early XL pilots in an effort to clarify the role of stakeholders in Project XL. EPA also held a roundtable meeting with a multi-stakeholder group in January 1997 to "find common ground" and to begin EPA's "mid-course evaluation and re-adjustment of Project XL."²⁶⁹ The agenda for this meeting was aggressive: to discuss whether the original vision of Project XL was the right vision; to discuss draft language that would modify Project XL's three key criteria—SEP, regulatory flexibility, and stakeholder involvement; and to discuss management and communication issues.²⁷⁰ In April 1997, EPA issued a formal modification of its guidance on Project XL in the Federal Register; this notice was intended to clarify the concepts, definitions, and boundaries of these three key criteria.²⁷¹

In regard to stakeholder involvement, the new EPA Project XL guidance grouped stakeholders into three categories of "direct participants," "commentors," and "general public," noting the distinct role each group would play in the development and implementation of XL projects. The Agency also outlined four steps of the XL process: "pre-proposal," "proposal development," "project development," and "implementation and evaluation," providing guidance on the various activities particular to each stage of involvement. Special emphasis was given to development of team training on technical issues and collaborative processes; ground rules, including whether stakeholders will have a veto power; and, that resources for technical assistance up to $ 25,000 per XL project would be available to the stakeholder groups upon a specific demonstration of need.

In addition to its 1997 guidance, the following year EPA assembled a stakeholder group to assist the Agency in developing [32 ELR 10098] a specific "how-to" guide that would be applicable to both XL applicant companies and community members or organization members that have an interest in an XL project. Subsequently, EPA released Project XL Stakeholder Involvement: A Guide for Sponsors and Stakeholders in March 1999.²⁷² Although very thorough and informative, the guide was not issued in time to be of assistance to the Minnesota XL pilots. By that time, the 3M Hutchinson pilot had ended and both Andersen and U.S. Filter stakeholder groups were fully operative. Nevertheless, as a participant in all three stakeholder groups, the MCEA believes some valuable lessons were learned about stakeholder involvement from the three Minnesota XL pilots.

3. Minnesota Project XL Stakeholder Groups—Lessons Learned

a. 3M Hutchinson Stakeholder Groups

The 3M pilot illustrates some of the concerns raised by the NGOs regarding the makeup of the stakeholder group and interaction with the national environmental organizations. 3M had independently formed a local community stakeholder group for its Hutchinson pilot project in May 1995, the same month EPA released its first notice announcing Project XL.²⁷³ 3M viewed the purpose of its stakeholder group as twofold: (1) to obtain feedback from the group; and (2) to disseminate information through the stakeholder group about the pilot project to the community at large.²⁷⁴ The 3M Hutchinson stakeholder group was comprised exclusively of local members and included, among others, county commissioners, retired 3M employees, a high school science teacher, a physician, state legislators from 3M's district, the mayor of Hutchinson, and the local chamber of commerce representative.²⁷⁵

Environmental advocacy groups criticized 3M for its stakeholder choices because there were no representatives from state environmental, public health, or other public organizations. Critics perceived the group as 3M-biased and, given the company's tremendous impact on the local economy, they doubted the group's ability to be objective—much less their ability to question or challenge the 3M Project XL proposal. In defense of its stakeholder choices, 3M countered that at the time it submitted its XL proposal, "there was no guidance from EPA regarding the stakeholder process, and therefore knowledge of the importance of the stakeholder process was limited."²⁷⁶ However, given 3M's awareness and involvement with national regulatory reform initiatives, including the ongoing CSI effort, it is difficult to believe how 3M could not have understood the importance of stakeholder involvement.

Furthermore, neither 3M nor the MPCA took steps early on in the process to solicit input from national NGOs. The MCEA believes 3M underestimated the national NGOs' potential to influence EPA on individual XL pilots. Despite the national NGOs' involvement with other XL pilots at the time (such as Weyerhaeuser, Intel, Merck, and HADCO), the company made a decision not to seek NGO input prior to the public comment period on the FPA and the XL permit. Moreover, given years of controversy over emissions trading policies, 3M should have anticipated some objection from national NGOs over the proposed "bubbles" in its XL permit. To ameliorate the impending opposition 3M should have taken steps to create an open and active dialogue with national NGOs in conjunction with EPA, the MPCA, and the Minnesota stakeholder groups. The company's failure to do so was problematic and only further buttressed EPA's resistance to the 3M proposal.

In early 1996, at the same time the national NGO groups were expressing dissatisfaction with public participation in Project XL, draft legislative language pertaining to stakeholders in the Minnesota Environmental Regulatory Innovations Act was vigorously debated. Lobbyists representing the Minnesota Chamber and 3M were opposed to a broad definition of "stakeholder" that would allow statewide organizations to participate as members of XL stakeholder groups. Ultimately, the definition of "stakeholder" was not narrowed, but rather remained broad in scope and parallel to EPA's guidance on stakeholder participation in Project XL.²⁷⁷ The chamber and 3M were also opposed to language that would require XL stakeholder groups to utilize a consensus-based decisionmaking process. Finally, a compromise was struck on the issue of decisionmaking by adopting language which requires a stakeholder group to "use a process which seeks consensus," but does not require consensus. Additionally, the MPCA commissioner, in a memorandum of agreement with state environmentalists, pledged to conduct at least one pilot project using a full consensus approach.²⁷⁸ The 3M Hutchinson stakeholder group was given "grandfather" status, and, thus, was exempt from the new law because it was formed before passage of the Environmental Regulatory Innovations Act.

Criticism of 3M's local stakeholder group in Hutchinson was somewhat tempered by the fact that another group with broader interests had been formed to analyze and provide input to the MPCA on the development and implementation of Project XL (both in general and on specific XL pilots). This group was known as the Pilot Project Committee (PPC), and its members included a variety of business representatives, independent consultants, academics from the University of Minnesota, and environmentalists.²⁷⁹ The PPC was actually a stakeholder group to the MPCA, not 3M. However, the PPC spent a majority of its time reviewing and discussing the 3M XL proposal, resulting in several suggestions that were incorporated into the FPA and permit. Most notable among them was the development of three criteria to be used to measure and judge whether the facility was achieving SEP.²⁸⁰

[32 ELR 10099]

At the beginning of the pilot, 3M gave the impression to PPC members that the group's role was minimal and very much secondary to the company's local Hutchinson stakeholder group. Gradually, 3M would come to recognize that the PPC worked well and it would eventually play an important role in reviewing and monitoring 3M's environmental performance.²⁸¹ However, during what would ultimately be the last four months of the 3M XL project, the PPC (and the Hutchinson group) were left entirely out of the negotiations that continued between the company and the regulatory agencies. This was especially frustrating for PPC members who believed the PPC's participation enhanced the process, and perhaps could have helped in negotiating a successful outcome.

As a result of the 3M pilot it became clear that Project XL stakeholder groups must be comprised of members who represent all significant interests in the proposal. An XL group consisting primarily of corporate-friendly members would not be perceived as objective. This would present a barrier to widespread acceptance and support of the project in the community in which the company is located. Moreover, obtaining input from national NGOs early in the process is also critical. Finally, it is important that no stakeholders are left out of the information loop; good communication flow among all participants (company employees and regulators, too) is essential to success.

b. Andersen Corporation's Community Advisory Committee (CAC)

The lessons learned from the 3M experience, along with EPA's new XL guidance had an impact upon the two other XL pilots in Minnesota. First, Andersen and U.S. Filter both prepared stakeholder involvement plans prior to the formation of their stakeholder groups. Both companies also sought input from others (including a state environmental group) before finalizing their stakeholder involvement plans, and both made efforts to obtain stakeholder participation from a wide variety of potentially interested parties.²⁸² Neither company restricted participation in their stakeholder groups to "locals only." Andersen specifically made an effort to include not only members with a neutral perspective on the company, but also those who had expressed views in opposition to Andersen. Moreover, Andersen made a deliberate effort early on in the process to obtain feedback on its proposal from national NGOs.

The Andersen CAC played a role similar to that of the PPC in the 3M XL pilot. While the CAC had some influence on the company's FPA, its role was limited in the area of technical requirements.²⁸³ The CAC, however, was instrumental in helping to develop the structure of Andersen's uniquely tiered performance ratio and how the ratio would be reported and enforced.²⁸⁴ Additionally, the CAC's concern over hazardous air pollutant releases influenced Andersen's commitment to keep emissions of air toxins within the state health department's draft guidelines.²⁸⁵ The CAC also influenced issues of community concern such as odor, noise, and traffic that are not covered by federal or state environmental laws. As a result of the CAC's involvement, odor issues are now better addressed through the Andersen CAC than the ad hoc approach used by the company in the past.²⁸⁶

Based on the MCEA's experience on the Andersen CAC, we conclude that a stakeholder group's strongest function is not to provide input on the minutia of regulatory changes or to advise on technical details. However, from the outset of Project XL, national NGOs adamantly, and ultimately successfully, lobbied EPA to make funds available to stakeholder groups for independent technical assistance. Such expertise was deemed necessary by NGOs who believed stakeholders needed help decoding technical information on which their judgments would be based, thus, they insisted, a neutral expert would level the playing field and would be critical to meaningful stakeholder involvement.²⁸⁷ After much discussion, the Andersen CAC decided that because the members were comfortable with the technical information presented by the company and regulatory agencies an independent technical expert was not necessary. Instead, the group determined that what might be most useful would be to have a neutral consultant audit the progress of the Andersen XL pilot half-way into the permit term.²⁸⁸

The MCEA therefore believes that while stakeholders can clearly make significant contributions on technical issues, the most important purpose of the stakeholder group lies in its accountability function. That is, through the stakeholder process the company must account for its actions and decisions (covering both regulated and nonregulated topics) in a public forum in a manner that is more transparent and interactive than ever before.²⁸⁹ The outcome is a new dynamic in environmental permitting that greatly strengthens the role of the public through the stakeholder process.

[32 ELR 10100]

c. U.S. Filter Recovery Services Project XL Stakeholder Group

In comparison to the 3M and Andersen pilots, the U.S. Filter stakeholder group had minimal influence on technical issues pertaining to the two main projects (water re-use and hydrochloric acid recovery) contained in the initial Project XL proposal. The stakeholder group's largest contribution was in providing more clarity and better structure to the proposal. For example, the concepts and specific activities of the two main projects were more clearly delineated in the proposal after the group provided input to the company.

The composition of the U.S. Filter stakeholder group was different from the other two stakeholder groups. The majority of stakeholders represented regulatory agencies and local businesses, but local residents were notably absent. EPA expressed some concern over this lack of balance in membership of the group.²⁹⁰ Yet, despite U.S. Filter's effort to get participation from local residents, it was unsuccessful due to a lack of interest.²⁹¹

Local resident indifference, and the high interest of others in the group, can be attributed to the following factors. First, U.S. Filter is just one of many companies located in an industrial park, thereby giving it a low profile, unlike the 3M and Andersen companies that have a major presence in their respective communities. Also, local residents did not view U.S. Filter's XL proposal as controversial. Conversely, the project was important to U.S. Filter's customers who were a large part of the proposal; thus, their interest was high and their representation on the group was essential. Finally, hazardous waste programs are delegated to the counties in the Twin Cities metropolitan area, and because the U.S. Filter project involved the recycling of hazardous waste, interest was strong among various county government agencies and their representation on the stakeholder group was critical.

Unfortunately, it was not until the XL proposal was almost ready for submittal to EPA for approval did the county members really become engaged in the process. As a result, U.S. Filter and the MPCA spent an additional four months working through many technical details with county members. The remainder of the stakeholder group was left out of the communication loop during this period of time. Subsequently, the entire U.S. Filter XL project was put on hold for approximately one year while the company obtained a renewal of its RCRA Part B permit from the MPCA.²⁹² This resulted in another extended period of time without full stakeholder input.

In recognition of this sporadic stakeholder communication, U.S. Filter and EPA initiated a process in late 1999 to revitalize XL stakeholder involvement. EPA hired a contractor to facilitate stakeholder meetings and to provide a set of ground rules for the group's consideration. Despite this effort, only one additional stakeholder meeting was held in January 2000.²⁹³ Over the next six months, U.S. Filter, EPA, and the MPCA continued to work out the details of the FPA. As the November presidential election drew closer, it became important for Vice President Gore to demonstrate the success of the Clinton Administration programs, including Project XL. This prompted a flurry of activity in August on the U.S. Filter XL pilot, as the Agency was under intense pressure to obtain final approval and a signed FPA as soon as possible. Despite the effort earlier in the year to reenergize stakeholder involvement, the Agency stressed to U.S. Filter the importance of getting agreement from a subset of the stakeholders (the counties, the MPCA, and the U.S. Department of Transportation (DOT)) rather than the entire group's concurrence, due to time constraints.²⁹⁴

The U.S. Filter XL pilot demonstrates that membership of XL stakeholder groups will vary. The circumstances and factors involved with each individual pilot project will determine the mix of stakeholder representation. Thus, it is even possible for a stakeholder group to function effectively without much (or any) local resident participation, provided the company makes its best effort to obtain community representation and throughout the project it continues to solicit community feedback, conducts other outreach activities, e.g. newsletters, open house events, and holds its stakeholder meetings at locations and times convenient to the public. Low public participation is more likely to occur in instances, like U.S. Filter's, where the issues involved are not controversial and the community does not perceive facility emissions as compromising environmental quality.

Finally, regardless of the composition of XL stakeholder membership, good communication with the group is essential for success. Communication with stakeholders is key to ensuring that all members are fully engaged in the process. Accordingly, the company, or its facilitator, must make attempts to get stakeholders to identify those issues that are—or could be—most critical to them as early in the process as possible, doing so will prevent unnecessary delay.

Part two of this Article has examined the three key criteria used by EPA to evaluate Project XL applications: SEP, regulatory flexibility, and stakeholder involvement. As this part has illustrated, all three criteria have evolved from rather vague initial concepts to detailed policies. Part two has also provided some examples of how these criteria have influenced the Minnesota XL pilots, and in some instances how the Minnesota pilots have influenced the definition or application of the criteria. The next part takes an in-depth look at each individual Minnesota XL pilot.

[32 ELR 10101]

VI. Minnesota's Project XL Pilots

A. Environmental Outcomes: Will Project XL Benefit Minnesota's Environment? The Jury Is Still Out

At the outset of the MCEA's Regulatory Innovations Project we had expected that at least three out of the possible five Minnesota Project XL permits would be in the implementation phase by the end of our three-year-study period. Accordingly, we planned to compare the pre-Project XL emissions released annually for each facility to the amount of emissions released during the implementation phase. Our intent was to review and analyze the environmental outcomes for each of the Minnesota XL pilots on a pollutant-by-pollutant basis. Originally, we predicted that our most significant conclusions would come from the comparison of the emission release data. We presumed this data would show quite clearly whether or not the Minnesota facilities achieved SEP. It was on this basis that the MCEA planned to judge EPA's Project XL program for its effectiveness in delivering better environmental protection and for its continued application in Minnesota.

However, two factors have precluded us from undertaking this type of quantitative analysis. First, an XL participant's withdrawal from Project XL (in this case 3M after more than a year into the negotiating process) was unforeseen and thus not an outcome considered by the MCEA in the development of its Regulatory Innovations Project. Second, the length of time involved prior to issuance of FPAs and XL permits (for both Andersen and U.S. Filter) was much longer than originally anticipated.²⁹⁵ As a result, none of the Minnesota Project XL pilots are in the implementation phase yet. Therefore, the MCEA is unable to assess the relative effectiveness of Project XL in improving Minnesota's environment because the data simply does not exist.

Accordingly, what follows is a qualitative assessment of the three Project XL initiatives undertaken in Minnesota. This part of the Article is comprised of three subparts that individually examine the Minnesota Project XL pilots: the 3M Hutchinson, Minnesota, tape manufacturing facility; Andersen's window and door manufacturing plant in Bayport, Minnesota; and U.S. Filter's hazardous waste treatment facility in Roseville, Minnesota.

Each of the three subparts will begin with a general description of the facility's operations then briefly describe the environmental emissions and applicable regulations for each plant. Next, each subpart will provide an overview of a company's Project XL pilots. Finally, each subpart will discuss issues of concern and expected benefits from each of the pilots. Due to the greater complexity of the 3M Hutchinson pilot, the subpart discussing it will also include information on the impact of 3M corporate changes at the Hutchinson facility, relevant information on 3M's efforts to reduce emissions at the facility, an in-depth look at the proposed emission caps, and factors leading up to 3M's withdrawal from Project XL.

1. 3M Company—Tape Manufacturing Facility, Hutchinson, Minnesota

The 3M Hutchinson facility is located about 60 miles west of Minneapolis in the city of Hutchinson, Minnesota. The facility is comprised of two large manufacturing buildings, known as the "North" and "South" buildings located next to one another on a 25-plus acre site.²⁹⁶ Prior to 3M's ownership, the facility was an abandoned war surplus hemp plant utilized by the government in World War II.²⁹⁷ 3M operations began in 1947 with the production of cellophane tape; today, its South building produces a variety of adhesive and pressure-sensitive tapes, such as transparent, electrical, and medical tape.²⁹⁸ In 1956, 3M built its magnetic media plant and produced the first commercially feasible roll of videotape in the world.²⁹⁹ Since then the North building has manufactured magnetic tape products for use in the recording, music, computer, movie, and television industries.³⁰⁰ Beginning in 1996, the North building began to replace its magnetic tape production lines with adhesive tape production lines.³⁰¹

3M considers the Hutchinson operation one of its flagship and showcase facilities due to its compliance record and its efficient and talented work force.³⁰² Hutchinson is 3M's largest U.S. manufacturing facility, employing approximately 1,800 people from 38 surrounding communities.³⁰³ It is also where 3M frequently tests new product lines. For instance, 3M's Post-it TM notes were first produced at Hutchinson and then moved to another plant for full production.³⁰⁴

For several reasons the 3M Hutchinson Project XL pilot is the most complicated of the three pilots discussed. First, 3M's original proposal was not based on EPA's Project XL criteria, but rather an innovative permitting concept it had designed known as "Beyond Compliance," discussed previously. Consequently, 3M entered Project XL with an already well-defined perspective on many issues, including SEP, that EPA had not yet fully developed for Project XL. Second, 3M's proposal was very broad in scope and covered numerous issues, such as air pollution emissions, hazardous waste, the development and utilization of an EMS for monitoring, and Internet website reporting of environmental information. Third, 3M's corporate decision to spin off its memory products into a new company resulted in uncertainty as to what types of products and processes would be [32 ELR 10102] produced at the North building over the course of the XL permit term. Taken together, these three factors amounted to a level of complexity unlike any other Project XL proposal submitted to EPA.

a. 3M's Corporate Changes Impact the Hutchinson Facility³⁰⁵

In 1996, during the development of the Project XL permit for Hutchinson, 3M corporate decisions resulted in a new spin-off company, known as Imation.³⁰⁶ This newly formed, independent company, headquartered in Oakdale, Minnesota, would thereafter produce 3M's memory products, such as its magnetic videotape and audiotape that were produced at the Hutchinson North building. However, a complete production changeover would not occur immediately. Over the next few years the North building would continue producing large volumes of visual recording tape to fulfill contract obligations with its customers.³⁰⁷

Ultimately, the Hutchinson North building would phase out of magnetic tape production altogether and transition to the production of adhesive tape products.³⁰⁸ The physical production line changes and the corresponding uncertainty over what products would be produced at the North building during the course of the XL permit was clearly a factor that contributed to the difficulty in reaching an agreement on the XL permit and FPA acceptable to all parties.

b. Sources and Emissions of VOCs and HAPs at 3M Hutchinson³⁰⁹

Of the various technologies employed at the facility, the one most significant to the design of the XL permit in terms of pollution limits, standards, and enforcement was coating. "Coaters" are the production lines that apply the adhesive or a magnetic coating to the uncoated web or substrate that make up the tapes produced at 3M.³¹⁰ The tape coaters at Hutchinson, if uncontrolled, can emit thousands of tons of VOCs yearly. Of the 13 coaters at the facility, 3M had equipped 12 with pollution control devices.³¹¹ At the time of the XL permit development, 4 of the 12 coaters were required by federal and state regulations to operate with pollution control equipment.³¹² The remaining eight coaters operated with voluntary pollution control, although they could bypass the control equipment for occasional process upsets, scheduled maintenance, or for the experimental use of solvents that were incompatible with the control equipment.³¹³ Other processes at the facility that release VOCs include parts washing, dispersion mixing, and solvent storage.³¹⁴

The primary environmental concern with VOCs is that once emitted they react in the atmosphere to form ozone and smog. In addition, VOCs are comprised of individual pollutants, some unregulated and others that are regulated by EPA HAPs.³¹⁵ The specific pollutants identified as HAPs are associated with human health effects ranging from short-term impacts, such as mild irritation, to long-term and serious impacts, such as reproductive disorders and cancer.³¹⁶ In an effort to reduce emissions of VOCs and HAPs, 3M had been working aggressively to introduce water-based solvents into its tape manufacturing processes.³¹⁷ Yet in 1996, all of its magnetic tape coaters and many of its adhesive tape coaters still required the use of organic solvents as a carrier to coat solids onto a substrate.³¹⁸

3M's North building used a solvent that was a mixture of VOCs consisting primarily of the HAP-regulated pollutants methyl ethyl ketone (MEK) and toluene, along with lesser amounts of non-HAP VOCs in its magnetic tape manufacturing process.³¹⁹ The South building utilized primarily non-HAP VOCs, e.g., heptane, naptha, and small amounts of other VOCs, with some HAPs (mostly toluene and methanol). At the North building 83% of the VOCs emitted were HAPs. In contrast, 23% of the VOCs emitted from the South building were HAPs. Another VOC and HAP source at both plants is thecompounding area, where coating materials are mixed in tanks. This area was unregulated at the time the XL permit was developed, although it was likely that pollution [32 ELR 10103] control would be required for the compounding area by EPA regulations that ultimately took effect in December 1996.

