State  Innovation Grant  Program:  Texas
                      Developing an Innovative Permit Initiative to Promote EMSs
                      (2002 Competition)
                        ie innovation urani rrogram 10 support
efforts led by state environmental agencies to test innovative approaches
for achieving better environmental results and improved efficiency in
permitting programs. Between 2002 and 2007, the State Innovation Grant
program competition awarded over six million dollars to support 35 state
projects that test permitting innovation for a variety of regulated entities
including several small business sectors. Asummary of the awards by year
appears in the table below.
    State Innovation Grant Program Statistics, 2002-2007
 Competition  Proposals  Proposals     Total Program
    Year      Submitted   Selected      Funding ($)
  2002/2003
                                          $618,000
                                        $1.425 Million
                                        $1.479 Million
 Cumulative
                                        $1.243 Million
                                        $1.611 Million
                                        $6.376 Million
"Innovation in Permitting" has been the theme of the State Innovation Grant
competition since its inception. In the last three competition cycles states
received awards for projects in the following three categories:
• The Environmental Results Program (ERP) is an innovative
  approach to improving environmental performance based on a system
  of the interlocking tools of compliance assistance, self-certification
  (sometimes, where permissible, in lieu of permitting), and
  statistically-based measurement to gauge the performance of an entire
  business sector. The program utilizes a multimedia approach to
  encourage small sources to achieve environmental compliance and
  pollution prevention. (See: http://www.epa.gov/permits/erp/)
• Environmental Management System (EMS) is a system involving a
  continual cycle of planning, implementing, reviewing and improving the
  processes and actions that an organization undertakes to meet its
  business and environmental goals. EMSs provide organizations of all
  types with a structured system and approach for managing
  environmental and regulatory responsibilities to improve overall
  environmental performance and stewardship.
  (See: www.epa.gov/ems/info/index.htm)
• Performance Track is a partnership that recognizes top
  environmental performance among participating US facilities of all types,
  sizes, and complexity, both public and private.
  (See: http://www.epa.gov/performancetrack/)
NCEI has provided awards also for projects testing watershed-based
permitting, and for permit process streamlining in past competitions. For
more information on the history of the programs, including information on
solicitations, state proposals, and project awards, please see the EPA State
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Project  Background:

  In 2001, the Texas legislature passed two laws: the
  first mandated the creation of the Strategically
  Directed Regulatory Structure (SDRS) to support
  innovative programs and promote performance-
  based regulation; and the second required the state
  to develop  regulatory incentives for implementing
  Environmental Management Systems (EMSs).
  Building on the state's environmental leadership
  program (CLEAN TEXAS), the SDRS was envisioned as
  a way to offer incentives to regulated facilities that
  can demonstrate that their practices are more
  protective of the environment and  public health than
  existing standards.

  In response to these new laws, the Texas
  Commission on Environmental Quality (TCEQ)
  applied for and received a State Innovation Grant to
  help support the implementation of the SDRS.  With
  these funds, TCEQ  launched a project to:

  .  Encourage innovative permitting activities  to
    address significant air and water quality issues;
    and

  .  Support innovative pollution prevention initiatives
    (i.e. involving EMSs, permitting actions,
    incentives).

  The project had three main components: 1)
  integrating EMSs into permitting activities and
  encouraging  improved environmental performance
  via incentives; 2) providing EMS training for TCEQ
  permit staff and regulated facilities; and 3) evaluating
  performance  and documenting project results.
                          NCEI
                          NATIONAL CENTER FOR
                          ENVIRONMENTAL INNOVATION

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Project Description

 At the outset of the SDRS project in 2004, TCEQ
 sought to establish incentives for CLEAN TEXAS members
 to improve their environmental performance. TCEQ
 identified permits for integration with EMSs activities
 and  incentives, established a process for accelerated
 permitting for CLEAN TEXAS members with an approved
 EMS, and created trainings for permitting staff on
 EMSs. These efforts culminated in an inter-agency
 Memoranda of Agreement (MOA) formalizing the
 incentives for CLEAN TEXAS members (i.e.  expedited
 permitting and reduced inspection frequency).

 Once the structure of permit incentives was in place,
 TCEQ worked to pilot test these incentives  among
 CLEAN TEXAS members with an EMS approved by
 TCEQ.  The Agency granted  expedited reviews for
 permit amendments to a number of eligible facilities,
 and  piloted incentives involving flexibility  in permitting
 requirements for two CLEAN TEXAS members.  One
 facility received a "flexible permit," that provided
 operational flexibility to  make predefined  changes
 without advance approval from TCEQ. For the other
 facility, TCEQ authorized a reduction in the frequency
 with  which the facility conducts required fugitive
 emissions monitoring.

