October 2008
         A Report on the Results
         from Projects Supported
         by the EPA State Innovation
         Grant Program

   Principles from the State/EPA Innovations Agreement1
   Experimentation: Innovation involves change, new ideas, experimentation and some risk of failure. Ex-
   periments that will help us achieve environmental goals in better ways are worth pursuing when success is
   clearly defined, costs are reasonable, and environmental and public health protections are maintained.

   Environmental Performance: Innovations must seek more efficient and/or effective ways to achieve our
   environmental and programmatic goals, with the objective of achieving a cleaner, healthier environment
   and promoting sustainable ecosystems.

   Smarter Approaches: To reinvent environmental regulation, regulator should seek creative ways to
   remedy environmental problems and improve the environmental protection systems, and be receptive to in-
   novative, common sense approaches.

   Stakeholder Involvement: Effective  stakeholder involvement produces better innovation projects and
   catalyzes public support for new approaches. Stakeholders must have an opportunity for meaningful in-
   volvement in the design and evaluation of innovations. Stakeholders may include other state/local gov-
   ernment agencies, the regulated community, citizen organizations, environmental groups, and individual
   members of the public. Stakeholder involvement should be appropriate to the type and complexity of the
   innovation proposal.

   Measuring  and Verifying Results: Innovation must be based on agreed-upon goals and objectives with
   results that can be reliably measured to enable regulators and stakeholders to monitor progress, analyze
   results, and respond appropriately.

   Accountability/Enforcement:  For innovations that can be implemented within the current regulatory
   framework, current systems of accountability and mechanisms of enforcement remain in place. For innova-
   tions that involve some degree of regulatory flexibility, innovators must be accountable to the public, both
   for alternative regulatory requirements that replace existing regulations and for meeting commitments that
   go beyond compliance with current requirements. Regulators will reserve full authority to enforce alterna-
   tive regulatory requirements to ensure  that public health and environmental protections are maintained,
   and must be willing to explore new approaches to establish accountability for beyond compliance commit-

   State-EPA Partnership:  The States and EPA will promote innovations at all levels to increase the efficien-
   cy and effectiveness of environmental programs. We must work together in the design, testing, evaluation,
   and implementation of innovative ideas and program, utilizing each other's strengths to full advantage.
' www.ecos.org/files/1426_file_Agreement.pdf

Table  of  Contents:
Chapter 1: Introduction to EPA's State Innovation Grant Program	3
     Program Overview and History	3
     Program Goals	3
     Strategic Theme and Targets for the Program	4
        Environmental Results Program	4
        Environmental Management Systems	4
        National Environmental Performance Track Program	5
     Summary of Awards to Date	5
     Measurable Outcomes	8
Chapter 2: Results of Completed State Innovation Grants Projects	9
   Environmental  Results Programs	9
     Delaware Environmental Results Program for the Auto Body Sector	10
     Maine Environmental Results Program for the Auto Body Sector	13
   Environmental  Management Systems	15
     South Carolina's Initiative to Incorporate EMS into Permit Decisions	16
     Colorado EMS Permit Pilot Project	19
     Texas Commission on Environmental Quality's Strategically Directed
     Regulatory Structure	21
   Innovative Streamlined Permits	24
     Arizona Smart Permitting for Stormwater Permits and Notice
     of Intent to Discharge	24
     Massachusetts' Assabet River Watershed Permit	26
Chapter 3: Ongoing State Innovation Grant Program Projects	29
     Introduction	29
     Ongoing Environmental Results Program (ERP) Projects	34
     Environmental Management System (EMS) Grants	37
     Performance Track-related Projects	39
     Other Projects Testing Innovation in Permitting  Processes	45

Chapter 4.  Lessons and Future Direction for the State Innovation Grant
Program	47
      Key Lessons	47
         1. Projects Have Produced Measurable Results	47
         2. State Innovation Grant Program Has Provided Key Support at Critical Time	47
         3. Strategic Focus Has Permitted Critical Mass of Experiments Around Several Key
         Ideas	48
         4. The State Innovation Grant Program Has Fostered the Transfer of Ideas and
         Building of Networks	48
         5. The State Innovation Grant Program Has Strengthened the State-EPA Innovation
         Partnership	48
      Future  Direction .                                                    .. 49

Chapter  1:
Introduction  to  EPA's State  Innovation  Grant Program
    ~he U.S. Environmental Protection Agency's (EPA)
      National Center for Environmental Innovation
      (NCEI) has prepared this report to describe the
results to date for projects funded under the EPA State
Innovation Grant Program. EPA expects that the projects
highlighted in this report will be of primary interest to
state environmental agencies, who may wish to develop
similar projects and build upon the successes and ap-
proaches highlighted here. This report may also be useful
to the EPA Programs and Regions to help them identify
additional opportunities for stimulating further innovation
in permitting programs.

This chapter provides an overview of the State Inno-
vation Grant Program, information on the program's
goals and strategic target areas, a summary of awards
to date, and a description of how the program meets
EPAs accountability requirements. Chapter 2 provides a
detailed description of the results of completed projects
supported by State Innovation Grants, while Chapter
3 summarizes State Innovation Grants projects that
are currently underway. Chapter 4 describes lessons
learned and potential directions for the program.

Program Overview and History
NCEI developed the  State Innovation Grant Program as
part of its implementation of the Agency's 2002 Innova-
tion Strategy, Innovating/or Better Environmental Results:
A Strategy to Guide the Next Generation of Innovation at
EPA.1 The Strategy was developed by the EPA Innova-
tion Action Council (IAC) to establish a management
framework for its innovation activities, including the
testing, evaluation, and diffusion of effective new envi-
ronmental protection approaches. The strategy has four
main elements:

1. Strengthen EPAs innovation partnerships with states
  and tribes.
2. Focus on priority environmental problems that de-
  mand innovative approaches.

3. Diversify environmental protection tools and ap-

4. Foster a more "innovation-friendly" culture and
  management systems.

Experience from earlier pilot testing programs has dem-
onstrated strong state leadership in developing creative
new approaches that produced better environmental re-
sults or improved efficiency in government operations
or for regulated entities. However, such efforts were
significantly constrained by  resource limitations.  As
a way to address the first element of EPAs Innovation
Strategy—strengthen [ing] EPAs innovation partnerships
with states and tribes—and help overcome state fund-
ing  constraints, NCEI established the State  Innovation
Grant Program fund to state pilot projects.  In announc-
ing  the new program, then EPA Administrator Christine
Todd Whitman recognized the very significant role of
the  states as the front-line laboratory for testing new
ideas and committed EPA support to continuing  that

Since 2002, the program has completed six competi-
tion cycles and has awarded 38 assistance agreements
to support state innovation projects.2
Program  Goals
Beginning with the initial 2002 competition, EPA set
out to help states build on previous innovation experi-
ence that had largely been focused on improvements
at individual facilities, and instead undertake more
strategic innovation projects that promoted larger-scale
models for "next generation" environmental protec-
tion. EPAs goal was to provide funding for seed proj-
ects that had potential to: 1) go beyond single facility
1  EPA 100-R-02-002, available online at http://www.epa.gov/opei/strategy
2  Detailed information about each of the competition cycles is available online at http://www.epa.gov/innovation/stategrants/

experiments to promote "systems-oriented" change;
2) provide better results from a program, process, or
sector-wide innovation; 3) and promote integrated
(cross-media) environmental management approaches
with a high potential to be transferred to other states.
Additionally, EPA wanted to use the State Innovation
Grant Program to:

•  Build more effective collaboration with states to
   identify areas ripe for innovation.

•  Help state agencies identify operating cost

•  Realize cost or time savings for regulated entities.

•  Elicit the best state ideas through a competitive

•  Build in measurement and evaluation essential to
   transferring the innovation.

Strategic  Theme and  Targets
for the Program
EPA selected "innovation in permitting" as the theme
for the  State Innovation Grant Program believing that
intersection between regulation and practical imple-
mentation to be fertile ground for creative improve-
ments.  Under this theme, EPA identified three strategic
target areas as the focus for State  Innovation Grants
funding: applications of the Environmental Results
Program model (ERP); exploration of the use of En-
vironmental Management Systems in the context of
permitting (EMS); and later, state environmental leader-
ship and recognition programs like EPAs National Envi-
ronmental Performance Track, many of which provide
permit  incentives.

Environmental Results Program
The ERP model is an innovative approach to improving
the environmental performance of various small busi-
ness sectors and other groups with large numbers of
small facilities. ERP is an integrated system of plain-lan-
guage compliance assistance that encourages pollution
prevention, facility self-assessments and self-certifica-
tion, and statistically-based performance measurement
to guide a combination of random and targeted inspec-
tions to verify both facility-specific and sector-based
performance. The approach was originally designed
by the Massachusetts Department of Environmental
Protection (MA DEP) to improve the environmental
performance of the dry cleaner, photo processor, and
printing sectors.3 Based upon the documented evidence
of performance improvements in Massachusetts' early
years of ERP, a favorable evaluation of the initiative by
the National Academy of Public Administration, and
in recognition of the significance of the environmental
threat that can be posed by large groups of small pol-
lution sources, the EPA has actively supported diffu-
sion of ERP across the states since 2000. More infor-
mation on ERP is available in the ERP States Produce
Results-2007 Report, States' Experience Implementing the
Environmental Results Program.4

Environmental Management Systems
EMS are a set of processes and practices that enable an
organization to reduce its environmental impacts and
increase its operating efficiency. Most EMS are built on
the "Plan, Do, Check, Act" model providing for a con-
tinual cycle of planning, implementing, reviewing, and
improving the processes and actions that an organiza-
tion undertakes to meet its business and environmental
goals. Some states have initiated programs that incor-
porate EMS into permitting programs, and more are
expected to do so in the future.

EPAs EMS Strategy (Strategy for Determining the Role
of Environmental Management Systems in Regulatory
Programs) describes the issues and considerations of
interest to EPA as the Agency explores whether and
how EMS can play a role in its regulatory programs.
EPA policy is to  encourage the widespread use of EMS
across a range of organizations and settings to improve
environmental performance and compliance; promote
pollution prevention through source reduction; and
continual improvement. The Strategy also identifies a
3  See http://www.epa.gov/projectxl/massdep/index.htm for more information about the original ERP designed by Massachusetts.
4  The Executive Summary of the 2007 ERP Report is available online at http://www.epa.gov/erp/erp_states.pdf.

number of policy ideas to test and the State Innovation
Grant Program has been a mechanism for conducting
tests of those ideas related to permitting. More informa-
tion about EPAs interest in EMS is available online at
http ://www. epa. gov/ems/index.htm.

National  Environmental  Performance
Track  Program
Performance Track is a partnership program that rec-
ognizes and rewards private and public  facilities that
demonstrate strong environmental performance beyond
compliance requirements. It promotes a collaborative,
performance-based leadership system for environ-
mental protection in which superior environmental
performers are acknowledged and treated differently
than other regulated entities that are at or below a
compliance threshold. Performance Track is designed
to augment the existing regulatory system by creating
additional incentives for facilities to achieve environ-
mental results beyond those required by law. To qualify,
facilities must have functioning environmental manage-
ment systems (EMS), a track record of good compli-
ance, a commitment to environmental improvements,
and an active community interaction program. In re-
turn for their efforts and commitments,  EPA recognizes
Performance Track facilities as environmental leaders
and offers regulatory and administrative flexibility that
encourages them to continue working to improve their
environmental performance. Performance track incen-
tives are also designed to encourage other facilities to
join the  program and demonstrate their environmental
leadership. A number of states that have similar per-
formance-based environmental leadership programs in
place are in the process of developing such  programs,
or are actively working with EPA to recognize and
reward Performance Track members by  cooperatively
implementing Performance Track incentives in their
state. Since 2005, the State Innovation Grant Program
has helped support such  state efforts. More information
about Performance Track is available online at http://

These three strategic target areas can assist permitted
entities addressa wide range of permitted entities. Spe-
cifically, ERP tends to focus on entities with relatively
little environmental expertise (often small businesses),
and is primarily oriented toward helping those facili-
ties come into compliance (although ERP also encour-
ages  pollution prevention and other best management
practices). Environmental leadership programs focus
on entities with more environmental expertise that have
already achieved compliance, and these programs are
intended to foster beyond-compliance performance.
EMS helps facilities at any level to continually improve
their performance and reduce their environmental
impact, whether they are seeking to achieve compliance
or go beyond compliance. Taken together, these types
of innovative approaches funded by the Grant Program
can be applied to a wide range of entities to encourage
environmental performance improvements. The first
two competitions for State Innovation Grants focused
on ERP and EMS, while the most recent three rounds of
competitions also included projects focused on Perfor-
mance Track-like programs.

In addition to projects supporting these three strategic
target areas, EPA has provided State Innovation Grants
to a small number of exploratory projects related to
the overall theme of innovation in permitting. These
exploratory projects included two efforts designed to
demonstrate watershed-based permitting approaches,
and one project designed to achieve permit process
streamlining through the application of information
system innovation.

Summary of Awards to Date
The State Innovation Grant program opened its first
competition in 2002. There were subsequent solicita-
tions in 2004, 2005, 2006, 2007, and 2008. This re-
port  will focus on the projects funded in the five  com-
petitions from 2002 through 2007 (at the time of this
report three awards for projects from the 2008 com-
petition are pending and the projects have not been
initiated). There have been 35 project awards in the
five competitions from 2002 to 2007 totaling almost
$6.7 million. The recipient states themselves contrib-
uted almost $2.435 million in matching funds for these
projects. The 35 projects funded to date include:

•  17 projects testing ERR5

•  8 projects examining the use of EMS in permitting
   (one of these projects is a combination of EMS and

•  8 projects that create or enhance performance-based
   environmental leadership programs similar to Perfor-
   mance Track (one of these projects is a combination
   of ERR and an environmental leadership program).

•  2 projects that support testing of watershed-based

•  One permit process streamlining project that used
   innovative information technology applications.

Figure 1-1 illustrates the distribution of projects by
type through the five competition cycles within the
strategic areas.

