(FORTUNE Magazine) – EXCEPT FOR TAXMEN and securities sleuths, no federal enforcers wield more power over business than those of the Environmental Protection Agency. Giant smokestack complexes, as well as little neighborhood factories using volatile chemicals that contribute to smog, must button up or face a visit from an inspector and penalties. Yet even the EPA's staunchest supporters consider it poorly managed, balkanized, and slow to carry out a complex agenda legislated over the past two decades. Says Douglas Costle, a former EPA chief: ''Congress has told the EPA to run in 360 different directions and get it done yesterday.'' Enter William Reilly, a professional conservationist, as EPA's seventh administrator. His easy access to President Bush has won the agency increased clout in the Administration, especially critical at a time of federal belt- tightening. Congress is taking notice too. There's a genuine desire among Democrats and Republicans alike to develop a good working relationship with EPA, and Reilly is the cause. But as Bush's ambitious proposal to amend the Clean Air Act moves with surprising speed through Congress, Reilly's EPA still faces tough questions: What is it supposed to do? And can Reilly break the gridlock? It is clear what has gone wrong. A panicky public, inflexible environmentalists, blindly resistant industry, a bullying Congress, and the EPA's scientifically skilled but poorly managed bureaucracy have clashed continually. Result: Many efforts to protect the environment have slowed to the pace of industrial sludge. Stored in incompatible computer systems, the EPA's vast database threatens to become a Tower of Babel. EPA's job is just too big. Given the breadth of its mission, it might as well be called the Universe Protection Agency. It must regulate air and water pollution, hazardous waste disposal and cleanup, pesticides, drinking water, and radiation. It must also conduct research on the health effects of pollutants and measure the gas mileage of automobiles -- a chore that could as easily be handled by the Department of Energy. Directly or indirectly, the EPA has jurisdiction over millions of pollution emitters, including every car and truck. Its 1987 Toxics Release Inventory is a census of 19,000 factories disgorging more than seven billion pounds of 328 toxic pollutants into the air, water, and land. Reilly could be just the man to get EPA back on track. During the Reagan Administration, the agency was either scorned or neglected, and mismanagement scandals under administrator Anne Gorsuch Burford seriously undermined morale and earned the enmity of Congress and the public. Republican Reilly, 49, a protege of previous EPA administrators William Ruckelshaus and Russell Train, is former president of the World Wildlife Fund and the Conservation Foundation. In enthusiastic temperament, he resembles George Bush, who has styled himself the Environmental President. The EPA boss passes muster with the Education President too. A history major at Yale, he went on to Harvard law school and a master's degree in urban planning from Columbia. He speaks French and Spanish and sings Mozart duets with his wife, Libbie, the mother of their two children and an accomplished soprano. Reilly can turn a phrase as well. ''This society,'' he says, ''halts trading in a bad stock faster than it cancels a bad chemical.'' SOME environmentalists have deemed him too ''middle of the road'' and too willing to work out solutions with industry. Reilly believes that it simply makes sense to bring all parties to the negotiating table. But to the true crusaders, that smacks of Vichy-like collaborationism. The EPA was born in the heady months following the first Earth Day in 1970 and consolidated more than a dozen environmental bureaus. Washington has allocated paltry funds for the agency's multiplying missions. Its $6.4 billion budget for fiscal 1989 was larger, in inflation-adjusted terms, than the first EPA budget 18 years ago. But if you subtract $1.6 billion in Superfund money, which is only for hazardous waste cleanup and is partly unused, the budget has shrunk. The EPA has been able to finance a doubling of its staff, to 15,000, only because it has been handing out fewer grants to local governments to build sewage treatment plants. ''The country,'' says Reilly, ''keeps layering on EPA all of its aspirations for the environment, which are idealistic and worthwhile but which the agency has not had the resources to pay for. A lot of our programs are held together with baling wire.'' Four key laws and their amendments drive environmental protection: the Clean Air Act of 1970, the Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act of 1976 (RCRA), governing solid-waste disposal, and the Superfund law of 1980. These four statutes alone total 841 pages and have generated thousands of pages of EPA regulations. The laws sometimes conflict. Pollution abatement often does not destroy dirt but merely moves it, say, from the rivers we swim in to the air we breathe. The nation's laws frequently fail to take account of this interrelatedness. The water pollution act, for example, requires municipalities and industry to remove contaminants from waste water. But some are volatile, toxic solvents that wind up in the air. As public concern has risen, so has congressional meddling. Over 90 committees and subcommittees have jurisdiction over some aspect of EPA, up from 15 when Ruckelshaus in the 1970s complained of having to testify too much on Capitol Hill. Lee Thomas, Reilly's predecessor, spent a quarter of his time there. EPA officials complain that the lawmakers want them to achieve protection that poses zero risk to humans. ''Congress has established levels of perfection for the EPA such that it is doomed from the start,'' says Ruckelshaus. ''When people are presented with