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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

KRC Expresses Grave Concerns with Environmental Cabinet Outsourcing of Air Pollution Permit Review  Posted: May 10, 2005
Kentucky Resources Council, Inc.
Post Office Box 1070
Frankfort, Kentucky 40602
(502) 875-2428 phone
(502) 875-2845 fax
e-mail: fitzKRC@aol.com
www.kyrc.org

May 9, 2005

Hon. Brent Yonts, Co-Chair
Hon. Katie Stine, Co-Chair
Government Contract Review Committee
Kentucky General Assembly
Frankfort, Kentucky 40601

Dear Representative Yonts and Senator Stine:

I am writing to convey the grave concern of the Kentucky Resources Council, Inc. with the decision of the Environmental and Public Protection Cabinet to outsource to two consulting firms the review of permit applications and the issuance of air quality control permits to industrial sources emitting pollutants.

The Cabinetís actions raise significant public policy concerns, as well as a number of institutional, economic, ethical and other issues that should have been fully vetted prior to undertaking an approach to issuance of environmental permits that is unprecedented in this state.

Let me be candid prior to identifying specific concerns, in conveying KRCís fundamental disagreement with the concept of privatizing the review and the issuance of environmental permits. The delegation of discretionary governmental functions is unlike the outsourcing of laboratory sample analysis or other defined, ministerial functions, since it involves delegation to a private entity of a discretionary responsibility to protect public health that was entrusted by the public to elected officials and to their governmental employees with an expectation that they would actually do the work. Privatizing permit review for air quality permits raises a host of very significant concerns touching on public health and environmental quality. The extent to which the government should delegate any essential government function to private parties should have be explored fully in the legislative arena before the executive branch delegated such powers.

KRC has a concern also with the extent to which the agency appears to be proposing to delegate essential, discretionary government functions. The language describing one of the contracts indicates that both the review and the issuance of the permits is being delegated. To the extent that the agency in fact or by contract delegates the obligation to assure that any permit meets all applicable standards, such a delegation is unconstitutional, since the agency is without authority to grant to any private entity the power to issue permits both setting and applying standards that will determine whether public health and the environment will be protected.

Beyond KRCís philosophical disagreement with the delegation of discretionary governmental regulatory functions to private contractors, the delegation raises numerous institutional, economic and ethical questions:

First, how did such a backlog develop in a program which was designed to be self-funded through permit fees that are set at the cost of a fully functioning program. If the agency is short-staffed, why was not a budget allowing for full funding of needed staff positions presented to the legislature, since the funding would have come from the permittees? Where is the comparative analysis of the short-and long-term impacts of outsourcing permit review relative to development of additional staff or short-term deployment of staff from other branches within EPPC? How is it that, when overhead will remain essentially the same for the agency, outsourcing to for-profit consulting firms will improve the performance and quality of the permits and achieve cost savings?

Second, doesn't outsourcing permit review both delay the inevitable need to increase staff capacity, and work against the long-term interests of the agency by removing both training and institutional capacity? With many of the senior staff scheduled to retire within the next few years, this is a critical period of transition in which development of junior staff capacity and conveying institutional memory would be disrupted by outsourcing a yearsí worth of permit review and issuance decisions.

Third, what happens if the quality of the outsourced work is not adequate? Will the state be able to resume permit review? Will there be financial penalties or other mechanisms for assuring contractor accountability? What benchmarks and criteria will be used to determine if the permits are adequate?

Fourth, what mechanisms of accountability are in place to assure no conflicts of interest, real or apparent? One of the two consulting firms has for many years represented, among its clients, entities holding environmental permits and trade associations representing regulated industries. In order to avoid the appearance of impropriety and conflicts of interest it would appear that any private firm engaged as a surrogate permit review agency could not continue to represent clients regulated by the cabinet for any pollution media, (not just air), and would not be able to review on any air permits for former clients. What conflicts policy has been put in place to address these concerns?

Fifth, what levels of permit review will be delegated? What involvement will the agency have in reviewing the consultants work and determining whether to issue the permit, and how will savings accrue when the agency cannot make a determination of whether the privately developed permit is adequate absent a thorough understanding of the permit.

Sixth, the flat-fee pricing mechanism seems designed to either underpay for review or overpay, since it is a flat fee regardless of the complexity of the permit.

Seventh, what measures will be taken to assure protection of proprietary information, and conversely, to assure open records access to information in the possession of the private firms.

Eighth, has the proposal been submitted as a SIP revision to EPA and should it not have been before entering into the contracts?

Ninth, what will the involvement of the contractor be in the event that a permit is challenged by the applicant or a third party? Will the contractor have the status of an agency employee for purposes of discovery and testimony, and who will compensate the consultant for time spent explaining the permitting process?

Tenth, what involvement will the consultant and agency have in responding to public and interagency comment?

Until each of these questions are answered, and the complex issues that underlie each area are fully vetted, moving forward to privatize permit review is, I believe, a troublesome expenditure of agency funds.

Thank you for your consideration of these concerns,

Cordially,

Tom FitzGerald
Director


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