  Figure 1-1: Number of State Innovation
      Grant Projects, by Project Type
                               Performance Track
2004     2005
                                    Total funding for the first (pilot) State Innovation Grant
                                    competition in FY 2002 was $617,500 funded across
                                    FY02 and FY03. The next four competitions that fol-
                                    lowed the pilot funded at approximately $1.2-1.6 M
                                    annually. Figure 1-2 illustrates how the selection of
                                    projects in each cycle of competition translate to invest-
                                    ment of EPA resources.

                                     Figure 1-2: State Innovation Grant Award
                                                Totals by Project Type
                                    1 1600
                               Performance Track
                                                              2002    2004    2005    2006
                                                                        Year of Competition
                                                    A summary of the number of proposals submitted,
                                                    and awards made for each of the competition years is
                                                    provided in Table 1-1.
 This figure includes two projects that combined ERP with other types of innovations.

Table 1 -1 . Summary of State Innovation Grant Competitions
Competition Cycle
(Fiscal Year)
Number of
Number of Projects
Total Amount of
$0.618 M
$1.526 M
$1.355 M
$ 1.644 M
$6.671 M
* Three of the six awards selected in 2002 were actually funded in 2003.
Table 1-2 presents summary information about specific state awards for the five competition cycles from
2002-2007. Additional information on each project appears in later chapters.
Table 1-2. Summary of State Innovation Grant Awards 2002-2007
(Fiscal Year)
Watershed-based Permitting
Autobody ERP
Streamlined Stormwater Permitting
Injection Well ERP
Strategically Directed Regulatory Structure
Whole-facility EMS
Underground Storage Tank ERP
Autobody/ Auto Repair ERP
Auto Salvage ERP
Concentrated Animal Feeding Operations (Agriculture) ERP
Dry Cleaner ERP
Printing Sector Combined ERP/EMS
Community EMS
EMS for Landfills
Watershed-based Permitting/Coalbed Methane Permitting
Common Performance Measures for ERP Programs
Underground Storage Tank ERP
Autobody Sector ERP
Drycleaner ERP
Industrial Footprint Approach
Environmental Performance Track
of Award
$79 K
$97 K
$75 K
$150 K
$200 K
$152 K
$200 K
$130 K
$199 K
$215 K
$125 K
$107 K
$198 K
$255 K
$250 K
$215 K
$203 K
$234 K
                                                                                   continued on next page

Table 1-2. Summary of State Innovation Grant Awards 2002-2007 (continued)
(Fiscal Year)
Environmental Performance Track
Underground Storage Tank ERP
ERP for the Oil and Gas Sector
EMS for the Textile Sector
Environmental Performance Track
Environmental Performance Track
Environmental Performance Track
Parking Lot Stormwater ERP
Construction Stormwater ERP
ERP for Small Business Sectors
Compliance Assistance On-Ramp for State Performance Track
Stormwater Performance Track
Dairy Sector EMS
Sustainable Washington ERP/Performance Track
of Award
$250 K
$250 K
$80 K
$225 K
$225 K
$225 K
$300 K
$200 K
$255 K
$200 K
$275 K
$225 K
Measurable Outcomes
Projects selected under the State Innovation Grant
program are intended to be fully compliant with EPAs
"Environmental Results under EPA Assistance Agree-
ments" Policy to ensure accountability and the pro-
ductive use of public dollars. The policy requires that
all Agency competitions include a commitment to
demonstrate results as a criterion for selection. Specifi-
cally the policy requires that grant work plans contain
1) well-defined outputs, and, to the maximum extent
practicable, well-defined outcomes; and 2) a descrip-
tion of how the project would support specific EPA
Strategic Plan goal(s), objectives(s) and, where avail-
able, sub-objective(s).  The State Innovation Grant
Program requires that grant work plans include all of
these elements.

Chapter 2:
Results of Completed State Innovation  Grants  Projects
       As of spring 2008, seven projects funded by the
       State Innovation Grant Program have been
       completed. These projects reflect a diverse
range of topics within the competition area includ-
ing two Environmental Results Programs for a small
business sector, three projects designed to promote
Environmental Management Systems, and two projects
designed to develop innovative or streamlined permit
approaches. The completed projects are:

Environmental Results Programs
(ERP) Projects
•  Delaware Department of Natural Resources and
   Environmental Compliance's voluntary ERP for the
   auto body repair sector.

•  Maine Department of Environmental Protection's
   voluntary ERP for the auto body repair sector in
   southern Maine.

Environmental Management Systems
(EMS) Projects
•  South Carolina Department of Health and Environ-
   mental Control's project to facilitate adoption of EMS
   in its permit or enforcement programs for Resource
   Conservation and Recovery Act (RCRA) solid waste
   disposal facilities.

•  Colorado Department of Public Health and the En-
   vironment's EMS Permit Pilot Project, which worked
   with four corporate partners to incorporate EMS as
   part of their environmental permits.

•  Texas Commission on Environmental Quality's ini-
   tiative to implement the state's Strategically Directed
   Regulatory Structure, which was designed to en-
   courage  innovative permitting activities and support
   innovative programs, including EMS, permitting
   activities, and incentives.
Innovative and Streamlined Permit
• Arizona Department of Environmental Quality's
  project to develop a Web-based Storm Water permit
  application system under the National Pollution
  Discharge Elimination System (NPDES).

• Massachusetts Department of Environmental
  Protection's watershed-based permit system for the
  Assabet River.

This chapter describes these seven completed State In-
novation Grant projects, including background infor-
mation, program development, and project outcomes.
Note that the outcomes  presented here are generally
those reported by the states in their final project re-
ports. EPA has not conducted a detailed, independent
evaluation of any of these projects yet although, where
EPA offers its own commentary or findings, the text so
indicates. The chapter begins by describing the ERP
projects, followed by EMS projects,  and innovative/
streamlined permit projects.

Environmental Results
ERP is an innovative approach to improving the envi-
ronmental performance  of business  sectors that have
large numbers of small facilities. ERP combines compli-
ance assistance, self-certification, agency inspections,
and statistically-based performance  measurement to ef-
ficiently improve environmental results across typically
small business sectors.6 The steps involved in a typical
ERP are illustrated in Figure 2-I.7 Both states that have
completed State Innovation Grant projects to develop
ERPs, Delaware and Maine, have followed these steps.
Delaware and Maine have also focused on the same
sector—auto  body shops—with the goal of improving
their compliance and environmental performance.
5 For more details on how ERP works, see "ERP States Produce Results - 2007 Report. States' Experience Implementing the Environmental Results Program
 Executive Summary," EPA100-R-07-007, May 2007. Available online at http://www.epa.gov/erp/erp_states.pdf.
7 Note that after states complete an ERP cycle, program staff often review changes in compliance rates, gather feedback from participants, and refine their
 ERP activities to improve program effectiveness. To date, the Delaware and Maine programs have not completed this step.

       Figure 2-1: Typical ERP Cycle

Step 1: Inventory. Identify the myriad small facili-
ties that are sources of pollution, many of which are
often unknown to regulators.
Step 2: Statistical Baseline Inspections. Conduct
random inspections to accurately measure existing
environmental performance and focus outreach on
the biggest problems.

Step 3: Compliance Assistance. Work with trade
associations to create and provide plain-language,
user-friendly assistance that improves compliance
and promotes pollution prevention.

Step 4: Self-Certification. Facilities conduct self-
assessments using a detailed checklist closely linked
to assistance materials. Responsible officials certify
to their facilities' environmental performance on
each item. If necessary, they submit plans to return
to compliance.

Step 5: Targeted Follow-Up. Identify potential
problem facilities via certification analysis, and target
them for inspections, correspondence or phone
calls. Provide assistance and/or initiate enforcement,
as needed.
Step 6: Statistical Post-Certification Inspections.
Conduct random inspections to accurately estimate
performance changes and verify facility certifications.

Step 7: Informed Decision-Making. Assess perfor-
mance data and consider whether to adjust compli-
ance assistance or other strategies directed at the
sector or, if sufficient progress has been made over
time, target resources elsewhere.
Delaware  Environmental
Results Program for the Auto
Body Sector

The Delaware Department of Natural Resources and
Environmental Control (DNREC) received a State In-
novation Grant in early 2003 to undertake a statewide
voluntary ERP for the auto body repair sector. DNREC
targeted the auto body repair sector to address the
substantial proportion of facilities in this sector that
were not in compliance with permitting requirements.
The Air Quality Management section of the DNREC
had conducted preliminary research that determined
that most auto body repair shops in the state had been
operating illegally and/or without a permit. At the time
the project started, Delaware had 152 auto body shops
statewide, most of them small- and medium- sized
shops. DNREC concluded that most facility operators
at these shops were unaware of their environmental
obligations. Unlike the larger corporately-owned chain
shops, Delaware's small auto body repair facilities did
not have the resources to hire environmental consul-
tants to ensure their compliance with environmental
laws. The sector was therefore an ideal candidate  for a
small business-focused ERP.

DNREC's overall goal in implementing this ERP was to
improve environmental compliance among auto body
repair shops. Delaware also hoped to achieve this im-
provement in compliance with a relatively small invest-
ment of state resources by using the ERP rather than its
traditional regulatory approach. The traditional ap-
proach required a regulatory agency staff large enough
to inspect every auto body repair shop on a regular
basis, and required DNREC staff to spend time with
each shop owner individually to inform and instruct
them about permit compliance. In contrast, ERP's com-
bination of compliance assistance, self-certification, and
statistically-based sampling allowed for efficient use of
a relatively small regulatory staff to conduct inspections
and provide collective outreach and education through
compliance assistance workbooks and workshops.

DNREC developed its ERP as a voluntary program,
meaning that auto body repair shops were not required
under law to participate in the program, although they
are required to meet regulatory requirements. To en-
courage auto body shops to participate in ERP, DNREC
developed a number of incentives, including: a simpli-
fied auto body-specific air permit application; a waived
permit application fee ($165); a period of amnesty for
shops in non-compliance; free technical assistance and
pollution prevention audits; and a Web-based ERP
portal and electronic submission system for self-certi-
fication reporting. At the time DNREC began the ERP
program, 104 of the 152 total shops in the state (68
percent) agreed to participate in the program. DNREC
attributed this success rate to its focused outreach and
compliance assistance efforts, plus the incentives pro-
vided for shop owners.
Program  Development
and Implementation
DNREC began developing its ERP in March 2003. The
state, using the assistance of a contractor with ERP
expertise, undertook an intensive planning process to
define how the ERP would work. DNREC also visited
vocational schools that taught auto body repair tech-
niques and consulted with Rhode  Island on its auto
body compliance assistance initiatives. As a result of
their research, DNREC staff:

• Developed an inspection checklist to be used in
  preliminary ERP inspections.

• Identified a protocol for digitization of facility infor-
  mation received from ERP auto body repair shops.

• Developed a database to maintain location, permit,
  and compliance data for all of the auto body facilities
  in the state.

Under the terms of the grant, EPA required Delaware
to demonstrate the beneficial effects of its auto body
ERP. To accomplish this, DNREC assessed the change
in compliance rates achieved through ERP by mea-
suring the initial or "baseline" compliance rate and
comparing it to the end-of-project compliance rate. To
establish the baseline, DNREC inspected a statistically-
based sample of 74 shops in 2003 and assessed their
compliance with environmental requirements using the
inspection checklist.  In addition, the inspectors  gath-
ered information about other business practices, such
as adoption of pollution prevention measures, which
provide  an indication of the shops' overall environmen-
tal performance. The indicators of how well each shop
was meeting its environmental compliance require-
ments and adopting beneficial environmental practices
are collectively termed Environmental Business Practice
Indicators (EBPIs).

After conducting the baseline assessment, DNREC
conducted a  series of educational workshops to inform
shops about environmental compliance requirements
and voluntary best management practices that reduce
the environmental impact  of auto body repair shops.
In addition, DNREC  developed a workbook and other

materials explaining all applicable environmental re-
quirements for the auto body sector in plain language.
DNREC's workbook included information on air, water,
and waste requirements, as well as voluntary pollution
prevention, energy efficiency, and best management
practices. The workbook was designed to educate facil-
ity owners and operators about all of the EBP Is that
would be measured in on-site inspections and in self-
certification forms (discussed below).

DNREC also provided shop owners and operators with
self-certification forms which presented a series of
questions designed to enable them to determine  if they
were in compliance with the environmental require-
ments covered by the ERE If the owners/operators de-
termined they were out of compliance in any area they
were expected  to fix the problem as soon as possible.
If the shop could not address the issue before return-
ing the self-certification form, the owner/operator was
expected to submit a return-to-compliance plan  stating
how they planned to bring the shop into compliance
and the timeframe for accomplishing this. In addition,
all owners/operators signed a legally-binding certifica-
tion that stated that the data they provided to DNREC
was true.

Following this  education and outreach process, facil-
ity owners/operators were allowed a period of several
months to review the workbook, complete the self-cer-
tification form, and return it along with any applicable
return-to-compliance plans to DNREC.

After this period, DNREC followed up with a sample
of facilities to assess the extent to which the educa-
tion and outreach process had improved compliance
and environmental performance, as measured by the
EBPIs. Over a one-month period, DNREC performed
47 random  post-certification inspections of participat-
ing facilities.

Project Outcomes
DNREC reported very positive results from this pilot
ERP program for the auto body sector. These results
included a significant improvement in compliance with
environmental regulations among participating facili-
ties. DNREC identified the  following improvements
from its ERP pilot for the auto body sector:

•  Compliance with the five air pollution control
   requirements measured increased by an average of
   24 percentage points.

•  Compliance with the one water pollution require-
   ment measured increased by an average of 77 per-
   centage points.

•  Compliance with the four hazardous and universal
   waste management requirements measured increased
   by an average of 43 percent.

•  The percentage of shops voluntarily undertaking
   eight specific pollution prevention and best manage-
   ment practices increased by an average of 20 per-
   centage points.