the impossible, they either freeze or study a situation to death. EPA has done both.'' It has become bogged down, for example, in Talmudic distinctions over ''risk assessment'' in an attempt to make a legally airtight case for suppressing this or that toxic substance. The result of all the laboratory research and risk assessment is 205.8 million pages of computer data. Much of it is hard to retrieve and narrowly focused. When Congress began passing environmental laws, it ordered the collection of data specific to each one. A single factory might have to get permits and make reports under a bewildering array of air, water, and land pollution statutes. But the data don't always mesh. MEANWHILE, budget pressure caused the EPA to stint on computer systems to store and retrieve all that information. Says David Hawkins, a former assistant EPA administrator now at the Natural Resources Defense Council: ''That's like neglecting maintenance spending for New York City. Pretty soon the bridges start falling apart.'' That Everest of data will get even taller as pollution measurement improves. ''In the future,'' says deputy administrator F. Henry Habicht, ''we're going to be able to find pollutants where we've never been able to find them before.'' When EPA was set up, its scientists could detect the powerful carcinogen dioxin in concentrations of one part per million. Now they can find it at one part per quadrillion. (Assume this page is covered with a million pinpricks. One part per quadrillion is equal to one-billionth of a pinprick.) Therein lies the potential for a new round of pollution scares. What if your backyard was found to have one part per quadrillion of a cancer-causing substance? Would you be concerned? Of course. But what is the chronic effect of being exposed over 70 years to minute traces of dioxin? It may be negligible, but no one wants to be exposed to dioxin if he doesn't have to be. WHEN THE EPA tried to set priorities in a 1987 study called Unfinished Business, some environmentalists were aghast. Using fundamental principles of what endangers or degrades life and property, EPA researchers ranked 31 environmental hazards according to cancer risk, noncancer health risk, ecological risk, and damage to natural resources and commercial buildings. Some of the conclusions were stunning. ''Inactive hazardous waste sites'' where material is no longer dumped, for which Superfund money is piling up, finished eighth (among a total of 29) in cancer risk, just behind No. 7, much- publicized stratospheric ozone depletion. Tied for first place were radon in the home and worker exposure to chemicals. The report suggested that Superfund was diverting scarce resources from more pressing issues. Congress has no such priorities. It responds when constituents hit the panic button about, say, Alar -- a chemical that makes McIntosh apples redder. Alar poses a small risk of cancer, perhaps four cases per 100,000 persons over a lifetime. The EPA took 12 years to study Alar in order to follow congressional mandates, and in early 1989 confirmed that it was a potential carcinogen. But when the Natural Resources Defense Council issued a study on pesticides and the Senate held hearings on the risks to young children, the mere publicity drove the sprayed apples out of the stores. What can the Administration, Congress, business, and environmentalists do to help unsnarl the EPA and let it concentrate on what matters most? The following steps belong on the agenda: -- Give the EPA more money for computers. Considering the size of its tasks, the $214 million it currently spends annually for all aspects of information management is not enough. Reilly hopes to get a 16% increase next year and wants money for supercomputers. -- Lower the level of rhetoric. Bush's clean air bill falls short of what some environmentalists had demanded. To help ensure passage, the EPA wanted the support of such politicians as Michigan Congressman John Dingell, a powerful auto industry champion. So it fashioned the bill to meet some of his and Detroit's objections, especially in the way tailpipe emissions are measured. ''Sellout,'' cried certain environmentalists, who should have credited Bush and the EPA for coming out with the first major environmental bill in nearly a decade. In fact, the environmentalists' worries turned out to be excessive, for in early October a House subcommittee approved a tougher provision on auto emissions that Dingell assented to in a major compromise. -- Give the EPA more discretion in implementing the law. A big increase in the agency's budget isn't necessarily the answer. But the EPA should at least have more flexibility in managing its scarce resources. That would also lead to faster and cheaper solutions. For example, the agency wants to get out of the business of stipulating what measures utilities must take to curb acid rain. Says William Rosenberg, head of the EPA's clean-air office: ''We wouldn't approve or disapprove a technology. We'd just measure what comes out of the smokestack. How somebody gets there would be their business.'' -- Consolidate the environmental laws into a single new law. Businesses would then have to deal with only one permit and one inspector instead of a platoon. Reilly favors this, and Terry Davies, a new assistant EPA administrator, has drafted a 217-page piece of comprehensive legislation. -- Set environmental priorities. Congress should produce its own version of Unfinished Business as a more rational guide to allotting scarce federal money. -- Don't demand perfection. ''You don't crack the environmental protection problem,'' says Ruckelshaus. ''You just have to stay everlastingly at it. If you don't, you start to lose ground.'' But even the most ardent environmentalists must make peace with the fact that living will always require some degree of risk.