HC79.E5
U6
              Regulatory Reform Initiatives Progress Report
              October 1979
240R79101

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Reform Closeup
A Tougher  Job
Requires
Smarter
Regulation

The Controlled Trading
Complement to
"Command  and  Control'
Regulation
By William Drayton, Jr.
Assistant Administrator for
Planning and Management
Every year our environmental problems get
worse. Our population continues to grow,
and so does the size of the economy sup-
porting each person. On the other hand, the
quantity of air,  water, and land is fixed.
Thus, even before we consider the impact of
our mushrooming chemical and technological
creativity,  environmental quality must deteri-
orate if we stand still.
  Throughout the 1970s we have been doing
anything but standing still.  Birds that have
not been seen for decades have begun to
reappear. Salmon have begun to swim up
the Connecticut River again, and Washing-
ton,  D.C. officials are debating whether peo-
ple can safely swim in  the Potomac again
next year.
  But the  1970s were relatively easy years for
environmental cleanup. We were able to
regain a lot of lost ground because we  had
relatively easy targets — a limited number of
sources that could remove a great  deal of
pollution for relatively modest per-pound
costs. Moreover, the problem we set out to
address was simpler than the one we now
face. For example, we  set out to control a
few gross pollutants such as basic oxygen
demand and particulates, not hundreds of
toxics — let alone the cumulative impact of
various mixes of pollutants.
  In order not to lose ground, we  will be
steadily pushed to do two increasingly  dif-
ficult things: First, we  must ask those we
have already regulated to tighten their con-
trols further —  forcing them in many cases
up the steep outer extremities of their cost
curves. The incremental pounds of pollution
removed when a company moves from 90 to
97 percent control will  almost always cost
very much more than the average cost of the
pounds already being removed.  As we  push.
further up  these cost curves, resistance will
understandably increase.
  Second, we must reach out and regulate
ever larger numbers of smaller and smaller
sources. This effort entails much greater ad-
ministrative effort for every pound  of pollu-
tion removed because the payoff from each
interaction is small. And it involves an ever
increasing  number of voters in what they
commonly  perceive as regulatory hassles.
This second path, consequently, also in-
creases public resistance to environmental
legulation.
  We are going to have to be innovative to
escape this trap.
  First, we must stimulate a sharp  increase
in the rate  of control technology innovation.
That is the chief, in the long term the only,
way we can protect environmental  quality. If
we cannot find a steady and rapid stream of
new ways of controlling more pollution at
lower costs, our society will be forced to
choose between environmental deterioration
and ever rising control costs.
  If we allow this to be the choice, everyone
will lose. That is why I believe that finding
new ways of stimulating new control tech-
nologies is essential for the environmental
movement and very important for our
economy.
  Second, we should look for other ways of
getting more for less. Whenever we can get
a pound of pollution removed for fifty cents
rather than a dollar (or two pounds removed
instead of one for that dollar), we are mov-
ing in the right direction.  Because we have
been operating with relatively crude "com-
mand and control" regulatory tools, enor-
mous opportunities seem available.
  In pursuing both these objectives, we must
be rigorously realistic. A good theory is not
enough. We must have practical, implemen-
table programs. Most especially, they must
be as administrable and as enforceable as
what we have now. A "reform" that
becomes a loophole (1) is no help and (2)
will undercut the whole effort to innovate.
  Over the last two years EPA has been
developing a closely interrelated set of
reforms that will, I believe, allow us to
escape the trap, to get more for less. These
reforms represent the first realistic comple-
ment, or perhaps alternatives to "command
and control" regulation. They can be
adapted to many non-environmental fields of
regulation as well.

"Command and
Control" Crude
Traditional environmental regulation sets very
specific emissions or discharge  limits for
each class of process it regulates. Thus, for
example, we will tell asphalt producers that
they cannot emit more than 5.7 pounds of
paniculate per million cubic feet of air from
their drying process. And then that same
standard applies to their loading and transfer
operations, 5.7 pounds of particulate per
million cubic feet. This sort of regulation
does not leave those it regulates much room
to find more efficient ways, or combinations
of ways, of meeting society's objectives.

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   Central commands are likely to be poorly
and belatedly informed; they are certain to
be ignorant of the specifics of each case. A
general standard for drying asphalt products
— or any other process — can never take in-
to account the age, condition, degree of use,
etc. of any particular equipment or process.
Only those who operate the plant have this
information.
   Further, those who write central com-
mands can only make relatively crude trade-
offs regarding how much control to ask of
sources of the same pollutant. They com-
monly seek to apply a rough measure of
comparable technological effort, sometimes
reinforced by a local ambient or water quality
modeling effort. Both approaches use eco-
nomics in only the crudest way, if at all.
Such attempts at central planning simply
cannot deal with the enormous variation and
flux of case specifics, let alone the infinite
possible combinations of actions that could
be used to meet any particular environmental
objective.
  We can improve the quality and sensitivity
of our central commands —  but only within
a very fundamental set of limits. The more
we try to adapt them to real world variations,
the more detailed,  cumbersome, and restric-
tive they become. On the other hand, the
more general we make them, the more
wasteful their inattention to specifics
becomes.*

Winning Allies:
The Strategic Alternative
The key to doing a better job — and to
escaping the trap we are now entering — is
to form an alliance. We need those we
regulate to put their case-specific knowledge,
their technical and managerial expertise, and
their energy and imagination to work to  solve
the environmental and economic dilemma we
share.
 "This paper really only considers the "command"
 side of our two-part "command and control"
 regulatory system. Once we have adopted sensible
 requirements, we must move on to the second
 half of the regulator's job: making sure that every-
 one does his or her part to comply. This part of
 our traditional system has also worked very poorly.
 The economic approach to enforcement embodied
 in the "Connecticut Enforcement Plan" that I
 discuss in my forthcoming Harvard Journal of
 Legislation article "Economic Law Enforcement"
 is, I believe, how we can best fix this second half
 of our dilemma.
  If plant engineers felt it were in their and
their firm's interest to find more efficient
ways of abating pollution, we would have
more control technology innovation than we
have ever imagined. (Further, by thus  involv-
ing these engineers we would overcome one
of the chief reasons we have such trouble
getting plants that have installed control
equipment  to operate and maintain it proper-
ly — the fact that, uniquely, the plant
engineers do not feel that this  equipment is
theirs.)
  If an engineer finds a way of getting more
particulates out of a plant kiln's emissions at
a low cost, we  can let him (or  her) increase
his (or her) particulate emissions from
another part of the plant where it costs more
to remove a pound of particulate. Or we can
let the management sell that reduction above
and beyond what is required by law to
another firm in  the same area that otherwise
could only  meet part of its particulate  control
requirements at much higher costs, if  at all.
Before either trade could  be effected,  we
would  have to be convinced that we could
administer  and  enforce the new arrange-
ments easily.
  These arrangements, and a host of vari-
ants, give managers and engineers a power-
ful incentive to  find more efficient forms of
control and more cost-effective mixes  of
control. They create a market in which busi-
ness can make  a profit by producing clean
air and water.
  As with most other markets, trading must
take place within  a set of agreed and policed
rules. I have consequently dubbed the set of
interdependent  reforms we are now review-
ing "controlled  trading".  The following
several sections briefly discuss some of the
specific reforms that EPA  plans to develop
together into this overall complement to
traditional "command and control" regula-
tion.