Overall, across all indicators measured, Delaware found
that shops increased compliance and performance by
an average of 30 percentage points. In addition, DN-
REC found the program helped the agency improve
its ability to monitor and track ongoing environmental
progress through permits. Of the 103 auto body shops
that participated in the ERP, 90 submitted an applica-
tion for an air pollution permit—a requirement that
most of the shops stated they did not know  about prior
to the ERP. Permits  are important tools that enable state
environmental agencies to monitor a facility's perfor-
mance and ensure compliance with environmental
regulations. Prior to the ERP, DNREC had not been
aware that these 90 auto body shops needed permits.

Delaware reported that 18 percent of the participating
facilities submitted  return-to-compliance plans, indicat-
ing that they had one or more environmental violations
when they submitted their self-certification forms.
Since DNREC did not require shops that corrected
environmental violations before they submitted the
self-certification forms to complete a return-to-compli-
ance plan, there may have been additional facilities that
found and corrected compliance issues before submit-
ting their self-certification forms to DNREC.

The improvements  in environmental compliance and
performance described above suggest a corresponding
reduction in pollution from the participating auto body

shops, although DNREC did not undertake a direct
measurement of reduction in effluents and discharges
and waste.

Overall, DNREC found ERP to be a success, and the
state began a second-round of facility self-certifications
in summer of 2007. In addition to the anticipated con-
tinuation of the auto body ERP itself, several pollution-
prevention efforts have grown out of the ERP and are
being implemented across the state. For example, DN-
REC's Energy Office held a "bio-products" workshop
in December 2005 to educate auto body shop owners
and other interested facilities about ways to use more
environmentally-friendly products, such as soy-based
cleaning solutions and degreasers, in place of tradition-
al cleaning products.

Maine Environmental  Results
Program  for the Auto Body

The auto body sector in Maine is subject to  federal and
state environmental regulations pertaining to air, water,
solid, and hazardous waste, however facilities in this
sector generally lack an awareness of the environmental
regulations that apply to them. The auto body sector
in Southern Maine includes approximately 100 shops,
comprised mostly of small to medium sized facilities that
operate with a minimal commitment of resources for en-
vironmental compliance. In particular, the Maine Depart-
ment of Environmental Protection (ME DEP) has deter-
mined that auto body shops are often out of compliance
with air requirements.  Air quality is of particular concern
in southern Maine, where the counties of Cumberland,
Sagadahoc, and York have historically not met national
ambient air quality standards for ground-level ozone.8 To
address air pollution and compliance concerns posed by
auto body shops in southern Maine, the ME DEP applied
for and received a State Innovation Grant in 2004 to
undertake a voluntary  ERP for this sector.
Program Development
and  Implementation
Maine's ERP included a multimedia approach that
addressed all of the federal and state environmental
regulations pertaining to the auto body sector. The ERP
also encouraged facilities to go beyond compliance
and incorporate voluntary best management practices
(BMPs) and pollution prevention measures.

Maine's ERP included the following components:

1. Compliance Assistance: ME DEP hosted a work-
  shop to educate auto body facilities on environ-
  mental regulations and developed a plain language,
  multimedia compliance workbook for sector opera-
  tors that covered all federal and state environmental
  regulations that apply to the auto body sector. The
  workbook also included BMPs and pollution preven-
  tion measures to encourage facilities to go beyond

2. Self-Certification: The ME DEP developed a plain
  language, multimedia self-certification compliance
  checklist for the auto body sector that closely paral-
  leled the workbook. The checklist was designed to
  allow facilities to self-identify where they were out of
  compliance,  and fix any violations  they found. If a
  facility was out of compliance and  could not fix the
  violation immediately, it was instructed to submit a
  return-to-compliance plan that explained how the
  facility would return to compliance within 30 days.
 The entire state of Maine is now officially meeting the ground-level ozone federal national ambient air quality standards. Maine's Redesignations and Main-
 tenance Plans request was published in the December 11, 2006 Federal Register.

  ME DEP was able to achieve a 42 percent self-certi-
  fication rate, and of the facilities that submitted self-
  certification forms, 81 percent of facilities initially
  identified that they were out of compliance with one
  or more requirements.

3. Agency Inspections and Performance Measure-
  ment: Using a statistically-based random design,  ME
  DEP conducted baseline onsite assessments prior to
  compliance assistance and self-certification using a
  sector-specific pollution prevention checklist they
  had developed.  These baseline assessments were
  conducted prior to compliance assistance and self-
  certification. The ME DEP also conducted statisti-
  cally random post-certification assessments after
  compliance assistance and self-certification, and the
  two assessments were  compared to determine the ef-
  fect of the ERP Maine's Auto Body ERP was a volun-
  tary program. To encourage facilities to participate in
  the program, ME DEP developed several incentives
  available to all participants, including:

• A recognition system for Environmental Leaders

  — ELs received the official EL logo decal to display
      at their facility.

  — ELs were listed as participants on the ME DEP's
      ERP Web page.

• Use of ME DEP's Small Business Compliance Incen-
  tives Policy (SBCIP) for facilities that voluntarily
  reported that they were out of compliance.
   — For violations that were not serious, small busi-
      nesses had an opportunity to work with the ME
      DEP's small business technical assistance staff to
      solve environmental violations within 90 days
      without an enforcement action.

•  Free technical assistance from the ME DEP.

•  An opportunity to use compliance assistance and
   self-certification to identify and fix violations which
   otherwise could lead to enforcement actions if de-
   tected by an inspector.

Project Outcomes
ME DEP's  goals for the ERP were to promote pollu-
tion prevention concepts, increase public and indus-
try awareness of environmental health concerns, and
increase environmental compliance. In ME DEP's view,
the project met each of these  goals, as discussed below.

ME DEP found that the ERP workbook and other
outreach methods successfully promoted pollution
prevention concepts. Specifically, the ME DEP work-
book included pollution prevention measures and ways
to reduce operating costs, reduce waste disposal costs,
protect the environment, improve worker health and
safety, and project a positive image to customers. ME
DEP also gave pollution prevention tips to facilities
while conducting onsite baseline and post-certification
assessments, as well as during the workshop. Finally,
ME DEP conducted onsite visits after the post-certifica-
tion assessments  to help facilities implement pollution
prevention practices. As an incentive to implement
pollution prevention practices, the state gave away 10
LaserPaint ™  devices to the facilities that implemented
the largest number of pollution prevention practices.
LaserPaint ™  is an attachment for any make/model
spray paint gun that maximizes paint transfer efficiency
and therefore  reduces air emissions from spray painting.

ME DEP worked to increase awareness of environmen-
tal health concerns by educating shops about these
concerns through the workbook, workshop,  and onsite
visits. For example, during the workshop, ME DEP
showed pictures  of what ozone damage looks like, and
explained  health effects of ozone. ME DEP also ex-

plained that sanding dust can be harmful if heavy met-
als such as lead, chromium, cadmium are present.

ME DEP found that most auto body facilities were
very receptive to the ERE Owners and operators of the
shops said that before participating in the ERP, they did
not know what regulations applied to them, and thus
they were very appreciative of the ME DEP's assistance.
Many of the larger auto body facilities were pleased that
ME DEP was visiting smaller auto body facilities as well
as the larger ones, in order to level the playing field and
assure that all facilities have to follow all of applicable

ME DEP measured the following changes in auto body
shop compliance with environmental requirements:

• The overall rate of compliance improved by 10 per-
  centage points.

• Compliance with hazardous waste requirements
  increased by an average of 3.7 percentage points.

• Compliance with a waste oil requirement increased
  by  3.4 percentage points.

• Compliance with a universal waste requirement
  increased by 52.5 percentage points.

• The number of shops undertaking voluntary pollu-
  tion prevention and BMPs increased by an average of
  11.6 percentage points.

• Compliance with air pollution requirements de-
  creased by an average of 2.5 percentage points.

With regard to the slight decrease in the percentage of
facilities meeting air  pollution requirements, it is im-
portant to note that the average rate of compliance with
these requirements was still high (ranging between
87.4 and 92.7 percent), even after this small decrease
in the compliance rate. In this case, the fact that one or
two shops fell out of compliance during the ERP cycle
slightly reduced what was an overall very high compli-
ance rate. It is interesting to note this relatively high
compliance rate for air pollution requirements, in light
of the fact that the project was initially motivated by a
concern over air quality.
''  For more information on EMS, see http://www.epa.gov/ems/index.html.
ME DEP hopes to continue the efforts it began with the
State Innovation Grant by expanding the auto body
ERP to additional counties or the entire state; develop-
ing a storm water ERP; or developing a mandatory ERP,
or a voluntary ERP with threat of regulation for those
facilities that do not participate.

Environmental  Management
Environmental Management Systems (EMS) are a set of
processes and practices that enable an organization to
reduce its environmental impacts and increase its oper-
ating efficiency. EMS provide organizations of all types
with a structured system and approach for managing
environmental and regulatory responsibilities to im-
prove overall environmental performance and steward-
ship, including areas not subject to regulation such as
product design, resource conservation, energy efficien-
cy, and other sustainable practices. EMS can also facili-
tate the integration of the full scope of environmental
considerations into the mission of the organization and
improve environmental performance by establishing a
continual process of checking to ensure environmental
goals are set and met. The most common framework
EMS use is the plan-do-check-act process, with the
goal of continual improvement. A well-designed  EMS
includes procedures for taking corrective action if prob-
lems occur and encourages preventive action to avoid

Many companies across the country are implementing
EMS to meet their environmental obligations and to
enhance overall environmental performance. As more
facilities invest time and money in these systems, they
are challenging states to recognize and integrate EMS
into the environmental regulatory framework. EPA
recognized this challenge when it issued its Strategy
for Determining the Role of Environmental Management
Systems in Regulatory Programs in April 2004. This
strategy document urged states to explore ways to in-
corporate EMS options into the permitting and regu-
latory structure. Through the State Innovation Grant
program, EPA sought to partner with states to find out
whether EMS could be used to improve the efficiency

and effectiveness of regulatory tools such as permitting.
Three states, South Carolina, Colorado, and Texas, have
completed State Innovation Grants-funded projects to
incorporate EMS into their permitting programs.

South Carolina's Initiative to
Incorporate EMS into Permit

The South Carolina Department of Health and Envi-
ronmental Control (DHEC) received a State Innova-
tion Grant to explore the relationship between EMS
and environmental permitting in 2004. While DHEC
recognizes facilities with EMS through its voluntary
environmental leadership program (South Carolina En-
vironmental Excellence Program, or SCEEP), there are
no regulatory benefits for having an EMS. Through the
State Innovation Grant, DHEC had an opportunity to
study ways in which a facility's EMS could be integrated
into the regulatory framework. By conducting a com-
parative analysis of selected facilities' EMS and permits,
the project sought to:

•  Study how an EMS could improve the overall perfor-
   mance of a facility.

•  Explore ways permit requirements could be inte-
   grated and streamlined based on an EMS.
• Determine how an EMS could ensure consistency in
  the development, implementation, and enforcement
  of a permit.

• Evaluate the potential benefits of incorporating EMS
  as an incentive for permitting options.

Program Development
and Implementation
DHEC first formed a cross-media project advisory team
comprised of permitting, compliance and enforcement
staff representing the major media programs (Air, Land,
Water, and Laboratory Resources). This team provided
assistance and advice throughout the implementation
of the project.

The project involved a review of the  permitted activities
and the EMS of four participating facilities. The crite-
ria for facility selection were: membership in SCEEP
and/or the EPA Performance Track program; a fully
implemented EMS; a good compliance record; types of
permits; and willingness to participate in DHEC staff
training. Each facility held multiple permits issued by
DHEC including, air, NPDES, wastewater pretreatment,
stormwater, and/or hazardous waste  treatment, stor-
age or disposal (TSD). The four facilities selected for
participation in the project included a U.S. Air Force
Base and three manufacturers which produce automo-
tive belts, chemicals, and cement. Involvement of one
of these facilities (the cement manufacturer) was later
discontinued because it was determined that the facil-
ity did not have the types of permits that were initially
targeted for study.

Working with the participating facilities, the project
undertook the following major tasks:

1. Providing EMS training for Agency staff, and more
  intensive training for the project advisory team to in-
  crease awareness and understanding of the purpose
  and mechanics of an EMS.

2. Examining each facility's existing permits and its
  EMS to determine how an EMS can impact permit
  requirements by:

  (a) Providing possible incentives in permitting options.

  (b) Streamlining administrative and/or other permit

  (c) Improving consistency in how permits are written,
     monitored and enforced.

  (d) Improving environmental performance and results
     in maintaining or going beyond compliance.

3. Determining ways in which specific permit require-
  ments could be addressed, altered or consolidated
  through an EMS.

4. Evaluating the  potential to incorporate EMS into
  facility permits.

With the assistance of an EMS consultant, the project
team conducted initial permit reviews. The team initial-
ly assessed the permits in light of the ISO 14001 EMS
standard, and made general comparisons between the
permit requirements and the EMS standard.10 Then, the
project team conducted site visits and analyzed facility
permits and their EMS to characterize the overlapping
regulatory and operational similarities between them.

Project Outcomes
In general, DHEC found  that although each facility
was compliance-oriented, the use of an EMS assisted in
tightening the compliance system function. The project
also found that there is a good correlation between the
facility's EMS and its permits, in that they both includ-
ed similar management topics. The EMS provided the
"road map" for the verification of permit and compli-
ance management through the "plan-do-check-act"
cycle of the EMS.

