STATEMENT OF ERIC V. SCHAEFFER
STATEMENT OF ERIC V. SCHAEFFER DIRECTOR, OFFICE OF REGULATORY ENFORCEMENT UNITED STATES ENVIRONMENTAL PROTECTION AGENCY BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS COMMITTEE ON COMMERCE U.S. HOUSE OF REPRESENTATIVES
June 23, 1998 Thank you for the opportunity to testify today about the General Accounting Office ("GAO") report on efforts to focus state enforcement programs on results. The Committee asked GAO to determine: (1) what alternative compliance strategies states are practicing; (2) whether and how states are measuring the effectiveness of these strategies; and (3) how the United States Environmental Protection Agency ("EPA") has responded to these states' efforts. These issues are important to EPA and State programs that enforce environmental law and ensure maximum compliance with those laws. These programs have undergone many changes at EPA and in the states in the past five years, and it is helpful to examine progress made and challenges still to be addressed by EPA and the states.
EPA Leadership in Alternative Compliance Strategies
The goal of EPA's enforcement and compliance assurance program is to protect the environment and human health through full compliance with all Federal environmental laws and requirements. Since EPA Administrator Carol Browner decided to reorganize the Agency's enforcement program in 1993, EPA has tried to meet that goal by maintaining and improving its capacity to effectively use enforcement action and by developing and implementing new approaches to achieving compliance. Since 1994, we have implemented a series of alternative compliance strategies which provide assistance and incentives for regulated entities to achieve and maintain compliance.
EPA is also actively building state capacity to implement alternative compliance strategies. EPA recently distributed $1 million to fund 23 regional-state partnership projects to develop compliance assistance tools that clearly explain the relationship between federal and state compliance (e.g., for the Texas Small Business Assistance Program, for the Florida Compliance Assistance and Training Program) and has trained over 100 state and local technical assistance providers on the relationship between printing, pollution prevention and compliance.
- We established compliance assistance centers for five small business sectors -- printing, auto service, metal finishers, printed wiring board manufacturers and agriculture. Four additional assistance centers will be established in the next few months for chemical manufacturers, municipal/local governments, transportation, and paints and coatings. Over the last six months, there were over one million hits to the compliance assistance center web-sites, 75,000 distinct visits, and over 600 electronic mail messages posted and answered. Ninety-two percent of the printers viewing our Printing Center's most recent Green and Profitable Printing Conference felt that their compliance status directly improved as a result. In addition to the Centers, the EPA has developed numerous compliance assistance tools targeted to specific industries. Examples of these tools include: plain-language guides to the dry cleaning and printing sectors; a process-based self-assessment tool for the organic chemical industry; and sector notebooks that provide the reader with a basic understanding of the environmental issues facing over 27 different industry sectors.
In January 1996, we issued our policy to encourage environmental auditing. The policy states that in situations where a regulated entity finds violations through voluntary environmental audits or other efforts that reflect the entity's due diligence, and where it promptly discloses and expeditiously corrects these violations, EPA will not seek gravity-based penalties and generally not recommend criminal prosecutions against the regulated entity. To date, 274 companies have disclosed thousands of environmental violations at more than 966 facilities across the nation. Over 450 of those facilities have corrected their violations expeditiously and EPA has significantly reduced, or in many cases completely diminished, the penalties that these 450 facilities would have been liable to pay.
- In June 1996, we issued our policy on compliance incentives for small businesses. The policy provides relief under certain circumstances for small businesses that are not repeat violators and that make a good faith effort to comply with environmental requirements by using on-site compliance assistance or by conducting an environmental audit and promptly disclosing and correcting violations that may be identified.
These three policies together comprise EPA's program to implement Section 223 of the Small Business Regulatory Enforcement Fairness Act ("SBREFA"), which requires that Agencies establish a penalty reduction program or policy for small entities. We submitted a report to Congress at the end of March on the scope of the program and its use to date. As of the end of fiscal year 1997, of 149 small entities that applied for penalty relief under the EPA program, 95 were granted relief, 10 were ineligible, and 44 cases were still under review. In addition, a number of States have adopted EPA's Small Business Policy or similar policies, and have granted relief to at least 565 small entities, based on information we have received from these States.