Offsets
   Offsets are EPA's first application of the
idea that one source can  meet its environ-
mental protection obligations by getting
another source to take additional control ac-
tions. In "non-attainment" areas pollution
from a proposed new source — even  one
which  controls  its emissions to the lowest
level possible — would aggravate existing
violations of ambient  air quality health stan-
dards and trigger the  statutory prohibition.
Our offset  policy  lets  new sources build
under such circumstances if they

•  control emissions to the lowest achievable
level; and
• persuade an existing source(s) to redi
emissions by an amount at least equal t
pollution the new source will add.
  The existing source's reduction is sup
posed to offset the impact of the new
source's emissions on air quality. EPA n
approve each proposed offset to ensure
the total amount of pollutants emitted is
tually less than before the offset transac
opportunity.  In seeking an existing soun
emissions that could be reduced to offsi
emissions, the owner of the new source
probably look for the most cost-effective
pollution reduction available.
  For example, in Oklahoma City,  Gener
Motors  worked out an offset agreement
local oil companies so that it could build
new auto assembly plant.  The oil compa
agreed to install either floating roofs (a v
economical type of control) or vapor
recovery systems on their storage tanks <
GM agreed to use a new painting proces
The expected reduction of hydrocarbon
emissions (a major ingredient in smog)  w
enough so that GM could build a $400
million plant that eventualty will employ
several thousand people.
  A similar offset transaction made it pos
ble for Volkswagen to open its first U.S.
assembly plant at New Stanton, Pennsyl-
vania. The offset came when the state  hi<
way department substituted water-based
hydrocarbon-based asphalt in its road cor
struction program for western Pennsylvan
  The offset policy lets a new source mee
ambient health standards by turning to
another source to find needed extra emiss
controls. There is no reason to confine thi
flexible arrangement to new sources in  are
violating air quality standards.

The Bubble
The bubble policy explicitly encourages th<
owners  of plants facing high marginal cost
of pollution control to meet their emission
reduction requirements by putting extra co
trols on discharge points within the plant
with lower control  costs in exchange for e<
ing the  pollution control requirements for
discharge points in the plant with high  con
trol costs. The bubble policy is so named
because it gives business managers the fle>
ibility to think of reducing total emissions
from an imaginary  canopy, or bubble, plac<
over all  the emission sources of a plant. If
they find it is cheaper to tighten the contro
of a pollutant at one point and relax contro
at another, they can do so as long as the

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  I  pollution from the plant does not ex-
  J the sum of the current limits on in-
  Jual sources of pollution in the plant.
  here are some restrictions, of course.
  des must be made between discharges of
  same pollutant. We would not,  for in-
  ice, allow a firm to emit more of a car-
  agenic pollutant in  return for an equal
  ume reduction  in a more innocuous  one.
  Mants with several  industrial  processes and
  ny emissions sources are the best can-
  ates for "bubbling". Chemical companies,
  el mills and petroleum refineries are
  ong those  now studying ways to imple-
  nt the bubble.
  Jnion Carbide may realize a savings of
  ire than $5 million by using the bubble  at a
  3St Virginia metal fabricating plant. To
  iet current State regulations for particulate
  ntrol, the company would have to replace
  high-energy scrubber with a new control
 vice, called a bag collector. This could
 st between $5 and $6 million.  Because
 jy now have alternative ways of reducing
 rticulates within the plant,  Union Carbide
 proposing to reduce emissions in another
 ay. The company would shut down two
 rnaces elsewhere in the plant to reduce
 irticulates by more than three times the
  el achieved by replacing the scrubber.
  us, the people of West Virginia and Union
  rbide both get cleaner air at lower cost.
 The DuPont Corporation tells us that
 plying the bubble to one of its largest
  nts will allow it to remove 89  percent of
  t plant's hydrocarbon emissions for $5
 Ilion. Otherwise  it estimates that it would
 ve to pay $20 million to remove 84 percent
 these emissions.
 The Offset and Bubble approaches allow
  reased pollution to be balanced by com-
 nsating decreases of the same pollutant
 m other sources. Because business firms
 ve considerable freedom to choose the
 lluting operation from which to reduce
  issions, these approaches can accomplish
 llution reduction at  the lowest possible
 st.

  nking and Brokerage
any new firms locating in urban areas will
 ed to find offsets. We want to encourage
tablished firms to anticipate the demand
r offsets by controlling emissions more
an the law requires and "banking" the ex-
  for later sale to another firm,  or for their
 m future use. Firms with lower control
 sts will be able to sell their offset for less
d are more likely to  attract customers.
ich firms will have a considerable incentive
 find the most effective,  efficient control
stems.
   To help this still small-scale market
 become more fluid and efficient, we will also
 need brokers to arrange trades between new
 firms and firms with banked (or bankable)
 emissions  reductions. We will need such
 brokers if we are to get smaller firms, which
 generally cannot afford the sort of in-house
 axpertise trading that such specialized
 markets will require, to participate in any
 number.
   In the Oklahoma offset case, for example,
 it was the  Chamber of Commerce, anxious
 to attract new jobs for the city, that served
 as a middleman. The Chamber sought out oil
 companies in the area that were willing to
 create the  offsets and brought them together
 with General Motors and the regulatory
 agencies. In some areas state or city govern-
 ments are  taking on this function, in a few
 others private for-profit firms have begun to
 function.
   To encourage the activities of these brok-
 ers, EPA is working to set up  information
 clearinghouses so that firms seeking offsets
 can easily locate firms wanting to sell them.
 Part of that assistance includes improved
 computer models to assess how sources
 contribute  to air pollution and to estimate the
 effects of new sources of pollution.
   Some of the grants EPA has recently
 awarded to cities for air quality technical
 assistance  will be used for developing emis-
 sions trading markets in urban areas that
 have not attained air clean enough to meet
 national standards.

 Marketable Rights
 Under contract to EPA, the RAND Corpora-
 tion is studying the use of marketable per-
 mits as a way of first allocating and then let-
 ting permit holders transfer to others some
 or all of their rights to emit pollution.
 RAND's study focuses on permits to emit
 fluorocarbons, but the concept clearly has
 broader potential application.  With modifica-
 tions the idea might eventually strengthen
 the controlled trading  market discussed
 above.