In an effort to meet its own corporate waste minimization goals and air emission reduction policy, 3M voluntarily installed four thermal oxidizers to control pollution at the South building and a solvent recovery system at the North building.³²⁰ This resulted in a dramatic decrease in overall VOC emissions at Hutchinson from 18,453 tons in 1989 to 2,307 tons in 1995.³²¹ Additionally, HAP emissions were reduced from over 12,000 tons in 1989 to 1,081 tons in 1995.³²²

c. Regulation of Air Pollutants at 3M Hutchinson³²³

The production lines at 3M Hutchinson that were in existence before passage of the CAA were granted "grandfather" status. These lines are permitted to operate without adherence to specific EPA regulations applicable to new sources or major modifications of existing sources for the control of "criteria" air pollutants.³²⁴ At the North and South buildings at Hutchinson, four of the six magnetic tape coaters, and three of the five adhesive tape coaters, were unregulated due to their grandfather status. The remaining lines—two magnetic tape coaters and two adhesive tape coaters—came under the CAA's regulations for new source performance standards (NSPS) and prevention of significant deterioration (PSD).³²⁵ Although the majority of the production lines were allowed to operate outside CAA requirements, 3M had to abide by other state and federal requirements. For example, pursuant to the federal Emergency Planning and Community Right-To-Know Act, 3M must submit annual toxic release inventory (TRI) data to EPA on its emissions of certain pollutants.³²⁶ 3M is also required to submit to the MPCA annual air emissions inventory reports that include its VOC emission release data.³²⁷

In addition to controlling criteria pollutants, such as VOCs, Title III of the 1990 Amendments to the CAA also required the control of HAPs through new EPA-approved technologies known as maximum achievable control technology (MACT) standards.³²⁸ The MACT standards applicable to the production of magnetic tape were to take effect in December 1996.³²⁹ It was anticipated that the new MACT standards would require all major sources to be controlled to at least 95% efficiency.³³⁰ However, 3M was already obtaining a control efficiency rate of 99% at its North building in 1995.³³¹ The 1990 CAA Amendments also contained a provision granting a six-year extension for the installation of MACT for facilities that could demonstrate a 90% reduction in HAP emissions between 1987 and the date the applicable standard was first proposed.³³² Accordingly, if 3M could demonstrate that the North building reduced HAP emissions by 90% prior to 1994 it would not be required to install MACT until 2002, and by then it would no longer be producing magnetic tape.³³³ Similarly, compliance with the federal MACT standard for adhesive tape coating operations (applicable to the South building) was also years away. EPA was not expected to issue a proposed standard until the year 2000, with an effective date sometime in the year 2003.³³⁴

d. Emission Reductions at the Magnetic Tape (North) Building³³⁵

Between 1989 and 1995, 3M reduced emissions at its North building, where it produced magnetic tape, over 93% from approximately 14,000 tons to 931 tons of VOCs.³³⁶ This emission reduction was achieved while production output increased overall by 67%.³³⁷ 3M was able to attain this reduction by installing a state-of-the-art solvent recovery system that recycled most of the solvents used on six of the building's seven magnetic tape coaters. Two of these coaters were required by EPA's NSPS to operate with a solvent recovery system, and 3M voluntarily chose to include the other four coaters in the system based on 3M's corporate Air Emission Reduction Plan. The annual efficiency of the solvent recovery system averaged approximately 99%, while the federal MACT standard for such systems requires a control efficiency rate equal to or greater than 95%. The remaining coater at the North building is not a magnetic tape coater and is not included in the solvent recovery system.

e. Emission Reductions at the Adhesive Tape (South) Building³³⁸

At the South building, where adhesive tape is manufactured, 3M reduced emissions by almost 68%, going from 4,300 [32 ELR 10104] tons of VOCs in 1989 to just under 1,400 tons in 1995. The reductions at the South building occurred, as stated above, while production increased overall at the Hutchinson facility by 67%. Emission reductions at the South building were not as remarkable as at the North building due to the difficulty in designing a low solvent recovery system for the adhesive tape coaters. Thus, reductions at the South building were achieved primarily from the operation of pollution control equipment (thermal oxidation), although source reduction efforts contributed to overall emission reductions. 3M reduced emissions on all five adhesive coating lines, even though EPA requirements only applied to two coating lines.³³⁹

The incentive to bring about emission reductions was twofold: economics (saving unnecessary costs associated with pollution control and disposal) and public relations (demonstrating a downward emission trend in reporting TRI data to the public). Nevertheless, despite the large reductions already realized, there remained significant opportunities at the South building to implement additional source reduction and pollution prevention measures. For example, 3M was advancing its ability to replace VOC solvent-based coaters with partially or completely water-based systems. Also, large reductions in fugitive (non-stack) emissions from VOC-based coaters could be achieved by completely enclosing the production line. Further, 3M was developing a new hot-melt technology for some of its products where VOC solvents were used but none, or very few, were emitted during production or use.

f. 3M's Project XL Proposal—An Overview³⁴⁰

In lieu of a traditional environmental permit, 3M originally proposed a covenant to be entered into between 3M, EPA, the MPCA, and the city of Hutchinson. What began as a 10-page covenant was substantially modified throughout the XL process and replaced with an FPA and draft permit. The following were the main features of the FPA and XL permit.

i. Permit Consolidation

The proposed 3M XL permit replaced a total of 22 individual permits, 18 of which were required by the MPCA. Instead of requiring separate permits for the construction and operation of a new wash tank, a distilled solvent surge tank and storage tank, a parts cleaning tank, three replacement natural gas burners on a coater oven, a liquid storage tank, and an upgrade to a microabrasives coater, all these activities, along with others, would be included in the XL permit. Thus, through consolidation, the XL permit was designed to simplify tracking environmental improvements, emissions, reporting, monitoring, and any changes. As a result, administrative time normally devoted to various individual permits by 3M and the MPCA staff could be allocated to other activities or initiatives, for example exploring pollution prevention opportunities.

ii. Multimedia Characteristics

The XL permit for Hutchinson was also designed to be holistic in both theory and practice. It included air emissions, water quality, and hazardous waste requirements. The hazardous waste terms and conditions authorized 3M to store hazardous waste on-site for 180 days, double the 90-day regulatory maximum storage time. Although the XL permit allowed 3M to store hazardous waste beyond the regulatory imposed storage period, 3M was not planning to increase the amount of hazardous waste it generated and no new hazardous waste storage tanks would be constructed. The rationale for an extended storage period was that with greater recycling of waste, it would reduce shipment of partial truckloads of hazardous waste off-site. Costs for shipping and compliance reporting would be lowered, and there would be fewer trucks transporting hazardous waste on the roads.

iii. Facilitywide VOC and HAP Caps (Bubbles)

The permit included an air emissions cap significantly below 3M's allowable regulatory limit, yet above the facility's 1995 actual emission levels. The caps allowed 3M to make modifications without going through the prescribed permit amendment process at the state regulatory agency.

iv. Mass Balance, Input-Output Analysis

The FPA committed 3M to undertaking a mass balance analysis to measure the facility's performance in terms of production per amount of emissions released, energy used, and other goals.

v. Individual Source Control Requirements

The permit required 3M to install individual control equipment on all new sources that emit over 40 tons per year of VOCs and to install best available control technology (BACT) on all sources (both new and existing) that emit over 100 tons per year of VOCs. 3M and the MPCA were to have mutually agreed upon a definition of BACT specific to the 3M facility (not necessarily the definition prescribed by EPA).

vi. Application of the Minnesota Department of Health's Health Risk Values (HRVs) for Toxic Air Pollutants

Through the FPA, 3M committed to report its emissions of toxic chemicals, and to ensure that facility emissions did not exceed the Minnesota Department of Health's proposed numerical HRVs established to protect the public from acute, subchronic, and chronic effects of toxic air pollutants. The permit required 3M to demonstrate that its emissions of toxic air pollutants for which there were HRVs established by the Minnesota Department ofHealth, were below a hazard index of 1.0 for carcinogenic and noncarcinogenic chemicals associated with chronic toxicological endpoints. The permit contained a condition limiting operations in order to prevent an exceedance of the department's acute HRV for toluene. For other HRVs with acute endpoints, 3M was to have defined an acute chemical release procedure, upon approval of the MPCA, that would define the probability of unacceptable exposures and identify operational procedures to prevent such occurrences.

[32 ELR 10105]

vii. Application of an EMS

Through the FPA, 3M committed to the development and implementation of an EMS—with stakeholder oversight—in an effort to verify compliance with the permit; move the facility to a more "design for the environment mode" by integrating environmental protection into overall strategic operations; and test whether an EMS provided better environmental or management results. The EMS was to have contained goals for pollution prevention, a waste ratio, reductions in toxic release inventory chemicals, and environmental impacts of products. Further, the permit required that an audit of an EMS be conducted annually with an independent third party performing an audit for years 1998, 2001, and 2005, and with 3M conducting audits for the remaining years.

viii. Periodic Regulatory Analysis

Review and analysis of state and federal regulatory requirements were to occur on November 1, 1998, 2001, and 2005, by the MPCA and 3M in order to determine what the allowable emissions of each pollutant would be on a facilitywide basis. Thereafter, the MPCA would determine whether a modification to the permit was needed to keep the caps in line with applicable law. The caps could be adjusted only downward if necessary.

ix. Stakeholder Involvement

Two stakeholder groups were formed to participate in the design, implementation, and evaluation of the FPA and permit. One group represented the Hutchinson community and was comprised of local members; the other represented statewide interests and included members from business, academia, consulting firms, and environmental groups.

x. Internet Reporting

Through the FPA, 3M committed to the development of a user-friendly Internet website where actual emissions data and compliance reporting would be posted and readily available.

xi. Measurement and Reporting Mechanisms to Encourage Pollution Prevention

While neither the FPA nor the XL permit contained a direct mandate to utilize source reduction or pollution prevention measures to achieve SEP, the public disclosure of the various monitoring and evaluation procedures, including a mass balance analysis, was considered a strong incentive to implement pollution prevention and source reduction techniques. Also, the completed EMS was to have included a detailed section on goals that would, among other things, evaluate all opportunities for preventing or reducing pollution using the waste management hierarchy and starting with source reduction.

g. Setting the Air Emission Caps—"Technical Difficulties"³⁴¹

The facilitywide limit, or caps, for air emissions of VOCs and HAPs was the issue that generated the most discussion and debate. By proposing the two caps it was as if the XL permit placed two separate "bubbles" over the Hutchinson facility, one for VOCs andone for HAPs. The caps were to take the place of specific technology-based regulatory requirements for numerous, individual emission points of VOCs and HAPs. The rationale for the VOC and HAP caps was to provide 3M plant managers at Hutchinson with the flexibility to decide how to most effectively allocate resources in order to comply with regulatory limits.

Determining the appropriate levels for the caps, however, was difficult because the caps had to be set at a level that would result in SEP; that is, a level superior to what would otherwise be achieved under existing regulations absent Project XL. This already complex task of establishing emission caps based on SEP was further complicated by the fact that the various parties involved had different understandings of this concept. Moreover, setting the caps was difficult due to 3M corporate decisions to phase out its memory products division, resulting in extensive production changes at the Hutchinson North building. These changes made estimating future emissions extremely difficult, as well as predicting the effect of future regulations on the Hutchinson plant over the 10-year period envisioned for this XL pilot. Unlike some other companies' Project XL proposals, the 3M Hutchinson pilot lacked a clear emissions baseline that could be used to measure the plant's future performance in emission releases against the proposed caps.³⁴² Thus, efforts by EPA, the MPCA, and 3M to develop a mechanism that regulators could use for comparison purposes grew increasingly complicated as XL negotiations progressed.³⁴³

Despite the uncertainty of production at the North building, 3M projected total emissions over the 10-year XL permit term for both the North and South buildings combined by assuming that the plants would be operating at full capacity (95% of the time at maximum line speed) and at a growth rate 6% higher than the U.S. economic growth rate.³⁴⁴ 3M further assumed a pollution control efficiency rate of 95% at its North building and a 90% rate for its South building. Under these assumptions, 3M concluded that maximum emissions would be 5,339 tons per year for VOCs and approximately 3,500 tons per year for HAPs.³⁴⁵ Based on these figures, [32 ELR 10106] 3M proposed a VOC cap of 4,500 tons per year and a HAP cap of 3,000 tons per year to be effective over the 10-year permit term.

Notwithstanding the fact that the proposed cap levels were higher than the facility's actual releases for the previous year (1995) of 2,307 tons per year of VOC and 1,081 tons per year of HAPs, 3M maintained that the proposed caps represented SEP. 3M arrived at its conclusion based on its belief that the caps would bring about increased reductions in emissions over the entire permit term in a manner that went well beyond compliance with current and future regulations. At the time, the air permit that 3M was operating under allowed 32,903 tons of VOC emissions per year from the Hutchinson facility. In addition, the 3M air permit had no limit on HAP emissions. If 3M did not operate its voluntary pollution control equipment, HAP emissions at Hutchinson would be 12, 413 tons per year. Further, according to the MPCA's assessment, even if the Hutchinson facility were to operate at the 3,000 tons per year HAPs cap limit, it would be below all carcinogenic EPA health risk thresholds. 3M therefore concluded that its proposed caps were far more stringent than the current allowable regulatory limits.

Furthermore, in setting its proposed caps, 3M projected no new major modifications of its production lines. Accordingly, 3M concluded the facility would not be subject to additional future regulation under EPA's new source review rules. However, 3M was aware that new EPA MACT standards to control HAP emissions for magnetic tape plants would take effect in the coming year. As a result, 3M anticipated that future allowable emission limits for HAPS at its North building would decrease to approximately 13,000 tons per year.³⁴⁶ 3M concluded its proposed caps would be well below future allowable regulatory limits as well as current limits.

The MPCA technical staff examined 3M's assumptions and acknowledged the uncertainty inherent in any estimate, which in this case was heightened due to the impending changes at the North building. Yet, in an effort to develop an XL permit that would satisfy EPA's criteria for SEP, the MPCA staff also developed emission projections (separate from those calculated by 3M) to be compared to current and foreseeable regulatory requirements. Like 3M, the MPCA's estimate of total allowable VOC emissions from Hutchinson was based on the assumption that the facility would be operating at full production and applying BACT standards. Unlike 3M's projection, the MPCA assumed technology improvements would enable adhesive tape coaters to achieve a 95% control efficiency rate. Therefore, according to the MPCA's BACT analysis, all of the facility's coaters would be controlled to a 95% efficiency rate. (3M's assumption was premised on 95% control for its magnetic tape coaters and 90% control for its adhesive tape coaters pursuant to current NSPS.)

The MPCA also predicted that by the year 2006 3M Hutchinson would only operate adhesive tape coaters. Moreover, the MPCA recognized that adhesive tape coaters emit substantially less HAP per unit of production than the magnetic tape coaters that 3M was phasing out. Based on these assumptions, the MPCA projected that by the year 2006 (the last year of the XL permit) allowable VOC emissions would be 3,300 tons per year, much lower than 3M's projection of 5,330 tons per year. The MPCA recognized, however, that its more stringent BACT requirements would presumably be phased in gradually over the course of the permit, if at all. Furthermore, agency staff acknowledged that its estimate of 3,300 tons per year in allowable emissions would most likely be applicable to the facility only in the last year of the XL permit.

Nonetheless, to ensure that 3M Hutchinson's caps were superior to regulatory requirements, the MPCA required regulatory reviews at set intervals throughout the permit term, thereby enabling the agency to readjust the caps (downward only) if necessary. In addition, the MPCA was aware that 3M had a corporate environmental policy to install BACT on all VOC sources emitting over 100 tons per year and to install control equipment on all sources emitting over 40 tons per year. Upon the MPCA's request, 3M agreed to include this policy as a condition in the XL permit. In exchange for agreeing to make company policy legally enforceable, the MPCA agreed to a more flexible definition of BACT, one that would be determined by a procedure set out in 3M's EMS that had yet to be approved by the MPCA.

Thus, from 3M's and the MPCA's perspective, the XL permit caps of 4,500 tons per year of VOCs and 3,000 tons per year of HAPs were determined reasonable, albeit based on less than perfect estimates of future emissions and regulations. Precisely due to that uncertainty, the parties included the periodic regulatory reviews as a "safety net" feature in order to guarantee that the caps would conform to changing regulations and production plans.

Finally, as was pointed out by some of the stakeholders, the caps also represented SEP because the new limits, in effect, subjected all of the facility's production lines to regulatory control and enforcement under the XL permit—even those "grandfathered" units currently not subject to regulation. Moreover, these stakeholders asserted, if 3M replaced one of its magnetic tape coaters that controlled 99% of VOC emissions via a solvent recovery system with an adhesive tape coater that only controlled 90% of VOC emissions, the result could increase VOC emissions by several hundred tons per year. Accordingly, 3M would be forced to innovate, most likely through increased pollution prevention and source reduction techniques, in order to keep its emissions under the caps. Thus, many concluded that the caps would drive SEP.

Table 1

Proposed VOC Cap Compared to Other VOC Emission Levels

XL Proposed VOC Emission Cap	4,500 tons/yr.
1995 Actual VOC Emissions Released	2,307 tons
1995 Allowable VOC Emissions	33,890 tons/yr.
1995 VOC Emissions Without	17,181 tons/yr.
Operating Voluntary Pollution Control
Estimate of Allowable Future VOC	13,450 tons/yr.
Emissions After MACT in Effect

[32 ELR 10107]

Table 2

Proposed HAP Cap Compared to Other HAP Emission Levels

XL Proposed HAP Emission Cap	3,000 tons/yr.
1995 Actual HAP Emissions Released	1,081 tons
1995 Allowable HAP Emissions	No Limit
1995 HAP Emissions Without	12,413 tons/yr.
Operating Voluntary Pollution Control
Estimate of Allowable Future HAP	3,816 tons/yr.
Emissions After MACT in Effect

Table 3

Potential Emissions Scenarios for 3M Hutchinson as Estimated by 3M and MPCA

	3M # 1	3M # 2	MPCA # 1	MPCA # 2
Number of
Coaters:	13	13	13	13
Type of	NSPS	NSPS	BACT	Actual
Control:	North @95%	at 90%	at 95%	BACT
	South @90%	on all	on all	at 95%
Year 2006
Tons VOC =	5,339	6,687	3,280	5,000
Year 2006
Tons HAP	3,500	n/a *	1,900	n/a *

^* information not available

h. 3M's Project XL Pilot—Criticisms and the Proponents' Response

The environmental issues overshadowing all others in the 3M Hutchinson XL pilot were those pertaining to air emissions of VOCs and HAPs. Other issues raised during the public comment period included the development of 3M's EMS; the linkage between the EMS, XL permit, and FPA; measuring and tracking pollution prevention; and the storage and management of hazardous waste. In addition, there were minor issues raised about the construction of an on-site wastewater disposal system. However, the predominant issue of concern with the 3M Hutchinson pilot focused on the proposed 4,500 tons per year VOC cap and the 3,000 tons per year HAP cap. While the previous section described the difficulty in setting the caps from a technical standpoint, this section examines the criticisms of the caps and the proponents' rationale in support of the proposed XL permit for 3M Hutchinson.

