The Risks and the Advantages of Agency Discretion: Evidence from EPA's Project XL

Abstract

I. INTRODUCTION Academic criticism of the administrative state has increased exponentially over the past several years, particularly with regard environmental regulation. Many commentators insist that the command and control approach enforcement is no longer useful Further, they contend that this approach likely will discourage innovation and create a disincentive continuous environmental improvement. They also assert that many prevailing environmental regulations are economically inefficient, violate free principles, and are undemocratic.(1) Most commentators urge some form of reinvention. Agreement ends, however, when it comes determining which reforms adopt. Since 1995, the U.S. Environmental Protection Agency (EPA or the Agency) has tried implement some reforms of its own, including Project XL (which stands for Excellence in Leadership). Through Project XL, EPA is exploring more flexible approaches encourage collaborative performance-oriented compliance with federal and state standards. Much of what EPA has attempted is based on theory. However, this theory is very much at odds with the enforcement philosophy upon which EPA was founded.(2) In implementing Project XL, EPA has faced intellectual, legal and cultural obstacles of many kinds. This paper analyzes a number of ways these obstacles have impeded Agency efforts adopt a more flexible approach regulation that relies more on market mechanics. Part I reviews the strategic considerations behind the founding of EPA, as well as its institutional structure and operation. EPA's history and structure make it a problematic setting in which apply adaptive management techniques. EPA was designed carry out a quasi-military mission, featuring vertical review of all decisions taken at lower levels. In addition, a more flexible and decentralized approach decision making would require the Agency alter its mission. Since the Agency's focus remains result-oriented and its management style almost entirely reactive, a clash between philosophies of adaptive management and command and control is inevitable. Part II reviews the doctrine of administrative discretion, noting that the dominant perspective in administrative law has been to fear discretion, reluctantly accept its presence, and attempt control it.(3) According this view, Congress chronically delegates broad authority administrative agencies. Thus, agencies are relatively unsupervised in their exercise of regulatory discretion. Part II concludes by arguing that this view is incorrect; Congress does not habitually abdicate its lawmaking responsibilities agencies. In fact, Congress retains more oversight of agencies like EPA than most commentators presume.(4) There is a surprising amount of discretion built into the administrative system. Unfortunately, most of it is not the kind that will encourage EPA or the private sector pursue innovation. Part III outlines several related attempts move EPA toward more collaborative and approaches achieving compliance under the Bush and Clinton administrations. These initiatives were actually the precursors Project XL. Significantly, building on adaptive management principles, XL sought incorporate the results of these experiments into EPA's existing institutional framework. Part III also describes the first group of proposed XL projects. Part IV analyzes the political reactions Project XL and reviews intra-agency disagreements over the appropriate exercise or discretion in specific XL projects. In addition, Part IV considers the strong reactions of the public and regulated community this move toward more flexible and performance-based regulation are analyzed. Part V suggests ways in which the Agency and the regulated community might work together overcome obstacles an increased reliance on administrative discretion, which is critical the ultimate success of Project XL and similar reform efforts. …