Performance audit, Department of Environmental Quality, sunset factors

              A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Department of
Environmental Quality—
Sunset Factors
Performance Audit Division
SEPTEMBER • 2004
REPORT NO. 04 – 08
Performance Audit
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting servic-es
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative John Huppenthal, Chair Senator Robert Blendu, Vice Chair
Representative Tom Boone Senator Gabrielle Giffords
Representative Ken Clark Senator Peter Rios
Representative Ted Downing Senator Thayer Verschoor
Representative Steve Yarbrough Senator Jim Weiers
Representative Jake Flake (ex-officio) Senator Ken Bennett (ex-officio)
Audit Staff
Lisa Eddy, Manager and Contact Person
Chris Horton
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553 -0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
September 27, 2004
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Stephen A. Owens, Director
Arizona Department of Environmental Quality
Transmitted herewith is a report of the Auditor General, A Sunset Review of the Department of
Environmental Quality. This report is in response to a November 20, 2002, resolution of the Joint
Legislative Audit Committee and was conducted as part of the sunset review process prescribed
in Arizona Revised Statutes §41-2951 et seq. This is the fourth and final report to be issued on the
Department.
Included with this report is a written response from the Department.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to th e public on September 28, 2004.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Office of the Auditor General
TABLE OF CONTENTS
1
5
Introduction & Background
Sunset Factors
Agency Response
page i
State of Arizona
page ii
The Office of the Auditor General has prepared an evaluation of the Arizona
Department of Environmental Quality (Department) using the 12 criteria in Arizona’s
sunset law. The analysis of the 12 sunset factors was conducted pursuant to a
November 20, 2002, resolution of the Joint Legislative Audit Committee and
prepared as part of the sunset review set forth in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
The sunset review of the Department also included a series of three performance
audits. The audited areas covered the Department’s Water Quality, Waste Programs,
and Air Quality divisions. As of July 1, 2004, the Department was authorized 865.9
FTEs and was appropriated approximately $89.7 million in fiscal year 2005. In
addition, the Department’s budget includes approximately $272.2 million in
nonappropriated funds, of which approximately $192.6 million is bond funds from the
Water Infrastructure Finance Authority (WIFA), and approximately $17.8 million is
federal funds to protect and enhance Arizona’s public health and environment.
Department organization
The Department is divided into four divisions and three offices:1
􀁺􇨠 Water Quality Division (189 FTEs, 21 vacancies)—The Water Quality Division
has primary responsibility for enforcing water quality standards in Arizona. It
accomplishes this by monitoring public drinking water systems, regulating
wastewater discharge and treatment, issuing permits for the release of certain
pollutants, analyzing water pollution problems and establishing standards to
address them, and monitoring and assessing the State’s surface and
groundwater quality.
􀁺􇩗 Waste Programs Division (253 FTEs, 81 vacancies)—The Waste Programs
Division protects public health and the environment by reducing risk associated
with waste management, regulated substances, and contaminated sites. It
1 After the completion of audit work the Department created a fifth division, the Tank Programs Division, which has 106
FTEs and 21 vacancies. This division was created to bring together programs related to underground storage tanks
(USTs). Specifically, the UST—Program Support and UST—Corrective Action Sections, totaling 75 FTEs, were transferred
from the Waste Programs Division. Also, the State Assurance Fund Section, totaling 31 FTEs, was transferred from the
Administrative Services Division.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
monitors waste storage and disposal, monitors underground storage tanks,
promotes pollution prevention and recycling, responds to environmental
emergencies, and reviews and approves operating plans for landfills and other
waste facilities. In addition, it includes the Superfund section, which is
responsible for identifying, assessing, and cleaning up sites on which the soil or
groundwater has been contaminated with hazardous substances.
􀁺􇩁 Air Quality Division (155 FTEs, 26 vacancies)—The Air Quality Division ensures
Arizona’s air safety and quality by monitoring and analyzing air quality data,
regulating sources of air pollution, and working with other state, local, and
federal agencies to plan and implement strategies to protect Arizona’s future air
quality.
The Department’s remaining division and its three offices provide policy
direction and administrative and programmatic support to the other three
divisions as follows:
􀁺􇩁 Administrative Services Division (170 FTEs, 33 vacancies)—The Administrative
Services Division provides financial, human resources, and information
technology support to the rest of the Department. In addition, it also oversees
management of the State Assurance Fund, which covers the cost of cleaning up
leaking underground storage tanks.
􀁺􇩏 Office of the Director (38 FTEs, 11 vacancies)—The Office of the Director is
responsible for establishing overall agency policy and direction, providing
information to the public, and representing the Department at the Legislature.
The Office of the Director contains the Legislative Liaison, the Department’s
Administrative Counsel, and the Communications Director.
􀁺􇩎 Northern and Southern Regional Offices (62 FTEs, 10 vacancies)—The
Department has established Northern and Southern Regional Offices to perform
several functions, construction reviews, water quality assessment, and air quality
compliance (including open-burn permits). The Northern Regional Office
inspects and investigates regulated facilities involving drinking water and
wastewater systems. The Southern Regional Office performs some emergency
response work as necessary for the counties it serves.
State of Arizona
page 2
Scope and methodology
The Department’s performance was analyzed in accordance with the 12 statutory
sunset factors. The following audits were completed:
􀁺􇨠 Water Quality Division (Report No. 04-05)
􀁺􇩗 Waste Programs Division (Report No. 04-06)
􀁺􇩁 Air Quality Division (Report No. 04-07)
This report also includes information obtained from department officials and the
Governor’s Regulatory Review Council.