 Further Steps
 Now we need to work hard at implementing
 this new framework. We need state and local
 agencies and individual companies to work
 together and with us to refine this promise
and turn it into the fundamental alternative I
 believe it can and should become.
  There is a great deal of refining still to do.
We need to find possible loopholes and close
them. We need to see how far we can ex-
tend offset trading geographically and how
big geographically we want to make bubbles
grow. We need to see how far we can go in
linking the several controlled trading pieces
together into one "market".  Can we, for ex-
ample, allow trades between bubbles and
offsets? And so on.
   This testing will help make clear what
legislative changes may make sense when
our air and water acts next are reviewed by
the Congress — as they are every four to
five years. Already I believe it is clear that we
should press to allow new sources to partici-
pate as fully as old sources in this controlled
trading. (New sources cannot now partici-
pate in most of these activities.)
By giving those we regulate incentives
to propose better ways of getting the job
done, we can avoid leaving society with
the disastrous choice of environmental
deterioration or ever-rising costs. By
releasing and directing their energy and
skills to finding new control technologies
and other ways of getting more done for
less we will accomplish  many times
more than we ever could by trying to do
the job better ourselves.

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Reform Update
EPA:

Environmental

Protection

Auditors
EPA's Office of Enforcement is
studying the use of a new
private market system for
monitoring compliance with en-
vironmental laws. It would
operate much the way that
public accountants certify the ac-
curacy of a company's financial
records.
  EPA would license indepen-
dent contractors who had the
skills necessary to be environ-
mental auditors. The monitors
would measure a company's in-
dustrial discharges and prepare
reports which the businesses
would forward  to EPA. Either
EPA or the state would certify
that an audit was done. EPA
would charge the businesses a
fee  for the audit certificates to
cover the cost of the program.
  At the present, the govern-
ment does not have enough peo-
ple  to inspect all the industrial
sources regulated by EPA
statutes. For example, only 20%
of major water pollution point
sources are inspected annually.
A program of private sector
auditors would help reduce the
monitoring gap without adding
inspectors to EPA's payroll. In
addition, private sector involve-
ment in enforcement activities
might lead to greater productivity
in the monitoring field.
  To maintain quality control
and prevent bribery in the audit-
ing  program, EPA would estab-
lish standards for auditing firms
and would conduct sample re-
views of their work. In addition,
auditors would not  be allowed to
monitor the same facility for two
consecutive years in hopes that
this would reduce the chances of
interpersonal relationships affect-
ing  the accuracy of monitoring.
  A contractor is studying the
feasibility of setting up the
auditing network for stationary
air pollution sources. The final
report is due by December. The
Enforcement Office is also con-
 sidering use of such a system for
 the water pollution and toxic
 substances programs.
   In another effort to improve
 enforcement of EPA regulations,
 the agency is considering the
 possibility of awarding grants to
 citizen groups to participate in
 various aspects of enforcement
 of environmental laws including
 monitoring,  legal research, and
 administrative aspects of the en-
 forcement process. Feasibility
 studies are currently underway.

 Agency contact:
 Gerald Bryan
 Office  of Enforcement
 EPA (EN-329)
 Washington, D.C. 20460
 202-755-2505


 Urban

Growth

 with  Cleaner

 Air
 EPA is one of four  Federal agen-
 cies sponsoring a $4 million
 demonstration program to help
 cities attract new and retain ex-
 isting industry while meeting
 clean air requirements.
  The  grants to eight urban
 areas will stimulate a number of
 innovations in state and local air
 pollution  policies. These pro-
 grams  will include:

 Boston (Mass.): To create off-
 sets for growth  by  reducing
 emissions at city-owned facilities,
 and to provide technical assis-
 tance to small pollution sources
 to make use of economies of
 scale (for example,  by organizing
 dry cleaners  to purchase pollu-
 tion control equipment together).

 Buffalo/Erie County (N.Y.): To
 establish  an  offset information
 center to help small and medium-
 sized firms facing pollution con-
 trol requirements that can im-
 pede growth, and to operate an
 offset bank.

 Philadelphia (Pa.): To identify
 target  industries to attract to the
 city and to propose financing
 mechanisms for environmental
 control devices and manufactur-
 ing processes most appropriate
 for these targeted industries, to
 investigate emission fees as a
 strategy,  and to develop new or
modified industrial plant siting
policies.

Chicago (III.): To develop and
maintain an emission offsets
bank, to design strategies for ad
ditional emissions offsets, and to
develop mechanisms for financial
and technical assistance to com-
panies.

Minneapolis/St. Paul (Minn.):
To begin work on establishing
emission limits in the region's
zoning process, to develop pro-
cedures for incorporating air
quality assessments into regional
capital improvement programs,
and to create offset banking and
an air quality ordinance as tools
for long term air quality manage-
ment.
  Elizabeth (N.J.), Bridgeport/
Waterbury (Conn.), and Portland
{Ore.) were also selected for
grants from among the 75 appli-
cants. The cities  were awarded
up to $500,000 each, based on
the degree of economic or social
distress, the severity of air pollu-
tion problems,  and the area's
commitment to economic devel-
opment and attainment of air
quality standards. The sponsor-
ing agencies also considered
how innovative the cities' pro-
posals were, whether the local
programs could be duplicated in
other areas, and the likelihood of
a continuing, self-supported
system after the demonstration
funding is  complete.
  The sponsoring agencies  (the
Departments of Commerce,
Transportation, Housing and Ur-
ban Development, along with
EPA) will hire a consultant to
evaluate the demonstration  pro-
gram on a national level.  EPA
staff will monitor the programs
and provide assistance.

Agency contacts:
Meri Bond
Office of Transportation and
  Land Use Policy
EPA (ANR-445)
Washington, D.C. 20460
202-755-0570;

John S. Hoffman
Policy Planning Division
EPA (PM-221)
Washington, D.C. 20460
202-755-9033
Banking  Crec

for Pollution

Reductions
EPA's Emissions Offset PC
allows areas with air quali
worse than national stand;
encourage industrial growl
while still making progress
toward clean air goals. Ne
sources  of air pollution cai
locate in these areas if exis
sources  reduce their emiss
by more than the emission
added from new  pollution
sources. Many states now
adopting an offset approac
way to accommodate new
growth.
  Under a recent revision i
offset policy, companies  w
reduce their emissions can
"bank"  those reductions fc
future use or sale, either in
set transactions or in other
actions  such as internal pla
changes under the "bubble
concept. Banking creates a
centive  for  companies to re
emissions even more than s
regulations require. It creati
pool, or inventory of emissi
reductions which new or e>
panding facilities can draw
  Without banking, the onl
to achieve the emission redi
tions necessary to offset  eci
nomic expansion in nonatta
ment areas (those where air
pollution exceeds national s
dards) is by imposing stricte
control  requirements on mai
sources  which have already
stalled air pollution  control
equipment. This  additional c
trol would force firms to  rep
newly-installed equipment, a
unnecessarily increase the cc
of pollution controls. Bankin
opens up less expensive opti
for  reducing emissions now,
rather than  making  firms  wai
until there is a pressing need
an offset.
  Banking will reduce the un
tainty facing firms now planr
expansions or new plants. If
emissions have been reduced
and banked, there will be opi
tunities  to build new facilities
Firms will face fewer delays.