- In November 1995, we issued our policy on flexible state enforcement responses to small community violations. The policy describes the circumstances in which EPA will defer to a state's decision to place a small community on an enforceable compliance agreement that provides for timely compliance with all applicable environmental mandates. States can allow small communities to set priorities among competing environmental mandates on the basis of comparative risk, and EPA will defer to the state's decision to waive all or part of the noncompliance penalty.
As the GAO report points out, many of these EPA initiatives were developed through consultation with stakeholders and some of them have served as models on which states have based their own policies. Taken together, these initiatives offer regulated entities a variety of ways to achieve and maintain compliance.
The Continuing Need for Enforcement
While implementing these alternative strategies, EPA has worked hard to maintain and improve its ability to identify, correct, and deter violations through inspections and enforcement actions. EPA firmly believes that alternative compliance strategies will be most effective when they are used as part of an integrated program which maintains a strong compliance monitoring and enforcement presence among regulated entities. For at least three reasons, a vigorous enforcement effort is vital to the success of alternative compliance strategies.
- Enforcement motivates regulated entities to comply with the law while it helps to ensure the protection of the environment and public health. The prospect of sanctions for noncompliance compels regulated entities to make an effort to comply. They come forward to use compliance assistance or various audit and incentive policies to avoid sanctions. In the absence of such sanctions, many regulated entities will simply wait for government to engage them through an assistance program rather than take affirmative steps to get into compliance. In a survey conducted by the accounting firm of Price Waterhouse in 1995, 96 percent of the respondents who performed environmental audits said that they did so in order to identify and correct problems internally "before they are discovered by an agency inspection."
- Enforcement provides specific and general deterrence. Enforcement actions not only deter future violations by the specific facility against which an action is taken, they also have a general deterrent effect on other similar facilities and the broader universe of regulated entities. The deterrent effect of enforcement drives regulated entities to avail themselves of alternative strategies and helps sustain a culture of compliance in which obeying the law is a duty, not an option.
Thus, as EPA has developed and implemented compliance assistance, incentive policies, and other alternative compliance strategies over the last five years, it has maintained a strong enforcement effort as the foundation of its program to ensure compliance with the law. Alternative compliance strategies combined with the motivating effects of enforcement action are a powerful prescription which can maximize compliance and protect the environment.
- Enforcement ensures economic fairness among regulated entities. Through penalties to recover the economic benefit of noncompliance, enforcement actions eliminate the unfair financial and competitive advantage that non complying facilities and companies gain over those who expend the resources to comply. By recovering economic benefit of noncompliance through penalties, regulated entities are encouraged to affirmatively pursue compliance through the use of assistance or other alternative compliance strategies. We are also told repeatedly from the regulated community itself that a "level playing field", visible federal presence, and enforcement against the bad actors is needed.
Implementation Challenges for EPA and the States
EPA and most states are now in the early years of operating enforcement and compliance assurance programs which have changed significantly. Instead of programs which have two major tools, (compliance monitoring inspections and enforcement actions) our programs now have added two additional tools which are discussed in the GAO report: compliance assistance and various compliance incentive approaches. Implementing these expanded programs has presented two difficult challenges -- how can we integrate most effectively the four tools we now have available, and how can results from these tools be measured in the most meaningful way?
The Integration Challenge. The challenge of integrating assistance, incentives, monitoring, and enforcement has been difficult for both EPA and state programs. There are two aspects to this challenge. The first is that the introduction of assistance and incentives into our programs is often misinterpreted by program personnel and regulated entities as an abandonment of the traditional monitoring and enforcement approach. As assistance and incentive approaches become operational, some state and EPA offices inappropriately de-emphasize monitoring and enforcement. Overcoming this phenomenon requires constant reaffirmation of the principle that an enforcement presence is an indispensable element of an integrated and effective program.
