March 14, 2006 1 Response to Comments Description of Collaboration with the Environmental Council of the States Regarding National Environmental Performance Track and State Performance Based Environmental Leadership Programs Reference: 70 FR 44921, August 4, 2005. Docket number EPA HQ OA 2005 0003 March 14, 2006 2 OVERVIEW The following summary provides EPA's response to comments received on its August 4, 2005, Federal Register Notice entitled " Description of Collaboration with the Environmental Council of the States Regarding National Environmental Performance Track and State Performance Based Environmental Leadership Programs" ( 70 FR 44921). The notice presented initial recommendations resulting from a collaborative effort between the Environmental Council of the States ( ECOS) and EPA to improve the value and effectiveness of performance based environmental programs. The recommendations included approaches to increase state support for these programs, mechanisms for integrating them into EPA's strategic planning process, and proposals for developing better incentives for facilities that are members of Performance Track and state performance based environmental programs.

The Agency received many comments that address the Performance Track program as a general matter, as well as comments on the specific recommendations from the workgroups. This document reflects the Agency's response to both types of comments.

SECOND ROUND OF PUBLIC COMMENT Several commenters stated that the time to review the Federal Register documents and submit comments to the public docket was too short and that the ideas described were too vague to adequately comment upon. As originally intended, EPA has developed a report that responds to the public comments. EPA did not originally intend to submit this revised report for public comment a second time, but after considering public comment, EPA has decided to publish the revised report in the Federal Register. The revised report clarifies proposed actions, and provides additional detail on approaches to improve performance based environmental programs as part of the ECOS EPA collaborative effort. The Federal Register Notice will provide 60 days for public comment. EPA encourages all interested parties to review the report and provide comment to the Agency on these important ideas.

CLARIFICATION OF INTENT FOR INCENTIVES SELECTION AND DEVELOPMENT Based on comments received, it is apparent that the criteria that EPA and states use in selecting incentives for performance based environmental programs were not clear to some commenters. In particular, several commenters stated that some of the incentives being considered would potentially result in more releases to the environment than allowed under existing environmental laws and regulations. It is a bedrock principle of Performance Track and similar state programs that members are expected to perform better than required under existing laws and regulations and that they commit to continuously improve their performance above and beyond compliance. Any incentives ultimately selected would not result in a net increase in releases to the environment.

The primary benefit that members currently receive from EPA in the Performance Track program and many state programs is public recognition. The charge to EPA from the ECOS Report to March 14, 2006 3 develop " better incentives faster" was in direct response to the fact that these programs offer few incentives beyond recognition to reward and recognize members for their commitment to effective environmental management, a sustained record of compliance, commitment to measurable goals, and transparency to the public. Therefore, as outlined in the workgroup recommendations, EPA and states are considering additional, specific benefits that will reduce some of the routine transaction costs of regulation and allow these facilities to focus more on environmental results. These incentives will be carefully designed and implemented to reduce regulatory burdens and transaction costs while not resulting in any net decrease in performance. At the same time, members are expected to provide more information than non members on their overall environmental performance and management to EPA, states, and the public. Again, neither EPA nor any state is considering regulatory changes that will reduce regulatory standards or expected environmental performance for program members.

GENERAL COMMENTS ON THE PERFORMANCE TRACK PROGRAM Support for Base Concepts EPA received a number of comments in support of the base concepts underlying Performance Track and state performance based environmental programs. Those concepts are that: ( 1) good performers who go beyond compliance should be recognized and supported, and ( 2) these good performers should have a different relationship with their oversight agencies than organizations that are not good performers.

Information, Education and Communication on Performance Track EPA received a number of comments stating that sufficient outreach efforts have not been undertaken to adequately inform and educate EPA staff, state staff, and the general public about the Performance Track program. Commenters stated that EPA Headquarters and Regional Offices act independently and are not all aligned around Performance Track goals.

The Agency considers outreach to stakeholders a critical component to successful program implementation. Before the program was established in 2000, a large outreach effort was conducted with Federal Register notices and public meetings held across the country to receive input from interested parties, including the States and general public, regarding the program's elements and design. In addition, each regulatory incentive provision specific to the program has been published as both a proposed and final rule in the Federal Register, along with information about the program itself. EPA has also conducted outreach campaigns about Performance Track and its benefits.

