I gave it a thought trying to be not pissed for a moment, and I think the action that is allowedanujtripathi2006 wrote:In my opinion A is the correct answer.
is dumping the phosphates and it is in my opinion independent of the amount it had been restricted to or perhaps even left unregulated once.
i.e.
..reduced the amount of phosphates (that) municipalities are allowed to dump to the GL.
second case where the noun is the noun clause in whole: the amount of phosphates (that) municipalities had been allowed to dump to GL... here amount really matters
given all the above and that GMAT goes for the simplest concise and clear answer I'd say that choice D is more appropriate. It has less words with a clear meaning.
BTW my first choice was A as most of you chose.