Office of the Auditor General
page 3
State of Arizona
page 4
In accordance with A.R.S. §41-2954, the Legislature should consider the following 12
factors in determining whether the Department should be continued or terminated.
The three performance audits identified areas that the Department has operated
efficiently and effectively, as well as opportunities for the Department to improve
operations. The evidence assembled under these 12 factors indicates the continued
need for the Department.
1. The objective and purpose in establishing the agency.
The Arizona Environmental Quality Act of 1986 created the Department to
protect human health and the environment. That act created a new agency from
several programs and offices that had previously operated within the
Department of Health Services.
The Department defines its mission as follows:
“To protect and enhance public health and the environment in Arizona.”
In support of this mission, three of the Department’s divisions—Water Quality,
Waste Programs, and Air Quality—perform four central functions:1
􀁺􇩍 Monitoring and Assessment—The Department collects air, water, and soil
samples for laboratory analysis to monitor for the presence of
contaminants. Department staff interpret data from field monitoring to draw
conclusions about environmental indicators and trends to form the basis for
future planning and policy decisions.
􀁺􇩐 Pollution Control—The Department issues permits, approvals, and
certifications to ensure that facilities are legally constructed and operated
and that any discharges to the air, water, and soil are within health
standards established by law. Department planning specialists also
develop management practices and control strategies in areas where
standards are not being met.
1 Effective August 2, 2004, the Department added the Tank Programs Division, which handles underground storage tank
programs and the State Assurance Fund.
Office of the Auditor General
SUNSET FACTORS
page 5
􀁺􇩃 Compliance Management—The Department offers guidance, assistance,
and incentives to encourage the public to reduce waste and resulting
pollution. As part of this effort, the agency conducts inspections of various
regulated facilities on a regular basis and in response to citizen complaints.
The Department also pursues both informal and formal enforcement
actions against regulated facilities to ensure compliance with environmental
laws.
􀁺􇩃 Cleanups—The Department investigates and oversees the removal and
cleanup of contaminated soil and water to protect public health and the
environment. The Department’s emergency responders also provide
technical assistance to local fire and police officials, as well as tribal
governments upon request, to contain and clean up hazardous chemical
releases.
2. The effectiveness with which the agency has met its objective and purpose and
the efficiency with which it has operated.
The Department is generally effective in meeting its overall objective and
purpose. For example, it has programs to monitor the quality of drinking water
in the State, it monitors the storage and disposal of hazardous wastes, it cleans
up sites contaminated by hazardous substances, and it regulates the release of
pollutants into the air, land, and water. In addition, the Department generally has
operated efficiently. For example, the Department has substantially eliminated
backlogged claims for financial assistance to clean up leaking underground
storage tanks. The audits of the Water Quality Division and the Air Quality
Division highlighted two other ways that the Department has operated efficiently.
Specifically:
􀁺􇩔 The Water Quality Division audit (see Auditor General Report 04-05, Finding
3) found that the Division has made significant progress in issuing Aquifer
Protection Permits (APP), including successfully processing all but one of
its nonmining applications, such as those from industrial sites and
wastewater facilities.
􀁺􇩔 The Air Quality Division audit (see Auditor General Report 04-07, Finding 2)
found that facilities that are the largest potential sources of air pollution are
generally complying with air pollution standards, and when they are not, the
Division generally takes timely enforcement action that soon corrects the
problem.
However, the three audit reports also identified several ways the Department
could improve its effectiveness and efficiency. For example:
State of Arizona
page 6
􀁺􇩔 The Water Quality Division audit (see Auditor General Report 04-05, Finding
1) found that the Division could improve its oversight of drinking water
quality monitoring. All public drinking water systems monitor their water
quality and report specified contaminant levels to the Division at specific
intervals, often monthly. However, division staff cannot address all facilities
with drinking water violations at any one time. As a result, the Division is
unable to immediately investigate every drinking water quality violation and,
in turn, take enforcement action against violating facilities. This inability to
take enforcement action against noncompliant drinking water systems
potentially exposes people to contaminated water.
The Division has been working to address this problem by looking for new
ways to encourage drinking water facilities to correct their violations with
minimal enforcement staff involvement. The Division reports that it has
begun to use automatically generated letters to notify facilities of any failure
to meet monitoring and reporting requirements, which require a response
within 10 days. If the facility fails to respond in a timely manner, the Division
reports that it issues a series of escalating violations and orders, potentially
including the imposition of fines. The report also found that the Division
could potentially improve its oversight of drinking water quality monitoring
by researching the costs and benefits of expanding its Monitoring
Assistance Program (MAP) to include testing of contaminants such as lead,
copper, and nitrates. The MAP program is a required water testing
assistance for small drinking water facilities, which compose the majority of
the Division’s monitoring workload. After the Division decides whether to
expand the MAP program, it should review its enforcement workload and
staff levels to determine if additional staff are needed.
Additionally, the audit found that the Water Quality Division could benefit by
charging fees for performing drinking water plan reviews and by
recalculating the fees charged to process APP applications. Statute
requires the Division to establish and charge fees to recover the costs of
the drinking water plan reviews, which are for the planning and construction
of facilities ranging from wells and water treatment plants to public
swimming pools. However, the Division does not charge any such fees.
Charging these fees would free up some General Fund monies and
potentially free up some federal grant monies for other uses. Additionally,
the Department should recalculate the fees it charges for processing APPs.
Rather than setting fees based on the actual direct costs to perform the
reviews, the Division has set them to recover only those costs not covered
by General Fund monies. Recalculating the fees could ensure a more fair
and accurate fee level. After it has adjusted its fees to recover its direct
costs, the Division should ensure that its future General Fund appropriation
requests to the Legislature reflect its full indirect costs.
