VII. The Evolving Role of the Regulator

The Alternative Path envisions a new way of environmental management comprising a three-way relationship involving an applicant, a stakeholder group, and the regulator. The role of the applicant is set forth in Chapter IV on Superior Environmental Performance. The role of the stakeholder is guided by the Considerations for Stakeholder Processes in Chapter V. This chapter outlines the Role of the Regulator in the Alternative Path.

The role of the regulator is set forth in a evolutionary context. As our environmental protection and enhancement system moves from prescriptive, technology-based requirements to an incentive performance-based contract, the role of the regulator must change as well. The historical functions and roles of federal, state, and local regulators will be modified by eliminating some functions, altering others, and creating entirely new functions.

The role of the regulator will change commensurate with the evolutionary changes in the environmental protection and enhancement system. Regulators operate and behave in the tight construct of their applicable rules, bound to implement their programs in a disciplined and fair manner, fully documented on the public record. Discretion is quite limited in order to ensure equities for all parties. Regulators are generally not at liberty to freely innovate "outside the box." The Aspen Series recognizes that in many cases the "box" must change first, with the expectation that regulatory operations and behaviors will change accordingly.

The following sections explain the general transition from the current regulatory system to the Aspen Series vision of the Alternative Path. For each stage of transition, the role of the regulator is identified.

The Current System
The current environmental protection and enhancement system is prescribed in numerous single-media federal statues, elaborated by highly complex rules and regulations. The system intends to abate and control pollution by the application of permits that are media-specific and often technology-based, with vigorous inspection and enforcement to ensure compliance. The majority of today's environmental regulation and enforcement is now carried out by state and local authorities pursuant to delegation agreements with EPA. The general attributes of the current regulatory system are to:

• perform environmental research and applied science;
• set national standards for health protection, ambient quality, and/or technology specifications;
• promulgate rules and regulations;
• register and license certain products;
• remediate past releases;
• issue permits;
• inspect for compliance;
• enforce as needed;
• monitor for environmental compliance.

The role of the regulator in the current system is tightly focused on the narrow and immediate implementation of rules to a particular situation, or to a particular application to release pollutants to the environment. The regulator's scope of performance is always on-the-record, and subject to close legal scrutiny and public accountability. That this system has produced such dramatic improvement in environmental conditions in America is testimony to the strong spirit of compliance with the rule of law and the public recognition of the value of a quality environment.

The current system of federal law and regulation will continue to prevail in America for the vast majority of enterprises in the near term. Meanwhile, certain evolutionary changes are beginning to modify the current system.

The Transitional System
The system that has prevailed for the last 25 years is now changing by the infusion of new non-regulatory mechanisms such as full transparency of information, disclosure under community-right-to-know programs, pollution prevention, market-based transactions, and consumer labeling.

Moreover, subtle shifts are taking place in the traditional portfolio of regulatory functions:

• chemical-specific standards evolving into national environmental goals;
• individual permits giving way to general permits and permit by rule;
• compliance assurance being supplemented by compliance assistance;
• monitoring for compliance being supplemented by monitoring for environmental results.

In this changing context, the role of the regulator is evolving. The regulator is still very much anchored to the old system while at the same time seeking to accommodate the power of these progressive changes. Mixed messages abound, progressivism conflicts with traditionalism, and in the near term, overall transaction costs tend to increase.

Yet this transition stage, however tentative and incomplete, represents real promise. Important lessons are being learned that will accumulate in further improvement. The Aspen Series recognizes the value of this transition, but envisions a more substantive "breakthrough" to the Alternative Path.

The Alternative Path
The role of the regulator distinctly changes in the Alternative Path. The regulator becomes an advocate for excellence, and oversees and guarantees the integrity of the process. The regulator facilitates the development and implementation of various projects under the Alternative Path. While somewhat speculative until further experience is gained, the Aspen Series envisions the following new roles for the regulator:

1. Selection of Projects to Enter the Alternative Path

• Develop and promulgate clear criteria for eligibility for selection as an Alternative Path project. Such criteria will define the conditions under which projects are likely to succeed under an Alternative Path and will include at a minimum superior environmental performance and a robust, transparent, and inclusive stakeholder process.

• Authorize the project agreement, using an "instrument," a formal document that can include waiving certain applicable regulatory requirements.
• Approve the project for implementation when it is determined that superior environmental performance will in fact be obtained.
• Approve the project if it has a robust, transparent, and inclusive stakeholder process.
• Approve the project if methods and metrics for auditing environmental results and reviewing performance, satisfactory to the stakeholders and regulators, are included in the project agreement; these should include conditions under which a project would have to revert to the basic regulatory system.
• Work to ensure that the project includes meaningful regulatory flexibility.

• Assure that superior environmental performance continues to be obtained by evaluating environmental progress during implementation.
• Ensure transparency of information and transparency of process.
• Verify that the stakeholder process continues to be viable.
• Guarantee the rights of all parties.
• Ensure compliance by the applicant with the terms of the agreement, including monitoring and reporting requirements.

• Enforce the terms of the project agreement throughout implementation. Enforcement sanctions could be on three tiers:
  
  • enforce the requirements of the agreement;
  • impose penalties;
  • project reverts to basic system within a specified time period.
    
• Define the conditions under which an applicant and/or regulator could re-open an Alternative Path project agreement. In any case, the applicant and/or regulator must obtain the support of the stakeholder group on any changes to the project agreement.

5. Additional Roles for the Regulator

• Evaluate the overall Alternative Path program as well as the progress on individual projects. This evaluation will include examining progress on superior environmental performance, stakeholder processes, cost-efficiencies, and other appropriate factors that can provide evidence on how well the overall objectives of an alternative system are being met.
• Continue to build capacity at the federal, state, and community level to implement Alternative Path approaches through technical assistance, financial assistance, training, education, and facilitation services.
• Examine the role of research under an Alternative Path scenario. A different type of research program may be needed to support community and stakeholder needs than under the current regulatory system.