Recommendations of the Texas Comptroller

Promote the Use of Environmental Management Systems

Summary

Environmental management systems assist regulated businesses in reaching, maintaining, and even exceeding compliance with environmental regulations. Texas should promote the use of these systems to improve compliance and reduce pollution. The Texas Natural Resource Conservation Commission should integrate environmental management systems into many of its programs, including permitting, compliance assistance, and enforcement.

Background

An environmental management system (EMS) is a set of operating policies, procedures, and methods that incorporate regulatory requirements throughout an organization’s business and manufacturing processes. These systems can help businesses move beyond simple compliance with environmental regulation to significant improvements in environmental performance and pollution prevention. In Texas, for instance, one large company conducted an environmental self-audit as part of its implementation of an EMS and discovered 42 violations of state environmental regulations that it quickly corrected and resolved.[1]

Some businesses have experimented with EMSs for many years, but until recently there has been no major trend toward widespread adoption of EMSs, perhaps due to the perceived lack of an economic rationale. In late 1996, however, the International Standards Organization (ISO) published the final version of an international EMS standard, ISO 14001.[2] Organizations adopting an EMS consistent with ISO 14001 specifications can be certified as conforming to the standard by a third-party auditor.

Publication of ISO 14001 has generated great interest in the business community because some international markets may begin viewing certification as a prerequisite for commerce. In the United States, the use of some form of an EMS is already being required or encouraged by many purchasers of goods and services.[3] In September 1999, for instance, Ford Motor Company and General Motors Corporation announced that they would require their suppliers to adopt ISO 14001.[4]

Texas has experimented with the use of EMSs but has not developed a comprehensive program for their use. The Texas Natural Resource Conservation Commission (TNRCC), the state’s lead environmental agency, has administered two programs involving EMSs, but they operated independently and had different standards for certification.[5]

Through its ongoing “Clean Texas” program, a voluntary incentive and recognition program for regulated Texas businesses, TNRCC provides incentives to companies that voluntarily implement an EMS.[6]

In addition, between 1995 and 1998, TNRCC operated a pilot project to develop a new inspection protocol and format for auditing EMSs, to make the determination of regulatory compliance quicker and easier for TNRCC’s inspectors as well as the regulated community.[7] In addition, the project evaluated whether companies with above-average compliance records and a working EMS should be considered for less-frequent inspections. At the conclusion of the pilot project, TNRCC and business representatives agreed that a definition or a required list of elements for EMSs would be useful to both TNRCC and the regulated community. To date, however, TNRCC has not devised such definitions. TNRCC also concluded that the future of any new inspection protocol would depend on the US Environmental Protection Agency’s acceptance of system audits in place of traditional inspections. Moreover, facility representatives indicated that third-party audits by independent accounting firms could lend additional credibility to EMS-based protocols.[8]

In a recent review of TNRCC, the Sunset Advisory Commission recommended that TNRCC encourage regulated entities to develop EMSs as a measure of their commitment to compliance with environmental regulations and to natural resource conservation. Furthermore, the commission recommended that EMSs play a key role in a new regulatory structure for TNRCC that it proposed as part of its report.[9]

Use of EMSs in Other States

Several states, including California, Texas, Oregon, Arizona, Illinois, Minnesota, Wisconsin, Pennsylvania, Massachusetts, and North Carolina, have formed a Multi-State Working Group to evaluate the effect of ISO 14001 on environmental performance and to test mechanisms for encouraging the adoption of ISO 14001-compliant EMSs.[10] The pilot tests are using a variety of approaches to determine whether ISO 14001 EMSs can be superior to traditional approaches relying heavily on rules, regulations, and traditional enforcement efforts. Under many of the pilots, participating facilities will adopt an ISO 14001 program in exchange for greater discretion in areas such as permitting, inspection frequency, and reporting obligations. The pilots then will evaluate whether the EMS produced the same or better environmental results at lower costs to both the public and private sectors.

The Multi-State Working Group cautions that the mere existence of an EMS is not a guarantee of compliance; governments must continue to maintain some degree of regulatory oversight over all regulated entities, regardless of whether they have EMSs in place or not. Nevertheless, the Working Group recommends that governments should not place undue regulatory burdens on entities that have voluntarily implemented an EMS.

Some states have already incorporated the use of EMSs in their existing regulatory programs. For instance, Wisconsin’s Green Tier Program uses performance contracts to provide incentives to reward environmental performance and encourage environmental consciousness. Under the Wisconsin program, flexible, efficient, and enforceable contracts are negotiated between the state and regulated firms. An EMS is established as part of the contract to ensure compliance, predictable performance and due diligence in protective actions. Self-auditing, policing, and reporting also may be incorporated in the contracts. The program allows businesses to save time and reduce costs; use innovative methods to obtain results; contain their legal liability; adapt to market or supply-chain demands; and trade emission credits, within certain limits.[11]

To participate in Michigan’s Clean Corporate Citizen program, companies must demonstrate that they have a strong and effective EMS in place. The EMS must include, among other components, an identification of environmental impacts, self-initiated compliance audits, public participation in their design, a strong and clear statement of the company’s commitment to environmental excellence, and environmental training for company employees. Companies that have such an EMS and a strong compliance and pollution prevention program are eligible for flexibility in air permitting as well as expedited permit processing.[12]. (Internet document.)