Office of the Auditor General
page 7
Finally, the audit found that the Water Quality Division still had a significant
number of APPs for mining facilities that had yet to be issued. Specifically,
as of December 2003, at least 34 mining APPs have not yet been issued.
Before the 2006 statutory deadline for processing these permits, the
Division will need to complete processing applications that it receives and
refer those facilities that fail to submit the required APP applications to its
compliance unit for appropriate enforcement action. The Division has
developed a strategy to assist in resolving the remaining applications by
the 2006 statutory deadline. For example, the Division has created a
schedule to monitor each application’s status through the permitting
phases, including the percentage of work completed within each phase.
􀁺􇨠 The audit of the Waste Programs Division (see Auditor General Report 04-
06, Finding 1) found that the Department could take steps to lower the
amount it pays for the remediation of leaking underground storage tanks,
and the Division could improve the degree of compliance with UST financial
assurance requirements. The steps the Department should take include
evaluating whether private contractors who bill the State Assurance Fund
(Fund) for the costs of cleaning up leaking USTs are charging the maximum
allowable costs, known as cost ceilings. If so, the Division should consider
revising its cost ceilings, which could reduce costs to the Fund. Additionally,
if the Department performs a new cost survey, which should help establish
new cost ceilings, it should change the methods it uses to perform the
survey. Further, the Department should explore the idea of using
competitive bidding between contractors for cleanup work as a way to keep
costs lower. The Department also needs to do a better job of ensuring that
UST owners comply with state and federal insurance requirements. Federal
and state regulations require that UST owners acquire at least $500,000,
and up to $1 million, of financial assurance to cover costs associated with
a UST leak. However, as of January 2004, only 62 percent of Arizona’s UST
owners met these requirements.
The audit also found that the Division’s Hazardous Waste Section needs to
improve the timeliness of issuing, escalating, and resolving enforcement
actions (see Auditor General Report No. 04-06, Finding 2). The Hazardous
Waste Section regulates hazardous waste facilities, including those that
generate, store, or dispose of these types of materials. The Division
regulates these facilities by issuing permits, conducting inspections, and
taking enforcement action when a violation is identified. However, the
Division sometimes takes several months to issue an enforcement action
when it finds a violation and does not always escalate enforcement actions
to the next level when facilities do not correct their violations and return to
compliance. For example, of the three administrative orders reviewed by
auditors (all issued in fiscal year 2003), the Division did not escalate one of
them, as directed by policy. Instead, the Division continued to negotiate
with the responsible parties to bring them into compliance.
State of Arizona
page 8
3. The extent to which the agency had operated within the public interest.
The Department has operated in the public interest by administering a wide
variety of regulatory programs that protect human health and the environment
from excessive and harmful pollutants. For example, the Department has made
substantial progress toward cleaner air in Arizona. Since the passage of the
Clean Air Act in 1970, the EPA has designated 20 areas in Arizona as
nonattainment areas, as air in these areas does not meet national air quality
standards. However, the Department has instituted several programs to combat
poor air quality. For example, the Cleaner Burning Gasoline Program was
designed to reduce the quantities of several pollutants in vehicle emissions, and
the Vehicle Emissions and Inspection Program was designed to reduce on-road
vehicle emissions. Between 1999 and 2004, the EPA has redesignated 5 of the
20 nonattainment areas to attainment status. Further, 10 other areas are eligible
for attainment status and are awaiting either the EPA or the Division to complete
the redesignation process (see Auditor General Report No. 04-07, Finding 1).
The Department has also protected the public interest by taking emergency
response actions to reduce the potential for exposure to hazardous substances.
The Department reports that in February 2003, it used its administrative authority
to order the suspension and revocation of the hazardous waste permit issued to
a regulated facility for major violations of hazardous waste laws at the
company’s facility in Phoenix. Additionally, because the condition of several
containers of waste had seriously degraded, the Department subsequently
declared the site an imminent and substantial endangerment to the community
in March, and the Department’s Emergency Response Unit began an
emergency removal action at the facility.
However, the Department should improve the timeliness of issuing enforcement
actions to noncompliant hazardous waste facilities (Auditor General Report No.
04-06, Finding 2). The audit found that the Waste Programs Division failed to
issue some enforcement actions within the time frames specified in policy.
Finally, the Water Quality Division does not assign enforcement staff to every
facility with drinking water violations, and as a result, violations can continue for
a considerable amount of time (Auditor General Report No. 04-05, Finding 1).
For example, some violations not yet assigned to enforcement staff had been
considered significantly noncompliant by the EPA for approximately 3 years, with
one system considered significantly noncompliant for almost 8 years.
The Department also reports that it works beyond the normal regulatory
functions to help protect public health and the environment. For example, the
agency reports that it has also worked to enhance children’s health through its
involvement in the Children’s Environmental Health Project, which works on
environmental issues affecting children’s health. In November 2003, the
Department joined the U.S. Environmental Protection Agency (EPA) and the
Office of the Auditor General
page 9
University of Arizona to launch a pilot integrated pest management project to
reduce children’s exposure to pesticides in schools.
The Department has also emphasized public participation and public
information. It has encouraged public participation through community outreach
and education as part of its compliance and enforcement efforts. For example,
underground storage tank (UST) inspectors work with UST owners and
operators during inspections to explain regulations and how to comply with
them. The Department also has an ombudsman who works to obtain solutions
to the public’s problems. Further, the Department has improved public
information through its Web site and through information provided to the public
and the media regarding air quality. For example, according to the Department,
in January 2004, it launched its redesigned Web site to improve public access
to information about the agency and its programs, statutes, rules, and functions.