DHEC found that permits set the required standards,
while the EMS provided the activities, steps,  and details
about how to meet the permit standards.  DHEC con-
cluded that while EMS are not a substitute for permits,
they may allow for streamlining of certain permit
While there may be an opportunity to streamline per-
mit requirements based on EMS, this permit streamlin-
ing process may not translate into administrative cost
savings for permit writers, since EMS add components
that require verification/confirmation as part of the per-
mitting process. However, there may be administrative
cost savings if EMS  are used as a tool for inspectors to
evaluate facility compliance. An inspector may not have
to inspect to the same level or "depth" of a traditional
facility inspection. For example, at the pre-inspection
interview, some aspects of the inspection may be ad-
equately covered by review of the facility's EMS. In ad-
dition, DHEC found that there may be an opportunity
to allow facilities to provide self-certification for certain
aspects of permits where it can be demonstrated that
the EMS provides more details/safeguards for meeting
the regulatory requirement.11

The project team assessed the possibility of reducing
the frequency of inspections across media programs
based upon a facility's EMS and past compliance
record, provided the EMS was submitted for DHEC
prior-review and the facility attested to the use of an
independent third-party auditor. However, in order to
pursue this opportunity, a commitment from the U.S.
EPA is needed to provide flexibility to state media-spe-
cific regulatory  programs to enable their annual grants/
work plan commitments to incorporate EMS into con-
sideration for the purpose of determining frequency of
facility inspections.
10 ISO stands for the International Organization for Standardization. ISO promotes the development and implementation of voluntary international stan-
  dards. ISO 14000 refers to a series of voluntary standards in the environmental field. The ISO 14001 standard requires that a community or organization
  put in place and implement a series of practices and procedures that, when taken together, result in an EMS. For more information, see http://www.epa.
11 Note that the project focused on the role of the EMS, but did not specifically address the role of the EMS audit.

DHEC noted that one question that was not addressed
by the project is a characterization of the universe of
facilities in South Carolina that actually have EMS,
and the correlation of compliance and enforcement
histories for those facilities. The final project report
recommended a future step for DHEC is to include
a cross-media pilot study through the 2008 inspec-
tion schedules that would include for each inspection
a report on three basic questions:  1) Does the facil-
ity have an EMS; and if so, 2) What type; and 3) Is it
certified by an independent third-party auditor? This
would provide information on the universe of facilities
with EMS and would be valuable information as DHEC
considers incorporating EMS into the regulatory frame-
work. The project team did feel strongly that regardless
of the type of EMS that a facility had, in order for the
agency to recognize it, it was critical that it be indepen-
dently audited and certified.

DHEC will continue to encourage regulated facilities
to implement EMS  through membership and recogni-
tion in SCEEP. In the past, facilities have encouraged
DHEC to recognize EMS in its regulatory activities, and
to offer incentives that encourage companies to develop
and implement EMS. This study has provided valu-
able information about the relationship of EMS to the
permitting process and, more importantly, the value of
EMS to facilities in managing compliance obligations
and enhancing environmental performance.

In reviewing this project, EPA identified several les-
sons that can be applied to EMS projects in the future.
First, management support is crucial to exploring the
use of EMS in the regulatory framework. Also, program
staff must be trained to understand the role that EMS
can play in the regulatory framework. In addition to
training at the outset of the program, ongoing training
is also needed to maintain staff awareness and address
staff turnover. While training was not the primary focus
of DHEC project initially, it quickly grew in importance
as project staff realized the need for more information
about EMS at the program staff level. While  EMS have
played a prominent role in the national dialogue on
environmental performance—both by industry and by
EPA program staff, e.g. permit engineers, inspectors,
and enforcement staff who typically have the most in-
teraction with a facility on a day-to-day basis, tend not
to be familiar with EMS or their potential to promote
compliance and environmental performance.

EPA also found that the DHEC project suggests several
examples where performance standards, in conjunction
with an EMS, could supplant prescriptive operational
controls, such as:

   —  RCRA training requirements.

   —  Emergency preparedness and response.

   —  NPDES nonconformity, corrective action,
       and preventive action.

   —  RCRA Waste Minimization Plan.

   —  Title V Air Permit Annual Compliance

The comparison of EMS and permits that DHEC
completed indicates a strong potential for using per-
formance standards in place of prescriptive operational
controls. However, this cannot occur until there is a
substantive culture change in how permits have been
traditionally written. Furthermore, such a change
would require support from EPA, since the state is
federally authorized or delegated to administer and
enforce the RCRA, Title V, and NPDES Storm Water
programs and as such must maintain an "equivalent"
and adequately enforced program.

EPA reviewed the project's performance measures to
assess the impact of the EMS on environmental per-
formance for facilities participating in this project.
Specific performance measures included improved
environmental performance through waste reduction or
waste avoidance, environmental condition indicators,
pollution prevention and waste minimization oppor-
tunities, and environmental compliance indicators. By
reviewing performance measure data and comparing
it to when the facilities implemented their EMS, EPA
found that there was not a strong relationship between
implementing an EMS and improving environmental
performance. Moreover, a review of facility compliance
records showed that facilities participating in the proj-
ect  did have some minor compliance issues after the

implementation of their EMS. All of the facilities stated
that the EMS assisted in strengthening the compliance
management and enhanced the regulatory linkage with
management practices. However, having an EMS did
not guarantee compliance, and facilities still had some
compliance situations that had not been prevented or
identified by their EMS. The relationship between pres-
ence of an EMS and impact on environmental perfor-
mance and compliance merits additional review and
analysis in future EMS projects.

Colorado EMS Permit
Pilot Project

The Colorado Department of Public Health and Envi-
ronment (DPHE) received a State Innovation  Grant to
develop an EMS Permit Pilot Program. The three-year
pilot program was initiated to challenge the conven-
tional approach to permitting. DPHE believed that, by
using EMS to serve in place of regulated facilities' en-
vironmental permits, the project could address  the en-
vironmental limitations of technology-based standards
while reducing the regulatory burdens on business and
industry. Early on in the project development, DPHE
moved to developing a permit that integrated the facil-
ity's EMS with its permits, rather than attempting to
substitute an EMS for a permit. The program involved
the voluntary participation of four corporate partners
from the aerospace, agricultural, and semi-conductor
industry sectors.

DPHE initiated the pilot program to test whether
a cross-media environmental permit incorporated
into a regulated facility's EMS would produce greater
environmental benefits and higher compliance rates
compared to traditional media-specific permits. DPHE
anticipated that EMS permits would result in reduced
oversight of participating  facilities, while granting
them increased flexibility  to meet environmental and
production demands.  If successful, the program would
allow regulators to consider cross-media impacts and
benefits in decision-making, and in doing so, become
more efficient and able to leverage limited resources.
DPHE expected that granting facilities the authority to
determine how best to meet their environmental goals
would ultimately lead to increased innovation and inte-
gration of pollution prevention concepts. The Depart-
ment also anticipated the program would foster greater
involvement by community stakeholders and generate
better information for the public and DPHE through
annual external audits. Other goals of the program

• Identifying opportunities to use a participating facil-
  ity's EMS to replace and/or augment DPHE's regula-
  tory functions, including inspections, minor permit
  modifications, and compliance reporting.

• Achieving reductions in overall administrative bur-
  dens by consolidating all environmental permits into
  one permit and establishing a single point of contact
  at DPHE.

• Establishing provisions for stakeholder involvement
  and public participation throughout the EMS per-
  mitting process.

Program Development
and Implementation
The program was conceived and implemented by
a cross-media team comprised of DPHE employees
representing the air pollution, hazardous waste, water
quality, radiation, and sustainability programs. DPHE
team members  invited stakeholders, including repre-
sentatives from the regulated community, environmen-
tal and community organizations, and local and federal
government entities to help develop the program.
The first task of the broader stakeholder group was to
promulgate the EMS Permit Pilot Program regulation in

accordance with the legislation passed by the Colorado
legislature authorizing the program. Over the course of
numerous meetings, stakeholders reached agreement
on the specific components of the program established
in the regulation, including: eligibility criteria for regu-
lated facilities; requirements for permit applications,
processing, issuance, and modification; public partici-
pation provisions; criteria for operational flexibility;
requirements for continual improvement projects; and
compliance monitoring and reporting requirements.

DPHE expected implementation of the program to
involve developing and issuing facility-wide EMS per-
mits to five facilities. DPHE carefully screened the five
initial participants to ensure that each was considered
an environmental leader within its respective industry.12
DPHE arranged for third-party baseline assessments,
which included measurement of existing environmental
conditions and an EMS audit, to be conducted at each
participating facility. Following the completion of the
assessment, DPHE assisted facilities with developing or
implementing their EMS.

Once  the developed or modified EMS were in place,
participating facilities and DPHE began the EMS permit
application process. The EMS permit application form
incorporated requirements from the state's air, water,
and waste programs. Applicants identified require-
ments from their existing conventional permits and
could add other applicable environmental requirements
for inclusion in their EMS permit. In addition, facili-
ties were required to list their requests for operational
flexibility, provide relevant data to allow DPHE and
local agencies to perform equivalency determinations,
propose continual improvement projects, and submit a
compliance certification form. DPHE worked with each
facility to prepare a Community Involvement and Com-
munications Plan (CICP), another requirement of the
permit application process. CICPs outlined the facility's
approach for establishing effective communication with
community stakeholders.

Upon completion of the EMS permit applications and
CICPs, DPHE drafted and issued the EMS permits.13
Participating facilities provided assistance to DPHE
during the permitting process in a number of ways:
identifying continual improvement projects; proposing
operational methods and technologies to comply with
regulatory requirements that also provide an incentive
for pollution prevention; reviewing cross-media im-
pacts of selected methods and/or technologies; conven-
ing an EMS Permit Program Advisory Group to provide
feedback on the application and draft permit. DPHE
developed specific environmental standards and work
practices requirements for EMS permits, ensuring that
these permits are considered equivalent to facilities'
existing environmental permits. Prior to issuance of the
draft or final EMS permits, the Department solicited
inputs from  stakeholders and conducted a public com-
ment process as required by state law.

Project Outcomes
DPHE's analysis of data over the course of the program
on EMS performance and regulatory compliance re-
flected improvements in performance compared to the
baseline environmental and compliance assessments.
Follow-up assessments conducted by a third-party
contractor at the conclusion of the pilot program docu-
ment an overall increase in environmental performance
across the four facilities. On average DPHE reported
that participating facilities achieved a  15 percent reduc-
tion in emissions of air pollutants, a 27 percent reduc-
tion in hazardous wastes generated, a three percent
 ! The fifth participating facility, Badger Creek Farms, eventually dropped out of the program because it felt the requirements for developing an EMS were
  overly burdensome.
 ' Two final EMS permits have been issued by DPHE: Ball Aerospace and Aeroflex. No agricultural facility permits were issued, although DPHE worked
  closely with those facilities in developing their EMS.

decrease in electrical energy use, and a 10 percent
reduction in natural gas consumed.

DPHE noted that the decision by U.S. EPA requiring
all participating facilities' conventional environmental
permits to remain in effect for the duration of the pro-
gram had serious implications for testing the efficacy
of the EMS permits. DPHE staff had to dedicate signifi-
cant time to the maintenance of these existing permits,
leading to conflicting priorities and resistance to the
EMS permitting process. Moreover, the requirements
of the existing permits prohibited DPHE from granting
participating facilities full operational flexibility, i.e., the
ability to implement alternative monitoring and record-
keeping procedures and pollution prevention strategies.
Limitations on operational flexibility also affected facili-
ties' ability to pursue unique and meaningful continual
improvement projects.

DPHE found that most industrial facilities had already
implemented continual involvement projects that ad-
dress significant environmental impacts. The one excep-
tion, a company that first implemented an EMS through
the pilot program, realized notable environmental ben-
efits from its continual improvement projects.

The public participation requirements of the pilot pro-
gram, i.e., facility development and implementation of
a CICP and EMS Permit Program Advisory Group, led
to enhanced communication with the community and
involvement by the public. DPHE noted that develop-
ing the CICP consumed participating facilities' time and
resources, but ultimately increased facilities' awareness
of community concerns as well as stakeholders' under-
standing of facility environmental impacts and plans for
improvement under the EMS permit.

EMS conformance and compliance audits conducted at
each participating facility are important components of
the program. DPHE created a compliance audit through
the EMS permit intended to stand in place of a tradi-
tional state inspection.14 In establishing the compli-
ance audit, the state did not relinquish its enforcement
authority. Instead, it made decisions about whether to
conduct inspections at participating facilities on a case-
by-case basis in order to direct its resources at the most
pressing environmental problems. DPHE conducted
an inspection at each facility during the program and
provided a third-party consultant to conduct annual
compliance audits.

With the completion of the EMS Permit Pilot Program,
DPHE has forged a new permitting and regulatory ap-
proach that relies on a performance-based EMS being
integrated with a facility's environmental permit(s). Ac-
tion taken by Colorado's General Assembly during the
2007 legislative session with passage of Senate Bill 07-
218, made this pilot program a permanent one within
DPHE. Now that the program has moved from pilot to
permanent, DPHE expects to work with EPA to explore
the potential for operational  flexibility.

Texas  Commission on
Environmental Quality's
Strategically Directed
Regulatory Structure

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,
while the second law required the state to develop reg-
ulatory incentives for implementing performance-based
 ' Note, however, that the companies involved in developing the regulation were not interested in reduced inspections as an incentive. They perceive the
 state and local inspections as a "check on their system", a valuable connection to the regulators, and of value to the facility when promoting environmental
 needs to management.

regulations through EMS. Subsequent rules adopted
by the Texas Commission on Environmental Quality
(TCEQ) encouraged the voluntary use of EMS and pro-
vided a framework for how the SDRS would support
existing and new innovative programs. Building on the
state's environmental leadership program (Clean Texas),
the SDRS was envisioned as a way to offer incentives to
regulated facilities that commit to and can demonstrate
that their practices are more protective of the environ-
ment and public health than existing standards.

TCEQ received a State Innovation Grant in 2003 to
support the implementation of the SDRS. TCEQ's goals
in setting out on this grant project were to 1) encourage
innovative permitting activities to address significant
air and water quality issues; and 2) support innovative
programs, including EMS, permitting activities, and
incentives. The project focused on three main compo-
nents: f) integrating EMS into permitting and encour-
aging improved environmental performance via incen-
tives; 2) providing EMS training for TCEQ permit staff
and regulated facilities; and 3) evaluating performance
and documenting project results.