Critics maintained, among other things, that the proposed caps did not even achieve equivalency with current conditions in comparison to 3M Hutchinson's actual emission releases.³⁴⁷ Further, they argued that creating a VOC cap at almost double the current emission levels was "contrary to both the spirit and explicit criteria of Project XL."³⁴⁸ Opponents claimed that the 3M proposed VOC cap "would increase, not decrease, air emissions; [it] would allow air emissions increases that would not likely be allowed under current law; and it would permit the facility to once again become one of the very largest sources of volatile organic compound (VOC) emissions in the nation."³⁴⁹ Moreover, critics asserted, that the FPA created only "paper reductions," and that those reductions "may even be illusory" because the 4,500 tons per year VOC cap was far beyond the MPCA's 3,278 tons per year estimation of allowable VOC emissions under future BACT requirements.³⁵⁰ Similarly, they found the "size of the [HAP] cap cannot be squared with [SEP as] the cap would allow the facility to triple its HAP output . . . and it would allow the facility to trade emissions of less toxic HAPS for emissions of more toxic HAPs."³⁵¹ Therefore, the critics concluded, the XL permit should not be issued to 3M Hutchinson because it failed to demonstrate, much less guarantee, SEP.

Critics correctly observed that the 4,500 tons per year cap was almost double the total amount of VOC emissions released by 3M Hutchinson in 1995. And their argument that the cap could not be construed as SEP would be sound if the facility's production and emission levels remained constant or continued to decrease dramatically throughout the 10-year XL permit. Accordingly, one critic's conclusion that the 4,500 tons per year VOC cap was nothing more than a "paper" reduction would be entirely legitimate. In other words, if the Project XL permit would only result in reducing the allowable regulatory emission level (that which is permissible on paper) from 38,000 tons per year to 4,500 tons per year even though actual emissions remained at approximately 2,307 tons per year, then no real emission reduction would be gained from the XL permit. Indeed, the critic's claim that this "reduction" was only illusory would be valid if ultimately the 4,500 ton per year VOC cap was above future allowable regulatory levels for the 3M Hutchinson facility.

Notwithstanding the obvious disparity between the proposed VOC cap and 3M's actual VOC emissions in 1995, proponents of the proposed 3M XL pilot concluded that the project did in fact meet the requirement of SEP based primarily on the following reasons. First and foremost, to those involved in the development of the FPA and permit, the proposed emissions cap could not be viewed independently from the performance ratio that would track the facility's product output per amount of VOC released over the duration of the permit. In fact, proponents downplayed the relative importance of the cap in determining whether the 3M pilot met the criteria for SEP. Proponents recognized that by the year 2006, the North building would no longer be producing magnetic tape, but adhesive tape products instead, and production was expected to increase. The MPCA and 3M had projected emissions for VOC in the range of 3,378 to 6,687 tons per year (which included the use of pollution control technology). (See Table 3.) Proponents asserted that tracking 3M's emissions based on the amount of product [32 ELR 10108] produced per year would be the key driver of SEP. Many were convinced that without Project XL, the pressure to demonstrate a declining performance ratio (that is, fewer emissions per product produced) would be almost nonexistent because current regulations did not require 3M to track, much less report, this production ratio.

Second, the caps' primary purpose was to be a reasonable upper boundary on emissions, whereas the facility's allowable levels, e.g., 32,903 tons of VOC, were wholly disproportionate to actual emission levels and were even viewed by EPA as irrelevant to the permitting process. Indeed, if either of the caps were to be exceeded it would be cause for an enforcement action. In contrast, 3M's then current permit allowed VOC emissions in excess of 4,500 tons per year to go unabated, and therewas essentially no limit on HAP emissions.

Third, proponents clearly understood that the caps provided 3M with a considerable emissions "cushion," especially in the early years of the XL permit when it would be highly unlikely that the facility's actual emissions would even come close to the cap limits.³⁵² However, proponents viewed the caps as a concrete backstop on which the company could depend upon, the advantage being that 3M could then more freely experiment with source reduction and other long-term sustainable techniques without fearing exceedances of the cap limits. Many proponents successfully argued that if lower caps were set 3M would not aggressively pursue innovative production techniques, but rather, would be compelled to rely on end-of-the-pipe control (such as thermal oxidation) to avoid any penalties for exceeding its caps. One example discussed by XL participants was that some source reduction techniques may initially yield only an 85% efficiency rate in reducing emissions, whereas the application of pollution control equipment may provide a 99% pollution control efficiency rate. Proponents observed that while the control equipment may provide greater reductions initially, it would fail to provide benefits or sustainable solutions over the long term. With projected VOC emissions in the range of 3,300 to 6,600 tons per year, proponents believed that the 4,500 tons per year VOC cap would be aggressive enough to drive innovation, yet not so tight as to inhibit 3M's ability to experiment with innovations compatible with long-term sustainability goals.

Fourth, proponents also recognized that the most stringent pollution control requirement scenario estimated by the MPCA (according to its BACT analysis) would limit the facility to 3,278 tons of VOC by the year 2006, clearly below the 4,500 tons per year VOC cap. Proponents, however, were not overly concerned with this disparity because they realized the MPCA's stringent "BACT limit" was only a best guess estimation. Furthermore, proponents pointed out, even if it would be accurate it would not take effect until the end of the 10-year permit term, which provided ample time to make adjustments to the cap before the more stringent BACT limit would take effect.

Correspondingly, proponents believed that conducting periodic reviews during the course of the permit term would ensure that the XL caps were in line with regulatory requirements. Periodic regulatory reviews would therefore alleviate any concern that actual emissions from 3M Hutchinson would be greater than what future regulations would require. Proponents were satisfied that appropriate modifications to the caps—downward only—would keep them in line with future regulatory requirements (such as more stringent BACT or MACT requirements). It was the belief of the proponents from a policy standpoint that promoting a new competence in environmental management through the application of a robust EMS and the development of long-term sustainable practices into the regulatory system through Project XL was paramount to, and ultimately far more beneficial than, comparing actual emissions to a VOC cap that was subject to regular review and reassessment.³⁵³

Additionally, proponents believed that the proposed VOC and HAPcaps would not jeopardize human and environmental health. Nowhere in any of EPA's comments, correspondence, or discussions with the stakeholder groups or the MPCA, did EPA raise a concern that the 3M pilot would directly cause adverse impacts to human or environmental health.³⁵⁴ Moreover, the 3M Hutchinson facility is located in an area that meets national ambient air quality standards under the CAA and the XL permit would not have altered that status. Furthermore, 3M committed to meeting the Minnesota Department of Health's proposed health risk values for toxic air pollutants, something it was not required to do under federal or state law.

Finally, proponents of the 3M pilot firmly believed that public pressure and oversight are some of the strongest motivating factors that will drive a company to achieve SEP. Proponents considered the 3M pilot to be a breakthrough in facilitating greater transparency in environmental reporting and compliance through the development of a simplified and understandable Internet website. Thus, additional public scrutiny was a compelling factor, along with those previously described, that led the proponents to conclude the 3M proposed permit and FPA met EPA's requirement of SEP.

i. Divergent Expectations Lead to 3M's Withdrawal From Project XL

It was the MPCA's understanding, prior to and even during the public comment period on the proposed XL permit and FPA, that facilitywide caps were acceptable to EPA and that no major issue remained.³⁵⁵ Thus, the MPCA, 3M, and involved stakeholders were both surprised and disturbed by the comments submitted by EPA at the end of the public comment period. Not only because EPA's comments contained a number of major issues, but because they conveyed a strikingly different understanding of key concepts embodied [32 ELR 10109] in Project XL than those shared by many of the Minnesota participants.

After the close of the public comment period, negotiations among the MPCA, EPA, and 3M over the proposed XL permit and FPA began in earnest.³⁵⁶ Meanwhile at EPA Headquarters, staff in the OPPE began to flesh out the skeletal Project XL with more definition, details, and deliverables. While 3M and other XL participants would come to recognize a need for greater clarity and definition for the XL program, as negotiations in Minnesota continued 3M managers, the MPCA's commissioner, and other staff began to feel as though EPA was changing the "rules" in the middle of the game.³⁵⁷ EPA, on the other hand, perceived its refinement of Project XL as a necessary response to requests for clarification of the project's definitions and boundaries.³⁵⁸ Nevertheless, the fact that many of the details had not been generally agreed upon within EPA at the outset of Project XL caused a great deal of difficulty in developing certain terms and provisions of the 3M XL permit, most notably those pertaining to a determination of SEP.

EPA's initial announcement described SEP as "performance that is superior to what would be achieved through compliance with current and reasonably anticipated future regulations."³⁵⁹ EPA later qualified the word "through" as meaning to take into account a source's actual emissions and a buffer, thus reflecting a source's existing emissions ability, not a source's allowable emission limits.³⁶⁰ EPA therefore came to the position that SEP for 3M Hutchinson required the company to, "on a plant-wide basis for each pollutant, achieve actual emissions that are below what actual emissions would have been under otherwise applicable regulations."³⁶¹ An application of this definition to 3M's proposed VOC cap would mean that the 4,500 tons per year cap must be lowered to 2,300 tons per year to reflect the facility's actual VOC emission releases. In addition, EPA stated that Project XL could not waive requirements of Title V of the CAA; therefore, the 3M XL permit "must be substantively equivalent to a Title V permit, including . . . line-by-line record keeping and monitoring, and reporting as required by otherwise applicable requirements."³⁶²

EPA's evolving concept of SEP also included a mandate, or guarantee, for a specific performance level that wasbased on 3M's actual emission releases. EPA's approach to demonstrating SEP was also very prescriptive and would have required a level of recordkeeping and monitoring at least as detailed, if not more so, than that which was required by 3M under the current system. (Not only would 3M be required to track performance under its XL permit, but it would also have to track performance based on what would otherwise have occurred absent Project XL, in effect this would result in a dual tracking system.) Additionally, EPA viewed past voluntary pollution control efforts primarily as a qualifying factor (among others) that would be considered along with a company's application for admittance into the Project XL program.³⁶³

In contrast, the MPCA, 3M, and many stakeholders viewed SEP quite differently; they were not insistent upon an up-front guarantee for a specific performance level. To these groups, the concept of SEP was inexorably linked to the experimental nature of Project XL, whereby the degree of superiority achieved would only be determined after the pilot was up and running.³⁶⁴ Accordingly, these groups strongly believed the XL permit and FPA were structured such that there was a very high probability that 3M's performance under XL would be superior to what it could otherwise accomplish under the current regulatory system. And, while actual emissions release data was important to these groups in setting a reasonable emissions cap, so were other factors, such as reporting a production ratio, assuring public health protection, and providing ample flexibility to enable aggressive source reduction efforts. Moreover, many stakeholders were more concerned with how to develop and test a system that encourages and rewards voluntary emissions control than with how to precisely allocate—or not allocate—credit for past voluntary control.

After five months of intense effort to resolve all of EPA's major issues of concern with the proposed 3M XL permit and FPA, two critical issues remained: (1) a determination of SEP, in particular, as it pertained to 3M's unregulated emission sources; and (2) what procedure to use to verify that SEP occurred. In order to verify SEP, EPA wanted 3M to evaluate each emission unit. Accordingly, 3M would be required to analyze, on a unit-by-unit basis, the impact of any modifications in light of any new regulations in order to compare what would have happened outside of Project XL to what actually happened under Project XL. This analysis became known as the comparable actions test (CAT).³⁶⁵ According to the CAT, each emission unit would have received a debit or credit and the XL permit would have required 3M to have more credits than debits overall.

While all participants agreed there was utility in conducting some type of comparative analysis, the CAT was prescriptive, complex, and essentially a return to "old style" regulatory compliance. It was anything but transparent or streamlined. To 3M, the MPCA, and other stakeholder members, theCAT came to represent the antithesis of the Project XL described to them by President Clinton at a formal [32 ELR 10110] announcement ceremony a year earlier in the Old Executive Office Building in Washington, D.C. To these parties, the CAT was not "less bureaucratic," not "more hassle-free."³⁶⁶ "It did not give 3M "the freedom to devise its own strategies . . . in consultation with their neighbors." It did not reaffirm 3M's responsibility to its community."³⁶⁷ On the contrary, the CAT came to represent an example of government "prescribing every little jot and tiddle detail," exactly what the president hoped to avoid with Project XL.³⁶⁸

Moreover, after much discussion, EPA, the MPCA, and 3M found the CAT had unintended results, and in some instances all parties could not even agree on what was intended in the first place.³⁶⁹ Particularly troublesome was the fact that, depending on how the calculations were done, e.g., product-by-product versus an overall unit average rate, the CAT gave differing results. Thus, after four months of working to obtain agreement on an acceptable CAT, 3M withdrew from Project XL in December 1996.³⁷⁰ According to 3M, the decision to withdraw was based on the need for certainty and ability for the company to quickly transition one of its plants into new product lines; something it concluded it could not do under the Project XL umbrella.³⁷¹ 3M managers believed they proposed a project that met EPA's original criteria for Project XL and that they were answering the call to be innovative, to think "outside-the-box."³⁷² 3M, the MPCA, EPA, and many stakeholder members expressed disappointment with the outcome and agreed that the element of time was wearing on all participants. Despite the end result, many valuable lessons were learned by all who participated in the 3M XL pilot experience. What emerged were both environmental benefits and lost opportunities.

j. 3M's Project XL Pilot—Environmental Benefits and Lost Opportunities

Based on EPA's experience with 3M Hutchinson and other XL pilots, the assistant administrator for the OPPE realized the importance of clarifying and further defining Project XL.³⁷³ Staff at EPA's Office of Reinvention claim to have learned agreat deal from the 3M XL experience, further acknowledging that the Minnesota pilot helped the Agency to better define SEP through what they have termed Tier 1 and Tier 2 levels.³⁷⁴ Moreover, EPA believes that Project XL is now clearly recognized internally, and outside the Agency, as a pilot program where ideas will be tested for potential application broadly, and not an alternative compliance path available to select companies in lieu of the current regulatory system.³⁷⁵

A tangible and positive outcome that resulted from the 3M Hutchinson XL pilot was a modification of EPA's HAP standard for the production of magnetic tape (known as the magnetic tape MACT). The existing magnetic tape MACT standard allows "facility owners or operators to leave a limited number of solvent storage tanks uncontrolled if they control coating operations at a level greater than the standards otherwise require."³⁷⁶ Based on the 3M experience, EPA has published a final rule amendment to provide another compliance option for facility owners and operators. If facility owners or operators chose to "over-control" HAP emissions from their coating operations beyond what the existing standards otherwise require, this final amendment gives operators the choice of leaving a limited number of solvent storage tanks and/or limited number of pieces of mix preparation equipment uncontrolled.³⁷⁷ EPA believes this final amendment will not decrease the stringency of the existing standards.

Notwithstanding the benefits of the 3M Hutchinson pilot, many of the Minnesota participants (stakeholders and MPCA staff) believe Minnesota lost an opportunity for further environmental gain, particularly in the area of transparent performance, because the XL permit was not issued. From the MCEA's perspective, the proposed Internet accessibility to information about 3M Hutchinson's environmental performance was potentially one of its strongest components. Website reporting of emissions and related data would have provided the Hutchinson community and other interested parties with information in a more accessible and understandable format than ever before possible.

As expected by the 3M XL pilot participants, emissions have decreased during the transition period at 3M Hutchinson. From 1996-1999, VOC emissions have been 2,167, 1,847, 800, and 714 tons per year respectively.³⁷⁸ Several new adhesive tape lines have been installed at the North building; some of the new coating lines utilize a water-based (low VOC) technology, and others utilize the traditional solvent-based systems.³⁷⁹ The predominant source reduction measures currently employed at 3M Hutchinson involve the research and use of water-based (low VOC) coating technology.³⁸⁰ However, despite these measures, discussions between [32 ELR 10111] 3M and MPCA staff on the facility's new Title V air operating permit have not (to date) focused on how source reduction projects or 3M's EMS could be incorporated into the new permit. Thus, over the last three and one-half years, Minnesota has lost an opportunity to take a holistic approach to regulatory permitting; one that examines—from the beginning of the permitting process—source reduction and pollution prevention techniques for their potential application and maximum environmental protection.

MPCA staff and 3M are presently exploring different ways to improve efficiency (for both the agency and the company) and operational flexibility for 3M Hutchinson while still maintaining human health and environmental protection.³⁸¹ And in all likelihood, 3M's new Title V air permit will include emissions caps for VOC and HAPs.³⁸² Also under consideration is a method to allow MPCA to "pre-approve" alternative operating scenarios as a condition of the new air permit; this would provide the company with the flexibility to make some changes without going through a time-consuming permit modification process.³⁸³ While this more flexible approach may yield a beneficial outcome, it is far from a new concept.³⁸⁴ Thus, Minnesota has lost an opportunity to experiment with "outside-the-box" thinking and ironically, as President Clinton put it, to "prove the cynics wrong."³⁸⁵

2. Andersen Corporation—Window and Patio Door Manufacturing Facility, Bayport, Minnesota

Andersen's facility is located about 25 miles east of St. Paul in Bayport, Minnesota. The plant is situated along the eastern bank of the St. Croix River, a federally designated Wild and Scenic River that separates Minnesota and Wisconsin. In 1903, Hans Andersen and his family began the Andersen Lumber Company in the St. Croix Valley. The company moved its operation in 1913 to its current site, and since then has grown into a leading manufacturer of windows and patio doors whose 110-acre campus, with its 78 buildings, accommodates a work force of approximately 3,000 employees.

In addition to its facility on the river, Andersen owns 245 acres located on a bluff overlooking the western boundary of the city of Bayport. The corporation purchased this land in 1994 for future expansion.³⁸⁶ In the mid-1990s, Andersen sought a permit from the MPCA that would allow the company to build a new facility on the bluff property for additional manufacturing operations, i.e., wood milling. The MPCA issued a permit that would cap VOC emissions at 95 tons per year and also cap particulate matter/particulate matter smaller than 10 microns (PM/PM[10]) at 95 tons per year. Due to changes in business, Andersen decided to reevaluate its options and subsequently dropped its construction plans. Background on the Andersen West site is relevant because the issue of whether it should be included in the XL permit was one of the initial topics discussed by the Andersen stakeholder group.³⁸⁷ Currently, a site suitability study is underway to determine the optimal use(s) for the Andersen West site.³⁸⁸

a. Window and Door Production and Related Emissions

Window and patio door manufacturing at Andersen involve a variety of processes, including wood cutting and milling, wood preservative application, painting, vinyl processing, adhesive operations, technology development, production support, and maintenance functions.³⁸⁹ Central to the design of the XL permit and FPA for Andersen are the VOC-emitting wood preservative processes. These processes include both the in-line, i.e., production line, treatment of products and the large "diptanks" that are used to treat batches of milled profiles. VOCs are also emitted during the painting, vinyl extrusion, and assembly processes. The processes that result in PM emissions are wood cutting and milling, vinyl production, and combustion. Andersen's 1996 actual VOC emissions were 1,507 tons and its PM emissions were 87 tons.³⁹⁰

b. Andersen Corporation's Project XL Pilot—An Overview

Andersen's XL pilot was designed to enable the company to transition to more environmentally friendly products and processes, such as manufacturing energy-efficient windows and doors made from recycled material, and using low-solvent technologies. Through Project XL, Andersen sought to make this transition more efficient by easing certain regulatory requirements. For example, the pilot would eliminate the need to undergo administratively burdensome permit modification procedures each time the company wants to modify or add equipment at its facility.

The following overview highlights some of the features contained in Andersen's FPA and XL permit. Chief among them are the facilitywide air emission caps (or bubbles) and the innovative "performance ratio" that will reflect the environmental achievements and efficiencies at the manufacturing plant. In lieu of Andersen's then-current permit limits for VOC, the XL permit requires compliance with an enforceable VOC emissions cap of 2,397 tons per year, with a subcap of 96 tons per year applicable to the Andersen West site. The XL permit also includes an enforceable PM/PM[10] cap of 209.1 tons per year applicable to nonmilling emissions. Under the XL permit, the Andersen West site will be subject to a separate PM/PM[10] emissions cap of 96 tons per [32 ELR 10112] year, for milling and nonmilling operations.³⁹¹ In addition, Andersen will reduce PM/PM[10] emissions from wood milling operations by exhausting all its emissions through baghouse filter collectors and it will demonstrate that its filter systems represent BACT.³⁹²

The most unique feature of the Andersen XL pilot is the enforceable "performance ratio." The ratio was specially designed for this XL pilot as a means of testing a performance-based mechanism to achieve environmental compliance.³⁹³ The theory behind the performance ratio is to "lock in" Andersen's commitment to lower VOC emitting technologies and to prevent the company from reverting to high VOC emitting production processes.

c. How the Performance Ratio Works

The performance ratio is based on pounds of VOC emitted per cubic feet of units shipped from the facility per year.³⁹⁴ The facility's annual performance ratio will be compared to a series of tiered performance limits developed by Andersen and its stakeholder group, the CAC. The four limits are the CAC Limit, the Enforcement Limit, the Project Limit, and the Reward Limit.³⁹⁵

. The CAC Limit is the average of the previous five years worth of performance ratios.³⁹⁶ This is the limit against which Andersen's ongoing performance will be evaluated. If Andersen's annual performance ratio exceeds the CAC Limit, the company must explain to the CAC why this exceedance occurred and establish a corrective action, which must be approved by CAC, to lower the performance ratio below the CAC Limit.