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 less uncertainty about the price
 and availability of the emission
 reductions they may neeJ for ex-
 pansion. And if companies can
 draw on these banked inven-
 tories in the future, they are
 more likely to invest more in
 pollution control today.
   The agency is actively seeking
 the participation of states, local
 government and businesses, and
 will assist groups wanting to
 establish banking systems. EPA
 will publish more detailed mate-
 rials to help state and local
 governments develop specific
 rules on how and when banked
 emissions can  be created,
 stored,  and used.

 Agency contact:
 John S. Hoffman
 Policy Planning Division
 EPA (PM-221)
 Washington, D.C. 20460
 202-755-9033


 Final  Report  on

 Resource

 Conservation

 Incentives
 The EPA Administrator chairs a
 Cabinet-level, interagency
 Resource  Conservation Commit-
 tee that recently completed a
 study of present and proposed
 policies  affecting resource con-
 servation and solid waste man-
 agement.  The Committee's final
 recommendations were pre-
 sented to  the President and to
 Congress  in June.
  The Committee had mixed
 views on the issue receiving the
 greatest attention — mandatory
 beverage container deposit
 legislation. Proponents of this
 measure cited expected savings
 in materials and energy, as well
as reductions in expenditures  for
solid waste management and  lit-
ter control. Opponents argued
that such  legislation would not
be cost-effective. Still others
favored  delaying a decision  on
 national container deposit legisla-
tion until there is more ex-
perience with container deposits
at the State level. The Commit-
tee also  endorsed further study
on extending deposit legislation
to  durable and hazardous goods
and rejected a proposal for a na-
tional litter tax.
   The Committee recommended
 against legislation to adopt a Na-
 tional Solid Waste Disposal
 Charge (Product Charge). The
 Committee did find a theoretical
 justification for making a
 product's price reflect municipal
 solid waste management costs.
 Although the data  base is uncer-
 tain, the Committee found the
 net economic benefits and waste
 reduction would most likely be
 low in practice. On the other
 hand, the Committee did favor
 local user fees for municipal solid
 waste collection and recom-
 mended further research on the
 subject.
   The Committee found that the
 present Federal tax structure
 reduces the cost of domestic
 virgin materials significantly,
 leading to overuse  of these
 resources.  Most of the Commit-
 tee members recommended con-
 sidering elimination or modifica-
 tion of these subsidies as part of
 the Administration's next tax
 reform package. Most of the
 members also recommended that
 new virgin material extraction
 taxes not be considered until ex-
 isting tax policies encouraging
 use of  virgin materials are
 eliminated.
   The Committee also examined
 subsidies for resource recovery
 and  product regulations as a
 resource conservation strategy.  It
 found that subsidies can be an
 effective but potentially expen-
 sive tool to stimulate resource
 recovery, and did not recom-
 mend any new subsidies. Like-
 wise, the Committee found that
 product design regulations could
 be effectively employed as a
 resource conservation tool, but
 the costs appear to outweigh the
 benefits in most cases.

 Agency contact:
 John Robinson
 Associate Assistant
   Administrator for Program
   Management and Policy
 EPA (PM-208)
Washington, D.C. 20460
202-755-0698
 Regulators

 Working

 Together
 EPA, the Food and Drug
 Administration, the Occupational
 Safety and Health  Administration
 and the Consumer Product Safe-
 ty Commission formed the Inter-
 agency Regulatory Liaison Group
 (IRLG) to coordinate Federal ef-
 forts to protect the public from
 hazardous substances. The IRLG
 introduced  reforms at both head-
 quarters and the regional levels
 to reduce regulatory overlap,
 inconsistency, and duplication.
  These efforts have led to:

 • A report  describing  how the
 four agencies are handling 24
 hazardous substances that two
 or more of  the agencies regulate;

 • Feasibility studies of a com-
 mon chemical regulations and
 guidelines system and a common
 chemical testing support system;

 • Sharing of laboratory work
 and equipment among IRLG field
 offices;

 • Interagency referrals of inspec-
 tion observations and  consumer
 complaints, as well as sharing
 lab  analyses, supplying expert
 witnesses, and coordinating en-
 forcement actions against the
 same firm;

 • A substantial improvement in
 sharing information on emergen-
 cy health problems among agen-
 cies; and

 • A long range preventive health
 plan for dealing with problems of
 chronic degenerative diseases,
 environmental cancer,  repro-
 ductive toxicity, and other im-
 munologic diseases.

  In January, the Food Safety
 and Quality Service (U.S.
 Department of Agriculture)
 became the fifth agency to join
 the  IRLG.
  In addition to the reforms
described above, IRLG work dur-
ing the first half of  1979 in-
cludes:
 • A report on scientific methods
 to identify and evaluate sub-
 stances that may pose a risk of
 cancer to humans; and

 • An  FDA-EPA neurotoxicology
 research program at EPA labora-
 tories  in North Carolina.

 Agency contact:
 Toby Clark
 Office of the Administrator
 EPA (A-100)
 Washington, D.C. 20460
 202-755-0453


 Screening

 Old

 Regulations
 EPA reviews some of its regula-
 tions periodically because of
 statutory requirements. For ex-
 ample, the Agency reviews the
 National Ambient Air Quality
 Standards every five years to
 take into account new data on
 the health effects of air
 pollutants.
   In addition to these required
 revisions, EPA has begun a com-
 prehensive review of its other
 regulations.  The President ini-
 tiated this review in his Executive
 Order 12044, "Improving Govern-
 ment Regulations". The Admin-
 istrator responded by committing
 the Agency to a two-step pro-
 cess.
   The  first step is to screen each
 regulation to decide whether:

 •  It is acceptable as it is;

 •  It requires short-term improve-
 ment; or

 •  It should be  scheduled for a
 long-term evaluation.

   For each regulation. Agency
 work groups are considering its
 costs, benefits, enforceability,
 language quality, overlap with
 other regulations or programs,
 and paperwork requirements.
 The Agency  expects to  complete
 this screening process by
 November 1979.
  The second step is to make
the necessary short-term revi-
sions, and to conduct long-term
evaluations of regulations with
particular problems or especially

-------
significant effects. The long-term
evaluations will occur over a five-
year period.
  EPA's program offices have
reviewed several regulations and
scheduled others for review this
year. These include:

• Office of Pesticide Pro-
grams is screening all of its
regulations.

