"Project XL," an Administration initiative launched in March 1995, is intended to enable communities (and businesses) to implement alternatives to traditional federal-style "command and control" environmental requirements. The "reinvention of environmental regulations" embodied in programs like Project XL is driven by increased calls for a shift of responsibility from the federal government to state and local levels, frustration over the burden of environmental regulation, the perceived greater cost-effectiveness of market-based environmental protection, and emerging technology and information tools for pollution prevention and control. In theory, Project XL will allow communities to achieve better environmental protection at lower cost by developing site and community-specific alternative compliance programs. Through Project XL, local governments may have the means both to avoid overly restrictive and unnecessary federal environmental requirements and, at the same time, better focus on local environmental priorities.
This article will examine the potential benefits for local communities through Project XL, identify opportunities for participation and describe examples of proposed XL initiatives. For Project XL purposes, a "local community" can include a city or county government, a regional government consortium, neighborhood and community organizations, community development corporations or other public or private local entities.
Project XL Objectives, Criteria and Process
Project XL, which stands for "eXellence and Leadership," is aimed at accomplishing some lofty goals. The Project, which is administered by the Environmental Protection Agency (EPA), seeks to enhance environmental protection while simultaneously enabling regulated entities to save money. Specifically, Project XL is intended to allow communities to avoid burdensome and unnecessary regulations, while encouraging the initiation of programs that will achieve results beyond those attainable through rote compliance with existing federal environmental requirements.
EPA plans to select a limited number of communities to receive regulatory "relief" (or "flexibility"), in exchange for enforceable, performance-based commitments to achieve beyond compliance environmental results. In other words, the XL applicant proposes to be relieved from strict compliance with a specific federal environmental regulation. In exchange for relief, the applicant must identify a means of meeting the objectives of the regulation that will achieve environmental results superior to those obtained through compliance with the regulation. In addition, as part of Project XL, EPA intends to provide technical assistance and other support to communities designed to enhance innovative environmental programs.
Objectives of XL
Project XL is a route through which communities may be better able to address local environmental priorities that might not be recognized or encouraged by the current regulatory system. Thus, selected communities may seek to avoid regulations that lock in inefficient or obsolete practices or technologies, and to redirect the resources saved through regulatory relief to other, more pressing, community-specific environmental priorities.
A premise of Project XL, that better environmental results can be achieved at less cost, is in accord with the view that responsible environmental management and innovative environmental programs can benefit the environment and the bottom line. By obtaining regulatory relief under Project XL, communities may generate cost savings by, for example, employing pollution prevention techniques rather than installing costly, end-of-the-pipe pollution controls.
The implementation of Project XL will also likely facilitate dialogue among key stakeholders. Communities seeking regulatory relief will be well served by promoting agreement among industry, residents and environmental groups on specific environmental objectives and activities prior to filing an XL application.
Finally, implementation of the XL program may provide new insights on possible environmental regulatory (and statutory) reform. EPA's effort may identify new ways for the federal government to provide state and local governments with more responsibility and authority for environmental protection and environmentally responsible, job-creating local development. In addition, XL could foster the development of new tools for monitoring pollution and providing better access to environmental information and decisionmaking by the public and environmental organizations.
Project XL Selection Criteria
Communities are selected as Project XL recipients on the basis of an application submitted to EPA Headquarters. The EPA has identified nine criteria for selecting Project XL recipients, including:
- Superior Environmental Results;
- Stakeholder Support;
- Economic Opportunity;
- Innovative, Multi-Media or Pollution Prevention Approaches;
- Feasibility;
- Transferability;
- System for Monitoring, Reporting and Evaluation of Results;
- No Shifting of Risk Burden to Other Segments of Community; and
- A Project Consistent with Community Planning and Goals.
The most important of these criteria appear to be: (1) that the XL proposal promote superior environmental results, and (2) that the proposal have the support of potentially affected stakeholders. With respect to environmental results, Project XL recipients must state explicit goals, benchmarks and means to measure and evaluate environmental progress and must demonstrate that proposal implementation will lead to environmental results superior to those achievable under existing and reasonably foreseeable future federal regulations. Improved environmental quality can be achieved either directly, i.e., through the environmental activities undertaken as part of the project, or indirectly, i.e., through cost savings resulting from project activities that are invested in follow-up activities that produce superior environmental results. The project may even involve, for example, trading costs saved through flexibility in one medium for improved environmental results in another medium, as long as the environmental quality of neither media is degraded.
