STATE AND FEDERAL ENVIRONMENTAL HOT TOPICS:

AIR ISSUES and ENFORCEMENT

Pamela M. Giblin 29th Annual Corporate Counsel Institute

May 11, 2007

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AIR: STATE ISSUES

Texas State Implementation Plan Event Reporting Title V Reporting Emissions Inventory Reporting Regional Haze Fuel Requirements Climate Change Legislation Other State Legislation

3Texas SIP: Map of Texas' Ozone Nonattainment/Near-Nonattainment AreasSource: www.tceq.state.tx.us

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Texas SIP Upcoming SIP Timeline:

May 2007: Agenda to consider adoption of the HGB 8-Hour Ozone Attainment Demonstration

May 2007: Agenda to consider adoption of the HGB Rate-of-Progress SIP

June 2007: Agenda to consider proposal of El Paso PM10 Redesignation and Maintenance SIP Revision

July 2007: Agenda to consider adoption of General Conformity SIP Revision

November 2007: Agenda to consider adoption of the Regional Haze SIP

December 2007: Agenda to consider adoption of the El Paso PM10 Redesignation and Maintenance SIP Revision

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Event Reporting Applies to all unauthorized emissions:

Emission Events (i.e., "upsets" or "malfunctions") Maintenance, Start-up and Shutdown ("MSS") Emissions

Reportable quantity ("RQ") for every possible air contaminant: Incorporates CERCLA/ECPRA RQs for listed substances 100 lb. RQ default for all non-listed substances

Record or report all events: Report if > RQ/24 hours Record if < RQ/24 hours (records available for inspection)

Prompt electronic reporting Initial Report as soon as practicable, but not > 24 hours Follow-up Report in 2 Weeks

Ready public access to reporting data Searchable reporting data lodged on TCEQ website

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Event Reporting: Compliance Emission events constitute violations Source "demonstration" for penalty relief:

Does not affect injunctive relief/order authority Source has burden of proof Correct reporting/recording is a prerequisite TCEQ review and makes determination

Substantive demonstration criteria mirror criteria in EPA's SIP guidance "Excessive emission events" determination

TCEQ Executive Director makes determination Based on several factors, e.g., frequency, cause and duration

Source options: Corrective action plans (CAPs) Obtain authorization (if available)

"Chronic excessive emissions events" determination Commission makes determination Separately affects "compliance history" status

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Title V Reporting

Semi-annual "deviation" reporting certified by a responsible official

Emission events constitute deviations

Reporting or recording errors constitute deviations (when reporting rules are incorporated as applicable requirement)

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Emissions Inventory Reporting

Annual report required of all major sources

Report must include and identify emission events and MSS emissions

Emissions inventory data used in SIP process Planning & modeling Rule development

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Regional Haze

EPA's Regional Haze rule requires the states, in coordination with the EPA, the National Park Service, the U.S. Fish and Wildlife Service, the U.S. Forest Service, and other interested parties, to develop and implement air quality protection plans to reduce the pollution that impairs visibility.

Texas has two Class 1 areas located in the western part of the state: Big Bend National Park and Guadalupe Mountains National Park.

The Regional Haze revision to the Texas SIP is due to EPA by December 17, 2007.

Best Available Retrofit Technology (BART) and the Clean Air Interstate Rule (CAIR) are other federal regulations expected to improve air quality and regional haze. The Texas BART rule was adopted in January 2007. The Texas CAIR was adopted in July 2006.

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Fuel Requirements

The TCEQ requires use of various fuel mixtures:

Reformulated gasoline year-round in the HGB and DFW areas

Low Reid vapor pressure gasoline each summer in East and Central Texas and El Paso

Oxygenated gasoline each winter in El Paso

Low-emission diesel fuel in East and Central Texas, including Houston-Galveston, Dallas-Fort Worth, and Beaumont-Port Arthur

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Texas Climate Change Legislation Three primary climate bills have been filed in the Texas Legislature

SB 945, filed by Sen. Rodney Ellis (D-Houston)-- Texas Global Warming Solutions Act

Would require Greenhouse Gas emission reductions to 1990 levels by 2021 based on calculating Statewide 1990 GHG emissions by January 1, 2009

Would require TCEQ to publish a list of early reduction actions by June 30, 2008 and rules implementing early reduction actions by January 1, 2010

Would require TCEQ to prepare a comprehensive plan detailing achievement of reduction goal by January 1, 2010

Would require TCEQ to adopt rules by January 1, 2012 setting GHG emission limits and reduction measures for sources or source categories

HB 2143, filed by Rep. Eddie Rodriguez (D-Austin) -- Texas Global Warming Solutions Act

Would require GHG emission reductions to 1990 levels by 2020 based on calculating Statewide 1990 GHG emissions by June 30, 2008

HB 2073, filed by Rep. Elliott Naishtat (D-Austin) Would require the TCEQ to prepare a report listing strategies to reduce GHG emissions

in Texas and adopt rules implementing the strategies by June 1, 2009

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Other Proposed Texas Legislative Bills Other air-related legislative bills that have been filed this Session

HB 1740, filed by Rep. Ellen Cohen (D-Houston) Would amend the Texas CAA to allow the TCEQ to impose more stringent

requirements at permit renewal, where the facility is permitted to emit an air contaminant that has the potential to produce adverse health effects or odors..."