. The Enforcement Limit will be set at two standard deviations above the CAC Limit. The deviations are included to account for VOC emission fluctuations due to normal operating events. This limit will not change over the 10-year permit period. An exceedance of the Enforcement Limit could subject Andersen to an enforcement action pursuant to current law.

. The Project Limit will also be set using two standard deviations above the CAC Limit. For the first three years of the permit period, the Project Limit will be the same as the Enforcement Limit; thereafter, whenever the CAC Limit is adjusted, the Project Limit will be adjusted correspondingly. Additionally, the Project Limit cannot exceed the Enforcement Limit. An exceedance of the Project Limit will result in the termination of the XL project, unless the CAC, the MPCA, and EPA all determine the project may continue.

. The Reward Limit will be set at two standard deviations below the CAC Limit. The Reward Limit cannot increase and may only decline if, for three consecutive years, Andersen's performance remains below this limit. Further, as an incentive, if Andersen operates below the Reward Limit, the company will qualify for one of three awards. In rank order they are recognition by EPA and the MPCA, the addition of mini-projects for inclusion in this XL pilot, and an extension of this XL pilot beyond the 10-year permit term. The reward to be given will be based on the length of time Andersen's performance remains below the Reward Limit.

The Andersen XL pilot also addresses emissions of HAPs through a voluntary commitment that is made enforceable through the FPA to conduct an air toxins analysis. The analysis will be conducted according to a process agreed upon by the company and the MPCA in conjunction with its XL stakeholder group (the CAC). The purpose of the air toxins analysis is to ensure that HAP emissions from the facility are within acceptable levels according to the Minnesota Department of Health's "health risk values."

While the central focus of the Andersen's Project XL pilot is on air emissions, there are other significant components as well. Some of Andersen's nonenforceable XL project goals include the continuing efforts to cease operation of its oldest diptank; eliminate the use of TRI chemicals; reduce solid and hazardous waste; enhance its groundwater remediation system; minimize well water consumption; utilize its EMS; and work with all stakeholders, including the continuation of discussions with the community about issues of concern, as set forth in its stakeholder involvement plan.³⁹⁷

d. Andersen's XL Pilot—Environmental Benefits and Concerns

i. Some Key Environmental Benefits

The primary environmental benefit of the Andersen XL pilot is a reduction of VOC emissions per volume of product manufactured at the plant. Reduced VOCs per volume of production will be the result of more efficient manufacturing processes, such as the expanded use of Fibrex TM material, an Andersen-created technology that turns waste, e.g., reclaimed sawdust and vinyl, into new windows; the increased use of waterborne wood preservative treatment systems (as opposed to older solvent-based systems); and the utilization of paint coatings with higher solids/lower VOC content. (See Tables 4 and 5 below.)

Key to the environmental benefits is the expansion of Fibrex TM material composite production.³⁹⁸ The advantages of Fibrex TM material are threefold. First, because Fibrex TM material is made from wood byproducts, it reduces [32 ELR 10113] Andersen's dependence on virgin wood supplies, thereby conserving forest resources. Second, it reduces VOC emissions because it does not require wood preservative treatment, from which a significant amount of Andersen's VOC emissions originate. Third, it is recyclable; Fibrex TM material waste is converted back into Fibex TM material component parts; thus, it is a pollution prevention technology that also exemplifies product stewardship.

Table 4

Air Emissions Comparison: Vinyl Clad Wood Vs. Fibrex TM Composite

(based on 1,000,000 standard window pieces)

Type of Emission	Vinyl Clad Wood	Fibrex Composite
	Profile	Profile
VOC	96.2 tons	5.6 tons
PM/PM[10]	0.69 tons	1.88 tons
HAP	0.19 tons	0.03 tons

Table 5

Air Emissions Comparison: Solvent-Based Wood Treatment Vs. Waterborne Wood Treatment

(based on 1,000,000 standard size window pieces)

Type of Emission	Solvent-Based	Waterborne
	Treatment (tons)	Treatment (tons)
VOC	87.0 tons	13.3 tons
HAP	0.16 tons	0 tons

ii. Some Key Concerns

Andersen's facilitywide cap on VOC emissions was foremost among concerns EPA and others had with this XL proposal. EPA's initial concern focused on the fact that the proposed 2,651 tons per year VOC cap was greater than the facility's 1997 actual emissions that were approximately 1,500 tons per year.³⁹⁹ The Agency asserted that any increase over 1997 emissions would result in an additional loading to the environment, and thus could not be deemed SEP. Moreover, EPA found the cap was not even equivalent to what otherwise would occur under current law and was, therefore, not acceptable.⁴⁰⁰ According to EPA, "companies who participate in Project XL must agree to enforceable limits that assure the company's performance will be at least equivalent to what would otherwise occur absent Project XL." One environmental group found the proposed VOC cap an emission level indicative of "business as usual . . . or [providing some] marginal continuous improvement . . . but not an effort to drive [SEP]."⁴⁰¹

However, EPA added, a demonstration of equivalency could be determined on an "emissions per unit of production basis" instead of overall actual emission releases. Thus, if Andersen could show that its performance under Project XL would improve, i.e., its emissions would decrease per unit produced, then EPA would be satisfied that this project would achieve SEP. Yet, Andersen's proposed performance ratio of 0.763 was also greater than its most current (1997) performance ratio of 0.73.⁴⁰² Consequently, EPA found that Andersen's proposal did not meet the requirement of equivalency. The Agency suggested to Andersen that "equivalence" could be obtained through an enforceable, declining performance limit based on the facility's actual emissions data.⁴⁰³ In essence, EPA wanted more than an enforceable commitment that Andersen would achieve SEP, it wanted an up-front, enforceable guarantee that Andersen's performance ratio would decline over the permit term. From EPA's view, this suggestion was "unlike traditional command-and-control [because] the limit would not drive performance; rather performance would bring the limit along behind it."⁴⁰⁴ Yet Andersen found the Agency's recommendation unduly restrictive and counter to its understanding of flexibility as embodied in Project XL.⁴⁰⁵

Another significant area of concern was the elimination of all "synthetic minor" limits⁴⁰⁶ at the facility. This would allow Andersen to modify existing equipment or install new equipment without undergoing any pre-construction review pursuant to the CAA's PSD program.⁴⁰⁷ The purpose of the PSD program is to protect air quality by ensuring that pollution emissions are at a minimum through both air pollution control technology requirements and air quality planning requirements.⁴⁰⁸ Accordingly, PSD regulations require facilities to apply BACT (which first requires an analysis to determine the best technology) and also to conduct a "source impact analysis" and an "air quality analysis."⁴⁰⁹

Relevant to the Andersen XL pilot is a provision within the PSD regulations that states once a facility relaxes its synthetic minor limitations, it must comply with all applicable requirements of PSD review.⁴¹⁰ This provision was put in place to prevent facilities from inappropriately breaking [32 ELR 10114] apart a "major modification" (that alone would require a PSD review) into two separate actions—obtaining a synthetic minor limit for a modified system (or unit) and seeking a change (relaxation) of the limit—and thereby escaping PSD review. Through Project XL, Andersen sought to remove all synthetic minor limits, which it currently had on a number of its waterborne treatment systems and on three of its solventborne paint systems, without completing PSD review applicable to those systems. Thus, EPA's concern focused on whether emissions from any future modifications of Andersen's treatment and paint systems would circumvent the PSD programs' purpose—to ensure no further degradation of air quality.

A final major area of concern with Andersen's XL proposal centered on its request to experiment with the processes to remove and reclaim the lead contained in paint on old windows (removed by Andersen as part of its window take-back program) for integration into its Fibrex TM technology. Essentially, Andersen sought the opportunity to recycle old window components into new products without invoking RCRA regulations applicable to hazardous waste.⁴¹¹ However, EPA found that Andersen's proposal was without sufficient detail to enable the Agency to determine whether RCRA would even apply to this activity and so requested additional information.⁴¹²

iii. Resolution of Concerns

Andersen was able to resolve concerns over the VOC cap, lifting the "synthetic minor" limits and the performance ratio primarily by proposing a new VOC cap of 2,397 tons, which was lower than its original 2,651 tons per year VOC cap.⁴¹³ EPA accepted Andersen's new cap and agreed to lift the synthetic minor status because, ultimately, it determined that the company's requested flexibility would not be circumventing PSD requirements of the CAA. EPA based its decision on several factors.

First, the Agency recognized that "Andersen is voluntarily adopting a plantwide cap of 2,397 [tons per year] of VOC emissions, which is based on lower than actual emissions from a period representative of normal source operation."⁴¹⁴ This new cap was calculated using the current actual performance ratio and actual past production volumes. Moreover, EPA found that Andersen's VOC cap would prevent the company from a recognized dilemma of the PSD program that occurs when facilities are able to "increase emissions above representative actual emission levels without undergoing PSD review."⁴¹⁵ The problem that has plagued regulators over the years typically occurs when companies continue to add small projects just below PSD thresholds, which are therefore not subject to any cumulative plantwide emission limits. EPA distinguished the Andersen XL pilot from this typical scenario by recognizing that Andersen's "VOC cap is based on actual emissions placing it on an even footing with respect to sources which do not take a PAL and it ensures that Andersen does not gain emissions credits merely for reducing allowable emissions."⁴¹⁶ Therefore, by allowing the VOC cap, EPA was not giving Andersen "credit to pollute" over its actual emission/previous production levels.

Second, EPA recognized that Andersen's VOC emissions have decreased consistently and in significant amounts since 1990. Moreover, EPA determined that Andersen could have obtained a plantwide VOC cap in 1990 when its actual VOC emissions were 3,753 tons per year rather than opting instead, as it did, for the "synthetic minor" limits. EPA therefore concluded that the proposed VOC cap of 2,397 "is at least equivalent to what Andersen could have done outside Project XL and is overall better for the environment."⁴¹⁷

Third, EPA found that the tiered performance limit system would create an incentive for Andersen to continue to reduce emissions.⁴¹⁸ The MCEA believed that the compromise of establishing a four-tiered performance limit system to which Andersen's annual performance ratio would be compared was key to EPA's acceptance of the original performance ratio. Because it was developed in conjunction with the stakeholder group and incorporated stakeholder oversight and involvement, the system enhances accountability and mitigates concern over inferior performance (or backsliding). Finally, the Agency concluded that it retained the right to end the XL pilot if Andersen did not show environmental improvement. Thus, the Agency was able to resolve its concerns with the VOC cap, synthetic minor limits, and performance ratio.

Concerns over Andersen's window recycling program and request for RCRA flexibility were resolved by the company's decision to withdraw that portion of the XL proposal from full-scale implementation. The stakeholder group, the MPCA, EPA, and Washington County all agreed that the concept of window recycling has great potential for significant environmental benefits, and, therefore, they encouraged Andersen to develop this project more fully. Andersen agreed to continue researching and evaluating the idea and to present it findings to the CAC and other XL parties no later than two years from the effective date of the FPA.

e. Andersen's XL Pilot—Some Concluding Observations

Andersen applied lessons learned from the 3M XL experience to its own XL pilot. Foremost among them was Andersen's realization that projects of limited scope were likely to be more acceptable to EPA and therefore more successful. The success of Andersen's XL pilot is, in part, attributed to the fact that its project was not as broad nor as far-reaching as 3M's. In addition, the company recognized [32 ELR 10115] that the more regulatory flexibility requested, the greater the difficulty in negotiating successful outcomes. Thus, after almost five years of working to obtain a Project XL permit, Andersen's pilot involved only two major federal regulatory changes. Finally, Andersen discovered that the most difficult and time-consuming changes are those involving regulatory flexibility from CAA regulations.

From the MCEA's perspective, the lessons learned from the Andersen XL pilot, when juxtaposed with the experimental and innovative purpose of Project XL, have resulted in a peculiar paradox.⁴¹⁹ That is, although EPA requested outside-the-box proposals through Project XL, the Agency has been reluctant to approve projects that stretch much beyond the regulatory perimeters. The MCEA does not advocate adopting alternative solutions without regard to the federal environmental laws or careful deliberation. The MCEA believes we can find a middle ground that will accommodate our nation's desire to improve our existing regulatory system through innovation without jeopardizing public health or the environment. However, in the MCEA's estimation, EPA has not achieved that balance with Project XL.

Furthermore, the MCEA believes that because there was a lack of clarity at EPA about what Project XL was and was not, especially at the outset of this regulatory innovation effort, it led to uneven and sometimes confusing implementation of Project XL. Accordingly, from our experience in the Andersen pilot, Project XL did not deliver all that it promised. Nonetheless, the MCEA is optimistic about potential benefits of the Andersen XL pilot, in particular we are anxious to track the effectiveness of using a performance-based approach to track emissions reductions in Minnesota.

3. U.S. Filter Recovery Services, Inc.—Hazardous Waste Treatment and Recovery Facility, Roseville, Minnesota

U.S. Filter is a commercial hazardous waste treatment and recovery facility located in an industrial-zoned section of Roseville, Minnesota, a first-ring suburb of the Twin Cities. U.S. Filter of Roseville is a subsidiary of the U.S. Filter Corporation that two years ago was acquired by Vivendi Corporation based in Paris, France.⁴²⁰ The U.S. Filter Corporation describes its operations as the largest water and wastewater treatment company in the world with facilities in Africa, Asia, Europe, and in North and South America.

The U.S. Filter operation in Minnesota was founded by more than 20 local metal finishing businesses that recognized the need for a central treatment and recovery facility (CTRF).⁴²¹ In 1983, the metal finishers incorporated as Metropolitan Recovery Corporation, thereafter they joined with Lancy Recovery, Inc. to fund and develop the CTRF project.⁴²² As a result, construction and operation of the CTRF, known as Metro Recovery Systems, began in 1988. Four years later, the U.S. Filter Corporation of Palm Desert, California, acquired Metro Recovery Systems. The facility has since grown from serving 23 businesses to over 800. It has transitioned from a one-shift work schedule to an around-the-clock operation, processing industrial wastes into reusable chemicals and metals. The U.S. Filter facility can accommodate the entire waste stream of a customer, or it can augment a customer's own existing treatment systems. U.S. Filter's goal is to recover 100% of all the wastes brought to its facility in Roseville; its current reuse rate of incoming inorganic wastes is over 95%.⁴²³

U.S. Filter's specialty is the recovery of metals from all types of waste generated by the metal finishing and printed circuit board industries.⁴²⁴ U.S. Filter is a fully permitted federal centralized treatment and recovery facility; therefore, it can accept and process wastes that have been designated as "hazardous" according to RCRA, as well as other regulated wastes.⁴²⁵ The facility also handles "non-RCRA" industrial wastes, such as ammonia water and low-level metal rinse waters that, according to state and local regulations, may not be discharged to the sewer or to landfills.⁴²⁶

a. U.S. Filter's Project XL Pilot—An Overview

U.S. Filter's Project XL pilot seeks to improve both the quality and management of process waters used by metal finishers, electroplaters, and other similar operators through the use of an ion exchange wastewater treatment technology.⁴²⁷ Ion exchange resins that collect chemical contaminants are considered a listed hazardous waste (known as an F006 waste) under RCRA regulations.⁴²⁸ U.S. Filter's management of these resins must be in accordance with RCRA regulations and the company seeks flexibility from RCRA regulations for the following four benefits: conservation of potable water; better metals recovery through waste segregation and use of ion exchange columns; reduced energy and other costs associated with water treatment; and reduced costs to generators for recordkeeping, manifesting, and transportation of this F006 waste.⁴²⁹

Currently, electroplaters, metal finishers, and other customers who use large volumes of water to wash and rinse materials as part of their manufacturing processes prefer to discard the wash and rinse water after only one use to a publicly owned treatment work (POTW) or to surface waters (in accordance with CWA requirements). Any metal [32 ELR 10116] sludge residue is generally land disposed off-site. The alternative for these generators is to treat the wastewater on site; however, the resins used in treatment are typically classified as an F006 waste. Accordingly, RCRA regulations require the generator to handle, store, and transport the resins according to strict procedures.⁴³⁰ The rigorous rules, the costs associated with them, plus the stigma associated with having a "hazardous waste" on-site, are factors that together create a significant deterrent to recycling for many operators.⁴³¹ Consequently, waste is not handled by preferred management methods, and the discarded wastewater places undue strain on POTWs and surface waters.⁴³²

Through Project XL, U.S. Filter sought to waive certain RCRA requirements perceived by U.S. Filter and its customers as barriers to the legitimate recycling and recovery of industrial wastes. In lieu of RCRA's reporting, storage, and cradle-to-grave manifesting regulations, the XL pilot would allow alternative management requirements. Under Project XL, U.S. Filter customers would turn over their hazardous waste material to U.S. Filter, a fully permitted RCRA Part B facility. U.S. Filter would transport canisters of resin (cation resins, anion resins, and mixed bed resins) that its customers can use to strip the metals from their wastewater, resulting in a highly purified water product that can be reused over and again.⁴³³ U.S. Filter would replace canisters of spent resin with fresh canisters for its customers on an as-needed basis. Customers may store spent canisters at their place of business for up to 90 days.⁴³⁴ Additionally, the XL pilot allows only licensed hazardous waste transporters, maintaining a DOT "satisfactory" rating and authorized by U.S. Filter, to transport the waste material.⁴³⁵

As a result of the resin regeneration process at U.S. Filter, the recovered acid is either sold to a customer or used over again at U.S. Filter as part of the facility's own resin regeneration process.⁴³⁶ The recovered hydroxide is used at U.S. Filter for the neutralization of acid metal waste brought to the facility. The resulting metal hydroxide sludges generated from the regeneration process would be recovered and transported to a secondary metals recovery company.⁴³⁷

Under the XL pilot, U.S. Filter and its customers must comply with requirements equivalent to those contained in RCRA for the protection of public health and the environment. In addition, U.S. Filter must submit hazardous waste reports (that would otherwise be required of U.S. Filter's customers under RCRA), recycle metals, and provide ongoing environmental performance reports as detailed in the FPA. EPA will set forth these requirements in a federal site-specific rule to be issued specifically for the U.S. Filter facility.⁴³⁸ The MPCA will also issue a similar rule and amend U.S. Filter's RCRA permit to reflect the new Project XL requirements. The XL permit would remain effective for a five-year period, after which it would automatically "sunset" unless all parties agree to an amendment of the project terms.⁴³⁹

Relevant to the overview of the U.S. Filter XL pilot is the fact that the company's original XL proposal encompassed not one, but two, specific RCRA projects (the water recovery and reuse project previously described) and another project involving the recovery of hydrochloric acid.⁴⁴⁰ However, during the time the XL proposal was undergoing review, the primary customer who intended to utilize U.S. Filter's hydrochloric acid recovery services purchased its own treatment equipment. Consequently, U.S. Filter determined the hydrochloric acid recovery project would no longer be economical, and the company abandoned plans for this portion of its XL proposal.⁴⁴¹ According to U.S. Filter, this potential customer decided to seek another solution for its wastes rather than wait out the Project XL process.⁴⁴² The uncertainty in predicting when EPA would grant final approval, and thus when implementation would begin, was discouraging to U.S. Filter and proved to be a principle barrier preventing the hydrochloric acid recovery project.

b. U.S. Filter's XL Pilot—Key Environmental Benefits and Concerns

i. Some Key Environmental Benefits

The key environmental benefits expected from the pilot include an increased recycling of resin; a reduction in demand for the production of potable water; and a reduction in effluent, salt, and metals discharged to the public wastewater treatment works. U.S. Filter estimated that during the first year, the project would prevent the disposal of 13,500,000 gallons of rinse water to the POTW.⁴⁴³ With an expanding customer base, U.S. Filter predicted that amount would increase to 22,500,000 gallons in the third year, and 90,000,000 gallons by the fifth year of the XL pilot.⁴⁴⁴ Additionally, [32 ELR 10117] U.S. Filter estimated that 1,350 pounds of metals (copper, nickel, and zinc) would be recovered the first year of the project (rather than disposed of in a landfill), with an increase to 2,250 pounds the second year and 9,000 pounds to be recovered during the third year.⁴⁴⁵

ii. Some Key Concerns

Initial concerns with this XL proposal focused on the fact that once the rinse water contaminants are collected on resins, the resin will be characterized as a "hazardous waste" under RCRA. This characterization triggered many questions, particularly from EPA and county representatives on the stakeholder group. The Agency was concerned with storage, handling, treatment, and transportation of the waste.⁴⁴⁶ EPA also wanted to ensure that the proposed tracking mechanism, in lieu of required hazardous waste manifesting, had safeguards equivalent to RCRA provisions.⁴⁴⁷

EPA was also concerned with the open-ended list of potential U.S. Filter customers. In response, U.S. Filter provided the Agency with a list of 280 businesses who could potentially participate in the program. Through U.S. Filter's proposal these customers would also become participants in Project XL, thereby requiring the Agency to review their past compliance histories for any enforcement actions.⁴⁴⁸ EPA doubted its ability to conduct enforcement screens in a timely manner; especially because the Agency was unclear which U.S. Filter customers would be participants.⁴⁴⁹ Additionally, EPA recommended that U.S. Filter develop a special service agreement with its customers for the XL pilot.⁴⁵⁰ The Agency wanted to assess the contractual requirements imposed and any disclaimers provided to the U.S. Filter customers. For example, EPA wanted customers to understand that participation in this XL pilot project did not preclude regulatory agencies from taking enforcement action if necessary.⁴⁵¹ Also, EPA wanted U.S. Filter customers to be cognizant of conditions imposed for spills on-site or failure to comply with their agreement with U.S. Filter. Furthermore, EPA suggested that U.S. Filter develop a clear process for the removal of a customer from the XL pilot in the case that environmentally related noncompliance, or other circumstances, warrant such action.⁴⁵²

The primary concerns for the county representatives on the U.S. Filter stakeholder group were as follows.⁴⁵³ First, the counties were concerned with how they would create a legal mechanism for this pilot, given the numerous regulatory jurisdictions involved, including EPA, the MPCA, and seven metropolitan counties. Second, they were concerned with the originally proposed "XL Waste" designation, as opposed to maintaining the "hazardous waste" classification. Third, they asserted that U.S. Filter's proposal did not clearly describe or substantiate the amount of environmental benefit anticipated; they recommended that U.S. Filter provide them with additional information demonstrating how the XL proposal was superior to current waste management practices. Finally, the counties, along with the MPCA, recommended that metal finishers participating in the U.S. Filter XL pilot should be required to participate in a third-party audit program, in addition to U.S. Filter's proposed regulatory outreach program to work with the Minnesota Metal Finishers Association to develop a self-audit program (as described in its XL proposal).

iii. Response to Concerns

Concern over the storage, handling, treatment, tracking, and transportation of the hazardous waste collected by U.S. Filter from its customers was addressed in the FPA and will be detailed further in the site-specific rule.⁴⁵⁴ Key to resolving the concern was a decision made by the participants that the waste will remain classified as a RCRA hazardous waste, but will be referred to as an "XL waste" as originally proposed. They concluded this classification would better ensure that safeguards equivalent to RCRA requirements would be employed in this XL pilot. Moreover, a special bill of lading will be used that includes information comparable to that found on the Uniform National Hazardous Waste Manifest in order to track the waste.