In addition, an XL applicant should not expect EPA approval absent strong stakeholder support. In essence, Project XL communities are able to take more responsibility for their own environmental performance, provided there is a demonstration that potentially affected stakeholders support an alternative approach.
The XL Process
EPA has established a three-stage process —Triage, Technical Review, and Final Project Agreement negotiation — for reviewing Project XL proposals. Within each stage, Project XL applicants should remain open to proposal refinement and continue to seek support from key stakeholders (including those within EPA itself).
Triage: During this period, intended to last roughly one (1) week, EPA Headquarters Project XL staff identifies and rejects proposals that are fundamentally flawed or lack sufficient information to conduct a technical review (e.g., requesting regulatory relief and proposing to invest savings in pothole repair).
Technical Review: Proposals that pass Triage advance to a four- to six-week technical review, during which the XL proposal is distributed for review of legal, technical and administrative feasibility and desirability. An organization whose proposal passes technical review is announced as an official Project XL recipient.
Final Project Agreement: The process of negotiating and executing a Final Project Agreement ("FPA") is intended to last no longer than six (6) months, although experience indicates that the negotiation process may take longer. During the FPA process the project recipient, the EPA and other involved parties (such as the state environmental agency) negotiate the details of their commitments under the program. The FPA will establish performance-based goals for better environmental results, set benchmarks for measuring success in achieving goals and enumerate methods for monitoring, reporting and evaluation. In addition, the FPA will identify the legal and administrative mechanisms that EPA will use to grant the "flexibility" sought by the project recipient. These may include variances and waivers, flexible interpretation of statutory and regulatory requirements, permit modifications or assurances of enforcement discretion. In some cases, similar administrative mechanisms will need to be provided at the state level.
There has been considerable uncertainty about whether the EPA has the statutory authority to grant "regulatory flexibility" under the Project XL program. In addition, critics have questioned whether XL recipients can rely upon promises made by the Agency in the absence of statutory authorization to "restructure" (or waive) regulating requirements.
Public participation is part of the EPA process, and the XL recipient is required to give public notice and receive public comment on its intent to develop an FPA. In addition, the EPA will issue the proposed FPA for public notice and comment before deciding whether to approve it.
While EPA Headquarters decides on whether to initially approve a proposal, FPA negotiations are conducted by the EPA regional office overseeing the region in which the project is to be located. The FPA is executed by the EPA Administrator, Regional Administrator or appropriate Assistant Administrator, as well as by the sponsoring organization and any other entities that will be officially involved in implementation.
Examples of XL for Communities in Action
Anaheim, California
The Anaheim Public Utilities Department, the first community recipient of an XL award, is proposing to expand three of its voluntary environmental improvement programs: (1) a chlorinated solvent reduction program aimed at protecting groundwater; (2) an abandoned well identification and closure project (also intended to enhance groundwater protection); and (3) an electrotechnologies program that is intended to help businesses reduce air emissions.
In exchange for these efforts, EPA will grant Anaheim flexibility in monitoring air emissions from the city's gas-fired power plant. Specifically, the Public Utilities Department will not be subject to an existing requirement to upgrade its existing continuous emissions monitoring system ("CEMS") to measure and monitor NOx and SO2 emissions at a combustion turbine peaking plant. This regulatory flexibility will have no impact upon the level of air emissions from the plant, but will free considerable resources that will be available to aid in implementing the three voluntary initiatives described above. Once implemented, these programs may well help to reduce air emissions.
As an XL recipient, Anaheim has received significant national recognition and visibility. In addition, as an outgrowth of the XL experience, a California organization partially sponsored by the U.S. Department of Commerce has agreed to partner with Anaheim to provide technical assistance to area businesses that wish to utilize innovative environmental technologies and cost-saving environmental practices.
Baltimore, Maryland
EPA's second community XL recipient is the Baltimore Development Corporation ("BDC"), which seeks regulatory incentives to facilitate the development of an "Ecological Industrial Park" in an underdeveloped, partially contaminated area of the city. Under the Eco-Park concept, a group of neighboring companies coordinate their activities to achieve pollution prevention and resource-sharing goals. Baltimore's Eco-Industrial Park, which is a key component of that city's federal Empowerment Zone plans, would create a closed-loop industrial park, in which one facility's waste product can be reused or recycled as another facility's raw materials. The regulatory incentives that will be provided under the Project XL initiative will be used both to promote greater returns for existing businesses, and to recruit additional Eco-Park tenants.