 TCEQ also adapted a rule allowing landfills with a
 TCEQ-approved EMS to use the EMS as their required
 site operating plan. To date,  no facility has taken
 advantage of this option.

 As part of the SDRS, TCEQ also conducted a series of
 outreach and education activities for agency
 management and staff, industries,  and municipalities,
 which included:

 .  Briefings on the CLEAN TEXAS program and EMSs for
    the TCEQ management team.

 .  EMS-specific training for permitting and enforcement
    personnel.
 . Training workshops for regulated entities throughout
   the state designed to show them how to use an EMS
   to meet or exceed permit and other compliance
   requirements, and improve their environmental
   performance.
 . Sessions to introduce EMS concepts to local
   government officials and demonstrate how EMSs
   can  help municipalities comply with regulations (e.g.,
   the Municipal Separate Storm Water Sewer System
   rule).

Results

 TCEQ's SDRS project succeeded  in  integrating EMSs
 into the agency's  permitting process and developing
 specific permitting incentives for CLEAN TEXAS members.
 It also  increased knowledge and understanding of
 EMSs  among approximately 500 industry and
 municipality representatives, and educated TCEQ  staff
 about the role EMSs can  potentially play the permitting
 process. TCEQ did note  a few challenges to
 achieving a higher level of success,  specifically with
 quantifying results, measuring time and cost
 effectiveness, and limitations on its ability to develop
 and offer incentives:

 . TCEQ had difficulty quantifying the direct impact
   SDRS had on reducing environmental impacts.
   Annual environmental results reports submitted  by
   CLEAN TEXAS facilities  during the grant period show
   measurable environmental reductions in pollutant
   emissions. These results occurred at all CLEAN TEXAS
   facilities, not just those  participating in the  SDRS.

 . TCEQ was not able to quantify cost and time savings
   for participants and the state as a result of expedited
   permit reviews and greater permit flexibility.  TCEQ
   did see higher costs  associated with the project,
   particularly in time invested by facilities seeking
   regulatory incentives.  These costs were attributed to
   a number of factors including: facilities submitting
   incomplete permit applications causing repetitious
   reviews, competing priorities for permitting staff, the
   difficulty of obtaining  agency approval for non-

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    standard or new innovative actions or procedures,
    and the extensive compliance screening process
    required for CLEAN TEXAS members.

 .  Limitations on the  types of incentives that could be
    developed and implemented for CLEAN TEXAS
    members also reduced  facility participation, which
    impacted the SDRS project.  Although many
    incentives were proposed, only a few were
    ultimately approved,  in part because of federal
    and state regulatory constraints and programmatic
    concerns. TCEQ found that interest among
    facilities in CLEAN TEXAS was often tied to the type of
    incentives offered, and their perception of
    tradeoffs between membership benefits versus the
    time and effort required.  Companies showed less
    interest when the incentives were tied to
    completing all CLEAN TEXAS membership
    requirements or when available incentives would
    not provide  flexibility for certain federal
    regulations.

 TCEQ will continue to encourage facilities to use
 EMSs to improve environmental  performance by
 conducting additional trainings with small  businesses
 and municipalities, as well as expanding its CLEAN
 TEXAS recruitment efforts.
Connection  to  EPA's  Goals
 TCEQ's permit initiative directly supports EPA's
 Strategic Goal #5, focused on compliance and
 environmental stewardship, by promoting an
 innovative approach  to improve environmental
 performance through pollution prevention measures.
 It also supports several Cross-Goal Strategies
 through exploration of improved compliance
 assistance approaches and incentives to help
 achieve environmental protection.
               Project  Contacts:

                For more specific information on the Texas
                State Innovation Grant, please contact one of
                the individuals  below:
                David James
                Texas Commission on Environmental Quality
                Austin, Texas
                512-239-3184
                djames@tceq.state.tx.us


                David Bond
                U.S. Environmental Protection Agency- Region 6
                Dallas, TX
                214.665.6431
                bond.david@epa.gov


                Beth Termini
                U.S. Environmental Protection Agency-Region 1
                Boston, MA
                617.918.1662
                termini.beth@epa.gov
              Program Contact:
                Sherri Walker
                State Innovation Grant Program
                U.S. Environmental Protection Agency
                Washington, DC 20460 (MC1807T)
                (202)-566-2186; FAX (202) 566-2220
                walker.sherri@epa.gov
United States
Environmental Protection
Agency
Office of Policy,
Economics and Innovation
(1807T)
   February 2008
EPA-100-F-08-019

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