Program  Development
and Implementation
At the outset of the  SDRS project, which was initiated
in 2004, TCEQ identified permits appropriate for inte-
gration with EMS and established a process to enable
expedited permitting for Clean Texas members with
an approved EMS. The state also established a joint
approach for training permit staff on EMS. These efforts
culminated in memoranda of agreement signed by the
agency's Small Business and Environmental Assistance
Division (SBEA) and Office of Permitting, Remediation
and Registration (OPRR). These memoranda formalized
the incentives offered to Clean Texas members includ-
ing expedited permitting and reduced investigation

TCEQ conducted a series of outreach and education
activities for Agency management and staff, industries,
and local government. SBEA conducted briefings on
Clean Texas and EMS for the TCEQ management team
and EMS-specific training for permitting and enforce-
ment personnel. TCEQ also held training workshops
for regulated entities throughout the state. These
workshops were designed to show companies how
they could use an EMS to meet or exceed their permit
and other compliance requirements and improve their
environmental performance.  Other sessions focused on
introducing EMS concepts to local government officials
and demonstrating how EMS can help cities comply
with regulations, specifically the Municipal Separate
Storm Water Sewer System rule.

An important objective of the SDRS project was to pilot
permitting incentives among Clean Texas members with
an EMS approved by TCEQ. The agency granted expe-
dited reviews for permit amendments to a number of eli-
gible facilities and piloted incentives involving flexibility
from permitting requirements for two Clean Texas mem-
bers. One facility received authorization for a "flexible
permit" that provides the facility operational flexibility to
make predefined changes without seeking advance ap-
proval from TCEQ. For the other facility, TCEQ autho-
rized a reduction in the frequency with which the facility
conducts required fugitive emissions monitoring.

In an effort related to the permitting incentives imple-
mented under the  SDRS, TCEQ recently adopted a rule
that authorizes landfills to use an agency-approved
EMS as their site's operating plan. The rule, designed by
the agency's Municipal Solid  Waste (MSW) Permitting
Division, encourages MSW facilities to implement an
EMS and provides more flexibility than site operating
plan requirements currently allow.

Project Outcomes
TCEQ implemented the SDRS project and achieved
its overall goal of integrating EMS into the permitting
process and developing specific permitting incentives
for Clean Texas members. However, TCEQ was not
able to quantify the direct impact of the permitting
incentives on efficiency and environmental outcomes.
Annual environmental audits conducted at Clean Texas
facilities during the grant period demonstrate measur-
able environmental benefits, such as reductions in
pollutants emitted, wastes generated, and water and
energy consumption, in addition to reductions in as-
sociated costs. However,  these results were realized by
all participants in Clean Texas and are not unique to
the facilities that implemented EMS and were granted
permitting incentives under SDRS. It is possible that
the comprehensive EMS training offered to the state's
businesses and industry as part of SDRS produced
changes in awareness that motivated facilities to join
Clean Texas and prompted existing members to make
further commitments to innovation and environmental
performance, such as implementing EMS. However,
TCEQ did not specifically measure/track this.

The amount of time and money saved by participants
and OPRR as a result of expedited permit reviews and
greater permit flexibility also cannot be quantified.
TCEQ acknowledges high transaction costs associ-
ated with the project, particularly the time invested by
facilities seeking regulatory incentives. In each case, the
process of reaching agreement from all stakeholders on
the proposed incentives took longer than anticipated.
The agency attributed the slow rate of progress to a
number of factors, including:

•  Lack of understanding by facilities about what was
   expected of them.

•  Competing priorities for permitting staff.

•  Difficulty in obtaining agency approval for non-
   standard or new innovative actions or procedures.

Another contributing factor was the extensive com-
pliance screening process required for Clean Texas
members. Over time, this process, wherein TCEQ staff
review the compliance history and status of participat-
ing facilities, evolved from an objective assessment of
enforcement data to a more comprehensive, subjective

Limitations on the range of incentives that could be of-
fered to Clean Texas members also affected the partici-
pation of facilities and  the overall impact of the SDRS
project. Although many incentives were proposed, after
careful consideration and consultation with the relevant
TCEQ program offices, only a few were ultimately ap-
proved. For many of the potential incentives, federal
and state regulatory constraints prohibited their adop-
tion. For others, programmatic concerns prevented
TCEQ from approving them. TCEQ found that interest
among facilities in Clean Texas was related to the type
of incentives offered and their perception of the relative
benefits resulting from membership compared to the
costs to the company in effort, time, and uncertainty. In
particular, companies showed less interest in participat-
ing when the availability of incentives was tied to the
successful completion  of all Clean Texas membership
requirements or when  they learned that the incen-
tives available would not provide flexibility for certain
federal regulations, which would require a rule change
to implement.

The State Innovation Grant program assisted TCEQ
in fulfilling its goal  of implementing the SDRS project.
The project resulted in the integration of EMS into the
agency's permitting process, improved environmental
performance through the application of regulatory
incentives and other innovations to move beyond
compliance, and an increased awareness  among the
Texas  businesses and industry about the importance
of performance-based EMS. TCEQ will continue to
encourage the use of EMS by regulated facilities to
improve environmental performance. To  this end, the
agency plans to conduct additional training on EMS
development and implementation for small businesses
and local governments as well as expand its Clean
Texas  recruitment efforts.

Innovative Streamlined
EPA has provided funding for a small number of
projects designed to test other innovations in permit-
ting. Two of these projects, carried out by Arizona and
Massachusetts, have now been completed. The Arizona
project focused on improving the permitting process
through innovative use of information technology,
while the project in Massachusetts was intended to
develop a watershed-based permit.

Arizona  Smart  Permitting  for
Stormwater Permits  and
Notice of  Intent  to  Discharge

In early 2003, the Arizona Department of Environmental
Quality (AZ DEQ) Water Division was facing a signifi-
cant fiscal problem as it worked to undertake additional
responsibilities in its Stormwater permitting program.
Prior to 2003, AZ DEQ had been accustomed to process-
ing approximately 2,000 National Pollution Discharge
Elimination System (NPDES) permit applications a year.
As part of the federal Clean Water Act Phase II Storm
Water Regulations, EPA issued a rule change in March
2003 that lowered the threshold amount of land devel-
opment construction acreage that required an NPDES
permit  from five acres to one acre, effectively mandat-
ing an expansion of the number of construction sites
required to obtain an NPDES permit for Stormwater dis-
charge.  AZ DEQ estimated that it would have to address
3,000 to 5,000 construction permit applications—a
doubling of permit work each year—with no possibility
of an increase in staffing levels.15

Arizona had already adopted EPAs general permit ap-
proach  to streamline its Stormwater General Permit
program for the construction sector.  Under this plan,
construction applicants eligible for a general permit
needed only to  file a Notice of Intent to Discharge
(NOI) 48 hours before construction began. However,
the processing of the general permit was completed
by hand, which was time and labor intensive for AZ
DEQ staff. AZ DEQ's general permit processing system
involved receiving paper NOIs, inspecting them for
completeness, and then entering them into a database.
Any NOIs that appeared to be incomplete required
weeks for additional review and clarification. As a
result, construction companies that filed NOIs often
started construction before receiving approval from AZ
DEQ. Arizona needed to find a way to get ahead of the
curve, before being overwhelmed by of the expected
huge increases in the number of NOIs, and turned to
the State Innovation Grant program to help fund its
transition from a traditional paper-based permit system
to an automated permit processing system.

In spring of 2003, AZ DEQ received  a State Innovation
Grant for the development of a Web-based Storm Water
permit application system under the  NPDES. The sys-
tem was designed to streamline the permit application
process through information systems automation.

Program Development
and  Implementation
AZ DEQ began its automated Stormwater permit pilot
project with the hope of saving time  and money for
applicants and creating a more effective and efficient
permitting process for Arizona. AZ DEQ coined the
name "Smart NOI" for their State Innovation Grant-
funded automation project. The goals of the project
were to develop an internet portal to help publicize the
general permit and allow potential dischargers to file
their NOIs online. The project also sought to streamline
 ' Arizona has delegated authority over its NPDES program, and therefore is charged with the responsibility of issuing NPDES permits.

the processing of NOI through the use of an automat-
ed, online, Geographic Information System (GlS)-based

The Web portal was designed to be simple for permit
applicants to use, while allowing AZ DEQ to screen
applicants through an automated process to determine
which projects would require site-specific permits or
other detailed review by AZ DEQ staff. As soon as an
applicant completes the initial screening questions,
data that identify the name, location, environmental
conditions of the site and other information are upload-
ed to a secure AZ DEQ site. A series of AZ DEQ valida-
tion programs use GIS to determine if the location of a
proposed construction site impinges on sensitive  drink-
ing water sources, impaired or unique water sources, or
endangered species locations. The system uses a series
of decision rules to determine which projects will re-
quire a full permit application. In addition, the system
checks the application for completeness and overall
data quality. Based on this review, the program either,
approves the data and moves it  to an AZ DEQ permit-
ting database, or flags the data for further review by the
state's permitting staff. This approach allows AZ DEQ
staff to focus more intensively on construction sites that
require their direct involvement and guidance.

The construction site applicant  receives an instant re-
sponse from the Smart NOI system to indicate if a more
detailed review will be necessary and what level of
permit coverage is required for the facility.  If only NOI
is required, the developer can complete the NOI online
immediately and move forward with construction after
48 hours. Alternatively,  in cases where a site-specific
permit is required, the program generates the neces-
sary permit application  forms that the applicant could
fill out and mail in to AZ DEQ.  (Facilities are required
to print out, sign,  and mail in their applications, rather
than just submitting them online, because the state
requires a signed copy of permit applications but does
not have an electronic signature system available.)
Overall, the online Smart NOI system provides a vast
improvement over the previous paper application pro-
cess, which required applicants to wait several weeks
for a response before completing the necessary permit
application paperwork.
AZ DEQ identified several measures of success for
the smart NOI project, including: a reduction in the
amount of time AZ DEQ spent on processing permits;
the participation rate in the program over time; and im-
provement in AZ DEQ's response times to its customers
who needed additional help. While AZ DEQ expected
that there would always be individuals that preferred
to continue to use paper-based applications, the state
estimated that it would be able to convert at least 50
percent of construction permit applicants to the Web-
based system within five years.

Project Outcomes
AZ DEQ's Smart NOI system took only a few months
to develop and implement, and it "went live" in
May 2003. AZ DEQ's program met many of its goals
including reduced permit processing  time, increased
participation in the program over time, and improved
response time for customers needing  help. Once
construction site applicants go online and enter basic
information about the proposed construction project,
the Smart NOI system provides an instant response
to whether a more detailed review will be necessary,
what level of permit coverage is required, and what
regulatory requirements apply. In cases where per-
mits are required, applicants can start the necessary
paperwork right away. When only NOIs are required,
developers can move forward with construction after
48 hours. In contrast, the previous  paper application
process required applicants to wait  for a response for
several weeks.

The Smart NOI project reduced AZ DEQ's total permit
processing time for basic NOIs from 5-7 days prior to
the Smart NOT system, to 2-3 days after implementa-
tion of Smart NOI. Arizona estimated that the online
system allowed it to process a much larger number of
permits per day increasing from 25 permits per day
under the old system to up to several hundred per
day with Smart NOI. Based on the reduction in time
required to issue a permit and the increase in number
of permit applications processed on an annual basis, AZ
DEQ's Smart NOI Stormwater permitting program has
improved its efficiency by approximately 80 percent.

After an initial low rate of participation in the Smart
NOI system, AZ DEQ reached its original goal of a 50
percent participation rate in 2006, two years before its
projected five-year deadline in 2008. Based on feed-
back from  applicants, AZ DEQ attributed the initial low
rate of participation to the dual nature of its online ap-
plication process that required the use of signed paper
documents. The Smart NOI system did make Arizona's
permitting process more efficient, however it did not
provide a wholly automated approach for doing busi-
ness. Some of the applicants preferred the single step of
submitting paper applications instead of the two-step
process of completing the permit online and then print-
ing out the paper forms for submission to AZ DEQ.

In the three years following the conclusion of the State
Innovation Grant project, AZ DEQ has fully imple-
mented the Smart NOI Web portal application system.
The Web portal has helped the state process over 4,000
permit applications. An online customer questionnaire
found that most applicants preferred the online appli-
cation compared to the prior paper-based system.

Arizona's Smart NOI permitting application system
continues to evolve and grow, and AZ DEQ has begun
to add new features to Smart NOI. For example, one of
the most frequent comments from users was that they
wanted a fully electronic system that would not require
them to print  out and mail in their permit application.
After the federal EPA issued a rule in May 2006 allow-
ing electronic  signatures, AZ DEQ began updating the
system to allow electronic submission of permit ap-
plications.  Arizona also updated the GIS functions of
the Smart NOI program with new mapping tools to
improve the accuracy of screening for proximity to sen-
sitive areas. Permit applicants can now fill out a short-
ened 2-page electronic application form and submit
a legally-binding electronic signature confirming the
accuracy of their application online. The state hopes
that these two improvements will help raise the partici-
pation rate to 80 percent by the end of 2008.

AZ DEQ believes that the future of its Smart NOI pro-
gram looks bright. Thanks to the positive reviews from
stakeholders who used the Web portal, the State of
Arizona decided to completely  fund ongoing operations
of the Smart NOI Web portal. The Web portal and the
automation system have demonstrated how to use  ad-
vanced information systems to  make the processing of
construction stormwater NPDES permits easier, faster
and better. Interest in the program's success is grow-
ing among other states. For example, Minnesota and
New Mexico have expressed interest in replicating  AZ
DEQ's Smart NOI system to address their own storm-
water program needs. While the Arizona Smart NOI
program has been a strong success, the state's efforts are
not directly transferable to other states for a number of
reasons including:

•  Database architecture that varies from state to state.

•  Characteristics of operating systems that also vary
   among the states.

•  AZ DEQ's proprietary software which may not be
   readily adoptable by other states.

Massachusetts' Assabet  River
Watershed  Permit

In late 2002, the Massachusetts Department of Envi-
ronmental Protection (MA DEP) had reached a turning
point in its efforts to restore the health of the Assabet
River. MA DEP had designated  the Assabet River as a
water body that should have sufficient water quality
to provide fish and wildlife habitat and allow swim-
ming, fishing, and boating. The river did not meet that
designated use due to pollution and excessive plant and

algae growth choking the river. A primary contribu-
tor to the river's poor water quality was the nutrient
phosphorus. MA DEP was aware of two sources of
phosphorus in the river: effluent from Publicly Owned
Treatment Works (POTWs) and sediments that had
collected behind obsolete dams in the river. The dams
had been built in the 1800s and early 1900s along the
course of the Assabet to power industrial mills, and
although the industrial mills no longer existed, the
remaining dams slowed down the flow of the river and
created impoundments behind the dams where phos-
phorus-laden sediments collected. MA DEP initially
concluded that the POTWs were the primary contribu-
tor to phosphorus pollution in the river, accounting for
up to 97 percent of the phosphorous introduced into
the water during low flow conditions.