EPA's concern over the potential U.S. Filter customers has been addressed by a number of requirements detailed in the FPA. Most notable is the requirement that U.S. Filter conduct a preliminary evaluation of its customers who desire to participate in the XL pilot as "U.S. Filter Project XL Waste Generators." The evaluation shall include the following activities: customers must complete and sign the U.S. Filter Recovery Services XL Waste Application Form; U.S. Filter will complete a waste characterization and an assessment of the customer's storage area for compliance with requirements of the XL pilot; and U.S. Filter will provide customers with a U.S. Filter XL Waste Training Module, a U.S. Filter XL Waste Materials Data Safety Sheet, and a copy of the FPA.⁴⁵⁵ Thereafter, the U.S. Filter customers must provide the company with a signed copy of the U.S. Filter XL waste FPA and a certification that it has read and agrees to follow the U.S. Filter XL Waste Training Module.⁴⁵⁶ U.S. Filter will also provide the names of the U.S. Filter XL Waste applicants to EPA and the MPCA for their own compliance screening evaluations. In addition, U.S. Filter XL waste generators will be required to update their applications [32 ELR 10118] before changing or increasing their waste streams or their processes.⁴⁵⁷ U.S. Filter will immediately remove a waste generator from the program if U.S. Filter believes it is warranted, or any of the regulatory agencies or counties should submit a request for removal. Finally, the legal mechanism to implement the U.S. Filter XL pilot will be a federal site-specific rule issued by EPA.⁴⁵⁸ Along with EPA's rule, the state will issue a similar rule and will revise U.S.Filter's RCRA permit to reflect the requirements of this XL pilot.

c. U.S. Filter's XL Pilot—Some Concluding Observations

Like Andersen's XL pilot, the U.S. Filter project was a protracted process. U.S. Filter's FPA was signed over two and one-half years from the first stakeholder group meeting, and by the time the site-specific rule is finalized, the process will be well over three years.⁴⁵⁹ The MCEA believes an overly slow-moving process, as witnessed with some XL pilots, is a major impediment to EPA's Project XL program. Not only is a lengthy process contrary to one of XL's original purposes—to streamline regulatory permitting—but also, in U.S. Filter's case, it was a significant factor that caused the company to dramatically reduce the scope of its project. From the MCEA's perspective as a participant in the U.S. Filter stakeholder group, the length of time involved, coupled with an irregular meeting schedule, led to a stakeholder involvement process that was neither as efficient nor as robust as it might otherwise have been. The MCEA therefore urges EPA to establish, and more importantly adhere to, firm deadlines throughout the XL pilot projects. It is critical to keep all participants on task to ensure the process continues to move along efficiently and effectively.

An additional concern with Project XL is that some projects further complicate, rather than simplify, regulatory requirements, again contrary to one of XL's main principles. For example, U.S. Filter recognizes that by in large RCRA regulations have brought about a truly beneficial result; yet, the company finds some RCRA regulations are not useful and even detrimental in their creation of barriers to recycling. U.S. Filter was concerned that some conditions requested by EPA in its XL pilot further tightened existing rules, in effect creating a "RCRA-plus" scheme, as opposed to relaxing requirements.⁴⁶⁰ Thus, the XL pilot process left the participants with the feeling that EPA has not fully delivered on its promise to provide flexibility and experiment with true alternatives.

Also, U.S. Filter was dismayed to learn, only months before the FPA was signed, that EPA would restrict the XL pilot to U.S. Filter customers from Minnesota-only businesses.⁴⁶¹ U.S. Filter claimed it had been the company's understanding all along that its XL project would be national in scope, thereby allowing it to accept waste from any of its approved customers, not just those in Minnesota.⁴⁶² The company asserted that limiting the XL pilot to Minnesota would reduce the environmental benefit significantly from that which was originally contemplated. Furthermore, it maintained this limitation would expose the company to potential financial loss.⁴⁶³

However, in its XL proposal U.S. Filter only noted the possibility of 352 potential customers, but provided no names or additional information about those businesses.⁴⁶⁴ Early on in comments on the proposal, EPA raised a concern about the "open-ended list of potential customers" pointing out the difficulty of conducting an enforcement screen in a timely manner if the Agency is not certain which businesses will be participating in the pilot.⁴⁶⁵ EPA suggested that the company designate a finite number of firms for initial participation in the pilot "prior to expanding the idea to the whole state."⁴⁶⁶ Although U.S. Filter submitted a list of Minnesota businesses to EPA, regrettably this issue was not resolved early on in the negotiation process, but rather surfaced again very late and could have been a deal breaker had the company and the Agency not worked out a compromise solution.⁴⁶⁷

Also at issue in the U.S. Filter pilot was the duration of the XL permit. U.S. Filter proposed a five-year term in its XL proposal and was dissatisfied with EPA's insistence on a three-year permit term.⁴⁶⁸ The company asserted that a three-year permit would not only be inadequate, but nonsensical too, as the program would be up and running for only one and one-half years before the company would have to begin planning for re-permitting. Under this scenario, U.S. Filter argued, there would be practically no opportunity to conduct a meaningful evaluation of their XL pilot project. Moreover, the fact that the process to obtain the XL permit would be longer than the permit term was frustrating to the company. Ultimately, EPA agreed to a five-year term.⁴⁶⁹

A final observation about Project XL, as experienced through the U.S. Filter pilot, is that although EPA's OPPE may have been eager to provide the regulatory flexibility requested, other offices within EPA, such as Enforcement and Compliance Assurance, and other external regulatory agencies were not so receptive to this concept. The MCEA believes this is because the OPPE's institutional philosophy recognizes a company's promise for environmental improvement [32 ELR 10119] as a benefit in exchange for the flexibility granted.⁴⁷⁰ In contrast, other EPA offices (and some other agencies) are inherently wary of a company's motive for requesting flexibility.⁴⁷¹ Consequently, they tend to view the anticipated environmental improvements with skepticism and resist any changes that will diminish their authority over the programs for which they are responsible. As a result, XL stakeholders witnessed internal Agency conflict in many XL pilots over the amount of flexibility that could or should be granted to XL companies.

Project XL was a very ambitious undertaking due in large part to the fact that the authority for implementing our environmental regulatory system is spread out among various offices, making agreement and consensus that much more difficult to achieve. For Project XL to operate more efficiently and effectively, the EPA Administrator must explicitly direct Agency staff to work cooperatively toward positive solutions that will ultimately strengthen our environmental regulatory system, not weaken or tear it apart.

The U.S. Filter XL pilot, that once seemed stalled to the point of collapse, since made significant progress. The FPA has been signed, the federal site-specific final rule was published in the Federal Register on May 22, 2001, and the accompanying Minnesota XL permit should be issued by the end of November 2001. The MCEA is optimistic that this XL pilot will enable U.S. Filter to achieve important reuse and recycling benefits through RCRA flexibility, thereby producing a better environmental outcome for Minnesota. However, MCEA calls upon EPA to recognize the "experimental" nature of Project XL and readily work with companies to find and implement true alternatives to current regulations while maintaining the same, or better, public health and environmental protection.

VII. Conclusion

Regulatory innovation initiatives, once only considered in obscure corners of the EPA and state environmental regulatory agencies across the country, are now a part of mainstream environmental policy. Since the reinvention explosion of the mid-1990s, many of the original initiatives, as well as new ones, continue to develop and flourish. At the national level EPA reports more than 75 innovation programs and states are involved too; for example, Minnesota has at least a dozen active innovation programs.⁴⁷² The abundance of innovation projects clearly signals the end of a regulatory regime based primarily on traditional command-and-control style management.

Project XL, one of EPA's many reinvention initiatives, was developed to experiment with new ways of meeting environmental responsibilities and goals. Essential to successful Project XL pilots are three key components: SEP, regulatory flexibility, and stakeholder involvement. SEP is the essence of innovation projects. For project proposers it means demonstrating that their proposal will bring about results better than would have otherwise occurred under the current regulatory system from both a quantitative and qualitative perspective.

As a participant in three Project XL stakeholder groups, the MCEA has found that the concept of SEP is one much easier to agree upon in theory than to put into practice. This is particularly true for those XL projects with a large air emissions component where participants must reach agreement on a number of complex air emission-related issues, e.g., the calculation of a facility's baseline emissions, past voluntary emission reductions, and facility upsets and shutdowns. All participants must have a clear understanding of these fundamental issues at the outset of a pilot; otherwise progress toward an acceptable and workable outcome will be severely impeded. In addition, MCEA believes that tracking a facility's environmental performance as tied to normalized product output and tracking relative toxicity of emissions over time will be far better indicators of SEP than merely tracking emission release data.

According to EPA, regulatory flexibility—the counter-part to SEP—will be easier to obtain if the flexibility sought is the direct cause of the anticipated environmental benefits. However, the MCEA believes that demonstrating a direct quid pro quo should not be the key factor indicative of the Agency's approval of the requested regulatory flexibility. Rather, we believe the key factors in assessing regulatory flexibility ought to be transparency and outcome. EPA should place paramount importance on whether proposals explain in clear and understandable terms how the regulatory flexibility sought will result in an environmental "win" through superior performance, e.g., through decreased emissions, reduced toxicity of emissions, etc. This "truth in advertising" concept, coupled with an effort to find the best possible environmental outcome, ought to be a primary focus for all participants involved in a Project XL pilot.

The third key component of Project XL is stakeholder involvement. As a result of the MCEA's experience, we find that the stakeholder involvement process, if done effectively by a company, will reap benefits in a manner much like those obtained through the implementation of pollution prevention measures. Both practices involve dedicating time and resources to the front end of the process (rather than addressing the problem after the fact). Project XL requires companies to form stakeholder groups at the outset the process, thus allowing members to work with project proposers "to build a project from the ground up."⁴⁷³ In contrast, standard regulatory procedure generally provides a 30-day comment period for public input after a company negotiates a permit with the state and federal regulatory agencies—at the end of the process.

Stakeholder groups should include members with a broad range of effected interests and perspectives. Due to site-specific differences, not all stakeholder groups will have the same make-up, but a demonstrated effort should be made to form a group as representative of the community as possible. Companies should even solicit participation from those who have voiced criticism over past company actions. If a company's XL proposal, or other similar innovation, is truly meritorious it will stand up to rigorous scrutiny. As a result, the company's credibility will be enhanced and support for the proposal will increase among the stakeholders and the community at large.

[32 ELR 10120]

Stakeholders must have access to technical information they believe to be trustworthy, and it must be readily accessible and easily understandable. The more reliable the information is to stakeholders, the less need they will have for EPA funding for independent technical assistance at the outset of an XL project. Instead, funding for third-party certification of results during the implementation phase of the project may provide a better use of Agency resources.

Furthermore, we find that a stakeholder group's greatest potential for influencing the outcome of a project lies in its ability to hold the project proposer accountable for meeting both enforceable and voluntary commitments and goals. Additionally, a stakeholder group has the ability to hold federal and state regulatory agencies accountable as well by demanding that a reasonable schedule is adhered to, and that government agency concerns are communicated clearly to the public without intimidating technical jargon and legal terminology. The MCEA believes another attribute of stakeholder involvement is the enhanced personal and community responsibility for getting involved and becoming part of the solution, instead of relying on government agencies to dictate outcomes.

A close examination of the three Minnesota XL pilots—3M, Andersen, and U.S. Filter—has revealed that, despite the intent of Project XL to bring about greater efficiency and less bureaucratic hassle, in some cases getting an approved XL permit has taken longer than standard regulatory permitting practice. Ironically, the Minnesota XL pilots have exemplified a less-efficient process where the state has yet to realize much, if anything, in terms of environmental benefit due to the slow pace of Project XL. Moreover, EPA's request for creative alternative strategies and new forms of flexibility turned out to be somewhat disingenuous because the Agency was not fully prepared to implement solutions much beyond the known territory of the current regulatory system. As a result, many participants in the Minnesota pilots became discouraged over lost opportunities to experiment with outside-the-box thinking, achieve environmental benefits, and "prove the cynics wrong."⁴⁷⁴

Project XL facilities will continue to emit pollution, as will a multitude of other sources. At the same time, other pressing environmental concerns and emerging issues will demand our attention. Accordingly, we must prioritize wisely because government, industry, trade groups, environmental groups, and others have limited resources to devote to environmental protection. Therefore, as more and more companies develop, implement, and see the value in robust environmental management practices, the more we should rely on self-motivating behavior within the private sector to ensure environmental protection. For this to occur progress must be demonstrated through increased public disclosure of environmental information.

The MCEA does not advocate the abandonment of limits, standards, and enforcement. Rather, we believe regulatory policies ought to be encouraged and reward responsible behavior and make parties increasingly accountable for achieving results in ways that are more understandable and transparent than ever before. For example, Internet technology provides a means by which companies can demonstrate their commitment to transparent reporting through the development of user-friendly websites where the public can track environmental performance.⁴⁷⁵ The MCEA hopes that lessons learned from the Minnesota XL pilots will be useful to EPA as Project XL continues to evolve. At the same time, we hope Minnesota's experience with Project XL will be valuable to EPA in its ongoing efforts to develop regulatory reform policies to address the many new environmental challenges we face in the 21st century.

1. The MCEA is a nonprofit, state-based organization founded in 1974 and dedicated to promoting sound environmental policies and long-term solutions to environmental problems in Minnesota. Their website is available on the Internet at www.mncenter.org.

2. See John H. Cushman Jr., EPA & Arizona Factory Agree on Innovative Regulatory, N.Y. TIMES, Nov. 20, 1996, at A10.

3. See Joint Statement on the Clinton Administration's Project XL Announcement, Nov. 3, 1995 (participating groups included: 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, the MCEA, National Environmental Law Center, National Wildlife Federation, Natural Resources Defense Council, Inc. (NRDC), 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, U.S. PIRG) (on file with the author).

4. See id.

5. In addition, the MCEA collaborated with the Center for Environment and Health Policy at the University of Minnesota on a Project XL Stakeholder Survey that was sent to members of 10 different XL stakeholder groups around the country. The purpose of the survey was to learn what impact the stakeholder involvement process had on achieving environmental outcomes and industry-community relations. Findings are summarized in the article, Barbara Scott Murdock et al., Stakeholder Participation in Voluntary Environmental Agreements: Analysis of 10 Project XL Case Studies (forthcoming).

6. As a result of the MCEA's experience with Project XL, the MCEA launched a collaborative effort with Koch Petroleum Group to develop a user-friendly website, www.kochpinebend.com, containing environmental performance information and emissions data. The website will also enable visitors to track Koch's pledge to reduce emissions by 50% in five years.

7. See Regulatory Reinvention (XL) Pilot Projects, 62 Fed. Reg. 19872 (Apr. 23, 1997).

8. See Letter from David Hawkins and Chris van Loben Sels, NRDC, to Fred Hansen, EPA Deputy Administrator, David Gardiner, EPA Assistant Administrator, and Keith Laughlin, Associate Director, Council on Environmental Quality (July 1, 1996), available at www.epa.gov/projectxl/merck/070396.htm [hereinafter Letter from David Hawkins and Chris van Loben Sels, NRDC]; see also Letter from Chris van Loben Sels, NRDC, and Eli Dorsey, Northeast Environmental Justice Network, to Fred Hansen, EPA Deputy Administrator (July 18, 1996) (copy on file with author) and discussion infra 3M—Adhesive Products Manufacturer—Hutchinson, Minnesota; see also Intel: Natural Resources Defense Council Comments at www.epa.gov/projectxl/intel/loben.htm; EPA's Response to Comments on Intel's Final Project Agreement (some commentors arguing the XL permit sets weaker standards than current law), available at www.epa.gov/projectxl/inteleparesp.htm; EPA's Response to Comments on Merck & Co.'s Project XL Pilot, Sept. 30, 1997, www.epa.gov/projectxl/merck/093097.htm (cross-pollutant trading not viewed as superior environmental performance (SEP)); HADCO: David Lennett to James Sullivan RE: Comments on Draft FPA, available at www.epa.gov/projectxl/hadco/021397 (submitted by Environmental Defense Fund stating "it is not at all clear that the proposed project meets the Project XL criteria for [SEP] . . . .").

9. See 16 Fed. Reg. at 19872.

10. Id. at 19876.

11. President Clinton & Vice President Gore, Reinventing Environmental Regulation, at 15 (Mar. 16, 1995), available at www.clinton.nara.gov [hereinafter Reinventing Environmental Regulation].

12. See Regulatory Reinvention (XL) Pilot Projects, 60 Fed. Reg. 27282, 27287 (May 23, 1995).

13. Id.

14. OFFICE OF REINVENTION, U.S. EPA, PROJECT XL STAKEHOLDER INVOLVEMENT: A GUIDE FOR PROJECT SPONSORS AND STAKEHOLDERS (1999), available at www.epa.gov/projectxl/032599.pdf.

15. See 64 Fed. Reg. 17465 (Apr. 9, 1999).

16. Author's conversation with staff at Citizens for a Better Environment, Minneapolis, Minn.

17. Id.; see also Comments on Project XL Permit No. 96-01 for 3M Hutchinson Manufacturing Plant (June 29, 1996), submitted by Leslie Davis on behalf of Earth Protector, Minneapolis, Minn. (copy on file with the author).

18. See Letter from David Hawkins and Chris van Loben Sels, NRDC, supra note 8 (which includes five pages of comments on 3M Hutchinson).

19. See Letter from Jim Swearingen, U.S. Steel-MINNTAC, to Lisa Thorvig, MPCA XL (Feb. 6, 1996) (outlining a proposed framework for a Project XL proposal) (copy on file with the author); Correspondence between the Mayo Clinic, Carol Wiessner, and the MPCA (regarding potential issue areas for the development of a Project XL pilot) (on file with the author); see generally ALFRED MARCUS ET AL., THE SEARCH FOR COMMON GROUND; FORGING A NEGOTIATED ENVIRONMENTAL AGREEMENT ch. 10 (Resources for the Future) (forthcoming).