At the federal level, the Environmental Protection Agency (EPA) has implemented the National Environmental Performance Track, a recognition program that provides incentives to encourage the use of EMS.[13] EPA’s New England Region separately implemented a similar “StarTrack” program that provides inspection and permitting incentives for facilities that adopt an EMS with third-party certification. StarTrack facilities have agreed to conduct comprehensive compliance and EMS audits, both reviewed by independent third parties, and to prepare environmental performance reports and make them available to the public.[14]

Recommendation

State law should be amended to promote the use of environmental management systems by providing regulatory incentives to participants.

To promote the use of Environmental Management Systems (EMSs) to improve compliance and prevent pollution, legislation should amend Subtitle B of the Texas Health and Safety Code, relating to solid waste, toxic chemicals, sewage, litter, and water. The statute should encourage the use of EMSs within all types of organizations, including state and local government agencies and businesses, and should direct the Texas Natural Resource Conservation Commission (TNRCC) to develop by rule a comprehensive program providing regulatory incentives for organizations that use an EMS.

TNRCC should integrate the use of EMSs into its many programs, including permitting, compliance assistance, and enforcement. TNRCC should determine specific EMS requirements and incentives. These could be similar to those the agency currently provides in its Clean Texas Program, including on-site technical assistance; accelerated access to information about programs; and, consistent with EPA requirements, expedited permitting, reduced reporting and record-keeping requirements, and less-frequent inspections.[15] TNRCC should consider establishing a mechanism to allow for public participation; developing model EMS plans for small businesses and local governments; and establishing environmental performance indicators to measure the program’s performance.

This recommendation is consistent with Sunset Advisory Commission recommendations 1.5, directing TNRCC to encourage the use of EMSs and expand opportunities for public participation; 3.4, directing TNRCC to improve accountability and controls for supplemental projects and publish staff precedents and interpretations for innovative regulatory programs; and 3.5, directing the agency to expand opportunities for public participation within innovative regulatory programs.[16]

Fiscal Impact

This estimate assumes that TNRCC will require two additional full-time equivalent employees (FTEs) to coordinate the development and oversight of this program. This estimate includes only two FTEs because TNRCC already has staff expertise in EMS and regulatory incentives. In the long term, TNRCC’s inspectors may experience reduced workloads, depending on the regulatory incentives offered.

[1] Texas Natural Resource Conservation Commission, Biennial Report to the 77th Legislature, Volume 1: Protecting a Thriving Texas (Austin, Texas, March 2000), p. 47.

[2] University of North Carolina at Chapel Hill and the Environmental Law Institute, National Database on Environmental Management Systems, “The Effects of Environmental Management Systems on the Environmental and Economic Performance of Facilities” (Chapel Hill, North Carolina and Washington, DC), p. 1.

[3] University of North Carolina at Chapel Hill and the Environmental Law Institute, National Database on Environmental Management Systems, The Effects of Environmental Management Systems on the Environmental and Economic Performance of Facilities, p. 1.

[4] National Academy of Public Administration, ISO 14001 and EPA’s Region I’s Star Track Program: Assessing Their Potential as Tools in Environmental Protection, by Jennifer Nash et al. (Washington, DC, June 2000), p. 11.

[5] Texas Natural Resource Conservation Commission, Compliance and Enforcement Review: A Joint Project by TNRCC Internal Audit and the Texas State Auditor’s Office (Austin, Texas, August 1998), pp. 47–49.

[6] Texas Natural Resource Conservation Commission, Clean Industries Plus: Program Description (Austin, Texas, April 1999), p. 12.

[7] Texas Natural Resource Conservation Commission, Field Operations Division, ECMS Pilot Project Internal Report (Austin, Texas).

[8] Texas Natural Resource Conservation Commission, Field Operations Division, ECMS Pilot Project, pp. 3-4.

[9] Sunset Advisory Commission, Texas Natural Resource Conservation Commission: Staff Report (Austin, Texas, May 2000), pp. 18 and 38.

[10] Pennsylvania Department of Environmental Protection, “Multi-State Working Group on Environmental Management Systems,” (http://www.dep.state.pa.us/dep/deputate/pollprev/ mswg/mswg.htm). (Internet document.)

[11] “A Green Tier for Greater Environmental Protection.” ECOS, The Environmental Communique of the States (Fall/Winter 1999), pp. 1 and 12. See also National Academy of Public Administration, Green Permits and Cooperative Environmental Agreements: A Report on Regulatory Innovation Programs in Oregon and Washington, by Jerry Speir (Washington, DC, June 2000), pp. 13–30.

[12] Michigan Department of Environmental Quality, Michigan’s Clean Corporate Citizen Program Fact Sheet (http://www.deq.state.mi.us/ead/tasect/c3/)

[13] US Environmental Protection Agency, “National Environmental Performance Track, Teleconference with the States,” Washington, DC, June 22, 2000. (Memorandum.)

[14] National Academy of Public Administration, ISO 14001 and EPA’s Region I’s StarTrack Program: Assessing Their Potential as Tools in Environmental Protection, pp. 39–63. See also US Environmental Protection Agency, New England StarTrack Program Guidance Documents (Boston, Massachusetts 1997/98 Draft).

[15] Texas Natural Resource Conservation Commission, Clean Industries Plus, Program Description, GI-244, (Austin, Texas, April 1999), p. 12.

[16] Sunset Advisory Commission, Texas Natural Resource Conservation Commission: Staff Report,

pp. 18 and 38.

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