The improved Web site provides the public with a user-friendly means of
accessing various information, including a calendar of events and several e-mail
notification lists. Additionally, the Department issues air quality forecasts for
areas within and bordering Maricopa County and wind forecasts for Yuma
County and the areas surrounding it.
4. The extent to which rules adopted by the agency are consistent with legislative
mandate.
According to the staff of the Governor’s Regulatory Review Council (GRRC) and
Office of the Auditor General legal counsel, the Department has promulgated
some, but not all, of the rules mandated by statute. According to the
Department, it initiates an average of 11 rulemaking procedures each year.
Although GRRC reports that the Department has promulgated some rules
required by legislative mandate, there are some areas where rules are required
but have not yet been implemented. For example, the Department has not
adopted rules to address priorities for using Water Quality Assurance Revolving
Fund (WQARF) monies. WQARF is a fund created under the State’s
Environmental Quality Act of 1986 to support cleanup efforts at sites that have
soil or water contaminated with hazardous substances. The Department reports
that it has sought assistance from the WQARF Advisory Board to develop criteria
for this rule. Additionally, according to GRRC, the Department lacks rules related
to providing a simplified administrative procedure for approving modifications
for small public water systems. According to the Department, it plans to initiate
rulemaking in this topic in 2004.
There are also several statutes relating to the Waste Programs Division that lack
rules. Most of these statutes involve the Solid Waste Section. For example, the
Department has not adopted rules regarding the implementation of the Arizona
Recycling Program and has not adopted rules to determine if a site is a recycling
State of Arizona
page 10
facility. Additionally, in the area of hazardous waste, the Department has not
adopted rules regarding the time and manner of annual registration for
hazardous waste treatment, storage and disposal facilities, hazardous waste
transporters, hazardous waste generators, and hazardous waste resource
recovery facilities. According to the Department, it has begun the rulemaking
process for some but not all of the areas lacking rules.
The Department has adopted most of the required rules related to air quality.
However, according to GRRC, the Department has not adopted rules regarding
the emission of hazardous air pollutants (HAPs). According to the Department,
it has begun the process of gaining stakeholder input relating to potential HAPs
rules, and will begin the rulemaking process in September 2004.
5. The extent to which the agency has encouraged input from the public before
adopting its rules and the extent to which it has informed the public as to its
actions and their expected impact on the public.
The Department reports that it solicits and considers comments that it receives
during the rules promulgation process. The Department’s environmental
program divisions each maintain a database of stakeholders who are notified of
proposed rule changes. Among those included in the database are
environmental and community advocates, tribal officials, legislators, federal and
state agencies, municipal governments, attorneys, lobbyists, and industry
representatives. Proposed rules also are published in the Arizona Administrative
Register and posted on the Department’s Web site. According to the
Department, when a proposed rule could potentially impact many stakeholders
or the public at large, it also conducts informal state-wide meetings to inform
citizens about the proposal and to solicit their comments. An example of this
process is the Water Quality Division’s APP rule revision, which has been sent to
the public for two informal review and comment periods in 2004. The
Department reports that this rule revision will undergo a formal review and
comment period before it is sent to GRRC for final review and approval.
6. The extent to which the agency has been able to investigate and resolve
complaints that are within its jurisdiction.
ADEQ’s waste, water, and air divisions all have inspection units that conduct
inspections of regulated facilities in response to the public’s complaints.
Regarding the Air Quality Division, the Department generally addresses in a
timely manner violations involving facilities that emit pollutants into the air (see
Auditor General Report No. 04-07, Finding 2). Specifically, the Air Quality
Division generally issues enforcement actions to facilities that may emit the
Office of the Auditor General
page 11
largest level of air pollutants within the time frames specified by its policies. The
Department’s strategic plan calls for the Air Quality Division to respond to
complaints within 5 days. The Department reports that it has also imposed a 5-
day time frame for complaint response in the Water Quality Division, and in the
Hazardous Waste and Solid Waste Sections of the Waste Programs Division.
Additionally, according to the Department, it reestablished an ombudsman
position within its director’s office in 2003 to oversee and track the agency’s
response to complaints. The Department also reports that it is in the process of
developing an automated complaint-tracking system within its Web site to
ensure that complaints are resolved in a timely manner. Further, the Department
has completed installation of a citizen complaint feature on its Web site, which it
reports will allow citizen complaints to reach the appropriate division for
investigation.
7. The extent to which the Attorney General or any other applicable agency of state
government has authority to prosecute actions under the enabling statutes.
According to statute, the Attorney General is the Department’s legal adviser and
prosecutes certain enforcement actions for the Department. While the
Department handles internally the informal enforcement actions taken against
facilities that commit minor violations and formal enforcement actions that result
in an administrative order, the Attorney General’s Office handles the formal
enforcement actions resulting in a civil or criminal referral. For example, in fiscal
year 2003, the Department reports having assessed, with the Attorney General’s
assistance, $253,580 in civil penalties in nine separate cases.
8. The extent to which the agency has addressed the deficiencies in its enabling
statutes that prevent it from fulfilling its statutory mandate.