20. See Letter from Peder Larson, Acting Minnesota Pollution Control Agency Commissioner, to Carol Browner, EPA Administrator (Sept. 17, 1996) (copy on file with the author).

21. See Memorandum from Carol Wiessner, to Pilot Project Committee members regarding the revised list of 3M commitments found in the FPA (June 28, 1996) (copy on file with the author).

22. Memorandum from David Sonstegard, Vice President, 3M Environmental Technology & Safety Services, to David Gardiner, EPA, Fred Hansen, EPA, David Ullrich, EPA Region V, and Peder Larson, Commissioner, MPCA (Sept. 5, 1996) (copy on file with the author).

23. See Letter from David Sonstegard, Vice President, 3M Environmental Technology & Safety Services, to Peder Larson, Commissioner, MPCA (Aug. 13, 1996) (copy on file with the author).

24. See Letter from David Wefring, 3M Environmental Technology & Safety Services, to Andrew Ronchak, MPCA (Aug. 8, 1996) (copy on file with the author).

25. See id.

26. See id.

27. Letter from David Gardiner, EPA, Ass't Administrator, to Peder Larson, Commissioner, MPCA (Aug. 29, 1996) (copy on file with the author).

28. Id.

29. See, e.g., U.S. EPA, MANUAL FOR EPA PROJECT XL TEAMS (1999), available at www.epa.gov/projectxl/033199.pdf and U.S. EPA, TOOLS FOR EPA XL TEAMS, available at www.epa.gov/projectxl/tools.htm, in particular § 8, Decision Making Protocol, available at$|L{www.epa.gov/projectxl/tools22.pdf.

30. See U.S. EPA, MANUAL FOR EPA PROJECT XL TEAMS, supra note 29, at 4. Those involved include "the particular Regional Office, the relevant Program Office (and often more than one Program office is involved), the Office of Reinvention, the Office of Enforcement and Compliance Assurance, and the Office of General Counsel." Id.

31. See id.

32. See author's discussion with Minnesota company representatives.

33. See 40 C.F.R. part 70 (pertaining to Minnesota's federally approved Title V air operating permit program) and 40 C.F.R. part 52 (pertaining to the requirements of issuing a prevention of significant deterioration (PSD) permit) as described in Project XL Site-Specific Rulemaking for Andersen Corporation's Facility in Bayport, Minn., 64 Fed. Reg. 19097, 19099 (Apr. 19, 1999).

34. President Clinton's Comments on Project XL at the Old Executive Office Building (Nov. 3, 1995), at www.clinton.nara.gov [hereinafter President Clinton's Comments].

35. 60 Fed. Reg. at 27283.

36. See www.kochpinebend.com. On this website visitors can also track Koch's pledge to reduce emissions by 50% in five years.

37. See U.S. EPA Region V, Suggestions for Improvement for the U.S. Filter XL Pre-Proposal (Apr. 1998) (copy on file with the author).

38. See Letter from George Anderson, U.S. Filter, to Bob Egan, U.S. EPA Region V (June 12, 2000) (copy on file with the author).

39. See id.

40. U.S. Filter Project XL Proposal, at www.epa.gov/projectxl/usfilter/page2.htm; see also U.S. EPA Region V's Comments on U.S. Filter's XL Proposal (approximately May 1998) (copy on file with the author).

41. U.S. EPA Region V's Comments on U.S. Filter's XL Proposal (approximately May 1998) (copy on file with the author) (emphasis added).

42. Letter from George Anderson, supra note 38. U.S. Filter states its disappointment to EPA about the "revelation that the project will not readily be extended beyond Minnesota . . ." and states that "ultimately this scenario will discourage future industry involvement with these types of government initiatives."

43. 62 Fed. Reg. at 19873.

44. Id. (emphasis added).

45. See THE ASPEN INST., PROGRAM ON ENERGY, ENVIRONMENT, AND THE ECONOMY, SERIES ON THE ENVIRONMENT IN THE 21ST CENTURY, A CALL TO ACTION TO BUILD A PERFORMANCE-BASED ENVIRONMENTAL MANAGEMENT SYSTEM (2000), available at www.aspeninstitute.org/eee/environment.htm.

46. See Robert Reiley, The New Paradigm: ISO 14000, 22 J. CORP. LAW 535, 543 (1997) (for a listing of corporate proactive environmental strategies). Some additional Minnesota examples include 3M's Pollution Prevention Pays policy first adopted in 1975, at www.3m.com/profile/envt/prevent.html, Andersen Corporation's environmental programs, at, www.andersenwindows.com/corporate/index.asp?p=40520000, and Pollution Prevention Program John Roberts Company environmental programs, at www.johnroberts.com/enviro/environment.html.

47. See infra notes 53 to 70 and accompanying text. Some examples include William F. Pedersen Jr., Can Site-Specific Pollution Control Plans Furnish an Alternative to the Current Regulatory System and a Bridge to a New One?, 25 ELR 10486 (Sept. 1995); ENVIRONMENTAL POLICY IN TRANSITION: MAKING THE RIGHT CHOICES, CENTER FOR ENVIRONMENT AND HEALTH POLICY, SCHOOL OF PUBLIC HEALTH, UNIVERSITY OF MINNESOTA (ed. K. Sexton & B. Murdock eds., 1996); Timothy J. Mohin, The Alternative Compliance Model: A Bridge to the Future of Environmental Management, 27 ELR 10345 (July 1997); William Ruckelshaus, Stepping Stones, ENVTL. F., Mar./Apr. 1998, at 30; Rena I. Steinzor, Reinventing Environmental Regulation: The Dangerous Journey From Command to Self-Control, 22 HARV. ENVTL. L. REV., 103 (1998) [hereinafter Steinzor]; Bradford C. Mank, The EPA's Project XL and Other Regulatory Reform Initiatives: The Need for Legislative Authorization, 25 ECOLOGY L.Q. 3 (1998).

48. See, e.g., Richard Liroff, Reforming Air Pollution Regulation: The Toil and Trouble of EPA's Bubble, THE CONSERVATION (1986) [hereinafter Liroff]; Bruce Ackerman & Richard Stewart, Reforming Environmental Law, 37 STAN. L. REV. 1333 (1985); John Graham, The Failure of Agency-Forcing: The Regulation of Airborne Carcinogens Under Section 112 of the Clean Air Act, 34 DUKE L.J. 100 (1985) (building a case for the reform of CAA § 112).

49. See WHITE HOUSE, REINVENTING GOVERNMENT: NATIONAL PERFORMANCE REVIEW (1993). See also the history of the National Performance Review, at http://govinfo.library.unt.edu/npr/whoweare/historynpr.html

50. See Press Release, White House, Office of the Press Secretary (July 14, 1994); see also OFFICE OF THE VICE PRESIDENT, ENVIRONMENTAL PROTECTION AGENCY, ACCOMPANYING REPORT OF THE NATIONAL PERFORMANCE REVIEW (1993), available at http://govinfo.library.unt.edu/npr/library/reports/epa.html.

51. See REINVENTING GOVERNMENT: NATIONAL PERFORMANCE REVIEW, supra note 49.

52. The author recognizes that regulatory reform has been ongoing at EPA, almost from its inception; however, not likely with the same gusto nor permanence accompanying this recent reform effort, as is evidenced by EPA's newly created Office of Reinvention in February 1997. See U.S. EPA, OFFICE OF THE ADMINISTRATOR, MANAGING FOR BETTER ENVIRONMENTAL RESULTS (1997).

53. Information and reports, at www.Clinton3nara.gov/PCSD/Publications.

54. THE PRESIDENT'S COUNCIL ON SUSTAINABLE DEVELOPMENT, TOWARDS A SUSTAINABLE AMERICA: ADVANCING PROSPERITY OPPORTUNITY AND HEALTHY ENVIRONMENT FOR THE 21ST CENTURY (1999).

55. The Aspen Institute is an impartial and nonpartisan forum. See www.aspeninstitute.org. Other reports released by the Aspen Institute Series on the Environment include: UNCOVERING VALUE: INTEGRATING ENVIRONMENTAL AND FINANCIAL PERFORMANCE (1998); THE STEWARDSHIP PATH TO SUSTAINABLE NATURAL SYSTEMS (1999); and A CALL TO ACTION TO BUILD A PERFORMANCE-BASED ENVIRONMENTAL MANAGEMENT SYSTEM (2000).

56. The Aspen Institute, The Alternative Path: A Cleaner, Cheaper Way to Protect and Enhance the Environment, in SERIES ON THE ENVIRONMENT IN THE 21ST CENTURY (1996) [hereinafter The Alternative Path].

57. See id at 10-12.

58. See id at 11-12.

59. OFFICE OF REINVENTION, U.S. EPA, THE COMMON SENSE INITIATIVE: LESSONS LEARNED ABOUT PROTECTING THE ENVIRONMENT IN COMMON SENSE, COST EFFECTIVE WAYS (1998).

60. See id.

61. See id.

62. EPA lessons learned from the CSI are contained in the EPA report, U.S. EPA, REINVENTING ENVIRONMENTAL PROTECTION 44-48 (1999) (EPA/100-R-99-002); see also www.epa.gov/commonsense/index.htm. Examples are provided for three industry sectors: metal finishing; iron and steel; and computer and electronics.

63. 59 Fed. Reg. 55117 (Nov. 3, 1994) (announcing the creation of the CSI Council).

64. See www.csis.org/e4e/ (Enterprise for the Environment).

65. See E4E, The Environmental Protection System in Transition: Toward a More Desirable Future, Jan. 15, 1998, at www.csis.org/e4e/.

66. See id.

67. See id.

68. See Ruckelshaus, supra note 47, at 34.

69. See U.S. EPA, Final Policy Statement on Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations, 60 Fed. Reg. 66706, 66710 (Dec. 22, 1995); and MINN. STAT. § 114C.20-.31 (1996).

70. See NATIONAL ACADEMY OF PUBLIC ADMIN., RESOLVING THE PARADOX OF ENVIRONMENTAL PROTECTION: AN AGENDA FOR CONGRESS, EPA, AND THE STATES 127-41 (1997) (which includes a case study of the Minnesota Environmental Audit Program) [hereinafter RESOLVING THE PARADOX].

71. See Reinventing Environmental Regulation, supra note 11; see also Telephone Interview by Donald Geffen, Fellow of the Strategic Management Research Center, Carlson School of Management, University of Minnesota, with David Gardiner, Lisa Lund, Cynthia Cummis, and Jon Kessler, all staff at EPA, OPPE (Feb. 10, 1997) [hereinafter Geffen Interviews] (copy on file with the author) (the interviews were conducted under a grant project entitled "Advising, Monitoring, and Evaluating a Minnesota Pollution Control Agency Pilot Project for Flexible, Multi-Media Permitting."

72. See RESOLVING THE PARADOX, supra note 70, at 7; see also The Alternative Path, supra note 56, at vi.

73. The Republican Contract With America (Sept. 1994).

74. President Bill Clinton, State of the Union Address (Jan. 1995).

75. Id.

76. Id.

77. See infra notes 59-63 and accompanying text. The CSI was designed to take an industrial sector-by-sector approach to develop integrated, holistic strategies for protecting air and water quality and our land. The six industry sectors included:automobile manufacturing; computers; electronics; metal finishing; petroleum refining; and printing. See THE COMMON SENSE INITIATIVE, supra note 59.

78. See Reinventing Environmental Regulation, supra note 11, at 5.

79. Id. at 14; Project XL is shorthand for eXcellence and Leadership.

80. See Reinventing Environmental Regulation, supra note 11, at 14-15.

81. See id. at 14.

82. See Geffen Interviews, supra note 71 (EPA staff at the OPPE made it clear that XL was not considered to be the "Alternative Path").

83. See author's discussion with Chris Knopes, EPA's Office of Reinvention.

84. See id.; see also the author's discussion with staff at the MPCA.

85. See 60 Fed. Reg. at 27287. These eight criteria were an elaboration of the prerequisite conditions for Project XL as stated in the president's report, Reinventing Environmental Regulation, supra note 11.

86. Of these original eight, those finalized include: Intel, HADCO, Merck, and Lucent Technologies (formerly AT&T); those withdrawn or inactive are 3M, Anheuser-Busch, and the MPCA. The South Coast Air Management District's request for federal flexibility was eliminated on "Corrections Day" in the U.S. Congress on December 12, 1995—when legislators could make specific adjustments to laws based on common sense (initiated by House Speaker Newt Gingrich (R-Ga.)) (www.epa.gov/projectxl/scaqmd/index.htm).

87. President Clinton's Comments, supra note 34.

88. Id.

89. Id.

90. Id.

91. Making Economic and Environmental Sense: Statements on Project XL (Nov. 9, 1995). (Comments from top officers at Intel, AT&T, Merck, 3M, and Anheuser-Busch) (copy on file with the author).

92. See id.

93. Press Release, Minnesota Pollution Control Agency, Federal Agency Authorizes Minnesota Project to Reform Environmental Regulation (Nov. 3, 1995).

94. Joint Statement on the Clinton Administration's Project XL Announcement (Nov. 3, 1995) (copy on file with the author).

95. Letter to Vice President Al Gore, Regarding Common Sense Initiative Input on Project XL Proposals from 26 Environmental/Public Interest Organizations (Sept. 21, 1995) (copy on file with the author).

96. See id.

97. Synopsis: MPCA Air Quality Division "Flexible" Permit for 3M Bush Street Facility, attachment to Minnesota Project XL Proposal (June 1995) [hereinafter Synopsis]. The VOC cap was amended in 1994 downward to 4,283 tons per year (365-day rolling average limit).

98. See id.; see also www.pca.state.mn.us/programs/projectxl/index.html (Project XL in Minnesota Background Information).

99. See Synopsis, supra note 97.

100. See supra note 98.

101. See id.

102. See Id.

103. For example, the 3M PAL permit did not change the St. Paul plant's "synthetic minor" status under the CAA and accompanying regulations.

104. See RESOLVING THE PARADOX, supra note 70, at 133.

105. See id. at 133-34.

106. See MINN. STAT. § 114C.20-28.

107. See Discussion with Lee Paddock, previously Director of Environmental Policy for the Minnesota Office of the Attorney General, who worked to develop the state statute.

108. See id. Some examples include ARK. CODE ANN. § 8-1-303 (Supp. 1995); COLO. REV. STAT. § 13-25-126.5; 1996 Mich. Pub. Acts 132; OR. REV. STAT. § 468.963 (Supp. 1996); TEX. CODE ANN. § 4447cc (Vernon 1996); WYO. STAT. ANN. § 35-11-1105(c)(ii)(D) (Supp. 1996).

109. See MINN. STAT. § 114C.24.

110. See id. § 114C.22, subpt. 2.

111. See id. § 114C.22.

112. See id. § 114C.26.

113. See MPCA, ENVIRONMENTAL IMPROVEMENT PILOT PROJECT, REPORT TO THE ENVIRONMENT AND NATURAL RESOURCES COMMITTEES OF THE MINNESOTA LEGISLATURE (1999).

114. See id.; see also RESOLVING THE PARADOX, supra note 70, at 128.

115. See 1999 Minn. Laws chapter 158.

116. The Minnesota Environmental Initiative (MEI) (www.mn-ei.org) is a nonprofit, nonpartisan organization that promotes environmental excellence in policy, management, land use, and energy generation and use. The MEI brings business, government, and advocacy groups together in collaborative forums designed to seek solutions to pressing environmental issues. The MEI also produces technical educational forums.

117. STRATEGIC MANAGEMENT RESEARCH CENTER, UNIVERSITY OF MINNESOTA COLLABORATING FOR A BETTER ENVIRONMENT AND ECONOMY IN MINNESOTA; RECOMMENDATIONS OF THE POLLUTION PREVENTION DIALOGUE 1 (1996), available at www.mn-ei.org.

118. Id. at 3.

119. See id. at 5-10.

120. Memorandum from Lisa Thorvig and Tim Scherkenbach, MPCA Managers, to David Ullrich, Deputy Regional Administrator, EPA Region V (Mar. 15, 1995) (copy on file with the author).

121. See id.

122. Memorandum from Carol Wiessner, Minnesota Center for Environmental Advocacy, to Brett Smith, North Star Chapter of the Sierra Club, Lisa Doerr, Citizens for a Better Environment, and Lisa Thorvig, MPCA (Feb. 1, 1996) and attachment "Remaining Issues Re: S.F. 1956 Minnesota XL Legislation" (copy on file with the author).

123. See Letter of Commitment from the Minnesota Pollution Control Agency, to the North Star Chapter of the Sierra Club, Citizens for a Better Environment, and Minnesota Center for Environmental Advocacy (Feb. 8, 1996) (copy on file with the author).

124. See MINN. STAT. § 114C.01-15.

125. See id. § 114C.10.

126. See id. § 114C.01.

127. See id. § 114C.11, subpt. 2.

128. Id.

129. Id. § 114C.11, subpt. 3.

130. See id. § 114C.11, subpt. 4.

131. Id.

132. See id. § 114C.11, subpt. 5.

133. See id.

134. See id. subpt. 6.

135. See id. § 115D.07 and .08.

136. See id. § 114C.12. subpt. 1.

137. See id.

138. See id. subpt. 5.

139. See id. subpt. 1, see also MINN. STAT. §§ 115 and 116.

140. See id. § 114C.14, subpt. 2 citing chapters 14.63 to 14.69.

141. See id. § 114C.10, subpt. 2.

142. See MPCA, PROJECT XL REPORT TO THE LEGISLATURE, MINNESOTA POLLUTION CONTROL AGENCY (1998).

143. Minnesota XL Permits are expected to be issued to both Andersen and U.S. Filter during the first quarter of 2002.

144. The Beyond Compliance Emissions Reduction Act of 1995, August 24, 1994 (proposed legislation drafted by 3M; copy on file with the author); see also David Wefring, A New Paradigm in Environmental Permitting, ENVIRONMENTAL TECHNOLOGY & SERVICES, ENVIRONMENTAL INITIATIVES GROUP (3M Company, St. Paul, Minn.) (presentation at P2 Dialogue meeting Feb. 24, 1995) (copy on file with the author).

145. The Beyond Compliance Emissions Reduction Act of 1995, Executive Summary (copy on file with the author).

146. See id.

147. See id.

148. See id.

149. See id.

150. Id. § 102.

151. See id.

152. See id. Executive Summary.

153. See id. § 102(b)(3).

154. See id. § 105(c). The governor may delegate the appointment of the LAC to the commissioner of the regulatory agency authorized to run the program.

155. See id. § 105(c). It should be noted that under the Act failure to appoint an LAC, or failure of the LAC to review the application or permit shall not preclude issuance of a beyond-compliance permit.

156. See id. §§ 202 and 203.

157. See Summary of the Pilot Project Subcommittee of the P2 Dialogue Meeting (Mar. 8, 1995) (copy on file with the author).

158. See Meeting notes of the P2 Dialogue (Feb. 24, 1995) (copy on file with the author).

159. See id.

160. See id.

161. 3M Proposal Project XL (July 10, 1995) (copy on file with the author).

162. All other applicants were companies, with the exception of the California South Coast Air Quality Management District whose proposal was quite limited in scope and ultimately withdrawn. See supra note 86.

163. MPCA Project XL Proposal submitted to EPA (June 16, 1995).

164. 60 Fed. Reg. at 27283, as referenced in MPCA Project XL Proposal, supra note 163, at 5.

165. See MINN. STAT. §§ 115B et seq.; 40 C.F.R. 272.1201 (authorizing Minnesota's hazardous waste program); 40 C.F.R. 70, app. A, Minnesota (authorizing the state's air operating permits program).

166. See Interview by Donald Geffen with Lisa Thorvig, Strategic Manager for Project XL, MPCA (Mar. 19, 1996) (copy on file with the author).

167. MPCA Project XL Proposal, supra note 163, at 1.

168. Id. at 1.

169. See id. at 8-13. It should be noted that comments on the draft MPCA Project XL proposal submitted by the MCEA emphasized the need to more aggressively address and incorporate pollution prevention opportunities into the Project XL proposal that, to some extent, were reflected in the final proposal.

170. Id. at 1. The MPCA's hope would not be fulfilled, because the 3M XL negotiations lasted a year and the Andersen XL pilot has taken five years to date.

171. Press Release, MPCA, Federal Agency Authorizes Minnesota Project to Reform Environmental Regulation (Nov. 3, 1995).

172. Id.; see also Thorvig Interview, supra note 166.

173. Author's discussion with the MPCA's staff.

174. See id.

175. See id.

176. Letter from Lisa Thorvig, Deputy Commissioner, MPCA, to Jay Benforado, Deputy Assoc. Administrator, EPA, OPPE (May 2000).