• Office of Air Quality Plan-
ning and Standards is review-
ing  and rewriting its regulations
on State  Implementation Plans
and will screen several of the
standards for hazardous air pol-
lutants.

• Office of Mobile Source Air
Pollution Control is reviewing
emission  regulations for light and
heavy-duty vehicles, aircraft, and
fuel economy of motor vehicles.

• Office of Radiation Pro-
grams is reviewing rules on the
uranium fuel cycle and on con-
trol  of radiation hazards in
uranium mining.

• Office of Noise Abatement
and Control has screened
regulations on interstate rail car-
riers, motor carriers, and medium
and heavy-duty trucks, and will
review rules on portable air com-
pressors.

• Office of Drinking Water
has begun a review of regula-
tions on grants to state drinking
water programs and national in-
terim primary drinking water
regulations.

• Office of Solid Waste has
screened six regulations and
plans to eliminate three regu-
lations and revise two others.

Other program offices will screen
the remaining regulations later in
1979. EPA's regional offices will
also be involved in the screening
process.

Agency contact:
Daniel J. Fiorino
Standards and Regulations
  Evaluation Division
EPA (PM-223)
Washington, D.C. 20460
202-755-2265
Consolidating

EPA's

Permits
Administrator Costle's task force
to simplify and consolidate per-
mit programs recommended that
EPA consolidate its permit pro-
gram regulations and policy
guidance; develop a single ap-
plication form; establish a single
organizational unit in EPA
Regional Offices to process and
issue permits; and work with
states and other Federal agencies
on permit consolidation.
  Deputy Administrator Blum
approved the report of the task
force on February  5, 1979.
  EPA(will soon propose con-
solidated permit program regula-
tions for the hazardous waste
management program under the
Resource Conservation and
Recovery Act, for  the under-
ground injection control program
under the Safe Drinking Water
Act, for the National Pollutant
Discharge Elimination System
under the Clean Water Act, and
for Section 404 (Dredge and Fill)
programs under the Clean Water
Act. To the extent feasible,
these consolidated regulations
will define standard permit con-
ditions, grounds for modifica-
tion, and procedures for process-
ing permit applications  and for
issuing permits.
  Public hearings on the con-
solidated regulations were held
in Dallas, Chicago, Seattle,
Washington, D.C. and Denver in
July and August of 1979.
   In a parallel project, an Agen-
cy work group has been develop-
ing a single application form
which can be used for  all EPA
permits. Where a single facility
requires multiple EPA permits, it
will soon  be able to apply for all
EPA-issued permits on a single
form.
   EPA will issue seven citizens
guides on permit consolidation at
the same time the proposed
regulations are published in the
Federal Register. These guides
will describe:

• The Agency's efforts in permit
consolidation;
• The proposed regulations ap^
plication form;

• Permit consolidation from the
state perspective;

• The proposed requirements for
consolidated permit regulations
for the hazardous waste pro-
gram;

• The proposed requirements for
the underground injection con-
trol program;

• The proposed requirements for
the dredge and fill programs;

• The National Pollutant
Discharge Elimination System
(NPDES) under the Clean Water
Act.

Agency contact:
Leonard Miller
Permits Division
Office of Water Enforcement
EPA  (EN-336)
Washington, D.C. 20460
202-755-2545


Making  English

Our Official

Language
The Agency's recently-formed
plain English team has been
helping all EPA offices write
regulations in clear language
without jargon, archaic legal
phrases, or incorrect grammatical
construction.
  Initially, each Assistant Ad-
ministrator chose one regulation
from each program office to be
drafted in plain English.
  At various stages of the
regulatory process, the plain
English team evaluated and
edited drafts of nine model
regulations and their preambles.
By February, all of the model
regulations had gone through
the process.  In addition to these
model regulations the Plain
English Project prepared a report
on how EPA could continue to
improve its regulation writing.

Agency contact:
Chris Kirtz
Standards and Regulations
  Evaluation Division
EPA (PM-223)
Washington, D.C. 20460
202-426-2693
Regulatory

Reform

Conference
EPA will hold a national con-
ference on "Regulatory Refor
of Environmental Protection F
grams" in spring 1980. The
agenda will cover EPA's con-
trolled trading program, the p
project to improve ways of
measuring the benefits of poll
tion control programs, the
economic impact of EPA's prc
grams, the environmental aud
concept and other current issi
in regulatory reform. State am
local pollution control officials,
academic experts, EPA person
from headquarters and the
regions and representatives of
business and environmental
groups will participate in panel
discussions.

Agency contact:
Paul Halpern
Standards and Regulations
   Evaluation Division
EPA (PM-223)
Washington, D.C. 20460
202-755-2811


Speeding Up

Construction

Grants
EPA hopes to speed up the
average processing time for run
water and sewer grants and loa
applications by more than a yea
under regulations published
September 27, 1978 in the
Federal Register. The shortened
processing time  will come from
reduced reporting requirements
on several types of loan applica-
tions and from consolidating
grants to small municipalities foi
developing project plans and ac-
tual construction.

Agency Contact:
Elaine Stanley
Facility Requirements
Office of Water  Program
   Operations
EPA (WH-595)
Washington, D.C. 20460
202-426-9404

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                                                             Regulatory  Reform Calendar
 Improving

 Benefit

 Analysis  in

 Regulations
 In analyzing new regulations,
 EPA has found it is considerably
 more difficult to measure the
 benefits than the cost of its pro-
 posals. While we have made
 progress in computing the
 overall benefits (reduced medical
 bills, reduced property damage,
 etc.) of pollution control, benefit
 estimation techniques are not ad-
 vanced enough to analyze the
 projected benefits of individual
 regulatory proposals.
   The Agency plans a pioneer
 $1.5 million project to advance
 the new science of benefit esti-
 mation. Because scientific re-
 search is uncertain and expen-
 sive, EPA will test the benefits
 assessment approach on selected
 regulatory proposals.
   This effort will draw on other
 EPA projects that have built up
 benefit estimation methodolo-
 gies, including:

 •  A major study of methods for
 Assessing Air Pollution Control
 Benefits (the Wyoming study),
 released in February 1979,
 developed national data about
 benefits from air pollution con-
 trol. The study concluded that
 such benefits may be substantial-
 ly  greater than previous studies
 indicated, because they failed to
 include benefits from reduced ill-
 ness as well as lower death
 rates. The Wyoming project also
 studied Los Angeles area air
 quality, finding a 30 percent im-
 provement would lead to be-
 tween $650 million and $950
 million in economic benefits per
 year.