The Department has been involved in recommending legislative changes where
they are appropriate and reports working with diverse stakeholders to develop
recommendations for new legislation. Several pieces of legislation affecting the
Department’s programs were enacted in the 2004 regular legislative session:
􀁺􇩌 Laws 2004, Chapter 146—Made changes to the WQARF program by
giving the Department’s director authority to suspend a preliminary
investigation at a possible WQARF site and then reopen the investigation if
necessary. Additionally, this legislation gives the director authority to
remove a site from the WQARF registry if necessary, as well as the authority
to restore a site that has been removed from the registry (see Auditor
General Report No. 04-06, Other Pertinent Information).
􀁺􇨠 Laws 2004, Chapter 247—Increases the cap on APP application
processing fees from $75,000 to $100,000 (see Auditor General Report No.
State of Arizona
page 12
04-06, Finding 4). This legislation also increased the annual APP fees for
facilities whose daily discharge under the permit is at least 1 million gallons.
􀁺􇩌 Laws 2004, Chapter 273—Set June 30, 2006, as the final date that UST
owners can report leaks to the Department and still be eligible for cleanup
coverage from the State Assurance Fund. The legislation also created a
Regulated Substance Fund, which is intended to succeed the State
Assurance Fund and provide funding for cleaning up leaking USTs whose
owners cannot be located or who are not financially viable. Finally, the
legislation allows owners or operators of leaking USTs to file a claim under
$500,000 per occurrence with the State Assurance Fund before accessing
their UST insurance (see Auditor General Report No. 04-06, Finding 1).
􀁺􇩌 Laws 2004, Chapter 303—Changes how the solid waste disposal fee is
distributed among the Solid Waste Fee Fund and the Recycling Fund. From
June 30, 2004 to June 30, 2005, half of the disposal fees collected at
landfills will be deposited in the Solid Waste Fee Fund, and the other half
will be deposited into the Recycling Fund. On and after June 30, 2005, all
the disposal fees will once again go into the Recycling Fund.
9. The extent to which changes are necessary in the laws of the agency to
adequately comply with the factors in the Sunset Laws.
Audit work identified two areas where changes may be needed to department
statutes, as follows:
􀁺􇨠 First, the Department may not receive any funding to clean up orphan
tanks, whose owners cannot be located when the Regulated Substance
Fund begins operation, and may need legislation to ensure that the funding
exists. Laws 2004, Chapter 273 requires the department director to transfer
funds from the State Assurance Fund to the Regulated Substance Fund on
July 1, 2011, but only if all eligible claims to the State Assurance Fund have
been paid. If additional time is needed to pay these claims, the State
Assurance Fund will continue to receive monies from the $0.01 per gallon
excise tax on USTs until all of its claims are paid. As a result, this would limit
the amount of excise tax revenues the Regulated Substance Fund would
receive, and could potentially result in the Regulated Substance Fund
receiving no funding at all for the cleanup of sites whose owners cannot be
located or are not financially viable. However, the Department has an
opportunity to report on the liabilities of the State Assurance Fund in
September 2009 and can advise the Senate President and House Speaker
regarding the need for additional funding. If this report finds that the
liabilities to the Fund will likely prevent the director from transferring monies
to the Regulated Substance Fund in July 2011, the Legislature could
Office of the Auditor General
page 13
consider making a statutory change to extend the excise tax beyond
December 31, 2013, so that the Regulated Substance Fund revenues could
reach $60 million for orphan tank cleanup (see Auditor General Report No.
04-06, Finding 1).
􀁺􇩓 Second, audit work indicated that the Department could potentially benefit
from legislation to grant it administrative penalty authority with respect to air
pollution control. This authority would allow the Department to unilaterally
issue administrative penalties to noncompliant facilities. Administrative
penalty authority is already possessed by the EPA, the air quality programs
in at least 26 other jurisdictions, and the Department’s Drinking Water and
Hazardous Waste programs. According to a department representative,
without administrative penalty authority, the Department must complete a
lengthy legal process, requiring the involvement of the Arizona Attorney
General’s Office, to issue even a minor financial penalty for air quality
violations. However, the limitations on the availability of the Attorney
General’s resources, and the additional time required to pursue an action
in court, restrict the number of cases that can be filed. Consequently,
administrative penalty authority could benefit the Department by allowing it
to pursue enforcement actions more quickly.
10. The extent to which the termination of the agency would significantly harm the
public’s health, safety, or welfare.
Terminating the Department would significantly harm the public’s health, safety,
and welfare, since it is the Department’s responsibility to protect human health
and the environment. If the Department were terminated, federal environmental
standards, such as those set out under the Clean Water Act and the Clean Air
Act, would still remain, and authority for enforcing these standards would revert
to the federal government. Additionally, terminating the Department could result
in shifting responsibility for state environmental programs to local governments,
creating the possibility of a patchwork of regulatory approaches by numerous
local governments.
The Department oversees monitoring of the State’s drinking water systems,
takes enforcement action when drinking water regulations are violated, and
supports the cleanup of water contamination when it occurs. If drinking water
contamination occurs at high levels, short-term health risks and even death may
occur. Similarly, the Department protects human health, safety, and welfare by
regulating hazardous waste treatment, storage, and disposal. The Department
oversees the cleanup of leaking USTs and state Superfund sites, at which soil or
water may be contaminated. Additionally, the Department regulates disposals of
State of Arizona
page 14
waste products at landfills. Finally, the Department regulates all sources of air
pollution in most parts of the State. In the State’s three most populous
counties—Maricopa, Pima, and Pinal—the Department shares air pollution
regulation with county authorities, but retains authority to regulate large facilities,
such as copper smelters and cement plants. Further, the Department
administers several programs, such as the vehicle emissions inspection and
maintenance program, which are designed to reduce the level of air pollution.
11. The extent to which the level of regulation exercised by the agency is appropriate
and whether less or more stringent levels of regulation would be appropriate.