Massachusetts faced  an uphill battle in overcoming po-
litical obstacles to reducing phosphorous contributions
to the Assabet River.  The four POTWs located along the
banks of the Assabet served six communities and oper-
ated independently of each other. In addition to the
difficulty of coordinating a unified plan to address the
problem, there were  a number of obstacles to improv-
ing water quality management considering that:

• Improvement to the  POTWs that could reduce the
  flow of nutrients into the river would have to be
  paid for by local communities.

• Each  town would be required to independently ap-
  prove the costs of preliminary environmental studies
  and long-term upgrades, requiring building a con-
  sensus in each of six separate town meetings.

• Massachusetts lacked the financial means of paying
  for ongoing water quality monitoring and modeling
  of the overall Assabet cleanup effort.

Fortunately, by the time MA DEP applied for a State
Innovation Grant in  2002, much of the public resis-
tance in the six communities to the cleanup had been
addressed through the formation of a community
partnership and the convening of the Assabet River
Consortium that includes the six communities served
by the four POTWs (Hudson, Marlborough, Maynard,
Northborough, Shrewsbury, and Westborough). The
Consortium's role is to coordinate individual communi-
ty efforts, collectively tackle the costs, and manage the
necessary environmental studies and treatment plant
upgrades. A community environmental organization,
the Organization for the Assabet River, partnered with
the Commonwealth to assist with field data collection
activities and fundraising efforts. MA DEP also pro-
vided critical technical assessment information, includ-
ing the analysis for the state's master environmental
planning document, the Total Maximum Daily Load
(TMDL) for nutrient loading for the Assabet River.

MA DEP was now at a point where it was ready to take
action to halt the continuing degradation of the water-
shed. In early 2003 MA DEP received a State Innova-
tion Grant to develop a watershed-based permit system
for the Assabet River. The purpose of the  grant was to
assist MA DEP in developing an innovative watershed
permit that would encompass the four POTWs that
discharged to the River. The watershed permit was
intended to govern discharge of nutrients into the river
from the four POTWs together as one component of
managing water quality under the TMDL to meet the
designated use of the river. Massachusetts hoped that
the watershed-based permit would provide  a way to
reduce the amount of phosphorous being introduced to
the Assabet River.

Program Development
and Implementation
The intent of the watershed-based permit was to in-
tegrate control of point source and non-point source
pollutants using information taken from the TMDL that

included point-source permitting at the four POTWs to
achieve the state's nutrient reduction goals for the river.

The watershed-based permit was designed to be imple-
mented in two phases. During Phase 1, POTWs would
be required to reduce their phosphorous discharges
and upgrade facilities so that they could achieve ad-
ditional reductions in the future if necessary. During
phase 2 (to be implemented in 2009), POTWs could
be required to meet even more stringent limitations on
phosphorus discharges if the state elected not to pursue
removing sediments from behind the dams (which, MA
DEP determined, was the other major source of phos-
phorus in the river), or if new criteria for phosphorous
reduction were developed by the state or EPA.

During the time that elapsed between the MA DEP's
application for a State Innovation Grant and the actual
award, Massachusetts learned more about the sources
of phosphorous contribution to the Assabet River. The
MA DEP had initially determined that POTWs were
the primary contributor, but later studies found that
the POTW discharge reductions alone would not be
enough to significantly reduce the phosphorous in the
water. MA DEP realized that in addition to the phos-
phorous reductions envisioned in the POTW watershed
permit, they would have to reduce sediment phospho-
rous contributions by 90 percent to have the intended
impact of improving the health of the Assabet River.

The MA DEP State Innovation Grant project was then
recast to allow the state to complete the quantification
and modeling of nutrient dynamics from river sedi-
ments in 14 dams or impoundments along the Assabet
River that had been identified as the major contributors
of phosphorous to the water. This modeling process
was designed to inform development of nutrient load-
ing limits that would become part of the watershed
permit. Watershed permit development for the four
POTWs was delayed to allow for the necessary sedi-
ment modeling and research. As part of this research
process to assess the magnitude of the sediment contri-
bution to the nutrient budget, MA DEP:

• Modeled the outcomes of a variety of phosphorous
  reduction strategies, including additional point
  source reductions; sediment removal; and other
  alternatives such as dam removal.

• Contracted with the United States Geological Survey
  (USGS) to conduct several studies of the sediments
  themselves to validate the assumptions made in the

• Developed a detailed  feasibility study investigating
  the most cost effective alternatives to achieve water
  quality standards.

• Used the research completed during the model
  assessments to complete a revised TMDL for the
  Assabet River.

Project Outcomes
In May 2005, EPA and MA DEP issued a final, water-
shed-based wastewater discharge permit to the four
POTWs that provided for an 87 percent reduction of
total phosphorous during the five-year permit cycle.
Implementation of these permits was delayed by an
appeal from the POTWs themselves, but in May 2006,
their appeal was dropped and the watershed permits
finally became a reality and are currently being imple-
mented. The implementation of the watershed-based
permit represents an important intermediate outcome
that will change POTW  behaviors and reduce pollution
loading into the Assabet River.

MA DEQ continues to pursue the restoration of the
Assabet River to a fishable and swimmable body of
water. Thanks to the combination of innovative wa-
tershed permits and innovative partnerships, that goal
is much closer than it was when the Agency began its
State Innovation Grant. The state estimates that within
the next 5 to 10 years, it will achieve its long-term goal
of ecological restoration of the Assabet  River.

Chapter  3:
Ongoing State  Innovation Grant Program  Projects
  In addition to the 7 completed projects, there are cur-
  rently 28 State Innovation Grant projects underway
  under the State Innovation Grant Program. Three addi-
tional awards from the FY 2008 competition are pending
at the time of this report's publication and those projects
have not yet begun. Table 3-1 below identifies the ongo-
ing State Innovation Grant projects in order of the date of
the award, and provides a summary of project characteris-
tics. The remainder of this chapter provides a characteriza-
tion of the ongoing projects funded from FY 2002 through
FY 2007 in each strategic target area, including the range
of sectors or audiences addressed, the range of project
goals identified, sample measures of success, and exam-
ples of accomplishments to date. More detailed informa-
tion about each project is available at the EPAs State
Innovation Grant Web site (http://www.epa.gov/
Table 3-1 . Synopsis of Ongoing State Innovation Grant Projects
(Fiscal Year)
Project Title
Injection Well
Storage Tank
Auto Salvage
Target Area
Selected Project Performance Goals
Improve compliance, pollution preven-
tion, and best management practices
in automotive and truck repair facili-
ties with Class V waste disposal wells
within source water areas for drinking
Achieve 100 percent participation by
UST operators by the end of the second
year. Achieve a minimum of 15 percent
improvement in compliance with UST,
RCRA, CAA Stage I and II, and SDWA
UIC requirements by the end of the
second year.
Achieve a 75 percent industry-wide
voluntary participation with a mini-
mum of 25-50 percent measurable
improvement in selected environmental
business practice indicators within two
Foster multimedia, "whole farm" man-
agement approaches through ERP. Ex-
tend effective environmental manage-
ment for Concentrated Animal Feeding
Operations (CAFOs) to address issues
beyond air and water quality compli-
March 2009
March 2009
                                                                              continued on next page

Table 3-1 . Synopsis of Ongoing State Innovation Grant Projects (continued)






(Fiscal Year)





Project Title

Dry Cleaner



Coal bed

Measures for
ERP Programs

Target Area


tal Results
Program and


Innovations in
the Permitting


Selected Project Performance Goals

Increase environmental compliance
among dry cleaners by providing com-
pliance assistance to all facilities within
the dry cleaner sector. Improved com-
pliance will result in reduced environ-
mental and public health exposures to
toxic substances. Streamline expensive
permit application and review process.
Improve the efficiency of inspection
activities through use of multimedia
compliance and enforcement tools.
Streamline the permitting process and
find innovative air permitting alterna-
tives to achieve improved environmen-
tal performance. Integrate permitting
options for the printing sector as part
of a performance based approach to
managing environmental risk. Reduce
the air permit burden while providing
regulatory flexibility. Improve the envi-
ronmental stewardship of participants.
Provide cleaner water, improved waste
management, and reduced toxics in
communities through the adoption of
cross-media environmental manage-
ment systems at the community and
municipal level.
Protect water quality in the Powder
River Basin from detrimental effects of
coal bed methane extraction through
development of watershed permits that
address flow, concentrations, and loads
for the project area based on water
quality requirements for its designated
use. Develop an efficient permitting
methodology that effectively incorpo-
rates cumulative impacts to water quali-
ty over the entire watershed. Strengthen
the NPDES regulatory mechanism.
Develop a template for watershed-based
NPDES permitting that will be transfer-
able to other watersheds.
In collaboration with six other states,
develop common measures for ERP
performance for a variety of business
sectors that will allow comparison and
cumulative assessment of benefits of the
application of ERP in specific sectors.


March 2008

June 2010


continued on next page

Table 3-1 . Synopsis of Ongoing State Innovation Grant Projects (continued)
(Fiscal Year)
Project Title
Storage Tank
Sector ERP
Storage Tank
ERP for the
Oil and Gas
EMS for the
Target Area
Selected Project Performance Goals
Achieve eight percent or better im-
provement in compliance for participat-
ing facilities.
Achieve eight percent or better im-
provement in compliance rates among
auto salvage facilities; thereby reducing
or eliminating the amount of pollution
and harmful contaminants released
into the air, land, and water from these
Achieve 25 percent increase in compli-
ance and 20 percent increase in best
management practices/pollution pre-
vention for dry cleaning sector.
Improve the effectiveness of state per-
mitting and non-regulatory efforts at
complex facilities through testing and
adopting of environmental footprint
accounting systems.
Improve environmental performance by
participating organizations.
For participating facilities, improve
comprehensive, multimedia compli-
ance, increase efficiency, and reduce
Identify performance and efficiency
improvements of ERP for UST sector by
comparison to traditional compliance
Achieve eight percent or better im-
provement in compliance with CAA,
CWA, and SDWA requirements.
Testing the application of EMS in the
redevelopment and operation of a
Brownfield site.
June 2009
April 2009
April 2009
continued on next page

Table 3-1 . Synopsis of Ongoing State Innovation Grant Projects (continued)




1 • • , i
ship with



(Fiscal Year)






Project Title




Parking Lot


ERP for Small

Target Area







Selected Project Performance Goals

Promote beyond-compliance perfor-
mance by expanding the number of
facilities participating in the Virginia
Performance Track program through the
testing of a variety of new incentives.
Encourage improved performance by
participating facilities through testing
of incentives including streamlined
permit renewals (air, drinking water,
and NPDES), expedited permits, onsite
pre -permit meetings with the permit
writer and compliance inspector, lower
level permit modifications for pollu-
tion prevention, and reduced reporting
Improve innovative results by develop-
ing a performance track program to
increase the number of beyond compli-
ance performers in the municipal and
agricultural sectors that will provide a
number of incentives, including permit
Increase compliance, decrease storm-
water pollution, improve water quality,
protect watersheds and streams, and
meet Total Maximum Daily Load Re-
quirements without having to develop
formal state permitting programs.
Improve compliance and promote
use of best management practices for
Stormwater control at construction
sites. Fulfill the requirements associated
with the Construction Site Runoff Con-
trol Measure component of the small,
MS4 Stormwater management programs
mandated by EPAs Stormwater Phase II
Final Rule.
Improve compliance, environmental
performance, and pollution prevention
practices among autobody shops, print-
ers, and other small businesses. Achieve
these goals in a more timely and
cost-effective manner than traditional
compliance assistance and monitoring






continued on next page

Table 3-1 . Synopsis of Ongoing State Innovation Grant Projects (continued)





(Fiscal Year)




Project Title

for State


Dairy Sector


Target Area





Selected Project Performance Goals

Achieve KY EXCEL membership of over
500 members. Encourage new mem-
bers to commit to and implement waste
and energy reduction projects. Develop
an ERP project focused on wastewater
treatment facilities and properties with
regulated underground storage tanks.
Improve compliance of construction
industry with the state's Construction
General Permit requirements. Encour-
age stronger Municipal Separate Storm
Sewer System programs for erosion
prevention and sediment control. In the
long term, reduce sediment waste load
allocations as identified in sediment
total Maximum Daily Load documents.
Increase understanding about EMS,
regulatory requirements, and best man-
agement practices for manure handling
procedures. Increase the number of
producers, animal units, and acres pro-
tected by EMS, emergency management
plan, winter spreading plan, nutrient
management plan, and participation
in the state's voluntary environmen-
tal leadership program (Green Tier).
Ultimately, increase compliance rates
for permitted operations and improve
groundwater and surface water quality
in the Lakeshore Basin.
Among auto body/refinishing shops in
three urban watersheds, increase com-
pliance rates by 50 percent, increase the
number of targeted businesses adopt-
ing best management practices by five
percent, and reduce annual releases
of mercury into Puget Sound by 300
pounds. Among businesses and organi-
zations statewide, 1) reduce materials
use, air emissions, water discharges,
and hazardous waste generation; 2)
conserve energy and water; and 3)
restore habitat.




Ongoing  Environmental
Results  Program (ERP)  Projects
Thirteen states receiving State Innovation Grants in the
2002-2007 funding cycles are currently implementing
ERPs. These states include Illinois, Indiana, Louisi-
ana, Maine, Michigan, Minnesota, Nevada, New York,
Rhode Island, Vermont, Virginia, Washington, and
Wisconsin. Most of these ERPs focus on small business
sectors that generally have relatively little environmen-
tal expertise. The specific types of businesses these
states are addressing through their State Innovation
Grant projects include:

• Dry cleaners.

• Printers.