 • Studies by the National Aca-
 demy of Sciences (NAS) analyze
 the benefits and costs of con-
 trolling 12 pollutants. NAS has
 completed two of these studies
 (for halomethanes and nitrates)
 and three more (chlorobenzelate,
 odors, and PCB's) will be done
soon.

 Agency contact:
 Deborah Taylor
 Economic Analysis Division
 EPA (PM-220)
Washington,  D.C. 20460
202-755-0733
Indexing  The

Opinions of

EPA's General

Counsel
The Environmental Law Publish-
ing Service of Chatsworth, Cali-
fornia has just published a two-
volume work, "The Opinions of
the General Counsel of EPA". It
contains legal memoranda from
the General and  Regional
Counsels in response to com-
monly raised questions about the
meaning of EPA's governing
statutes. The new work includes
the decisions on the National
Pollutant Discharge Elimination
System which are the legal back-
bone of EPA's water permit pro-
gram. These opinions do not
carry the force of law, but
together with court decisions,
will give environmental lawyers
access to the legal documents
affecting their work.

Agency contact:
Bill Pederson
Office of General Counsel
EPA (A-130)
Washington, D.C. 20460
202-426-0508
The calendar on the following pages lists all of EPA's Regulatory
Reform Initiatives and the status of each, as of September 1979. Many
of these initiatives are described in greater detail elsewhere in this
report. Others are explained in the agency's December 1978 progress
report on Regulatory Reform Initiatives.
  You may obtain more information about any of these reforms from
the agency contact listed. The Agency's Regulatory Reform Staff will
provide a current inventory of all EPA's regulatory reform initiatives
upon request (See address below).
Name
Address 	
City ft State
Company or Organization
 D
I would like to receive a list of EPA publications on regulatory
reform

I would like more information about EPA's conference on
"Regulatory Reform of Environmental Protection Programs"
(available early next year)

I would like to receive future progress reports on EPA's
Regulatory Reform Initiatives (DO NOT CHECK THIS BOX IF
YOU HAVE  ALREADY SENT IN A FORM TO THE REGU-
LATORY REFORM STAFF)
                               SEND THIS FORM TO:
                               Daniel Fiorino
                               Regulatory Reform Staff
                               (PM-223)
                               Environmental Protection Agency
                               Washington, D.C. 20460

-------
Regulatory  Reform Calendar
Alternatives  and
Supplements to
Regulation
Initiative
 1. Marketable Permits
2. Economic Incentives
to Control Air
Pollution
 3. Innovative Resource
 Conservation and
 Solid Waste
 Management
 Alternatives
EPA, assisted by the Rand Corporation, is studying alterna-
tive ways to control emissions of chlorofluorocarbons
(CFC) from sources other than aerosol sprays, including
the allocation (perhaps by auction) of production or use
permits for environmentally acceptable amounts of CFC.

Under Section 405 of the 1977 Clean Air Act Amendments,
EPA has begun to study economic incentives as alterna-
tives to traditional regulation in controlling air pollution.
The EPA Administrator chairs a Cabinet-level, interagency
Resource Conservation Committee, which has examined
several innovative ways to conserve resources and
manage solid waste, including beverage container deposits,
product charges, and tax incentives for recycling.
Status

Draft final report due
in September
Studies over the next
year will cover
nitrogen oxide and
benzene emissions

Final report approved
in June 1979
Agency Contact*

Jim Hughes
Office of Regulatory Analysis
(TS-794)
755-6660
Willard Smith
Economic Analysis Division
(PM-220)
755-2887

John Robinson
Associate Assistant
Administrator for
Program Management
and Policy
(PM-208)
755-0698
4. Study of Operation
and Maintenance
Strategies
5. Federal
Procurement
Incentives
To ensure proper operation and maintenance of pollution
control equipment the Agency is evaluating a number of
policy alternatives,  including two supplements to traditional
regulation: (1) increased use of private sector services to
diagnose problems, correct them, and operate and main-
tain publicly owned treatment works, and (2) economic
penalties on violators of pollution standards equal to what
they save by not properly operating or maintaining the
equipment.

Procurement incentives rely on the Federal Government's
purchases of goods and services from private industry to
encourage the production of environmentally superior
products.
Decisions on the
POTW portion of the
Study are expected in
September 1979
Incentives for noise
reduction have been
applied to trucks, air
compressors and
lawnmowers
Ron Brand
Program Evaluation Division
(PM-221)
755-0350
Stanley B. Durkee
Technology and Federal
Programs Division
(ANR-490)
557-7634
6. Encouragement of
Innovative Technology
 7. Nonconformance
 Penalties
Several programs under the Clean Air and Clean Water
Acts encourage the development of better control tech-
nologies, by extending compliance deadlines for dischargers
using innovative pollution control systems.
Heavy-duty engine manufacturers which fail to meet an
emissions standard may continue to sell their product if
they pay a nonconformance penalty. The penalty is de-
signed to keep non-complying manufacturers from using
their cost advantage against those who comply.
EPA accepting
applications for
compliance date
extensions; several
grants made to state
and local
governments
Proposed regulation in
Federal Register
Feb. 12, 1979; final
rule expected in
March 1980
Stephen Bugbee
Permits Division
(EN-336)
472-3365 for water program
compliance date extensions;
Joe Easley
Municipal Construction
Division
(WH-547)
426-4445 for grants for in-
novative systems;
Francis J.  Biros
Stationary Source
Enforcement Division
(EN-341)
755-2560 for air program
compliance date extensions.

Frank Slaveter
Mobile Source
Enforcement Division
(EN-340)
755-1572
*AII contacts are located in Washington, D.C. (area cods 202)
unless otherwise indicated. The numbers in parentheses are mail
codes for offices at EPA Headquarters, 401 M Street, S.W.,
Washington, D.C. 20460.
8

-------
Initiative
                                                                                      Status
                                                                                   Agency Contact
8. Plantwide
Emission Reduction
9.  Alternative
Strategies for Clean
Air Nonattainment
Areas
10. Banking of
Emissions Reductions
11. Air Quality
Technical Assistance
Grants
12.  Economic Incen-
tives for Prevention of
Significant Deteriora-
tion of Air Quality

13.  Noise Emission
Labelling
14. Clean Air
Noncompliance
Penalties
 EPA would view each plant's emissions as a whole and
 give plant managers the flexibility to seek the least costly
 ways of limiting their emissions, so long as total pollution
 from  the plant would not exceed that allowed under cur-
 rent standards. EPA refers to this approach as the
 "bubble" concept.