EPA believes that improvements can and should be made in informing, educating, communicating and coordinating with individual programs and offices, both at EPA and the states, to ensure that EPA and state staff are more knowledgeable about the program and its goals. Specifically, EPA has taken the following steps: March 14, 2006 4   EPA's Innovation Action Council ( IAC), comprised of career executives with responsibility for the Agency's innovation agenda, determined that Performance Track would be one of the priority innovation programs designated for " scale up." Scale up has included additional outreach and education for EPA Headquarters and Regional staff.

  Representative from the Performance Track Program have met with each media program office ( managers and staff) individually to discuss priorities and ways to collaborate more closely to achieve environmental goals.

  EPA has engaged with outside state organizations, such as ECOS, specifically on Performance Track issues.

  EPA has held bi annual national conferences with state agencies as well as an annual national conference with the Pollution Prevention Round Table, the Performance Track Participants Association, and EPA's Office of Enforcement and Compliance Assurance to better educate EPA staff, state staff, and members of the general public about Performance Track.

  State Innovation Grants will continue to be awarded by EPA to help promote state performance based environmental programs to the extent funding is available.

  EPA has, and will continue to enter into a number of Memoranda of Agreements ( MOAs) with individual states to help promote and coordinate Performance Track and state based programs. All MOAs are coordinated with EPA Regional Offices.

  EPA has made Performance Track documents and brochures available on its website, holds regular scheduled conference calls with EPA Regions and states, and advertises Performance Track whenever opportunities arise.

  Numerous articles on Performance Track have been published in trade publications, including the ECOS Journal.

  The Agency's National Program Manager Guidances now include references to the program ( see discussion below on Program Objectives Included in National Program Guidance.)

  EPA officials make numerous speaking engagements every year about Performance Track at state meetings, association meetings, and other events. The Agency welcomes opportunities and suggestions to speak with additional groups.

  EPA conducts site visits at up to 10% of Performance Track facilities each year; some of these visits have been attended by state and local community representatives. March 14, 2006 5 One commenter stated that some state and local agencies do not know the identities of member facilities within their jurisdictions. The commenter further stated that state and local agencies should be aware of those facilities proposed to be admitted and should be consulted to provide answers to questions about compliance history and the environmental achievements claimed by the applicant. The commenter also suggested providing training to states to implement the program.

While the Agency recognizes that there may be instances where some individuals in a state or local agency may not be aware of the member facilities in their jurisdiction, the Agency has a multi faceted approach in place to engage states ( with states in turn directly engaging local agencies) and is striving to educate and inform the rank and file staff of those organizations about the program. For example, EPA communicates directly with a network of designated Performance Track contacts in virtually all states in which there is a PT member nearly 40. Such information exchange has been an important program component since the inception of Performance Track. First, a thorough consultation and review process is conducted for every proposed facility applicant at EPA Headquarters, Regional Offices, states, the Department of Justice, and local governments to the extent they are responsible for regulatory implementation within the state. For a complete list of potential contacts involved in this process, see the Performance Track website at www. epa. gov/ performancetrack/ sitemap. htm. Second, EPA communicates regularly with states on program development and implementation. EPA conducts monthly conference calls with states, and conducts a bi annual state conference ( for a listing of members by state see the Performance Track website). Third, EPA does provide some select training to states on implementing Performance Track and more recently is providing training on the Performance Track site visit protocol. Fourth, states are invited to accompany EPA on site visits at Performance Track facilities. Any state interested in training opportunities is encouraged to contact the EPA Performance Track coordinator in their Region.

Another commenter suggested that EPA confront the possibility that Performance Track could convey a perception that industry sought incentives and Agency agendas have displaced superior environmental performance ( and the need to verify it) as the priority concerns of these programs. The priority concern and focus of the Performance Track program and State programs is improving environmental performance. In its communications, publication and general messages, EPA places performance of member facilities as its top priority. While some incentives ideas may come from member facilities initially, the vast majority do not. The development of incentives is a very long process, typically taking years, and during that time there are myriad opportunities for input from stakeholders to shape the design and function of an incentive. Incentives with the greatest potential opportunities for improving environmental performance are often regulatory in nature, and would go through standard agency rulemaking procedures in accordance with the Administrative Procedures Act.