• Animal feedlot operations.

• Auto  body/refinishing shops.

• Auto  salvage yards.

• Oil and gas production.

• Underground storage tank (UST)  operations, with a
  focus on gas stations.

• Car and truck repair facilities that have floor drains
  covered under the Class V Waste  Disposal (injection)
  well requirements.

In addition, two of the thirteen states are using State
Innovation Grant funding to test ERP as an innovative
way to address stormwater runoff.

All of these ERPs are seeking to improve  compli-
ance and environmental performance in target sec-
tors through a combination of compliance assistance,
self-certification, and statistically-based performance
measurement. Over the long term, these programs
are working to reduce negative environmental im-
pacts (e.g., physical, chemical, and biological hazards)
from regulated small businesses to the greatest extent
possible. In many cases, these states are using ERP
to integrate air, water, and waste requirements into a
single compliance assistance,  certification, and inspec-
tion program. Five of the ongoing ERP projects are
voluntary; in other words, facilities can choose whether
or not they wish to participate in compliance assistance
and self-certification aspects of the program, however,
compliance with the underlying air,  water, and waste
requirements is mandatory.

The 13 states conducting grant-supported ERP projects
are in various stages of implementing these programs.
These stages include:

•  Creating an inventory of the universe of regulated
   facilities (or those that are contributing to the envi-
   ronmental issue of concern).

•  Conducting baseline inspections at a statistically-
   based sample of facilities to determine the extent to
   which the sector is in compliance and meeting key
   best practices for pollution prevention, and to help
   focus subsequent outreach on the most serious prob-
   lems. As part of this step, it is necessary to develop
   an inspection checklist and to train inspectors.

•  Conducting compliance assistance outreach.
   As part of this step, it is necessary to develop and
   distribute plain-language, user-friendly compliance
   assistance (e.g., workbooks, fact sheets, and work-
   shops) to improve compliance and promote pollu-
   tion prevention.

•  Creating, distributing, and collecting self-
   certification forms from all participating facilities.
   Self-certification forms are  closely linked to compli-
   ance assistance outreach materials. As part of the
   self-certification process, facilities assess their own
   operations and submit the  self-certification form. If
   they are out of compliance, facilities submit a return-
   to-compliance plan.

•  Conducting post-certification inspections at a
   statistically-based sample of facilities to measure

   changes in compliance and environmental perfor-
   mance compared to the baseline and to verify the
   accuracy of facility self-certification forms.16

Table 3-2 summarizes the accomplishments of the 13
states to date in meeting these milestones.17

In some cases, states are experimenting with combining
this standard ERP approach with other policy tools, such
as EMS. For example, the state of Wisconsin is develop-
ing a hybrid program that will include a multimedia
compliance-assistance ERP for small print shops and an
EMS-based permit system to encourage beyond-
compliance performance among larger printing facilities.

The 13 states have determined key measures of suc-
cess as part of their project development. Performance
measures are sector-specific in most instances and will
be used to assess the achievements of the states' proj-
ects at the completion of each State Innovation Grant.
Examples of these performance measures include:

•  Number or percent of facilities in the target sector
   that participate in the ERP (this applies only to vol-
   untary programs).

•  Number or percent of facilities that request or
   receive compliance assistance or participate in ERP
   compliance assistance workshops.

•  Improved facility understanding of applicable re-
   quirements as measured by facility self-certification

•  Degree of improvement in compliance in post-certi-
   fication audits as compared to baseline audits.

•  Improved environmental performance, as indicated by:

   —  Reduced  hazardous waste generation (measured
       by a reduced need to empty sumps and spill

   —  Reduced  air emissions (measured by increased
       compliance with vapor recovery requirements).
   —  Decreased use of volatile organic compound and
       hazardous air pollutant coatings.

   —  Improved management and clean-up of solvents
       and waste.

•  Reduction in the number of hours required to de-
   velop permits.

•  Cost savings realized as a result of facilities in the
   target sector adopting pollution prevention ap-
   proaches and  best management practices.

In addition to these 13 states working to develop and
implement ERPs, two states are working to test tools
that enable comparison of ERP performance across

•  The Massachusetts Department of Environmental
   Protection is leading a consortium of seven states
   to develop and test a set of shared, sector-specific
   performance measures that can be used across states
   implementing ERP in the same sector. The effort
   will collect information from participating states for
   at least one common business sector among these
   states. Participating states expect that the common
   performance measures will enable them to quantify
   their environmental results and lead to more effec-
   tive use of states' resources.

•  The Rhode Island Department of Environmental
   Management (RIDEM) is working to test whether
   ERP can be as effective, or more effective, than tra-
   ditional regulatory approaches in improving compli-
   ance for the UST sector.  RIDEM is conducting this
   project in collaboration with the Florida Department
   of Environmental Protection (FDEP), which main-
   tains a traditional compliance assistance and enforce-
   ment program for this sector. By working with FDEP,
   RIDEM will be able to compare the relative costs and
   benefits of a traditional program to ERP. The proj-
   ect results will inform decisions by other states in
   determining if ERP for USTs is a suitable alternative
   inspection/compliance program.
16 For more detailed information on the ERP process, see Chapter 1 or EPAs ERP Web site at www.epa.gov/erp.
17 Note that as part of ERP, many states also conduct targeted follow-up, which includes identifying potential problem facilities based on the self-certification
  data and targeting them for inspections or other follow-up actions. In addition, after completing post-certification inspections, states assess sector-wide
  performance data and determine whether to adjust strategies for achieving compliance and improved environmental performance in the sector. These steps
  are important but are more ongoing in nature and are not as easily tracked as other ERP milestones; therefore are not reflected in Table 3-2.

Table 3-2: Achievements of Milestones for Ongoing State Innovation Grant ERP Projects

ERP Progress Milestone Achieved
tion Cycle
(Fiscal Year)
Car and Truck
Class V Waste
Disposal (in-
jection) Wells
Animal Feed-
lot Operations
Auto Salvage
(gas stations)
Auto Salvage
Oil and Gas
Parking Lot
Auto Body
Shops and
Auto Body
Universe of












Facility Self-



Conduct Post-

3 Washoe county only; Clark County not completed
' Auto Body Sector only

Environmental  Management
System (EMS) Grants
Four states that received State Innovation Grants in
the 2002 to 2007 funding cycles (Indiana, Wisconsin,
Washington, and Georgia) are in the process of imple-
menting five projects to test the use of EMS in permit-
ting processes. Although the target audiences for these
projects are quite different, they are all seeking to use
EMS as a way to foster continuous improvement pro-
cesses for environmental management. Each project's
goals, measures of success, and activities to date are
summarized below.

Indiana is using its 2004 State Innovation Grant to
develop and implement a voluntary program designed
to encourage local governments in the state to adopt
Community EMS. The project is designed to provide
recognition for communities that implement environ-
mental improvements, including adoption of an EMS.
The goals of Indiana's project, entitled CLEAN, include:

• Fostering local government pollution prevention

• Developing a recognition program for voluntary stew-
  ardship activities for the local government sector.

• Providing cleaner water, improved waste manage-
  ment, and reduced use and release of toxics through
  the adoption of cross-media EMS at the community
  and municipal level.

• Improving state responsiveness to local concerns
  through improved communication, compliance as-
  sessment, and technical assistance efforts.

• Promoting implementation of high quality environ-
  mental projects at  the local level to improve overall
  environmental performance of municipalities and
  businesses, and enhance quality of life for citizens.

The state has proposed several measures of success for
its project, including:
• Number of municipalities participating in CLEAN
  and/or the number of municipalities expressing

• Environmental improvements at pilot communities
  participating in CLEAN.

• Number of permitting improvements resulting from
  CLEAN, such as fewer municipal permit application

• Number of partnerships formed between various
  state agencies as a result of CLEAN.

Indiana has made significant progress in developing its
project to date. The state has developed EMS assis-
tance materials and outreach materials to promote the
program, conducted onsite visits in pilot communities,
and developed and provided compliance assistance to
municipalities joining CLEAN and adopting commu-
nity EMS.

Wisconsin has been funded to develop two EMS proj-
ects. The first of these projects, funded by a 2004 State
Innovation Grant, is designed to implement a program
for improving compliance using both EMS and ERP for
the printing sector. The ERP portion of the project is
focused primarily on smaller facilities. The EMS por-
tion of the project involved developing an alternative
regulatory structure that uses EMS as the basis for facil-
ity permits. The goals of Wisconsin's EMS/ERP project
are to:

• Streamline the permitting process and find innova-
  tive air permitting alternatives.

• Integrate permitting options for the printing sector
  as a significant step toward creating a performance-
  based approach to managing environmental risk.

• Reduce the air permit burden while providing regu-
  latory flexibility.

• Improve the environmental stewardship of

The state has identified the following performance mea-
sures for the EMS element of its pilot project:

• Administrative costs of EMS-based permits for regu-
  lated facilities and the state, compared to traditional

• Emissions from participating facilities compared to
  emissions from a control group of non-participating

• Reduction in the number of volatile organic com-
  pound and hazardous air pollutant emissions result-
  ing from pilot  implementation.

• Reduction in the number and amount of pollutants
  in other media (e.g., water and waste) resulting from
  the pilot.

• Reduction in the amount of time the state needs to
  review construction permit applications and revi-
  sions resulting from the pilot.

To date, Wisconsin has developed and conducted staff
EMS training. The state is now working to establish a
multimedia EMS  team within the Wisconsin Depart-
ment of Natural Resources and conduct EMS Roles and
Responsibilities training.

Wisconsin also received a State Innovation Grant in
2007 for a second EMS project that will promote EMS
as a tool for multimedia environmental improvement
among dairy farms of all sizes (regulated and unregulat-
ed) in the Lakeshore Basin region of the state. The vast
majority of dairy  farms in the state are too small to be
subject to confined animal feeding operation (CAFO)
regulations, and although these unregulated farms are
significant contributors to polluted runoff, the state has
found it infeasible to expand the regulatory program
to address small dairy farms. This project is intended
to supplement existing CAFO regulations by exploring
the use of EMS as a tool to establish  voluntary envi-
ronmental improvement goals, measure progress, and
ultimately protect and restore water  quality in the state.
Specific goals  of the project are to:

• Build upon the EMS knowledge and capacity in the
  state and move beyond the feasibility or "proof of
   concept" stage and test the full potential of EMS as
   a tool for environmental improvement in the dairy

•  Develop a critical mass of land and animals protect-
   ed by an EMS, thereby creating noticeable improve-
   ments in ambient environmental conditions.

•  Forge supply-chain relationships, for example by
   linking dairy producers and processors using EMS,
   to drive and reward environmental improvement.

The state has identified numerous performance  mea-
sures it will use to assess short-term, intermediate, and
long-term outcomes of the project in the Lakeshore
Basin, such as:

•  Improved understanding among dairy producers
   about EMS, regulatory requirements, and best prac-
   tices for manure handing that will minimize risk of
   spills or runoff.

•  Increased number of producers, animal units, and
   acres protected by EMS and other plans and systems
   to reduce environmental impacts (e.g.,  emergency
   response plans and nutrient management plans).

•  Increased compliance  rates for permitted dairy

•  Improved groundwater and surface water quality

This project is currently in the startup phase.

Washington state received a 2005 State Innovation
Grant to implement an Environmental Management
System program for the pulp and paper sector. This
project is adapting EMS to give facilities in the sector
an "Industrial Footprint" measurement that they can
use to assess their overall environmental impact. The
facilities can then use the measurement to improve
their environmental performance. This will result in
an improvement in the effectiveness of state permit-
ting and non-regulatory efforts at complex facilities by
moving away  from media specific compliance measures
toward sustainability measures of environmental, eco-
nomic and social objectives.

Initially, the project is assessing the "Industrial Foot-
print" of eight chemical pulp and paper mills in Wash-
ington by developing:

• A baseline footprint for each facility evaluated, as
  well as the pulp and paper sector as a whole.

• A basis for comparison between facilities.

• A comparison of the performance of facilities with an
  EMS in place to those without an EMS.

Footprint measurement will hightlight opportunities
for facilities to reduce waste and pollution as well as
saving energy, water, materials, and money. Ultimately
the project expects to measure its success by assessing
the degree to which the footprint measurement tool is:

• Credible to the community, the state, the facilities
  and EPA.

• Broad, including all major environmental impacts
  and can be adopted to measure economic and social
  impacts as well.

• Robust, meaning that it can be used to measure the
  footprint of an individual facility or a whole sector,
  and that it can be used to compare similar facilities.

• Cost effective.

• Practical, minimizing the need for propriety data.

• Transferable to other facilities.

• Informative in measuring the environmental perfor-
  mance of facilities.

Currently Washington is working to secure participa-
tion of pulp and paper mills. The state has developed
environmental, social, and economic indicators and
is working to develop mill-specific indicators. Wash-
ington has also initiated community outreach, and has
developed a draft stakeholder involvement plan.

After an initial effort to develop an EMS project de-
signed to encourage manufacturing facilities to adopt
an EMS approach in permitting, Georgia had to
reconsider that project because of a general lack of
support from the originally targeted sector. Instead,
Georgia has revised their work plan to frame a project
that would apply Environmental Management Systems
to the redevelopment of a brownfield site at a closed
truck assembly facility in Hapeville, GA. The EMS will
have two components, one that will be focused on the
site redevelopment and the other on site operation fol-
lowing the redevelopment.

Performance Track-related
Seven states received State Innovation Grant fund-
ing between 2005 and 2007 for eight projects that are
designed to recognize and reward facilities that vol-
untarily do more than required by law to protect the
environment and public health. These "Performance
Track-like" projects which are related or similar to
EPAs National Environmental Performance Track, are
based on the principle that companies with  a history
of beyond-compliance performance and dedication to
continuous improvement should be treated  differently
than other facilities.  To foster continuous improvement
at member facilities, Performance Track-like programs
(generically referred to as performance-based leader-
ship programs) offer incentives such as recognition,
low priority for routine inspection, improved com-
munication with regulators, and technical assistance
or peer networking.  Experience has shown that EPA
needs to work in partnership with states to effectively
deliver incentives and rewards for the national pro-
gram. States seeking to promote environmental lead-
ership are developing state-level, performance-based
environmental leadership programs that align with, and
encourage participation in, the National Environmental
Performance Track, while also addressing state-specific
priorities and interests.