 EPA is reviewing alternative ways to accommodate growth
 and control pollution in areas where pollution is already
 worse than national standards. These include non-
 traditional means of pollution control such as emission
 charges, the emissions offset market, and other economic
 approaches.
EPA announced that sources who reduce their emis-
sions under its offset policy can "bank" emission
reductions for future use or sale, either in offset
transactions or in other transactions which EPA and
the states currently allow (such as internal plant ex-
changes under the "bubble" concept). This group will
work with State and local governments to assist in
establishing operating systems.

EPA, along with the Departments of Commerce, Transpor-
tation and Housing and Urban Development, is sponsoring
a $4 million demonstration project to aid cities  in achieving
industrial growth while meeting clean air requirements.
 Air bubble in
 Federal Register;
 Jan. 18, 1979;
 water bubble pending
 Revised work plan
 due in September
 1979
 Guidance to states
 on alternative
 systems issued by
 late fall
Eight urban areas
selected to receive
the grants
EPA is studying the use of economic incentives such as        Report due in late
marketable permits and emissions charges in the "preven-      1979
tion of significant deterioration" (PSD) of air currently
cleaner than required by national standards.

Rather than directly regulating noise emitted by consumer      Final rules due in
products,  EPA is requiring manufacturers to inform con-       September 1979
sumers of the noise levels of products.
EPA is required to assess administratively a noncompliance
penalty against polluters who violate Clean Air Act re-
quirements. The amount of the penalty will equal the
money the violator has saved by not installing pollution
control equipment.
Proposed rules
published in Federal
Register March 21,
1979
 James Kamihachi
 Economic Analysis Division
 (PM-220)
 755-2677
 Alex Christofaro
 Policy Planning Division
 (PM-221)
 755-2733;
 Darryl Tyler
 Office of Air Quality Plan-
 ning and Standards,
 Research Triangle Park,
 N.C.
 (MD-15)
 919-541-5425

 John Hoffman
 Policy Planning Division
 (PM-221)
 755-0933
 Meri Bond
 Office of Transportation and
 Land Use Policy
 (ANR-445)
 755-0570;
 John Hoffman
 Policy Planning Division
 (PM-221)
 755-0933

 Marty Wagner
 Policy Planning Division
 (PM-221)
 755-4803

 Tim McBride
 Office of Noise Abatement
 and Control
 (ANR-490)
 557-2710

 Bob Homiak
Stationary Source
 Enforcement Division
 (EN-341)
755-2581
15. Environmental
Auditors
16. Citizen Role in
Enforcement Activities
The Office of Enforcement is considering a new monitoring
system of environmental auditors based on the model of
certified public accountants.
The Office of Enforcement has given grants to citizen
groups to participate in environmental enforcement
activities including monitoring and participation in
permit reviews. The Enforcement Office is consider-
ing expanding the program to other activitip-
Final report of con-
tract study due in
December
Feasibility studies
currently underway
Gerald Bryan
Office of Enforcement
(EN-329)
755-2505

Judy Shaffer
Office of Enforcement
(EN-336)
755-0750;
Bob Steinwurtzel
Office of Enforcement
(EN-338)
755-0750

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Regulatory  Reform Calendar
Improving  the
Quality  of
Regulation
Initiative

1.  Studies of Cumula-
tive Impacts of
Regulation
2. Screening and
Review of Existing
Regulations
3. Evaluation Plans for
New Regulations
4. Evaluation of
Alternatives
5. Plain English Project
6. Task Force on
Public Participation
7. Water Program
Public Participation
Policy
8. Reimbursement for
Public Participation
EPA is conducting studies on the cumulative effects of the
Agency's air and water regulations on major industries.
EPA has begun to review all of its existing regulations to
decide which can be eliminated, simplified,  replaced with
non-regulatory policies, or otherwise improved.
EPA now includes with each new significant regulation a
plan to evaluate it within five years after it is implemented.
The evaluation will assess the regulation's cost, its public
acceptance and extent of compliance.


EPA is studying ways to improve work group's considera-
tion of non-regulatory alternatives.
The Agency recognized the need to write its regulations
more clearly. It has begun a number of projects to ensure
EPA regulations are written in plain English.
In April 1978, the Administrator and Deputy Administrator
created a task force on public participation to survey and
evaluate the Agency's efforts to involve the public.
The Agency has proposed a regulation establishing public
participation requirements for programs under the Safe
Drinking Water Act, the Resource Conservation and
Recovery Act, and the Clean Water Act.
EPA has started a pilot project to pay the expenses of
groups that cannot otherwise afford to participate in
regulatory proceedings.
 Status

 Six studies already
 published; more in
 progress
Results will be pub-
lished at end of 1979
Regulation Develop-
ment Manual is being
written
A checklist of
alternatives is now
available
EPA style manual is
drafted
Currently developing
Public Participation
Policy and Pilot Com-
pensation Program

Report in Federal
Register February 16,
1979
One toxics project
has been completed.
Air and water pro-
grams are developing
their own pilot
projects
 Agency Contact

 Willard Smith
 Economic Analysis Division
 (PM-220)
 755-2887

 Daniel Fiorino
 Standards and Regulations
 Evaluation Division
 (PM-223)
 755-2265

 Daniel Fiorino
 Standards and Regulations
 Evaluation Division
 (PM-223)
 755-2265

 Daniel Fiorino
 Standards and Regulations
 Evaluation Division
 (PM-223)
 755-2265

 Chris  Kirtz
 Standards and Regulations
 Evaluation Division
 (PM-223)
 426-2693

 Sharon Francis
 Office of the Administrator
 (A-100)
 755-0425

 Lee Daneker
 Office of Hazardous
 Materials
 (WH-556)
 755-7638

 Bill Pederson
Office of General Counsel
 (A-130)
426-0508
 10

-------
Initiative

9. Regulatory Agenda
10. Indexing of the
Opinions of EPA's
General Counsel
11. Interagency
Regulatory Liaison
Group IIRLG)
 EPA publishes its Regulatory Agenda in the Federal
 Register four times a year. The Agenda provides informa-
 tion to assist public participation in EPA's regulatory ac-
 tivities.  It includes a list of regulations the Agency is
 preparing; the status of each regulation; and an Agency
 contact for each regulation.

 The Environmental Law Publishing Service of Chatsworth,
 California has published a two-volume work, "The
 Opinions of the General and Regional Counsels of EPA." It
 contains legal memoranda in response to commonly raised
 questions about the meaning of EPA's governing statutes.