177. See President Clinton's Comments, supra note 34.

178. The others are: innovation/multimedia; pollution prevention; transferability; feasibility; monitoring, reporting, and evaluation; and shifting of risk burden. 60 Fed. Reg. at 27287.

179. 62 Fed. Reg. at 19872.

180. See Reinventing Environmental Regulation, supra note 11.

181. Id.

182. Skeptical States Still See Hope for Project XL's Future, STATE ENVTL. MONITOR, Nov. 3, 1997, at 24.

183. See 60 Fed. Reg. at 27282; see also President Clinton's Comments, supra note 34.

184. See Reinventing Environmental Regulation, supra note 11, at 36.

185. See id.

186. See 62 Fed. Reg. at 19872 (establishing more clarity and definition to the Project XL program).

187. See generally Meeting Notes, "Project XL Minnesota: Lessons Learned for Moving Forward," sponsored by the Pilot Project Committee (Apr. 1, 1997) (copy on file with the author) [hereinafter Lessons Learned].

188. See id.; see also Meeting summary from Kevin Curtis, Keystone Center, Alfred Marcus, and Donald Geffen, University of Minnesota to participants in 3M Hutchinson Project XL proposal debrief (Apr. 11, 1997) (copy on file with the author).

189. The 3M Project XL proposal was 7 pages (without attachments) and the FPA was 29 pages; in comparison, Andersen's Project XL proposal was 13 pages and its FPA was 59 pages in length (without attachments).

190. President Clinton's Comments, supra note 34.

191. Id.

192. Vice presidential debate, Al Gore and Jack Kemp (Oct. 9, 1996), transcript reprinted in the WASH. POST, Oct. 10, 1996, at A25.

193. Vice President Al Gore, Remarks at a White House Conference on the Environment and Technology (Dec. 12, 1994).

194. 60 Fed. Reg. at 27287.

195. See 3M Proposal Project XL, supra note 161, at 10.

196. See supra note 19.

197. U.S. GENERAL ACCOUNTING OFFICE, ENVIRONMENTAL PROTECTION: CHALLENGES FACING EPA'S EFFORTS TO REINVENT ENVIRONMENTAL REGULATION 18 (1997).

198. Basically, emissions trading allows companies to over-control emissions at one release point where reductions are least costly, in exchange for under-controlling emissions elsewhere at the facility that would require much greater control costs. Thus, the "bubble policy" puts an imaginary bubble over the facility and allows the facility flexibility in controlling its emissions, provided the impact on air quality from a bubble's total release is equal to or better to the regulatory requirements. For a good description of this issue, see Liroff, supra note 48.

199. Id. at xii.

200. Id.

201. Id. at 10-12.

202. See Skeptical States, supra note 182, at 24 (quoting one EPA source who said: "There's almost nobody in OECA [Office of Enforcement and Compliance Assurance] that likes XL . . . there's nothing wrong with the laws we have."

203. See generally Liroff, supra note 48, at 10-12.

204. NGOs include environmental and other public interest groups.

205. See NRDC Letter, supra note 8.

206. See id.

207. See id.

208. See id.

209. National Steel Corporation's proposed bubble was initially approved by EPA, but the NRDC uncovered large modeling errors and ultimately EPA reversed its decision. See Liroff supra note 48, at 91-97.

210. See id. at 80-83.

211. Id. at 82.

212. Id.

213. See id. at 86-89.

214. See id.

215. See id.

216. See id. at 143-44.

217. See generally id. at 61-103 (bubble policy in practice). Liroff also gives examples of two model bubbles that worked well; two examples include the 3M Bristol, Pennsylvania, tape manufacturing plant, and the du Pont Chambers Works chemical plant in Deepwater, New Jersey. See id. at 67-70.

218. See id. at 65.

219. See id. at 141.

220. See id.

221. See id. at 142.

222. Natural Resources Defense Council Comments on 3M Hutchinson Project XL (July 3, 1996) (copy on file with the author) [hereinafter NRDC Comments on 3M Hutchinson]; cf. NRDC comments on Intel and Merck XL projects (also included as part of the July 3, 1996, comments).

223. Yet there were some local environmentalists more closely aligned with the "expansionist" viewpoint.

224. Comments by MCEA, Sierra Club North Star Chapter, and Citizens for a Better Environment on the proposed 3M XL Permit for 3M Hutchinson (June 28, 1996) (copy on file with the author). See also the discussion infra 3M Company—Tape Manufacturing Facility, Hutchinson, Minnesota.

225. Compare 60 Fed. Reg. at 27282 with 62 Fed. Reg. at 19872.

226. 60 Fed. Reg. at 27283.

227. Id.

228. Id.

229. See The Alternative Path, supra note 56, at 3.

230. See id. at 13.

231. See NRDC Comments on 3M Hutchinson, supra note 222, at 14.

232. Cf. The Campaign for Responsible Technology, along with other advocacy organizations, described the Intel Corporation's Project XL Agreement as a "sweetheart deal" whereby "XL" stands for "EXtra Lenient." See also Press Release, Campaign for Responsible Technology, Coalition of Community, Environmental/Justice, and Labor Organizations Blast Clinton Administration "Sweetheart Deal" With Intel—"Project XL" Translates to "EXtra Lenient" De-Regulation (approximately Nov. 19, 1996); see also EPA Unveils First Major Project XL Permit, But Critics See Huge Flaws, INSIDE EPA, at 16-17 (1996) (environmentalists attack Intel's XL permit as a "sweetheart deal" and call Project XL a "fundamentally bankrupt, backward step . . . .").

233. See, e.g., EPA's Project XL Conference "Xlpalooza," New York, N.Y. (Sept. 11-12, 1996) (copy of the draft meeting summary on file with the author); EPA internal meeting, "XL Proposal and Project Development Process: From Pre-Proposal to Final Agreement, Revised" (Nov. 27, 1996) (copy of overheads on file with the author). EPA held an XL roundtable meeting on Jan. 13, 1996, with stakeholders to discuss concerns and proposed revisions to the program (copy of the draft meeting minutes on file with the author).

234. See 62 Fed. Reg. at 19876.

235. See id.

236. Id.

237. Id.

238. See 3M Draft Final Project Agreement, at 18 (May 29, 1996).

239. See id.

240. See id.

241. Andersen Corporation, Draft Project XL Proposal to EPA, at 5 (Jan. 30, 1998).

242. See id.

243. See U.S. Filter Recovery Services, Inc., Project XL Proposal to EPA, at 3 (Oct. 21, 1998).

244. See Update From Activists, AT THE SOURCE, A NEWSLETTER FOR THE POLLUTION PREVENTION NETWORK (National Environmental Law Center), Sept./Oct. 1995, at 2.

245. See Letter from Representatives of 25 Interest Groups, to Vice President Gore, Regarding Common Sense Initiative Input on Project XL Proposals (Sept. 21, 1995); Update From Activists, supra note 244, at 2.

246. See Activists Skeptical as Project XL Moves Forward, AT THE SOURCE, A NEWSLETTER FOR THE POLLUTION PREVENTION NETWORK (National Environmental Law Center), Nov./Dec. 1995, at 1, 4.

247. See id.

248. Letter from Representatives of 25 Interest Groups, to Vice President Gore, Regarding Common Sense Initiative Input on Project XL Proposals, supra note 245.

249. See EPA Unveils First Major Project XL Permit, But Critics See Huge Flaws, supra note 232, at 16 (in regard to the Intel Project XL Agreement).

250. See Letter from Representatives of 25 Interest Groups, to Vice President Gore, Regarding Common Sense Initiative Input on Project XL Proposals, supra note 245.

251. See Letter from Ted Smith, Silicon Valley Toxics Coalition, and JoLani Hironaka, Santa Clara Center for Occupational Safety and Health (and 18 other signatories), to David Gardiner, EPA Ass't Administrator (Oct. 27, 1995) (copy on file with the author).

252. Letter from David Gardiner, EPA, Ass't Administrator, to JoLani Hironaka, Santa Clara Center for Occupational Safety and Health (Oct. 31, 1995).

253. See id.

254. Id.

255. See id.

256. See id.

257. See Letter from David Gardiner, EPA Ass't Administrator, to JoLani Hironaka, Santa Clara Center for Occupational Safety and Health (Nov. 2, 1995) and attached Letter from Jon Kessler, EPA, Acting Director, Emerging Sectors and Strategies Division, to XL Applicants (Nov. 1, 1995) (copy on file with the author).

258. Letter from Fred Hansen, EPA Deputy Administrator, to JoLani Hironaka, Santa Clara Center for Occupational Safety and Health (Nov. 1, 1995); see also Letter from David Gardiner, supra note 257.

259. See Letter from Chris van Loben Sels, NRDC, to John Ehrmann, Keystone Center (Mar. 21, 1996) (setting our information needs for Project XL) (copy on file with the author); Letter from Ted Smith, Silicon Valley Toxics Coalition, to David Gardiner, EPA Ass't Administrator (Apr. 17, 1996) (regarding stakeholder process follow up) (copy on file with the author); Letter from Chris van Loben Sels, NRDC, to Fred Hansen, EPA Deputy Administrator (July 18, 1996) (outlining next steps to improve both the substance and accountability of Project XL); EPA's Project XL Lacks Critical Citizen Input, AT THE SOURCE, A NEWSLETTER FOR THE POLLUTION PREVENTION NETWORK (National Environmental Law Center) (Summer 1996); U.S. EPA, National Stakeholder Involvement in Project XL, Some Questions and Answers (Sept. 1996) (copy on file with the author).

260. See supra note 257.

261. See NRDC Letter, supra note 8.

262. See id.

263. See supra note 232; see also Cushman, supra note 2.

264. See supra note 232.

265. See NRDC Letter, supra note 8.

266. See EPA's Project XL Conference "Xlpalooza," supra note 233.

267. See id. at 43, "Stakeholder Principles in a Nutshell." Oddly enough, the 3M pilot was not represented on an EPA slide showing examples of stakeholder support for FPAs ranging from "clearly supportive" to "less clear" (the Project XL pilot companies represented were Intel, Merck, Berry, Weyerhauser, and HADCO) (copy on file with the author). Yet, letters from the statewide stakeholder group to the MPCA for the 3M XL pilot voicing unanimous support for the project were sent to Carol Browner, EPA Administrator, on September 19, 1996, and Fred Hansen, EPA Deputy Administrator, Andrew Ronchak, MPCA, and David Sonstegard, 3M, in August 1996 (copies on file with the author).

268. See Letter from the Pilot Project Committee, to Carol Browner, EPA Administrator (Sept. 19, 1996); Letter from the Pilot Project Committee, to Fred Hansen, EPA Deputy Administrator, Andrew Ronchak, MPCA, and David Sonstegard, 3M (Aug. 1996) (both letters voiced unanimous support for the project) (copies on file with the author).

269. The author attended the January 13, 1996, roundtable meeting in Washington, D.C., and the July 10, 1997, roundtable meeting in Chicago, Illinois.

270. See Meeting minutes from January 13, 1997, roundtable meeting (copy on file with the author).

271. See 62 Fed. Reg. at 19872.

272. EPA's Office of Reinvention contracted with Resolve, Inc. to evaluate stakeholder participation and process via survey and focus groups for the following Project XL pilots: Weyerhaeuser, Intel, Merck, and HADCO; the results can be found in Evaluation of Project XL Stakeholder Processes, Resolve, Inc. (June 1998).

273. See 3M Draft Final Project Agreement, supra note 238, at 16.

274. See id. at 16.

275. See id.

276. Id.

277. See MINN. STAT. § 114C.02.

278. See Letter of Commitment, supra note 123.

279. The PPC was originally formed as a subcommittee of the much larger group known as the P2 Dialogue that was assembled to addresses pollution prevention in the context of regulatory innovation initiatives. The MCEA was a member of both the P2 Dialogue and the PPC.

280. See Letter from the PPC, to Hansen, Ronchak, and Sonstegard (Aug. 1996). The letter describes the three criteria as follows: the first, and highest, standard of SEP is whether actual emissions decrease from current actuals as production increases; the second criterion is whether emissions decrease based on an emissions per production ratio; and the third is whether emissions remain below what otherwise applicable law would require as determined by a periodic regulatory analysis.

281. See Lessons Learned, supra note 187.

282. Andersen and U.S. Filter both requested the MCEA to review their draft stakeholder involvement plans.

283. The CAC's position on emission releases led to a bifurcated VOC emissions cap. Stakeholders preferred that the VOC cap on potential emissions from Andersen's West site remain separate from the VOC cap amount for its main production facility, to avoid a scenario where emissions from the Main site would be "transferred" to the West site.

284. See section VI.2.c. How the Performance Ratio Works, infra.

285. At this writing Andersen is in the process of conducting an air toxics analysis in accordance with the MPCA's guidelines.

286. See Project XL Final Project Agreement for Andersen Corporation, at 59, attach. B, Guidelines, Andersen Community Advisory Committee, Responding to Community Inquiries. A regular agenda item at a CAC meeting is a report from Andersen on the number of calls received by the company, the reason for the call, and what follow up action was taken. But cf. Steinzor, supra note 47, at 195 (the author suggests "EPA would be well-advised to eliminate this ["community concerns"] amorphous and dangerous category from the criteria that define Project XL or any other reinvention effort. Id.) While not significant to the big picture goals and objectives of regulatory reinvention policies, from MCEA's experience, community concerns are a very important aspect of reinvention initiatives that should not be minimized or overlooked.

287. See supra notes 243-63 and accompanying text.

288. See Andersen CAC meeting minutes June 25, 1998 (copy on file with the author).

289. Cf. Pedersen, supra note 47 (emission cap programs must be "transparent and accountable . . . maintaining public confidence is at the heart of these proposals."); Steinzor, supra note 47, at 178-80 (transparent standards will allow people to better evaluate the benefits of Project XL proposals).

290. See Suggestions for Improvement for the U.S. Filter XL Re-Proposal, EPA Region V (Apr. 1998) (copy on file with the author).

291. The one "community" member was a high school science teacher who taught at the local high school and formerly lived in Roseville (where the facility is located), but has since moved to Minneapolis. The MCEA, a state-based environmental organization was a member of the group, but U.S. Filter was unable to get any representation from a local environmental group or environmentalist.

292. U.S. Filter had originally planned to link the RCRA Part B permit and the Project XL permit together through one process. However, in order to meet some of its operating needs U.S. Filter needed the new Part B permit, and due to the length of time involved with the Project XL process it was no longer feasible to work on the two simultaneously.

293. Among other business, the Project XL stakeholder group modified its ground rules to include "calling meetings at least twice a year, as opposed to holding meetings only 'twice a year.'" Meeting Minutes, U.S. Filter Recovery Services XL Project Stakeholder Meeting (Jan. 26, 2000) (copy on file with the author).

294. This, despite EPA's assertion that continued stakeholder involvement in the process is "important and essential." See Memorandum from Sandra Panetta, EPA Office of Reinvention, to U.S. Filter Stakeholder Group members (Jan. 6 2000) (copy on file with the author).

295. The Project XL FPA for Andersen was signed in June 1999, and since then work has continued on the XL permit, which is expected to be issued during the first quarter of 2002. U.S. Filter's FPA was signed in September 2000, and the site-specific final rule was published in the Federal Register (66 Fed. Reg. 28066 (May 22, 2001)); however, the accompanying Minnesota XL permit is expected to be issued during November 2001.

296. However, for purposes of current air emission permitting, the Hutchinson facility is considered a single source and the MPCA no longer uses the "North" building and "South" building designations. (Author's e-mail correspondence with the MPCA's permit engineer July 3, 2000.)

297. See 3M, WELCOME TO 3M HUTCHINSON TAPE MANUFACTURING PLANT & MAGNETIC MEDIA PLANT (1986).

298. See id.

299. See id.

300. See id.

301. See id. As of July 3, 2000, 3M Hutchinson had only two small magnetic tape production lines in operation on a limited basis. (Author's e-mail correspondence with the MPCA's permit engineer July 3, 2000.)

302. According to the presentation by 3M staff that accompanied a tour of 3M Hutchinson taken by the author on April 22, 1996.

303. See MPCA, ENVIRONMENTAL ASSESSMENT WORKSHEET FOR THE 3M HUTCHINSON PROJECT XL 3 (1996) [hereinafter EAW]; see also 3M, WELCOME TO 3M HUTCHINSON, supra note 297.

304. 3M's presentation during the author's tour of the 3M Hutchinson facility on April 22, 1996.

305. The following subsections: 3M's Corporate Changes Impact the Hutchinson Facility, Sources, and Emissions of VOCs and HAPs at 3M Hutchinson, Regulation of Air Pollutants at 3M Hutchinson, Emission Reductions at the Magnetic Tape (North) Building, Emission Reductions at the Adhesive Tape (South) Building, 3M's Project XL Proposal—An Overview, and Setting the Air Emission Caps—"Technical Difficulties" are based on Donald Geffen & Alfred Marcus, Environmental Regulation for Sustainable Development (Strategic Management Research Center, Carlson School of Management, University of Minnesota, June 30, 1997) (paper prepared for the Minnesota Environmental Quality Board); much of that article is incorporated in a book by ALFRED MARCUS & DONALD GEFFEN, THE SEARCH FOR COMMON GROUND: FORGING A NEGOTIATED ENVIRONMENTAL AGREEMENT (forthcoming) [hereinafter MARCUS & GEFFEN].

306. The Project XL proposal for the Imation facility in Camarillo, California, which manufactures magnetic data storage cartridges for the computer industry, was finalized and signed on December 20, 1999. The Imation pilot allows for performance-based compliance, establishes an emissions cap below regulatory limits, and includes an EMS verification process. See www.epa.gov/projectxl/imation/122099.pdf.

307. For example, 3M Hutchinson was to begin production of video tape for the Disney Studios' animated film, "Toy Story" and for the motion picture "Titanic," according to information provided to the PPC at a presentation accompanying the tour of 3M Hutchinson on April 22, 1996.

308. As of July 2000, 3M Hutchinson had only two small magnetic tape production lines in operation on a limited basis. (Author's e-mail correspondence with the MPCA's permit engineer, July 3, 2000.)

309. See MARCUS & GEFFEN, supra note 305.

310. See EAW, supra note 303, at 3; see also 3M, WELCOME TO 3M HUTCHINSON, supra note 297.

311. See EAW, supra note 303, at 19.

312. See author's e-mail correspondence with 3M plant engineer, Mike Bennett, May 24, 2001 (copy on file with the author). One of the coaters (# 5L) at the South building contains an additional coating station and is operated with two control technologies: a two-bed carbon adsorption solvent recovery unit on 5L, and thermal oxidation on the 5Lre-Lab. Thus, three pollution control requirements are mandatory for two coating production lines.

313. See EAW, supra note 303, at 19.

314. See id.

315. See id. at 22.

316. See "Air Toxics Analysis," Attachment 5 to Technical Support Document, appended to the Draft XL Permit for 3M Hutchinson (May 1996).

317. Water-based solvents are not "solventless," but do contain a lower percentage of VOCs and thus are preferable.

318. Adhesive material or magnetic particles are dissolved in organic solvents, like MEK or heptane, and this mixture is applied to a substrate surface. The coated substrate is dried in ovens where the solvents evaporate and the resulting product is magnetic or adhesive tape. See EAW, supra note 303, at 19.

319. Both MEK and toluene are regulated as HAPs by EPA in accordance with the federal CAA, 42 U.S.C. § 7412, ELR STAT. CAA § 112.

320. See EAW, supra note 303, at 20; see also 3M, ENVIRONMENTAL STATEMENTS CONTAINING 3M CORPORATE ENVIRONMENTAL POLICIES (copy on file with the author).

321. See EAW, supra note 303, at 20; see also "Total Facility Actual Emissions History," Attachment 2 to Technical Support Document (citing TRI Emission Reports for 1991-1994 and MPCA Emission Inventory Reports).

322. See "Total Facility Actual Emissions History," supra note 321. See also ENVIRONMENTAL DEFENSE, ENVIRONMENTAL RELEASE REPORT FOR 3M HUTCHINSON (2000), available at www.scorecard.org/env-releases/facility.tcl?tri_id=55350MMGMDHIGHW.

323. See MARCUS & GEFFEN, supra note 305.

324. See 42 U.S.C. § 7475, ELR STAT. CAA § 165. Thus, lines in existence prior to August 7, 1977, are exempt from regulations applicable to EPA's PSD program and NSPS aimed to prevent violations of national ambient air quality standards for, so-called criteria pollutants: sulfur dioxide (SO₂), nitrogen oxides, carbon monoxide, VOCs, ozone, and lead.

325. See "Allowable/BACT/MACT Scenarios," Attachment 3 to Technical Support Document, appended to the Proposed 3M Minnesota XL Permit No. 96-01 (May 1996).