Five states have received  State Innovation Grants to
develop new performance-based environmental leader-
ship programs; these states include Indiana, Kentucky
New Hampshire, Tennessee, and Washington. Table
3-3 provides a summary of each project's target audi-
ence, goals, program requirements, measures of suc-
cess, and degree of alignment with the National Envi-
ronmental Performance Track.


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In addition to the states using EPA funding to develop
new state-level, performance-based environmental
leadership programs, two states, Arizona and Virginia,
are using State Innovation Grants to improve exist-
ing state performance-based environmental leadership
programs. These efforts are  described below.

In support of EPAs National  Performance Track Pro-
gram, the Arizona Department of Environmental Quality
(ADEQ) has established its own state Performance Track
Program in 2005. The state has elicited feedback on the
program from the Performance Track community, which
has identified several opportunities for improvement.
ADEQ plans to use their 2006 State Innovation Grant
funds to address these opportunities by:

• Providing assistance and  recognition to high per-
  forming small businesses, small communities, and
  agricultural enterprises that may not qualify for
  Arizona Performance Track, but would like to adopt
  an EMS to decrease their environmental impacts.

• Expanding Arizona Performance Track membership
  by increasing the level of flexibility in permitting and
  reduction in reporting obligations.

Over the three-year grant cycle, ADEQ will measure
its results by analyzing the number of members in the
state-level Arizona Performance Track program, and the
number of agricultural operations participating in the
program, and the overall environmental improvements
by program participants.

Virginia's Department of Environmental  Quality
(VDEQ) is using its 2005 State Innovation Grant to
build the state's capacity to communicate and deliver
incentives for the National Environmental Performance
Track program as well as the Virginia Environmental
Excellence Program (VEEP). VDEQ hopes to better
integrate policy procedures  and delivery of these two
programs, while exploring new incentives options  for
participating facilities.
VDEQ expects that improved communication from
VDEQ staff will increase the number of facilities seek-
ing acceptance into the VEEP or national Performance
Track program, and will also boost compliance rates
and environmental performance. VDEQ plans to mea-
sure these results by assessing:

•  Changes in attitudes of VDEQ managers (to be mea-
   sured through a pre- and post- project survey).

•  Number of institutions attending a financial incen-
   tives forum.

•  VEEP and Performance Track participation rates over
   the project's term.

•  VEEP and Performance Track accomplishments
   through the annual performance reporting process
   and Toxics Release Inventory data trends.

To date, Virginia has seen success in its performance-
based programs achieving higher environmental results
among facilities, while allowing these facilities greater
operational flexibility. VDEQ hopes this program will
not only improve the delivery and content of their
incentives program, but also help maintain or increase
the extent of regulatory flexibility they can provide to
high performing facilities.

Other Projects Testing
Innovation in  Permitting
In addition to three strategic innovation priority areas
(Environmental Results Programs, Environmental Man-
agement Systems, and state Performance Track Pro-
grams), NCEI has funded a small number of projects
designed to test other significant innovations. Two of
the three projects under this category have been com-
pleted and are described in Chapter 2 of this report. A
third project, a grant to the Wyoming Department of
Environmental Quality, is currently underway and tests
the use of watershed-based permitting as a tool for pro-
tecting water quality in the Powder River Basin. This
watershed is affected by coal bed methane recovery.

Water quality in the targeted segment of the Powder
River is impacted by salinity in effluent from coal bed
methane recovery operations, potentially threatening
the river's designated use as a fishable river. The water-
shed-based permit is designed to address these impacts.
This approach differs from current permitting programs
by making a cumulative assessment of the potential im-
pacts to water quality in the basin and incorporating  all
sources of a pollutant of concern into a single permit.
The watershed permit will allow allocation of pollutant
loading to the hundreds of coal bed methane recovery
sources in this segment of the river. Since an emerging
concern is water quality in the river as it crosses the
border into Montana, this project is designed not only
to achieve and demonstrate results in protecting water
quality in Wyoming, but also to transfer the project
methodology to other watersheds and states.

The goals for this project are to:

• Establish targets for water flow, concentrations, and
  pollutant loadings for the project area based on wa-
  ter quality requirements for its designated use.

• Develop  and implement an efficient permitting
  methodology that effectively incorporates cumulative
  impacts to water quality over the entire watershed.

• Streamline the NPDES  permit application sequence
  and strengthen the NPDES regulatory mechanism  to
  achieve compliance with established water quality
•  Develop a template for watershed-based NPDES per-
   mitting that will be transferable to other watersheds
   in Wyoming and potentially to other states with
   similar permitting issues and watersheds.

The performance measures for this project are:

•  Improvement in water quality to maintain the river's
   designated use.

•  Reduction in permitting cost for applicants result-
   ing from elimination of site-specific permits once a
   watershed permit is in place.

•  Reduction in time necessary to process permit ap-
   plications from receipt of the permit application to
   its submission for public notice.

•  Reduction in WY DEQ operational costs resulting
   from reduction in personnel hours required for per-
   mit application processing.

To date, WY DEQ has achieved several key project
milestones, including sponsoring the initial stakeholder
committee meetings for the Clear Creek and Fence
Creek watersheds and conducting watershed-based
WYPDES permitting stakeholder committees meetings.
Building on these efforts, WY DEQ is now working to
finalize the waste load allocations within the watershed,
implement the watershed permit, and develop a final
project report to enable the approach to be transferred
to other watersheds and states.

Chapter 4:
Lessons and  Future  Direction for the  State  Innovation
Grant Program
Key  Lessons
Ammber of State Innovation Grant-funded proj-
       :cts are now complete and they provide us with
       he first measurable results for the program. The
lessons learned from the first six rounds of competition
include the following:

1. Projects Have Produced Measurable
First, most of the completed projects have resulted in
measurable improvements in compliance, environmen-
tal results, and/or operational efficiency. As previously
discussed, Delaware reported that its ERP resulted in a
30 percentage point improvement in overall auto body
shop compliance, a 37 percentage point increase in
auto body shop compliance with high priority compli-
ance indicators, and a 20 percentage point increase
in the number of facilities voluntarily taking steps to
prevent pollution and adhere to environmental Best
Management Practices (BMPs). Maine reported that its
ERP achieved a 10 percentage point increase in overall
compliance rates, and almost a 12 percentage point
increase in the number of shops undertaking volun-
tary pollution prevention and BMPs. State Innovation
Grants have also resulted in measurable reductions in
pollution and increases in conservation. For example,
Colorado reported a 15 percent reduction in emissions
of air pollutants, a 27 percent reduction in hazardous
wastes generated, a three percent decrease in electrical
energy use, and a 10 percent reduction in natural gas
consumed as a result of their innovative use of EMS
in permitting at participating facilities. Finally, State
Innovation Grants are working to make environmental
regulatory programs more effective and efficient. For
example, Arizona's Smart NOI Stormwater permitting
program achieved close to an 80 percent improvement
in efficiency as measured by the reduction in time
required to issue a permit and the increased number of
permit applications processed on an annual basis.
Rigorous implementation of EPAs policy mandating
that assistance agreements commit to demonstrate
measurable results on the part of EPA grant project
officers and state project managers has helped ensure
these results. The Grant Program provides training and
technical assistance in logic modeling and performance
measurement to help each grantee identify and measure
specific performance outcomes. In this way, State Inno-
vation Grants are designed to produce information on
how well each innovative pilot works and what factors
influence its effectiveness to facilitate their evaluation
and transfer.

2. State Innovation Grant  Program  Has
Provided Key  Support at Critical Time
With many states confronting tight budgets in recent
years, the seed funding provided through the State In-
novation Grant Program has enabled states to continue
developing and testing innovative new environmental
protection approaches in a way that would probably
not otherwise have been possible. While States have
long served as the laboratories of experimentation, their
ability to test new ideas is highly affected by available
funding. While federal funding has also been con-
strained in recent years, EPAs steady investment in the
State Innovation Grant Program has provided an im-
portant source of seed capital to permit states to pursue
potentially more effective and efficient new approaches
amid their budget challenges.

The State Innovation Grant Program has leveraged
significant state resources. Despite their budget con-
straints, states have provided $2,329,660.

3. Strategic Focus Has Permitted
Critical  Mass  of Experiments Around
Several Key Ideas.
Another significant lesson for NCEI is the vafue of
maintaining a strategic focus on promising target areas
over time. In testing any hypothesis, multiple experi-
ments are always desirable to explore the robustness
of the idea. In the State Innovation Grant Program,
sustained focus on ERP, EMS, and Performance Track-
like programs has enabled concentrated learning about
these highly promising approaches. This has permitted
the build up of knowledge critical to understanding
the full potential of those concepts, which has helped
accelerate adoption by other states.  For example, with
regard to ERP, states have developed applications for
eight new sectors beyond those originally pioneered by

An obvious tradeoff with this strategic focus is that
support has not been available  for other fertile areas of
innovation outside of permitting such as new environ-
mental technologies or intelligent information systems.
Some have also expressed concern that wholly original
ideas may not garner support, although over the his-
tory of the Program, NCEI has  selected 3 projects—a
little less than 10 percent of all program projects out-
side of the target areas. Nonetheless, NCEI recognizes
this tradeoff and would eagerly support a wider range
of projects should additional funding become available.
Demand appears significant; applications for funding
have routinely outstripped available resources in each
round of competition by about four-fold. Additional
resources would also enable expansion of the program
to American Indian Tribes, as was originally envisioned.

4. The State Innovation Grant Program
Has Fostered the Transfer of Ideas and
Building of Networks
The Environmental Results  Program (ERP) is an excel-
lent example of how good ideas can spread. Since the
State Innovation Grant Program selected the Delaware
ERP in the 2002 competition, a number of additional
states have requested support for ERP projects, and
EPA has funded 12 of them. These 12 projects address
eight new sectors and an innovative adaptation of ERP
for a multi-sector stormwater management project. In
the  two projects from 2007 that are designed to test
ERP for management of stormwater runoff, one proj-
ect focuses on runoff from construction sites, while
the  other is focused on parking lots in heavily devel-
oped areas. In future years, the State Innovation Grant
Program could also provide a mechanism to  test ERP
for other emerging issues. For example, a report from
the  National Academy of Public Administration in the
spring of 2007 suggested that ERP could be used on a
pilot basis to test how successfully it might be in reduc-
ing  nutrient pollution flow into the Chesapeake Bay
from poultry producers on the Delmarva Peninsula.21

States recognize that a key benefit of the Grant Program
is that it creates opportunities for them to share insights
and learn from their peers in other states. The grants
include travel resources that allow recipient states to
participate in events such as the biennial State-EPA En-
vironmental Innovation Symposium as well as the State
ERP Consortium. In fact, the State Innovation Grant
Program was instrumental in helping launch the States
ERP Consortium—a collaboration of 24 states sharing
information on ERP implementation and performance

5. The State Innovation Grant Program
Has Strengthened the State-EPA
Innovation Partnership
The collaboration on the thirty eight projects funded
under the State Innovation Grant program has pro-
vided a strong foundation for a stronger State-EPA
partnership overall. Since 2002, State representatives
have routinely participated in meetings of EPAs Innova-
tion Action Council (IAC). The IAC, comprised of EPAs
senior-most career leaders, convenes quarterly to set
direction, oversee, champion, and troubleshoot EPAs
innovation agenda. The Chair and Vice Chair of the
Cross Media Committee (CMC) of the Environmental
Council of the States (EGOS) are standing members of
 ' Taking Environmental Protection to the Next Level: An Assessment of tlie U.S. Environmental Services Delivery System, A Report by a Panel of the National Acad-
  emy of Public Administration for the United States Environmental Protection Agency April 2007, Page 35.

the IAC and are typically joined by three or four other
State Environmental Commissioners at each meeting.
Since 2004, the IAC and the CMC have shared a joint
work plan identifying priority areas for collaboration
on innovation. In addition, EPA and ECOS have co-
sponsored four Innovation Symposia where state and
EPA innovation practitioners gather to share ideas and

Future Direction
As mentioned, additional resources would enable
expansion of the program  to American Indian Tribes
and additional thematic areas. One area of potential
interest includes state application of the "environmental
footprint" approach to foster business sustainability by
improving energy and material use efficiency. An envi-
ronment "footprint" measures the amount of nature's
resources an individual, facility, community, or country
consumes in a given year;  by measuring businesses'
environmental footprints,  states seek to identify oppor-
tunities to reduce their overall environmental impact.22

A second area that the grant program may be able
to support and stimulate is the application of "lean
manufacturing" tools and techniques for environmental
improvements, such as waste reduction, resource and
energy conservation. (See http://www.epa.gov/innova-
Another potential area for future collaboration that
NCEI would like to explore with states is testing tools for
integrated permitting approaches (i.e., an environmen-
tal permit for a facility that includes all of the regulated
environmental impacts for all environmental media).
Permits of this type are already being used in Europe and
appear to improve the efficiency of regulation while giv-
ing facilities flexibility within an environmental permit
to integrate continuous improvement into their environ-
mental management and compliance strategy.

In the next four years, thirty one projects (including the
three new awards from 2008 pending at the time of this
report) will also report results that we hope will pro-
mote interest and provide insight and guidance that will
stimulate broader testing and adoption of innovation by
states leading to improved environmental results from
permitting programs. We hope that the State Innovation
Grant Program can continue to be a vehicle to test new
ideas and that NCEI can continue to facilitate the sharing
of results and implementation experiences. This report,
subsequent progress reports, and the information posted
on the program's Web site (http://www.epa.gov/innova-
tion/stategrants) will provide mechanisms to document
and share  results. Additionally, events such as the State-
EPA Innovation Symposium (http://www.excelgov.org/
sustainableresults) will continue to provide opportuni-
ties for states to share their results from State Innovation
Grant projects.
22 See, for example, the "Industrial Footprint Reduction Project" proposal submitted by the State of Washington at http://www.epa.gov/innovation/