Texas Proposes New GHG Emissions Rules

While the State of Texas continues to challenge EPA’s GHG rules in court—so far unsuccessfully, although the U.S. Supreme Court has accepted certiorari on one challenge—the stage is now being set for Texas to issue GHG permits. If the Supreme Court affirms EPA’s authority to regulate GHG emissions through the Clean Air Act (CAA)’s programs for the permitting of new and modified stationary sources, then TCEQ’s GHG permitting rules will govern future GHG air permitting in Texas. On the other hand, if the Supreme Court ultimately rules against EPA and finds that the Agency lacks authority to use the CAA’s permit programs to regulate stationary sources of GHGs, Section 2 of HB 788 also allows the TCEQ to repeal these rules. A Supreme Court ruling is expected before the end of the Court's current term in June 2014.

The Proposed Rules

On October 23, 2013, the TCEQ voted to approve the publication of the proposed GHG rules and to invite public comment. Not only will these new rules establish a new TCEQ GHG permitting program, they will eventually end the existing bifurcated air permitting process in which Texas air permit applicants must seek separate approvals from both TCEQ and EPA when their facilities emit not only conventional air pollutants in sufficient amount, but also GHGs. TCEQ’s lack of authority over GHG emissions left the EPA as the only permitting authority in Texas that could issue the necessary preconstruction permits to major sources of GHG, a situation that was itself the source of many complaints from the regulated community. To redress this situation, the Texas Legislature enacted HB 788.

HB 788, which became effective June 14, 2013, enables TCEQ to assume the GHG permitting responsibilities that EPA has exercised since 2011. TCEQ’s new authority is now codified in the Texas Health and Safety Code at Section 382.5102, and the Agency has wasted no time in drafting comprehensive rules to implement its new authority. A few weeks ago, the TCEQ made available a complete draft of these proposed GHG rules before they were formally approved by the Commission on October 23, 2013. Publication of these proposals in the Texas Register is slated for November 8, 2013; a public hearing is scheduled for December 5, 2013; and the public comment period will run until December 9, 2013. The TCEQ aims to promulgate these rules by March 26, 2014, but the process does not end there.

TCEQ must then submit the newly promulgated rules to EPA for approval as part of the Texas’ State Implementation Plan (SIP), specifically those portions of the SIP which govern “Prevention of Significant Deterioration” (PSD) permitting. The TCEQ in effect will be conceding, unless the Supreme Court decides otherwise, that PSD applications in Texas must address not only the conventional air pollutants that have always been covered by the PSD program, such as NOx, VOC and SO2, but GHGs as well. One of the most significant implications of the new rules is that the TCEQ, not EPA, will be making key PSD decisions regarding the level of control that PSD applicants must exercise in order to satisfy the Best Available Control Technology (BACT) element of PSD review. To date, nationwide, BACT for GHGs is usually based on the maximum degree of energy efficiency that a source or modification can achieve. Increasingly, GHG reviews are also focused on reducing releases of methane from oil and gas facilities. For the foreseeable future, it is only in the case of new or modified coal-fired power plants that EPA might insist upon the installation of GHG emissions capture systems to satisfy the BACT requirement, and then only once EPA has set a final New Source Performance Standard (NSPS) under CAA section 111(b) to that effect.

The CAA’s SIP approval process can be time-consuming, especially in Texas, where the State and EPA have been battling each other for several years. The process has been an iterative, complicated and sometimes even contentious. Indeed, some months ago, the TCEQ estimated that the process to propose, promulgate and obtain the EPA’s approval of the new GHG rules could take as long as three years to complete. In some cases, EPA has shelved TCEQ SIP submissions for over a decade or more. Moreover, the currently effective Federal Implementation Plan or FIP, which was put in place to ensure there was some GHG permitting authority in Texas in the absence of any state permitting authority, must be rescinded before the revised Texas SIP can take effect. Finally, both agencies are likely to consume time in developing transition plans when it is appropriate to do so.

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