The second dilemma posed by the integration challenge is that it is not possible to prescribe the appropriate mix of tools that programs should use to maximize compliance. Integrating these tools cannot be reduced to a simple rule (e.g., "assistance first, enforcement as a last resort) or a resource formula (e.g., 60% to enforcement, 40% to assistance). Instead these tools need to be applied based on a factual analysis of noncompliance patterns and environmental problems and on the need to maintain an enforcement presence which provides a deterrent to violation of environmental law.
The integration challenge accounts for much of the confusion between EPA and the states about the use of alternative compliance strategies. While promoting the use of alternative compliance strategies, EPA has at the same time confronted those states which seem to be abandoning altogether the use of inspections and enforcement and states which establish alternative strategies which weaken the legal authority of states to take enforcement action as required under federal law.
The Measurement Challenge. The second implementation challenge is to measure the results of enforcement and compliance assurance programs in a meaningful way. The GAO report points out many of the reasons why EPA and the states are finding it difficult to move beyond counting activities or outputs to measure actual results or outcomes that can be attributed to enforcement and compliance assurance programs.
EPA and the states have worked to develop a set of measures for enforcement and compliance assurance programs as part of the implementation of the National Environmental Performance Partnerships process. The set includes four output or activity measures (e.g., inspections conducted, enforcement cases completed) already reported to EPA in existing national data systems and four outcome or result-based measures (e.g., compliance rates) to be reported by states that have established such measures. Our experience to date is that very few states are able to report any outcome data to us, presumably because such measures have not yet been implemented due to many of the issues GAO describes.
For the federal enforcement and compliance assurance program, EPA has a major effort underway to develop and implement an enhanced set of performance measures through its National Performance Measures Strategy ("Strategy"). The set of measures developed through the Strategy emphasizes outcomes and results. It includes the measures we are using with the states under the Performance Partnership Agreements and some additional measures which EPA will use for its program but not impose on the states. These measures were developed through extensive consultation with stakeholders and more than 20 state environmental agencies who responded to our request for ideas about meaningful results-based performance measures. EPA is now implementing these measures, and a number of states have been or will be working with us to conduct pilot projects to test and evaluate individual measures. EPA expects to have all the measures operational for fiscal year 1999. At the end of fiscal year 1999, we expect to be able to provide to Congress and the public an array of information about the performance of our enforcement and compliance assurance program which includes compliance rates, pollutant reductions and other environmental improvements resulting from our activities, and the impact of compliance assistance on the behavior and performance of regulated entities.
The GAO Recommendations
In its report, GAO has made two recommendations: (1) that EPA implement the measures in its Strategy on schedule and in a collaborative effort with states; and (2) that EPA promote greater consistency about the "appropriate balance in EPA's enforcement program between enforcement and compliance assurance activities." EPA will carry out both of these recommendations.
EPA fully intends to implement our enhanced performance measures on schedule and have them in place in fiscal year 1999. We have formed a series of work groups to implement the measures, and we are now determining the types of information needed to support the measures, how we will collect such information, and how to develop statistically valid and representative compliance rates. We will be trying out some of these measures in pilot projects conducted by EPA and participating states over the next several months.
As mentioned in the GAO report, EPA has taken a variety of steps in the past three years to promote a consistent message about the mix of enforcement and compliance assurance activities. But more can and will be done to clarify and communicate our preferences about integrating enforcement, compliance assistance, and incentive policies. The challenge in promoting a more consistent message will be to define clearly and simply for a national and decentralized program the "appropriate balance" urged by GAO, and to apply that message to our activities in a way that allows EPA and individual states the flexibility to tailor their relationships to address each state's unique combination of environmental and noncompliance problems, and their program capabilities and deficiencies. The true challenge of this GAO recommendation is to find the appropriate balance between consistency and flexibility. We will make every effort to do so in our operations at EPA and in our interaction with the states.
We appreciate the analysis provided by GAO and the opportunity to testify before the Committee about the findings and recommendations of the report. We look forward to addressing the issues and challenges described in the report.