EPA Asked To Review Outsourcing Of Air Permit Reviews By Kentucky

Jimmy Palmer, Regional Administrator
US EPA, Region IV
Sam Nunn Atlanta Federal Center
61 Forsyth Street, SW
Atlanta, GA 30303

G. Alan Farmer, Acting Director
Air, Pesticides & Toxics Mgmt. Division
US EPA, Region 4
Sam Nunn Atlanta Federal Center
61 Forsyth Street, SW
Atlanta, GA 30303

Re: Request for Initiation of Permit Revision
And For Formal Review, Kentucky Title V Program

Dear Mssrs. Palmer and Farmer:

I'm writing to request that EPA initiate a program revision pursuant to 40 CFR 70.4(i) concerning the outsourcing of Title V permit reviews by the Kentucky Division for Air Quality, and that Kentucky be required to seek EPA approval prior to continued use of private contractors for Title V permit review.

I am also writing to request a formal review by Region IV of the adequacy of staffing and budgetary resources of the approved Kentucky Part 70 program.

Beginning on May 1, 2005, Kentucky outsourced the review of a number of Title V permits to two private contractors. Kentucky has published a second RFP and is currently analyzing bids submitted for outsourcing some Title V permit review for a two-year period.

The Kentucky Resources Council, Inc. (KRC) has been vocal in expressing concern that outsourcing the review of permit applications to private consulting firms raises potentially significant institutional, economic, ethical and other issues. (See attached letter).

Let me be candid prior to identifying specific concerns, in conveying KRC's 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. Indeed, the “permitting authority under 40 CFR 70.2 is defined as a state or local agency authorized by the Administrator to carry out the permitting program, and in this instance, the entity carrying out much of the review for those permits is neither an agency, nor an entity authorized by the Administrator.

With respect to the specific issues presented by the outsourcing of Title V permit review by the state, KRC's concerns are both legal and technical in nature.

First, as a matter of law, KRC believes that the state is obligated to submit the proposed change of permit review procedures to EPA as a proposed revision to the Part 70 program pursuant to 40 CFR 70.4(i). Had the state done so, the public would have had a formal opportunity to review and comment on the proposed outsourcing, and to seek appropriate binding assurances that the permitting process would remain in all respects consistent with Part 70 requirements.

40 CFR 70.4(i) obligates the state to “keep EPA apprised of any proposed modifications to its . . . procedures.” Beyond doubt, this dramatic change in permit review procedures departs from the program processes initially approved under 40 CFR 70.4(b)(8) and warranted a revision to the program. Under 40 CFR 70.4(i), I am requesting that EPA initiate a program revision regarding the outsourcing of permit review, and provide a public comment period on the specific terms and conditions for outsourcing, reporting obligations, and other details of the relationship among the contractor, the agency, the applicant, and the public.

During the comment period on the program revision, KRC will be raising these and other issues of concern:

1. Whether outsourcing permit review may adversely impact on the ability of the agency to manage the Title V program. Outsourcing works against the long-term interests of the agency by hiring out rather than developing 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 three years worth of permit review and issuance decisions.
2. If the quality of the outsourced work is not adequate, what mechanisms and capability does the state have to resume permit review.
3. Is there sufficient oversight over the delegated permit review and product. Absent a thorough understanding of each permit application and the individual plant processes, it is difficult to conceive of how the agency can meaningfully review the consultant's work and determine whether a particular permit review has been adequate.
4. 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.
5. What the involvement be of the contractor in the event that a permit is challenged by the applicant or a third party, and what involvement will the consultant and agency have in responding to public and interagency comment.

I am also writing to request that your agency conduct a formal review of the Kentucky program in order to assure that the program implementation remains in accordance with Part 70 obligations. The state is obligated to maintain adequate personnel and funding to administer . . . the program. 40 CFR 70.4(b)(8). Apparently, the outsourcing of permits was initiated to address a permitting backlog, and is now being proposed for an additional two-year period, raising a fundamental question as to whether the state agency has that the personnel and funding necessary to administer the program.

A formal review of the Kentucky permitting process that would identify the extent to which the need to outsource was / is driven by structural problems rather than a one-time, short-term need, and that would evaluate the impact of outsourcing on Kentucky's capability to implement a Part 70 program is appropriate given that Kentucky is now poised to enter into the second round of contracts that rely on outsourcing to meet federal program obligations. I would hope that the review would also include a qualitative assessment of the deliverables from the outsourcing, by reviewing a random sampling of outsourced permits and of those processed in-house.

I am not unmindful of the difficulties that faced Kentucky at the time of the initial decision to outsource permit review. The inability to attract and retain engineers and other technical staff, low salaries, and the retirement of a number of staff, contributed to backlog that the agency was attempting to address in the manner it believed best. I am concerned, however, that outsourcing should be a temporary, last-resort approach to fulfilling essential governmental functions rather than a surrogate for an adequately staffed and funded program, and that if it is to occur, it happen only after EPA review and approval.

Thank you in advance for your consideration of these concerns.

Cordially,
Tom FitzGerald
Director

cc: John Lyon, Director,
Division for Air Quality

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