326. 42 U.S.C. §§ 11021-11023, ELR STAT. EPCRA §§ 311-313 (reporting requirements).

327. See MINN. R. pt. 7019.3000-7019.3100 (requires all facilities in Minnesota that have an air emissions permit to submit an annual emission inventory report to the MPCA quantifying emissions of the following regulated pollutants: carbon monoxide, nitrogen oxides, lead, particulate matter, particulate matter less than 10 microns in diameter, SO₂, and VOCs.

328. 42 U.S.C. § 7411(d), ELR STAT. CAA § 111(d).

329. See EPA's NESHAP Final Standards for HAPs From Magnetic Tape Manufacturing Operations, 59 Fed. Reg. 64580, 64587 (Dec. 15, 1994).

330. See supra note 325.

331. See "3M Calculations and Submittals Relating to Air Emissions," Attachment 6 to Technical Support Document, appended to the Proposed MinnesotaXL Permit No. 96-01 (May 1996).

332. 42 U.S.C. § 7411(i)(5), ELR STAT. CAA § 111(i)(5).

333. See 3M, CORPORATE POLICY STATEMENT, EARLY REDUCTION OF HAZARDOUS AIR POLLUTANTS (1991) (on file with the author).

334. See Draft Minnesota XL Final Project Agreement, at 12.

335. See MARCUS & GEFFEN, supra note 305.

336. See supra note 325, at attach. 2.

337. See EAW, supra note 303, at 20.

338. See MARCUS & GEFFEN, supra note 305.

339. See EAW, supra note 303, at 20.

340. See MARCUS & GEFFEN, supra note 305.

341. See id.

342. See id. at ch. 8. These authors point out that the 3M pilot differed from other Project XL proposals, for example, Intel, Weyerhaeuser, and Merck. Intel was a new plant with no prior operating history and proposed lower emission caps than would otherwise be allowed under standard permitting practices; in addition, Intel was designed as a "minor source" with a proposed emission cap for VOCs of 40 tons per year (3M's proposed VOC cap was 4,500 tons per year). Weyerhaeuser was proposing clear, enforceable reductions for some of the facility's pollution discharge into the Flint River that would be below current actual emission levels. Merck proposed to reduce total air emissions to at least 300 tons per year, which was less than the facility's current actuals.

343. For an excellent discussion of the Comparable Actions Test (CAT) that was developed as the comparison mechanism, see id. at ch. 6.

344. See id.

345. See author's notes from the PPC meeting on February 22, 1996, and 3M presentation to PPC; see also Environmental Regulation for Sustainable Development, supra note 305.

346. This amount assumes the continued use of coaters is not required to be controlled due to the units' grandfather status.

347. NRDC Comments on the Proposed FPA and Permit for [3M Hutchinson] MinnesotaXL Permit No. 96-01, June 29, 1996, at 1 [hereinafter, NRDC Comments] (copy on file with the author).

348. Id.

349. Letter from David Hawkins and Chris van Loben Sels, NRDC, to Fred Hansen and David Gardiner, EPA, and Keith Laughlin, Council on Environmental Quality (July 3, 1996).

350. See NRDC Comments, supra note 347.

351. Id. at 3.

352. Note, 1996, 1997, and 1998 emission levels were well below the proposed caps.

353. See MARCUS & GEFFEN, supra note 305.

354. In terms of possible direct impacts, in EPA's initial comments on the proposal, the Agency did find the "24 hour notification of emergency spills and releases is not acceptable, as this time period could permit/FPA (sic) adverse public health and environmental exposures." EPA Comments on Minnesota XL Permit No. 96-01 and Final Project Agreement for the 3M Hutchinson, Minnesota Facility, July 2, 1996 [hereinafter EPA Comments on 3M].

355. The MPCA was under this impression as a result of a June 10, 1996, meeting at EPA Region V offices in Chicago to discuss the 3M XL proposed permit and FPA. Andrew Ronchak, Project XL: The Minnesota Experience, JOURNAL OF TECH. ASS'N FOR THE WORLDWIDE PULP & PAPER CONVERTING INDUS. (May 1997). The MPCA staff believed it had followed all principles and guidelines set forth by EPA for Project XL and had kept EPA informed during the development of the permit and FPA. See EPA, PRINCIPLES FOR DEVELOPMENT OF PROJECT XL FINAL PROJECT AGREEMENTS (1995).

356. From this point on through the end of the year, the stakeholder groups began to play less and less of a role in the Project XL process. From September through December the stakeholder group members (and others) were left entirely out of the information/discussion loop which after the fact 3M regretted and apologized for. See PPC, PROJECT XL IN MINNESOTA, LESSONS LEARNED FOR MOVING FORWARD (1997). This left many participants wondering whether the stakeholders' continued participation and involvement could have played a constructive role that would have led to a different outcome, that is issuance of a Project XL permit. See Memorandum to Participants in the 3M Hutchinson Project XL Proposal Debrief (Apr. 11, 1997).

357. See PROJECT XL IN MINNESOTA, LESSONS LEARNED FOR MOVING FORWARD, supra note 356, at 5 (copy on file with the author).

358. See 62 Fed. Reg. at 19872.

359. 60 Fed. Reg. at 27287 (emphasis added).

360. According to the author's notes. (I can't attribute this explanation to any one particular EPA staff member, thus, the author does not intend to present this explanation as a formal EPA position. Rather, it was the way an EPA staff person reconciled its initial description of SEP with its later determinations of SEP to me during an informal conversation.)

361. EPA Comments on 3M, supra note 354, at 3.

362. Id. at 5.

363. Only in "outstanding site-specific circumstances . . . would EPA consider crediting the pre-existing voluntary control to the XL project," 62 Fed. Reg. at 19876.

364. Although EPA described Project XL as "experimental," unlike a true experiment, EPA wanted to guarantee the outcome before the experiment even began.

365. For an excellent analysis of the CAT, see MARCUS & GEFFEN, supra note 305, at ch. 6.

366. See President Clinton's Comments, supra note 34.

367. Id.

368. In his speech President Clinton stated:

If we can prove [Project XL] works . . . we can have government doing what it ought to do: be in the business of defining the public interest, making it clear, making sure it's advanced, but not prescribing every little dot and detail about how people pursue it in every business, in every community, in every enterprise all across the land. That is our goal.

Id.

369. See Presentation by MPCA staff to the PPC, Overview of the CAT (copy on file with the author).

370. See Letter from David Sonstegard, 3M, to Peder Larson, MPCA Commissioner, and David Gardiner, EPA Ass't Administrator (Dec. 24, 1996) (withdrawing from Project XL).

371. See id.

372. See id.

373. See Lessons Learned, supra note 187; see also J. Cohen, Clearing the Air, GOV'T EXECUTIVE, Sept. 1997, at 45, 48 (quoting EPA's then-Deputy Administrator Fred Hansen, "we learned a lot from the [3M XL] experience and changed some of our approaches").

374. See Lesson Learned, supra note 187; see also author's discussions with EPA staff in the Office of Reinvention.

375. See Lessons Learned, supra note 187. It should be noted that in June 2000, EPA formally proposed the Performance Track program (www.epa.gov/performancetrack) which is comprised of two tracks: the Environmental Achievement Track and the Environmental Stewardship Track designed to enhance the current regulatory system.

376. 64 Fed. Reg. at 17465.

377. See id. The 3M XL permit proposed to over-control emissions on its coating lines and leave its "compounding area" (where coating materials are mixed in vats) uncontrolled.

378. Emissions data is available on the MPCA's website at http://www.data.pca.state.mn.us/pca/emissearch.html.

379. See id.

380. See id.

381. See id.

382. See id.

383. See id. (the pre-approved changes would be subject to all applicable state and federal requirements and resulting emissions must be within an overall emissions cap).

384. See 42 U.S.C. § 7661a(b), ELR STAT. CAA § 502(b). The ability of state regulatory agencies to allow for changes at a facility without requiring a permit revision was established by the 1990 Amendments to the CAA.

385. See President Clinton's Comments, supra note 34.

386. Of the 245 acres, only 150 acres of the total property is available for development, as the remaining acreage contains a wetland, a bluff land tract that is in a conservation easement, and three probable Native American burial sites. See Andersen Project XL Final Project Agreement, at 12 (Mar. 31, 1999) [hereinafter Andersen FPA].

387. See supra at note 283 and accompanying text. After discussion, the Andersen CAC decided in favor of including Andersen West within the Project XL permit and maintaining the predetermined emissions caps. CAC meeting minutes from March 24, 2998, and April 14, 1998.

388. See Andersen FPA, supra note 386, at 12.

389. See Andersen Corporation Project XL Proposal (Jan. 30, 1998).

390. See Andersen CAC meeting minutes January 20, 1998 (presentation on Andersen's Emission Inventory); see also Andersen's 1996 Air Emission Inventory Report (on file at the MPCA).

391. This cap will be applicable to future development at Andersen West.

392. "In accordance with 40 C.F.R. S 52.21(j)(4), Andersen and MPCA shall review and modify as appropriate the BACT determination for milling operations. If it is determined that the baghouses no longer meet BACT, the permit will be opened for necessary modifications." Andersen FPA, supra note 386, at 17.

393. In contrast to the standard "command-and-control" mechanism.

394. See Andersen FPA, supra note 386, at 12, and as further described in Attachment A to the Andersen FPA.

395. See id. at attach. A (describing the Performance Ratio and the four-tiered limits to Andersen FPA).

396. Every three years the CAC Limit will be recalculated. The CAC Limit may decline, but may not increase unless the CAC approves the change in conjunction with the MPCA and EPA. Also, the CAC Limit cannot decline below the Reward Limit. See id.

397. See id. at 10.

398. Currently, Fibrex TM material is used in Andersen's replacement window product line and has been introduced in components of other product lines. See id. at 8.

399. Similar to the 3M XL proposal which involved a VOC cap and a HAP cap that were greater than current actual emissions.

400. See EPA comments on Andersen Project XL Draft Final Project Agreement(May 28, 1998).

401. Comments/questions to the MCEA from the 3M XL proposal, MPCA (Aug. 13, 1998)

402. Andersen selected 0.763 as the pound per unit ratio based on 1994 data because it was the most recent data available at the time Andersen developed its Project XL proposal.

403. See Letter from Brad Beeson, EPA Region V, to author (May 28, 1998) [hereinafter Beeson Letter] (copy on file with the author).

404. Id.

405. The MCEA's understanding of Andersen's position as a result of discussions and stakeholder meetings.

406. "Synthetic minor" is a term used to refer to operational and/or control limitations that a facility agrees to, e.g., restricting hours of operation, or requiring specific pollution control equipment, thereby limiting its emissions to prescribed levels in order to avoid "PSD review." PSD regulations require specific analyses covering air quality impacts and BACT (pollution). Through the agreed-upon limitations, a facility is thereafter making only a "synthetic minor" modification (in comparison to those truly minor modifications which do not, because of the small changes involved, require the extensive PSD review process). See 64 Fed. Reg. at 19102.

407. See Beeson Letter, supra note 403. The purpose of the PSD program is to prevent significant deterioration of air quality in areas of the country that attain national ambient air quality standards (NAAQS) for a designated list of chemicals. Andersen is located in an area that meets NAAQS for both VOCs and PM and thus has been designated by EPA to be an "attainment area" for those chemicals. See 64 Fed. Reg. at 19102.

408. See 64 Fed. Reg. at 19102.

409. See 40 C.F.R. § 52.21(j), (k), and (m).

410. See id. § 52.21(r)(4).

411. Because old windows may contain lead-based paint, under RCRA regulations this waste may be considered hazardous. See Letter from David Ullrich, EPA Acting Regional Administrator, to Richard Fowler, Andersen Corporation (Feb. 20, 1998).

412. See id.

413. Andersen's initial VOC cap was based on 1987 production and emissions data because it was a high-volume year, and, furthermore, 1987 was within the previous 10-year time frame in 1995 when the company was developing its Project XL proposal. In the mid-1990s EPA was considering a change to its new source review (NSR) rules that would allow facilities to look back 10 years at historic emissions when establishing facilitywide emission levels, i.e., caps. See 61 Fed. Reg. 38250, 38258 (July 23, 1996). See also EPA SUMMARY OUTLINE COMPARISON OF NSR REFORM RULEMAKING PACKAGE AND CURRENT RULES (1996), available at www.epa.gov/ttn/nsr. However, by the time negotiations on the FPA were under way it was 1998, and 1987 was outside the 10-year time frame. Also, by 1998 it became less likely that EPA would adopt a 10-year look back.

414. 64 Fed. Reg. at 19103 (the period from 1993 through 1997).

415. Id.

416. Id.

417. Id.

418. See id.

419. Be innovative . . . but not that far reaching; throw out the rule book, but save all the pages, especially those pertaining to the CAA.

420. The acquisition was finalized on April 23, 1999. Vivendi is a communication and utilities giant with over 200,000 employees and annual sales of approximately $ 35 billion. See also www.vivendi.com.

421. In 1982, the Metropolitan Waste Control Commission (MWCC) together with industry formed a task force to evaluate the possibility of establishing a central recovery facility.

422. As a result of civil penalties for noncompliance with federal standards for waste pretreatment for metal finishing operations, the MWCC and the MRC agreed in 1984 that the MRC industries could apply those penalties toward building a CTRF. In addition to funding provided by the MRC shareholder industries, other contributors included Lancy Recovery, Inc. and St. Paul Port Authority through the sale of revenue bonds. Construction began in September 1987 and the CTRF opened in July 1988.

423. See U.S. FILTER, UNIQUE RECOVERY SERVICES FOR INDUSTRIAL WASTES & WASTEWATER 3-4 (1997).

424. See id. at 4; see also www.usfilter.com.

425. See U.S. Filter Recovery Services RCRA Part B Permit No. 981098478. This permit is issued in accordance with RCRA and accompanying EPA regulations found at 40 C.F.R. Parts 260 et seq. and 40 C.F.R. § 272.1201, app. A, Minnesota; and MINN. R. §§ 7001 and 7045 (Minnesota's permitting rules and hazardous waste program rules).

426. See U.S. FILTER, UNIQUE RECOVERY SERVICES, supra note 423. "Non-RCRA" wastes are those not covered by RCRA. See id.

427. See U.S. Filter Recovery Systems (sic) Project XL FPA, at 4 (Sept. 21, 2000) [hereinafter U.S. Filter FPA].

428. See id. RCRA; MINN. R. § 7045.0135, subpt. 2 (F).

429. U.S. Filter FPA, supra note 427, at 4.

430. See id. (citing 40 C.F.R. Parts 261-266; 268, 270, 273, and 279).

431. See U.S. Filter Project XL Proposal, at 1 (Oct. 21, 1998).

432. See U.S. Filter FPA, supra note 427, at 6-7. The Minnesota Waste Management Act, MINN. STAT. § 115A.02 establishes the following waste management hierarchy: reduce, reuse, recycle, then disposal.

433. See U.S. Filter FPA, supra note 427, at 6.

434. See id. at 10.

435. See id. at 4.

436. See id. at 6.

437. See id. at 6.

438. To be codified at 40 C.F.R. pt. 266, subpt. N. (See U.S. Filter FPA, supra note 427, at 7 for a listing of the 20 project elements describing the site-specific rule that is found at new subpart N). The final site-specific rule was published in the Federal Register (66 Fed. Reg. at 28066). According to the MPCA's staff, it is anticipated that the Minnesota XL permit will be issued in November 2001.

439. See U.S. Filter FPA, supra note 427, at 40.

440. The hydrochloric acid recovery system project as originally planned involved U.S. Filter employees transporting containers of spent hydrochloric acid from the customer, e.g., a small electroplating shop, to U.S. Filter for processing through a distillation system. The hydrochloric acid vapors would have been condensed into a hydrochloric acid product, which then would have been sold back to metal finishers for reuse. The distilled water recovered from the process would have been reused at the U.S. Filter facility. The recovered metals would have been shipped off-site to a smelter, and the mixed metals residue from the smelting process thereafter would have been used by the cement manufacturing industry as a feedstock curing agent.

441. See author's discussion with U.S. Filter staff. See also Meeting Minutes of the U.S. Filter Recovery Services XL Project Stakeholder Group (Jan. 26, 2000) (copy on file with the author).

442. See author's discussion with U.S. Filter staff.

443. Based on 12 current customers in the first year. See U.S. Filter FPA, supra note 427, at 28.

444. Projections are based on 3 new customers in the second year and an additional 8 in the third year; fourth and fifth year projections are based on an expansion to 200 of U.S. Filter's current out-of-state customers and 200 new customers outside Minnesota (provided similar rules are adopted in other states or a federal rulemaking authorizes expansion outside of Minnesota). See U.S. Filter FPA, supra note 427, at 28.

445. See id. at 28 (projections are based on the same number of customers as described in the previous footnote).

446. See Letter from David Ullrich, Deputy Regional Administrator, EPA Region V, to George Andersen, U.S. Filter (Feb. 23, 1999) and attached U.S. EPA Comments and Concerns [hereinafter EPA Comments on U.S. Filter] (copy on file with the author).

447. See id.

448. See BOB EGAN, EPA COMMENTS ON USFRS PROPOSAL (1998) [hereinafter EPA Comments-Egan] (copy on file with the author).

449. See id.

450. See EPA Comments on U.S. Filter, supra note 446, at 4.

451. See id.

452. See id.

453. See E-mail from Joe Carruth, MPCA, to George Andersen and Martin Bergstedt, U.S. Filter, and attachment (Aug. 13, 1998) (regarding the concerns of county regulators as compiled by the MPCA following discussions between the county and state regulators) (copy on file with the author).

454. See U.S. Filter FPA, supra note 427. It is anticipated by the MPCA's staff that the site-specific rule will go on public notice sometime in November 2001.

455. See id. at 11-12. In accordance with the FPA, the company is required to develop, implement, and maintain a "U.S. Filter XL Waste Training Module," which will consist of a training manual along with other appropriate communication media, e.g., brochures and videos, and a "U.S. Filter Material Data Safety Sheet" (consistent with Occupational, Safety, and Health Administration requirements) to be used by U.S. Filter XL Waste Generators.

456. See id. at 9.

457. See id. at 10.

458. To be codified at 40 C.F.R. pt. 266, subpt. N.

459. This does not include the two-plus years of pre-proposal work developing the concept prior to submitting the final Project XL proposal to EPA. It was during this period that the MPCA devoted a tremendous amount of staff time to developing an acceptable Project XL FPA and permit for 3M Hutchinson; thus, other prospective Project XL applicants were relatively inactive pending the outcome of the 3M XL pilot.

460. See Letter from George Anderson, supra note 38 and author's conversation with George Anderson, U.S. Filter (July 28, 2000).

461. See Letter from George Anderson, supra note 38.

462. See id.

463. See id.

464. See U.S. Filter Project XL Proposal, supra note 431; see also U.S. EPA Region V's Comments on U.S. Filter's XL Proposal (May 1998) (copy on file with the author).

465. See U.S. EPA Region V's Comments on U.S. Filter's XL Proposal (May 1998) (copy on file with the author).

466. Id.

467. The compromise was to phase in customers from outside Minnesota, provided rule changes were adopted federally or in the other participating states. See U.S. Filter FPA, supra note 427, at 28.

468. See U.S. Filter Draft FPA, at 50 (Apr. 25, 2000) (proposing the term of the permit at three years after the effective date of the site-specific rule) (copy on file with the author).

469. The MCEA believes that EPA concession on the permit term, along with compromises made on other issues, was do to mounting pressure from the EPA Administrator's office to get as many FPAs signed before the year, and President Clinton's term, ended. The U.S. Filter FPA was signed on Sept. 21, 2000.

470. See supra notes 201-03 and accompanying text, discussing the two differing philosophies on society's responsibility for air pollution control: "command minimalists" and the "command expansionists."

471. See id.

472. See http://www.epa.gov/opei/byepi.htm and http://www.pca.state.mn.us/hot/envinnovations.html (for a listing of EPA and MPCA innovation projects).

473. 62 Fed. Reg. at 19877.

474. This is a reference to President Clinton's speech upon announcing the initial Project XL pilots selected by EPA. The president remarked,

If we can prove [Project XL] works, we can literally change the way Americans look with fear either on environmental threats, or on the government, or on some new economic enterprise. . . . A lot is riding on those of you who have agreed to participate in this project. I think we can really change the way people look at our common problems is (sic) we can prove, as I believe you will, that this works.

President Clinton's Comments, supra note 34.

475. See the MCEA/Koch Petroleum Group Collaborative website on the Internet at www.kochpinebend.com.

32 ELR 10075 | Environmental Law Reporter | copyright © 2002 | All rights reserved