A commenter recommended that emphasis be placed on organizational benefits that will appeal to employees not involved with environmental issues. Such benefits would include decreased costs, risk, work safety, and increased product quality. The Agency will continue to focus on the March 14, 2006 6 environmental benefits of the program, but agrees that program membership can result in important non environmental benefits as well.

Another commenter recommended that the concept of " good performer" needs to be better communicated to Agency staff and to the public. Many organizations go far beyond the statutorily based minimum standards and to meet true environmental goals we need a higher level of performance. EPA agrees with the commenter and will strive to highlight this concept in our outreach efforts.

Branding Commenters suggested that Performance Track should become a recognized designation of excellence and universally accepted measure of environmental performance in the United States. EPA refers to this concept as " branding." Commenters suggested that as part of a branding effort, EPA should create channels of communication nationally among states and EPA Regions on incentives and innovation successes and challenges. Commenters also suggest that EPA senior leadership drive additional outreach to show EPA's commitment to Performance Track and state programs, including leadership from the media and enforcement programs as well as the National Center for Environmental Innovation. EPA agrees with the comments and has begun preliminary efforts in these areas.

Program Objectives Included in National Program Guidance A commenter noted that after five years of the program's existence, Performance Track's goals and objectives are not mentioned in all of the Agency's National Program Manager's Guidances and related documents. Where the program is mentioned, conditional language may be used. While EPA understands the commenter's concerns, the Agency believes it has made progress in this area by including Performance Track references in many of the NPM Guidances. Also, EPA realizes that ultimately, inclusion of Performance Track activities, commitments, and performance standards is within the discretion of individual media and enforcement program managers. Current guidance containing Performance Track language includes the following:

  http:// www. epa. gov/ ocfo/ npmguidance/ oar/ 2005/ oar_ finalnpmguide. pdf   http:// www. epa. gov/ ocfo/ npmguidance/ owater/ 2005/ ow_ npg_ narrative. pdf   http:// www. epa. gov/ ocfo/ npmguidance/ oswer/ 2005/ oswer_ npmguide. pdf   http:// www. epa. gov/ ocfo/ npmguidance/ oppts/ 2005/ oppts_ guidanceapr5. pdf   http:// epa. gov/ compliance/ resources/ policies/ data/ planning/ npmguidance2006. pdf   http:// www. epa. gov/ ocfo/ npmguidance/ ocir/ 2005/ ocir_ guidance06. pdf Statutory Authority One commenter discussed the need for federal statutory backing for the goals of the program and suggested that without unequivocal statutory language for Performance Track, its policy statements may continue to be unheeded by the traditional core programs' managers and staff. March 14, 2006 7 The Agency's role is not to lobby for legislation. Although Performance Track is not based on statute, the program complements the existing regulatory programs with new flexible tools and strategies that produce real environmental results. EPA management and staff are committed to ensuring successful implementation through Performance Track policies and coordination with Agency Program Guidances and individual media offices.

Coordination With Programs Outside of EPA Commenters suggested an effort be made to ensure coordination with programs outside of EPA, such as OSHA's Voluntary Protection Program, American Chemistry Council's Responsible Care Program, as well as with other programs within EPA. EPA agrees with these comments and has made significant progress in establishing these important inter and intra government relationships. EPA signed a Memorandum of Agreement ( MOA) with OSHA on April 24, 2002, that commits the two agencies to coordinate the Performance Track and Voluntary Protection programs. The EPA/ OSHA MOA can be found at: www. epa. gov/ performancetrack/ partners/ federal. htm. Similarly, the Agency signed an MOA on June 30th, 2004 with the American Chemistry Council and the Synthetic Organic Chemical Manufacturers Association that establishes a partnership between Responsible Care and Performance Track with regard to the kind of Environmental Management System acceptable to both programs. Information on the ACC/ SOCMA MOA can be found at http:// www. epa. gov/ performancetrack/ events/ accsocma. Another intra governmental MOA is currently under development with EPA's Chesapeake Bay Program.