Baltimore seeks regulatory flexibility and other incentives that will promote expedited site remediation and development, beyond compliance practices by existing and new industry, and the establishment of a closed-loop resource system. The Final Project Agreement for the Eco-Park is still under development.
Opportunities and Incentives for Environmental Innovation
It is not possible to identify all of the cost savings and environmental protection opportunities available through Project XL because the only limit on such opportunities is one's imagination. However, certain areas can be identified that are particularly promising for cost savings and innovation.
Perhaps the area of greatest potential is pollution prevention. Substantial savings can be generated by using projects, processes and practices that reduce or eliminate pollution at the source, rather than treating or disposing of pollution after it is created. Pollution prevention can be achieved, for example, through energy demand-side management programs or efficiency upgrades in public buildings and industrial facilities. Pollution can also be prevented through the substitution of environmentally preferable products and technologies for hazardous materials such as solvents used in cleaning, detainting and other municipal operations.
Another opportunity for innovation and cost savings is in the area of brownfields renewal and sustainable economic development. Brownfields are abandoned or underutilized commercial and industrial sites that remain undeveloped due to the actual or perceived threat of environmental contamination (and the potential for associated liability). The EPA, the states and the Congress have identified brownfields redevelopment as a top environmental priority and initiated several programs to promote brownfields renewal. Flexibility granted under Project XL might allow for protection against federal Superfund liability for those who commit to remediate and redevelop brownfield sites. For example, EPA could delegate to state agencies, or even local development organizations, the authority to reduce the threat of liability associated with potentially contaminated brownfield sites, assuming there is a corresponding obligation to perform remediation activities. Such actions may encourage the use of innovative (but experimental) assessment and cleanup technologies.
A third area for potential opportunity is the use of innovative environmental technologies in pollution prevention, control, cleanup, monitoring and treatment. In fact, the EPA has issued a Project XL guidance document that encourages proposals that would make use of innovative environmental technologies as a tool for superior environmental performance. In the community context, regulatory flexibility and technical assistance can enable local governments to promote the use of environmental technologies by area businesses.
Another area for potential flexibility and cost savings is in the use of air emissions offset projects. The acid rain allowances trading program of the Clean Air Act provides potential opportunities to gain valuable allowances through environmental management projects that reduce air emissions. EPA officials have suggested that under Project XL, local governments could obtain Clean Air Act emission credits in exchange for urban programs designed to reduce emissions from stationary sources (such as power plants) or from vehicles. Regulatory flexibility may be necessary or helpful in some cases where constraints might otherwise prohibit the use of such emissions strategies.
Embarking on the Project XL Path
If your community has identified burdensome and seemingly unnecessary federal environmental requirements, and devised an alternative means of meeting the goal of the regulation, you may wish to seek regulatory incentives under Project XL. Factors that can increase the success of these projects, based on the lessons learned from the first year of the Project XL program, include:
(1) Pursue Established Priorities: Success in a Project XL or other voluntary government program should not require your community to formulate an environmental scheme or strategy out of thin air. Instead, in submitting a Project XL application, you should formulate an environmental strategy geared toward the site-specific or place-based environmental priorities and needs that have been developed over time in your community.
(2) Identify Potential Benefits from Alternative Environmental Protection: The development of an alternative environmental protection program by a local community can provide potential benefit in a number of areas. Regulatory burden and cost can be reduced. Environmental protection can be enhanced. Citizens, businesses and other community stakeholders can be brought into the environmental decision-making process in a positive manner. Your community should identify early on the potential benefits of a Project XL initiative in order to build support for the program and better ensure its success.
(3) Reach Out to Stakeholders: A commitment to cooperation and shared decision-making among those potentially affected by a Project XL initiative should result in greater success in obtaining EPA approval and in implementing a project with broad community support. When in doubt, be more open and inclusive and, at a minimum, ensure that there is consensus on vision, goals and objectives (if not the means for getting there).
(4) Remain Flexible: If the goals of your environmental programs are based upon the consensus of your stakeholders and the expectation of tangible benefit to the community, they should be a steady guide to your efforts. However, it is important not to become entrenched regarding the means for achieving these goals, but instead to remain flexible and willing to experiment as appropriate under the circumstances.
Conclusion
Project XL is a promising effort at environmental regulatory reinvention that can produce win-win results for both communities and their environment. By keeping the goals of the program in mind; ensuring broad participation and remaining flexible, community participants in Project XL can make the program work to considerable and beneficial advantage.