The Department’s statutes and rules allow it an appropriate amount of regulatory
authority over facilities that emit or potentially emit waste, water, and air
pollutants into the environment.
The Department exercises significant regulatory power over the disposal of
waste and the release of pollutants into the air, water, and soil. The Department’s
regulation in these areas seems mostly appropriate. However, the Department
could do more when it identifies those violating environmental laws. Specifically,
the Department often takes longer than its own guidelines recommend to bring
those facilities back into compliance. For example, the Hazardous Waste
Program sometimes takes several months to issue an enforcement action when
it finds a violation (see Auditor General Report No. 04-06, Finding 2). In addition,
Water Quality Division staff cannot address every drinking water violation
occurring at any one time, and therefore they prioritize the violations. However,
some violations continue for a considerable amount of time, with some facilities
remaining out of compliance for years at a time (see Auditor General Report No.
04-05, Finding 1).
12. The extent to which the agency has used private contractors in the performance
of its duties and how effective use of private contractors could be accomplished.
The Department uses private contractors to accomplish some of its duties, and
the audits did not identify any additional opportunities for the Department to use
them. For example, the Water Quality Division’s Monitoring Assistance Program
hires a private contractor to conduct some water quality tests and report the
results to the Division. In addition, the Department’s state-lead program uses
contractors to clean up leaking USTs whose owners either cannot be located or
are not financially viable. Finally, the Department uses a contractor to administer
its vehicle emissions inspection and maintenance program in Maricopa and
Pima Counties. The contractor performs the general public’s emissions testing,
and department staff oversee the contractor and inspect all public and private
fleet inspection sites.
Office of the Auditor General
page 15
State of Arizona
page 16
Office of the Auditor General
AGENCY RESPONSE
ARIZONA DEPARTMENT
OF ENVIRONMENTAL QUALITY
1110 West Washington Street   Phoenix, Arizona 85007
Janet Napolitano (602) 771-2300   www.azdeq.gov
Governor
Stephen A. Owens
Director
Northern Regional Office
1515 East Cedar Avenue   Suite F   Flagstaff, AZ
86004
(928) 779-0313
Southern Regional Office
400 West Congress Street   Suite 433   Tucson, AZ
85701
(520) 628-6733
Printed on recycled paper
September 24, 2004
Ms. Debra K. Davenport, CPA
Auditor General
2810 North 44th Street, Suite 410
Phoenix, AZ 85018
Re: Sunset Review and Sunset Factors Report
Dear Ms. Davenport:
The Arizona Department of Environmental Quality appreciates the opportunity to respond to the
Sunset Factors report prepared by the Office of the Auditor General. The Sunset Factors report
addresses the Department’s Sunset review and includes discussion of the Auditor General’s three
performance audits of the Water Quality, Waste Programs, and Air Quality Divisions of the
Department. We greatly appreciate the conclusion in this report that the Sunset Factors analysis
“indicates the continued need for the Department.” There is no doubt that the efforts and
achievements of this Department improve the environment and quality of life for the citizens of
Arizona.
As the Sunset Factors report reflects, the Department successfully achieves its mission “to
protect and enhance public health and the environment in Arizona.” The Department achieves
this mission through the performance of several central functions—policy development,
outreach, monitoring and assessement, compliance management, clean ups, and pollution
control. The Department’s primary goal is to improve the quality of Arizona’s air, land and
water through the prevention and reduction of unhealthful levels of air pollution, reducing
pollution to and the risk associated with contaminated land and water, and ensuring safe drinking
water. The Department also engages in numerous initiatives and outreach efforts to further its
mission, including the Children’s Environmental Health Project, under the leadership of
Governor Napolitano. This letter outlines some of the Department’s environmental quality
efforts to effectively reach out to stakeholders, control pollution, and enforce the environmental
laws.
Initiatives and Outreach
The Department takes pride in its efforts to improve public health and the environment. For
example, the Department recently has made significant achievements in air quality. In 2003, the
Department received the annual Clean Air Award from the American Lung Association of
Arizona in recognition of the Department’s successes in improving air quality in Arizona.
Additionally, throughout 2003, the Department worked constructively with stakeholders and the
Ms. Davenport
September 27, 2004
Page 2 of 5
U.S. Environmental Protection Agency (EPA) to designate the boundaries for the Phoenix area
eight hour ground-level ozone nonattainment area within the northeastern portion of Maricopa
County and a very small portion of northern Pinal County. The Department’s effective effort
avoided imposition of EPA’s presumptive boundary, which would have placed the entirety of
both Maricopa County and Pinal County in the new non-attainment area.
Moreover, just recently EPA has proposed to redesignate the Phoenix Metropolitan area as being
in attainment for the federal carbon monoxide standard. This is an important achievement that
recognizes the significant improvements that have been made in the Valley’s air quality.
In addition, much has been written about the new, more stringent, federal standard for arsenic in
drinking water and the difficulties Arizona water supplies may have meeting that standard.
Arsenic occurs naturally in many parts of our state, and some of the most affected communities
are those least able to afford the costs of treatment. Knowing this, the Department constructed
Arizona’s Arsenic Master Plan—a guide for small water systems for identifying the most
effective and least costly method to ensure compliance with the new drinking water standard.
The Arsenic Master Plan assists the Arizona Corporation Commission in its efforts to approve
appropriate rates for private water systems; it enables community leaders to understand the
decision process that must occur before a treatment technology is selected; and it helps small
water systems find the right sources of funding and technical expertise. Even more, ADEQ’s
Arsenic Master Plan has served as a model for similar efforts in other states.