Better State   EPA Program Alignment A commenter stated a desire for one set of program requirements to count toward the full qualification of both Performance Track and state performance based programs, so that entry to one program would automatically allow entry into the other. The Agency believes that while the proposal would create a uniform system across the country, EPA and state programs have different reasons for choosing their requirements, and different capacities to administer each program. Some states may not wish to raise or lower their standards to meet EPA's criteria, and other states may not have the legal authorities to implement certain federal incentives.

Nevertheless, EPA is continuing to encourage better alignment between state environmental programs and the Performance Track program. For example, high performing facilities applying to both Virginia's Environmental Excellence Program and Performance Track may do so by filling out one application. Similarly, Virginia has committed to implement federal Performance Track incentives for facilities in Virginia, and EPA has committed to encourage facilities to join Virginia's program. Internally, EPA is aligning its staff to better support Performance Track and state performance based programs. Refer to the section above titled " Information, Education and Communication on Performance Track," for more information on these efforts. March 14, 2006 8 Compliance and Inspections EPA received comments both for and against the Agency's current policy on low inspection priority for member facilities. One commenter noted that although facilities are in compliance when admitted into the Performance Track program, these facilities may not necessarily stay in compliance. The commenter urged EPA to set and enforce standards for determining the continuing compliance of members through inspections and promptly removing noncomplying facilities from the program.

The Agency believes that the Performance Track compliance screening criteria provide a high level of confidence that a facility has shown, and will maintain, a strong compliance record. To expect no violations would be unrealistic for facilities of any size or complexity. A record of sustained compliance is a starting point; the larger purpose is to create conditions under which program members will achieve measurable environmental results that go beyond compliance.

The low inspection priority policy does not mean " no inspections," but recognizes that facilities that have demonstrated good compliance records, adopted an Environmental Management System ( EMS), committed to good faith efforts to achieve measurable results beyond compliance, and are being more transparent about their environmental performance, should require fewer inspection resources than others. When there is cause, Performance Track members are subject to inspections. In addition, states currently are inspecting Performance Track members at a high rate. However, many states are interested in using their own performance based programs to shift at least some of their inspection resources from the proven high performers to facilities in whom regulators have little confidence and who rarely, if ever, receive any inspection attention. The low inspection priority simply suggests that at least some of these inspection resources could be redirected to facilities that rarely or never receive attention and that could be far higher compliance risks.

Another commenter questioned the policy of granting membership to a facility if other facilities owned by that company have experienced significant violations over that same ( or some earlier) period. The Agency understands the commenter's concerns, and notes that members apply and are admitted to the program on an individual facility basis, not corporate wide. The Performance Track compliance screening criteria, developed in coordination with EPA's enforcement office, states that " participation in the Performance Track [ program] will not be appropriate if the compliance screen shows any of the following, under federal or state law:

Criminal Activity

Corporate criminal conviction or plea for environmentally related violations of criminal laws involving the corporation or a corporate officer within the past 5 years.

Criminal conviction or plea of employee at the same facility for environmentally related violations of criminal laws within the past 5 years. March 14, 2006 9

Ongoing criminal investigation/ prosecution of corporation, corporate officer, or employee at the same facility for violations of environmental law.

Civil Activity   Three or more significant violations at the facility in the past 3 years.

  Unresolved, unaddressed Significant Non Compliance ( SNC) or Significant Violations ( SV) at the facility.

  Planned but not yet filed judicial or administrative action at the facility.

  Ongoing EPA or state initiated litigation at the facility.

  Situation where a facility is not in compliance with the schedule and terms of an order or decree.

In addition to the above criteria, EPA may also consider whether there are significant problems or a pattern of noncompliance in an applicant's overall civil or criminal compliance history." One commenter raised the concern that becoming a member of Performance Track draws additional scrutiny to their operations and perhaps creates greater liability. Another commenter similarly noted that Performance Track may make facilities a higher visibility target, and that a true partnership should be built on trust instead. Agency policy is to not subject Performance Track applicants or members to greater enforcement scrutiny than they would otherwise receive. EPA's intention is to work collaboratively with members who routinely do more than is required by law.

Product Environmental Performance One commenter questioned whether resource consumption by manufacturing processes is the only measure valued by the EPA and how product environmental performance is considered when participating in Performance Track. The commenter stated that facilities that choose to assure their product is designed to reduce environmental impacts must be included in this recognition program as well as facilities that do not manufacture products.