 EPA, the Food and Drug Administration, the Occupational
 Safety and Health Administration and the Consumer Prod-
 uct Safety Commission have formed the Interagency
 Regulatory Liaison Group (IRLG) to coordinate Federal ef-
 forts to protect the public from hazardous substances.
Status

Agenda published
first week of May
Completed
Cancer identification
document published
February 1979;
USDA's Food Safety
and Quality Service
joined IRLG in
January
Agency Contact

Phil Schwartz
Standards and Regulations
Evaluation Division
(PM-223)
755-2693
Bill Pederson
Office of General Counsel
(A-130)
462-0508
Toby Clark
Office of the Administrator
(A-100)
755-0453
12. Regulatory Reform
Conference
13. Improving Benefit
Analysis in Regula-
tions
EPA will hold a national conference on "Regulatory            Spring, 1980
Reform of Environmental Protection Programs." State and
local officials, academic experts, EPA personnel and
representatives of business and environmental groups will
participate.

The agency has initiated a new study to advance the state      Two year study
of the art of benefit estimation. The project will draw on a      started
previous study of methods for assessing air pollution con-
trol benefits released in February 1979 and a series of Na-
tional Academy of Science studies.
                        Paul Halpern
                        Standards and Regulations
                        Evaluation Division
                        (PM-223)
                        755-2811

                        Deborah Taylor
                        Economic Analysis Division
                        (PM-220)
                        755-0733
                                                                                                                                          1 1

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Regulatory Reform Calendar
Reducing
Regulatory
Burdens
Initiative

1. Improving New
Source Permit
Reviews
2. Consolidating EPA's
Permits
3 Revised Ad-
judicatory Hearing
Procedures
4 Sunset for New
Reporting Re-
quirements
Numerous permits are often required before a company
can begin construction of a new source of pollution. To
reduce delay, complexity, and uncertainty EPA has an-
nounced new rules for handling these permits.

Administrator Costle directed an Agency task force to
work on  consolidating all agency permits, using a single
permit application form; common application procedures
and regulations, consistent definitions of key terms, and
consistent reporting periods and due dates.

The Office of General Counsel (OGC) is changing hearing
procedures that should lead to improved, more streamlined
decision-making while preserving parties' rights.
EPA has adopted a sunset policy for reporting or record-
keeping requirements of each new regulation
Status

Rules announced in
Sept. 1978; task force
continuing
Report approved Feb.
5, 1979; regulations
proposed on June 14;
hearings held in July
and August

Hearing procedures
for new pesticide per-
mit consolidation due
in fall  1979
Completed
Agency Contact

Abby Pirnie
Policy Planning Division
(PM-221)
755-2733

Leonard Miller
Permits Division
Office of Water Enforcement
IEN-336)
755-2545

Bill Pederson
Office of General Counsel
(A-130)
426-0508 for water permits;
Dave E. Menotti
Office of General Counsel
(A-132)
755-2680 for pesticide
hearings.

Phil Schwartz
Standards and Regulations
Evaluation Division
(PM-223)
755-2693
5. Internal Report
Reduction Task Force
6. Construction Grant
Application Processing
Two Agency task forces have been working on reducing
reports that EPA requires of its regional offices and State
agencies
Under regulations published in the Federal Register, EPA
hopes to speed up the average processing time for rural
water and sewer grants and loan applications by more than
a year
Completed,
recommendations
implemented
Rules published Sept.
27, 1978;  Interagency
Agreement for rural
water and sewer
grants signed
December 1st
Ferial Bishop
Office of Toxic Substances
(TS-794)
755-8963;
Howard Howell
Program Reporting Division
(PM-227)
245-3000

Elaine Stanley
Facility Requirements
(WH-547)
426-9404
 12

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Appendix	

How EPA

Develops
Regulations

EPA produces regulations in a
five-stage process: (1) starting
work on a regulation,  (2) prepar-
ing a development plan, (3) pre-
paring a decision package, (4) in-
ternally reviewing the  regulation
and decision package, and (5)
publishing the regulation in  the
Federal Register. Each regulation
goes through the last  three
stages twice, first as a proposed
regulation and again as a final
regulation.

When the Assistant Administra-
tor for a lead office (the office
responsible for developing the
       regulation) determines that a
       regulation is required by law or
       otherwise decides to start work
       on a new regulation, he sends a
       notification  form to senior
       management. This brief standard
       form requires no analysis. The
       lead office submits this notifica-
       tion form as soon as possible,
       usually within 45 days of the
       time it learns (through passage
       of new legislation, a court order,
       etc.) that regulation  may be
       necessary.

       Next, the lead office forms a
       work group with members from
       relevant EPA offices. With the
       help of the work group, the lead
       office then prepares  a  plan for
       developing the regulation. The
       lead office includes in  this
       development plan, among other
       information,  an  analysis of the
       alternatives  to regulation, a
       public participation plan, a
       schedule for developing the
       regulation, and a priority
       classification of  the regulation.

       The lead office,  with the assis-
       tance of the work group, then
       prepares a decision package.
       This package consists  of the
       regulation, a preamble stating
       the purpose  of the regulation, a
               statement of the resources re-
               quired to implement the regula-
               tion, and an analysis of the antici-
               pated environmental and eco-
               nomic impacts of the regulation.
               It also includes such supporting
               documents as the reporting im-
               pact statements and evaluation
               plan.

               After the lead office Assistant
               Administrator approves the deci-
               sion package, he submits it for
               prepublication review.  This pro-
               cess has three parts: Steering
               Committee review, Red Border
               review, and final review  by the
               Administrator and Deputy  Ad-
               ministrator. The details of  the in-
               ternal review vary depending on
               the priority classification
               assigned to the regulation. The
               Steering Committee is a group
               of representatives of the Assis-
               tant Administrators  and chief
                     staff offices that generally over-
                     sees the regulation development
                     process. The "Red Border"
                     review is the next stage of inter-
                     nal review.  It derives its name
                     from the color of the cover sheet
                     we put on the package which
                     goes to our senior management.
                     The regulation then  goes to the
                     Administrator and Deputy Ad-
                     ministrator. When the  Adminis-
                     trator has signed it,  it is pub-
                     lished in the Federal Register.

                     The chart, which appears
                     in EPA's Final  Response to the
                     President's  Executive Order on
                     "Improving Government Regula-
                     tions," illustrates EPA's regula-
                     tion development process:
Stages in The
Development of
Significant EPA
Regulations
1. Start work:
Send Notification Form

Invite work group
members

Schedule a
development plan
2. Prepare a
development plan:

Classify regulations as
Major or Routine

Identify purpose,
issues, major
alternatives

Plan external
participation measures

Describe analyses
including Regulatory
Analysis when required

Establish development
and publication
schedules

Notify interested and
affected parties of work
plans
3. Prepare a decision
package:

Involve public,
State/local officials

Analyze effects:
— Environmental
— Economic
-Urban
— Resource
— Paperwork

Write rule, preamble

Recommend action to
Administrator
4. Conduct internal
reviews:

Conduct Steering
Committee review

Conduct "Red Border"
review by senior
management

Conduct final review by
Administrator
5. Publish in Federal
Register:
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