Over the last three years, the Department’s Water Quality Improvement Grant Program has
provided more than $6.9 million to both public and private entities throughout Arizona to help
reduce the impact of non-point sources of water pollution in the state’s watersheds. These grant
recipients, who provide their own matching funds, implement projects that have addressed
erosion control, aquatic wildlife restoration and wetlands mitigation. Non-point source pollution
is considered the most significant threat to water quality, and ADEQ will continue its efforts to
protect the quality Arizona’s water resources.
Also, the Department has placed a high priority on initiating early response actions, through the
WQARF (State Superfund) Program, at contaminated sites where human health is threatened or
where sources of contamination can cause significant environmental impact if not contained. In
January 2003, ADEQ initiated an early response action to control contaminated groundwater at
the intersection of Central Avenue and Camelback Road in Phoenix when contamination was
found in a parking garage. In March 2003, the Department initiated an early response action to
address contaminated groundwater at a site in Quartzite when water supply wells were found to
be contaminated. ADEQ provided residents with bottled water until they could be connected to
the public drinking water system, and designed a treatment system to control the spread of
contamination. In May 2003, ADEQ initiated operation of a groundwater containment system in
Tucson to prevent contamination from spreading toward active municipal drinking water wells.
During 2004, ADEQ added three new sites to the state’s WQARF registry, bringing the total
number of sites on the list to thirty-six.
Ms. Davenport
September 27, 2004
Page 3 of 5
The Department continually examines ways to improve the administration of its programs. For
example, as the report recognizes, the Department took the initiative to make substantial
improvements to the administration of the State Assurance Fund (SAF). When the Napolitano
Administration took office in January 2003, the Department faced a backlog of over 1,100
unpaid SAF applications. In early 2003, an internal working group was established by the
Director to determine the reasons for this enormous backlog. In May 2003, the Department
made key administrative changes to the SAF, and, as the audit recognizes, since that time, the
Department has eliminated this backlog. SAF applicants no longer must wait years for payment.
The SAF is operating on a cash basis and, as applications are processed and approved, they are
paid. The Department thanks the Auditor General for noting this dramatic improvement to SAF
claims processing in the audit.
Additionally, in January 2004, ADEQ launched its redesigned, user-friendly web site to better
serve the citizens of Arizona and the regulated community. The improved web site is loaded
with information about the Department and its programs, includes calendaring and LISTSERV
functions, and ultimately will allow access to integrated Geographic Information System (GIS)
information. Also, the Department used a federal grant, one of only three innovation grants
awarded nationally by the EPA, to develop its “Smart NOI,” web-based water quality permit
processing tool. This online function allows the Department to receive an application, sort the
information into the proper databases, and apply a decision- making matrix to the application to
rapidly distinguish those applications for immediate approval from those that require more
detailed attention. Under the Smart NOI program, ADEQ timely processes thousands of these
permits a year. The improved web site will enable us to provide more “e government” functions
to the regulated community.
To further increase the efficiency of services provided by the Department to rural communities in
the state, since 2001, ADEQ has employed community liaisons in each of the state’s “four
corners.” These environmental program specialists are based in Kingman, St. Johns, Yuma and
Sierra Vista. They provide local communities, businesses and other stakeholders with a wide
range of permitting, compliance and outreach assistance, including the resolution of complaints
against the Department.
Children’s Environmental Health
In addition to these and other pollution control and customer service initiative s, the Department
is proud of its work on the Children’s Environmental Health Project (Project), which focuses on
reducing environmental risks to children’s health in Arizona, including particularly the effect of
air quality on childhood asthma and other respiratory illnesses. In the summer of 2003, nearly a
year in advance of the federal imposition of the new, eight-hour ozone standard, the Department
began forecasting and widely reporting the ground-level ozone standard, which is more
protective of children’s health. Children are at risk from exposure to harmful ozone because they
are active outside, playing and exercising, and the Department’s ozone forecasts allow parents
and caregivers to adjust outdoor activities accordingly. The Department, in cooperation with
Maricopa County, provides daily forecasts of ozone, particulate matter, and carbon monoxide
levels, and announces appropriate health advisories on our web site.
Ms. Davenport
September 27, 2004
Page 4 of 5
Further, as part of the Project, in August of this year, the Department, in cooperation with several
school districts in Arizona, launched an innovative pilot program to reduce children’s exposure
to harmful diesel emissions from buses idling near schools. Key elements of the pilot program
include having drivers turn off buses upon arrival at a school and not restart the engine until the
bus is ready to depart. Diesel emissions can aggravate respiratory illnesses, such as asthma, and
have been linked to lung and heart disease. One of the components of diesel emissions, carbon
monoxide, also can reduce alertness and learning capacity in children.
Also, ADEQ’s pollution prevention program, within the Waste Programs Division, recently
received a grant from the EPA to educate and encourage school districts to construct or retrofit
schools to be more environmentally friendly. This “Green Schools” initiative will develop
design, construction and operational practices that will reduce children’s exposure to potentially
harmful chemicals typically found in school settings. Additionally, the Department has surveyed
Arizona schools on the use of chromated copper arsenic wood-coated playground equipment to
assess children’s potential exposure to this substance. Finally, when TCE-contaminated water
was being used for irrigation in a northern Arizona elementary school, the Department quickly
stepped in and conducted sampling of the water supply to ensure that children were being
protected. The Department is conducting further investigation of the cause of contamination in
the irrigation water and options for correcting the problem.