Resource consumption by manufacturing processes is not the only measure valued by the EPA. Downstream environmental aspects and indicators can be used as commitments under the " products" category of the Environmental Performance Table for the Performance Track program. More information on the Performance Track indicators and the Environmental Performance Table based on the Global Reporting Initiative can be found on EPA's web site at http:// www. epa. gov/ performancetrack/ members/ downloads/ final_ ept. pdf.

Application, Evaluation and Membership EPA received comments referring to Performance Track's application and renewal process, the reporting framework, the eligible types of commitments, and the third party certification March 14, 2006 10 requirements. Most comments stated that these processes are too burdensome and not streamlined enough.

EPA will take these comments into consideration and look for opportunities to reduce the resource burden associated with program membership that will not impact the Agency's need for information to measure the progress of the facility and the program as a whole.

One commenter urged the need for objective evaluations of environmental performance and pollution reductions achieved from Performance Track and state performance based programs. EPA is currently investigating the opportunity to secure an objective evaluation of the Performance Track program.

EPA also received comments stating that the admission requirements and screening criteria for joining Performance Track and remaining in the program should be more stringent. One commenter recommended that the screening criteria should consider the last five years of an applicant's compliance history; applicants with two similar significant violations within that period would not be admitted. Overall, the Agency believes it strikes a reasonable balance between entry criteria and benefits of program membership. However, the Agency continues to evaluate the program and will take these comments into consideration as it seeks to ensure continued program improvement. EPA has recently developed more stringent entry criteria including requiring an independent EMS assessment.

Another commenter suggested the need to foster membership and create program value for small and medium sized business. EPA has held numerous discussions with representatives of small business interests and is encouraging participation by qualified small businesses and their facilities. The Performance Track website at EPA www. epa. gov/ perftrac/ program/ sm bus. htm outlines specific program entry criteria designed to meet the needs of these facilities. The Agency will continue to seek opportunities to encourage further participation.

Public Notice and Comment EPA received comments that the programmatic details of Performance Track and the specific regulatory incentives offered through the program have not adequately been made available for public review and comment. As noted above, EPA agrees that the materials included in the docket did not provide extensive details regarding Performance Track; the documents referred readers to the program website, www. epa. gov/ performancetrack for information.

As discussed above, a large outreach effort was conducted at program inception with Federal Register notices and public meetings held at various locations across the country to receive input from interested parties regarding the program's elements and design. In addition, each regulatory incentive provision specific to the program has been published as both a proposed and final rule in the Federal Register, along with information about the program itself. EPA has also conducted outreach campaigns about Performance Track and its benefits. Performance Track has and will continue to meet legal notice requirements along with continuing outreach about this program, March 14, 2006 11 and opportunity for public comment. EPA's cooperative effort with ECOS as outlined in the current and upcoming Federal Register notice is just one more example of this commitment to proactive outreach and transparency.

PUBLIC COMMENTS ON ECOS EPA WORKGROUPS RECOMMENDATIONS Measures and Evaluation One commenter noted a reluctance of those charged with tracking the performance of states' programs under EPA State environmental agreements ( established under the National Environmental Performance Partnership Agreements ( NEPPS)) to properly credit work done under National Performance Track or other performance based programs. The commenter noted that a redeployment of resources to those performance based programs is not being allowed under NEPPS.

While the Agency understands the commenter's concerns, EPA believes that Regions and their respective states are moving toward a more flexible use of resources under NEPPS agreements. One of the main goals of NEPPS is to give states more flexibility to direct resources to the most pressing environmental problems when and where such programs are in keeping with state priorities and strategic goals, and where such programs have been fully designed to ensure that all participants are in compliance with all applicable state or federal environmental laws. EPA recognizes that every state has different priorities and encourages states to recommend new ideas and approaches during the EPA state grant negotiation process.

A commenter stated that core programs and performance based programs often use inconsistent measures when describing their performance. The core programs use number of inspections, permits issued, or enforcement actions ( i. e., output measures), while performance based environmental programs use tons of waste reduced, or millions of gallons of water use reduced ( i. e., performance or outcome measures). The commenter recommended that this language gap be bridged.

To date, the Performance Track program has focused on measures that are performance based and outcome oriented rather than output oriented to achieve program goals. Concurrently, the Agency's program offices have been developing outcome measures to better measure the actual environmental impact of their activities rather than counting the number of permits or amount of fines. Development of outcome measures is also being driven in response to the Performance Assessment Rating Tool ( PART) process for evaluation of Agency programs by OMB.

Another commenter questioned whether EPA and states have objectively and systematically evaluated the actual environmental gains from devoting resources to Performance Track programs. Specifically, the commenter questioned whether the environmental opportunity costs March 14, 2006 12 from directing those same resources toward stronger standard setting under the core programs and broader compliance assurance or enforcement activities have been evaluated. The Agency agrees that EPA and state environmental agencies should assign resources to the most effective and efficient ways to protect the environment. The Agency has systematically evaluated the environmental gains as a result of the Performance Track program, and publishes an annual report that provides this in formation in detail. For some of the latest environmental results that have been produced by the Performance Track program and its members, see the third annual progress report at http:// www. epa. gov/ performancetrack/ pubs. htm. Performance Track has also commissioned the Harvard Regulatory Policy Program to evaluate several aspects of the program, including program effectiveness and efficiency.

Overall, Performance Track and similar state programs are a valuable complement to the existing regulatory system in achieving environmental goals, but are not meant to displace conventional regulatory programs and resources. Performance Track adds to the range of strategies that government and others can use to achieve better environmental results, especially with respect to problems and situations for which conventional, deterrence based regulation may be less effective.

The program was designed to respond to widespread concern about the limits of the conventional regulatory system on its own to address a newer set of environmental problems. A number of influential organizations, among them the National Academy of Public Administration, the Aspen Institute, the President's Council for Sustainable Development, and the Enterprise for the Environment have called for more collaborative, flexible, and performance based environmental protection strategies. In particular, there has been interest in changes that recognize different levels of performance among facilities, an interest which Performance Track was designed to promote.

One commenter stated that there was little discussion and evidence of actual superior environmental performance or demonstrated performance that goes beyond compliance as part of Performance Track Membership. Member facilities voluntarily report on a comprehensive set of environmental indicators that go beyond reporting required by law including greenhouse gas emissions and materials use. These reports indicate that members have cut their generation of solid waste by nearly 600,000 tons and have decreased their energy use by more than 8.4 trillion British Thermal Units ( BTUs).

Another commenter recommended that an additional measure be included in evaluating the effectiveness of incentives that will ensure that no compliance issues or environmental degradation will be created by the incentive. The Agency agrees with the commenter and will include such a measure as the revitalized incentives system is further developed and implemented.

A commenter also stated that EPA must conduct the systematic evaluations called for by the Office of Inspector General report before expanding the program or making it a core element of current regulatory programs. This February 2005 report examined EPA voluntary programs in March 14, 2006 13 general, and its findings did not specifically refer to Performance Track. The report, however, recommended that voluntary programs have better ways of measuring results and holding participants accountable. In fact, Performance Track was designed with these very issues in mind. It holds members accountable, and requires them to file an Annual Environmental Performance Report, documenting their activities in a format specified by EPA. It requires them to show how they use their EMS to maintain compliance and improve their performance, discuss corrective actions they have taken, report their progress in achieving their performance goals, and discuss their community outreach Incentives Many commenters emphasized the need for more and better incentives that provide more than recognition, reduce burden and transaction costs, and are market based, meaningful, and timely. Another commenter suggested that incentives and recognition be developed for any facility impacting the environment, not just facilities with water or air permits. In addition, a recent survey of Performance Track members showed that while most facilities highlighted the changed relationship with their regulatory authorities as the greatest benefit of the program, the second most important benefit was the potential to take advantage of incentives that reduce the transaction costs of regulation.

EPA recognizes that incentives are needed to allow the Performance Track program to retain and recruit new members and achieve greater environmental results. The joint ECOS   EPA workgroups and the revitalized strategy for development of incentives discussed in this Federal Register notice are a direct result of this effort. Some commenters noted the incentives strategy should manage and track the number of incentives. Commenters also noted that many individuals outside of Performance Track have reviewed the types of incentives described in these workgroup documents and that a reasonable justification of the value of the incentives should be supplied and discussed by all involved in the review process. EPA agrees and will make diligent efforts to involve and encourage interested parties in discussions about incentives development, including opportunity for public notice and comment on any new regulatory provisions. EPA will continue to proactively engage states, non governmental organizations and others in these discussions as appropriate.