Permitting and Enforcement
The Department achieves its primary goal to improve the quality of Arizona’s air, water and
land, in part, through the issuance of permits and appropriate enforcement actions. For example,
as noted in the audit report, the Water Quality Division has made significant progress toward
meeting the requirement to issue aquifer protection permits, or APPs, on the schedule mandated
by the Legislature. Further, the Auditor General recognized the achievements of the Air Quality
Division in meeting federal air quality standards and taking appropriate, timely and effective
enforcement actions against major sources of air pollution. As suggested in the report, because
this Department has won program delegation from EPA over the last 18 years, if the Department
were terminated, EPA would assume responsibility to implement and enforce environmental
laws in Arizona. The regulated community would answer to EPA’s Region 9 office in San
Francisco, which divides its time among a number of states and tribes. The federal government
would not be held to licensing time frames and would not be accountable to the Governor, the
Legislature, or Arizona’s citizens.
Compliance with and enforcement of Arizona’s environmental laws is a high priority for the
Department, and these efforts are recognized as important by the Office of the Auditor General.
The Department takes enforcement actions in a variety of forms. The Department may take an
informal action, such as issuing a notice of opportunity to correct, or NOC, if the violation is
minor, or a notice of violation, or NOV, if the violation otherwise does not merit formal action.
Formal enforcement actions include compliance orders and civil lawsuits. The Department may
issue compliance orders and civil lawsuits for major violations, repeat violations, and to impose
appropriate penalties.
Ms. Davenport
September 27, 2004
Page 5 of 5
Among its many efforts, ADEQ continues to pursue enforcement against Innovative Waste
Utilization (IWU) for actions related to the company’s operations and its hazardous waste permit
at its south Phoenix facility. The facility and its employees were the subject of a lengthy
investigation by a coalition of federal, state, and local law enforcement agencies. When the
investigation lead to a raid and the arrest of several key employees at the facility for selling
hazardous waste to make methamphetamine in early 2003, ADEQ suspended IWU’s license to
operate the facility, issued a compliance order, and permanently revoked the facility’s license.
The Department then hired and oversaw the work of a contractor to properly hand le, remove and
dispose of the waste at the facility.
Additionally, ADEQ continues to pursue enforcement action against Kinder Morgan for soil and
groundwater contamination caused when Kinder Morgan’s fuel pipeline ruptured near Tucson
and released tens of thousands of gallons of fuel into the environment in July 2003.
Audit Findings
In addition to the numerous and significant achievements of the Department highlighted in this
letter and in the Sunset Factors report, the report includes findings from the three Division
performance audits. The Department has agreed with all the findings in the audits and has
agreed to implement all the recommendations. For example, through the Water Quality
Division, the Department will review the potential to expand the drinking water Monitor
Assistance Program to improve the Department’s oversight of drinking water quality monitoring
by public water systems. Further, the Department will institute fees for engineering reviews
performed by the Water Quality Division and already has begun the recalculation of APP fees, as
recommended by the Office of the Auditor General.
Additionally, the Department, through the new Tank Programs Division, will increase
compliance and enforcement efforts of the financial responsibility requirements for owners and
operators of underground storage tanks. Likewise, the Department will review the State
Assurance Fund cost ceilings to ensure they represent the true costs of cleaning up leaking USTs.
The Department, through the Waste Programs Division, also will consider steps to issue
enforcement actions more quickly with the goal of returning facilities to compliance more
quickly, as suggested by the audit. Finally, through the Air Quality Division, the Department
will continue to improve the air quality in Arizona and to issue timely and appropriate
enforcement actions when the Department discovers violations of the air quality laws.
We thank the Office of the Auditor General both for its effective communication throughout the
audit and Sunset review process and for this opportunity to respond to the Sunset Factors report.
Sincerely,
Stephen A. Owens
Director
02-09 Arizona Health Care Cost
Containment System—
Sunset Factors
02-10 Department of Economic
Security—Division of Children,
Youth and Families, Child
Protective Services
02-11 Department of Health
Services—Health Start
Program
02-12 HB2003 Children’s Behavioral
Health Services Monies
02-13 Department of Health
Services—Office of Long Term
Care
03-L1 Competitive Electric Metering,
Meter Reading, and Billing
and Collections
03-01 Government Information
Technology Agency—
State-wide Technology
Contracting Issues
03-02 Registrar of Contractors
03-03 Water Infrastructure Finance
Authority
03-04 State Board of Funeral
Directors and Embalmers
03-05 Department of Economic
Security—Child Protective
Services—Foster Care
Placement Stability and
Foster Parent Communication
03-06 Arizona Board of Appraisal
03-07 Arizona Board for Charter
Schools
03-08 Arizona Department of
Commerce
03-09 Department of Economic
Security—Division of
Children, Youth and Families
Child Protective Services—
Caseloads and Training
04-L1 Letter Report—Arizona Board
of Medical Examiners
04-L2 Letter Report—Gila County
Transportation Excise Tax
04-01 Arizona Tourism and
Sports Authority
04-02 Department of Economic
Security—Welfare Programs
04-03 Behavioral Health Services’
HB2003 Funding for Adults
with Serious Mental Illness
04-04 Department of Emergency and
Military Affairs and State
Emergency Council
04-05 Department of Environmental
Quality—Water Quality Division
04-06 Department of Environmental
Quality—Waste Programs
Division
04-07 Department of Environmental
Quality—Air Quality Division
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Arizona Department of Transportation, Motor Vehicle Division—
State Revenue Collection Functions
Arizona Department of Transportation, Motor Vehicle Division—Information
Security and E-government Services
Arizona Department of Transportation, Motor Vehicle Division—Sunset Factors