One commenter noted that several of the proposed incentives discussed, such as customized incentives and improved SIP approval processes, are too vague and undefined to offer thorough comments. These incentives were not described in detail because EPA was more interested in receiving comments on the overall appropriateness of the proposals. A more specific proposal with greater detail will be provided for public notice and comment . The commenter also suggested not using the terms " chit" and " certificates" for describing some of the incentive related ideas. EPA agrees with this comment and has eliminated such language.

One commenter noted in a reference to the Subgroup 2 report that "[ S] ource specific innovation alternatives to conventional environmental requirements" is again too vague for meaningful comment. But if the coded implication is that incentives should no longer " include . . . required March 14, 2006 14 compliance with environmental laws and regulations," to quote the EPA's definition of environmental stewardship, this obviously would be problematic. EPA will not develop any incentive that does not require compliance with environmental laws and regulations.

Monitoring and Reporting EPA received comments both for and against reductions in monitoring and reporting frequencies. One reason offered in support focused on facilities with both sustained monitoring compliance history and consistent monitoring results well below their permit limits. The commenter stated that reduced monitoring makes sense because it provides incentives to reduce discharge levels for those sources not currently qualifying for the incentive. The incentive can drive environmental improvements that might not be attained otherwise. Another commenter noted the significant efficiency improvements to be gained for the regulated community and state and federal agencies by reducing the amount of unnecessary paperwork where there is no apparent environmental benefit, thereby allowing resources to be used for more pressing environmental issues.

Comments offered against the idea of reduced monitoring and reporting emphasized that reductions would limit the amount of information available to the public or make it inaccessible. Another commenter suggested a way to alleviate this concern is to require facilities to submit an annual certification of compliance and make previously reported information publicly available. This information could be kept either on site, on a facility's web site, or available upon an individual's request. Agencies would still retain the rights to inspect. The commenter also highlighted the overall increase in information that becomes publicly available on individual facilities via the Performance Track web site.

EPA is mindful of both points of view and will take these points into consideration in the development of any incentives regarding a reduction in monitoring or reporting frequencies. In any event, if such reductions require a modification to the regulations, the Agency will go through notice and comment before adopting any change. In all cases, the Agency will ensure that these incentives continue to be protective of human health and the environment.

Available Program Flexibility Commenters stated that clarification and documentation from EPA on current flexibilities in regulatory programs would enable state programs to utilize those options more efficiently and effectively. The commenters added that identification of the provisions is not enough. EPA should provide clarification of intent and available assistance. Uncertainty in the application of innovative and alternative options can limit the use of these provisions. EPA will provide written clarification and documentation where current flexibility exists, along with implementation assistance as appropriate.

Permitting One commenter expressed concern that " review differentiation" might mean reduced review or oversight of individual permits. It was not EPA's intent to suggest that a reduced standard of March 14, 2006 15 completeness or review be given to a Performance Track facility's permit. The intent was to suggest a means to provide improved mechanisms for administratively processing permit applications and renewals. For example, a Performance Track facility's application could be placed " first in line" for processing. Another comment warned against improperly delegating " inherently governmental" functions to permittees such as through self drafting of permits. It is not the Agency's intent to delegate such functions improperly, and we will be careful not to do so. This is an area that will require further examination by the Agency to determine what measures along these lines would be appropriate. The Agency will ensure adequate opportunity for public comment on these approaches.

Sector BMPs Commenters stated that best management practices leading to permit by rule and general permit opportunities within industry sectors could lead to significant efficiency improvements for both the regulated community and state and federal agencies. Commenters stated that this potential should be fully explored using exemplary environmental performers, such as Performance Track members. EPA recognizes that sector based approaches are a good way to identify significant opportunities for environmental improvements. Information on EPA's sector based program can be found at http:// www. epa. gov/ sectors/. EPA is exploring new ideas for working with industrial sectors and will take this suggestion into consideration.