HB 1745, filed by Rep. Sylvester Turner (D-Houston) Would amend the emissions event reporting provisions of the Texas CAA to change

the RQ-event reporting deadline from 24 hours to 1 hour Would establish a fee in the amount of $1/ton for emissions events over 10,000

lbs/year by a regulated entity

HB 1252, filed by Rep. Dennis Bonnen (R-Angleton) Would authorize the TCEQ to renew a preconstruction permit when a permit

amendment that requires public notice is submitted no more than 36 months before the date the permit expires

Would authorize the TCEQ, for cause, to establish a permit term for a preconstruction permit issued for a nonfederal source not to exceed 10 years

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AIR: FEDERAL ISSUES

Federal Air Programs Exceptional Events Upcoming Federal Deadlines Federal NSR Reform NSR Supreme Court Cases Climate Change

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Federal Air Programs

State Implementation Plans: Final PM2.5 Rule Sets forth the requirements states must meet in their SIPs to ensure

that nonattainment areas will attain the PM2.5 standard as expeditiously as practicable, but no later than 2015.

Clean Air Interstate Rule On March 10, 2005, EPA issued the Clean Air Interstate Rule, which

permanently caps emissions of sulfur dioxide and nitrogen oxides in the eastern United States.

Clean Air Mercury Rule On March 15, 2005, EPA issued the Clean Air Mercury Rule to

permanently cap and reduce mercury emissions from coal-fired power plants. This rule made the United States the first country in the world to regulate mercury emissions from utilities.

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Exceptional Events

Earlier this year, EPA published its Exceptional Events rule, which establishes criteria and procedures for determining whether air quality monitoring data has been influenced by exceptional events. 72 Fed. Reg. 13,560 (March 22, 2007).

Exceptional Events are: unusual or naturally occurring events that can affect air quality but are not

reasonably controllable or preventable; events caused by human activity that is unlikely to recur at a particular

location or natural event; and are determined by EPA to be an exceptional event.

This rule requires states to take reasonable measures to mitigate the impacts of an exceptional event.

The effective date of this rule is May 21, 2007.

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Federal Regulatory Deadlines Ozone SIPs for 8-hr NAAQS June 15, 2007 Attainment for 8-hr ozone NAAQS June 2007-2024* Regional Haze SIPs December 17, 2007 Revised Ozone NAAQS final rule March 12, 2008 PM2.5 SIPs for 1997 standards April 2008

CAIR NOx (Phase I) January 1, 2009 CAIR SO2 (Phase I) January 1, 2010

CAMR (Phase I) January 1, 2010 Designations for 2008 Ozone NAAQS March 2010* Attainment of 1997 PM2.5 NAAQS April 2010

Designations for 2006 24-hr PM2.5 NAAQS April 2010*

Ozone SIPs for 2008 NAAQS March 2011* Attainment of 2006 Ozone NAAQS March 2012-2029* PM2.5 SIPs for 2006 24-hr NAAQS April 2013*

Compliance with Regional Haze SIPs 2013-2018 Phase II CAIR (NOx and SO2) January 1, 2015

Attainment of 2006 PM2.5 24-hr NAAQS April 2015*

Phase II CAMR January 1, 2018

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NSR: Supreme Court Cases Environmental Defense v. Duke Energy Corp.

On April 2, 2007, the Supreme Court issued a decision in which it held that the Fourth Circuit's determination in Duke Energy was inconsistent with the language of the PSD regulations

The decision confirms that the emissions tests for modifications under NSPS and PSD are independent

U.S. v. Cinergy 7th Circuit decision that NSR requires annual emissions test

criticized 4th Circuit Duke decision Cinergy appealed decision to Supreme Court

New York II D.C. Circuit vacated equipment replacement rule

NSR applies to "any" physical change that increases emissions so EPA can only adopt de minimis exclusions

EPA and UARG appealed decision to Supreme Court

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Climate Change The U.S. government has established a comprehensive policy to address

climate change. The three basic components of this policy are:

Slowing the growth of emissions; Strengthening science, technology and institutions; and Enhancing international cooperation

To implement its climate policy, the U.S. government is using both voluntary and incentive-based programs to reduce emissions.

The climate change initiative incorporates expertise from many federal agencies, including EPA, as well as from the private sector.

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Climate Change: Supreme Court Decision

Massachusetts v. EPA

On April 2, 2007, the U.S. Supreme Court ruled that EPA has authority under the Federal CAA to regulate greenhouse gas emissions from cars

Petitioners have standing to challenge EPA's denial of their petition for rulemaking on greenhouse gas emissions from new cars

Greenhouse gases fit within the CAA's broad definition of air pollutant, so EPA has authority to regulate them

On remand, EPA must ground its reasons for action or inaction in the statute

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Federal Climate Change Legislation

Two pieces of proposed Federal legislation specifically target utilities: Electric Utility Cap-and-Trade Act

utility industry-specific GHG cap-and-trade plan plan starts with a 15% auction of emission credits in 2011, and

progresses to a 100 % auction by 2036 Clean Air Planning Act

utility industry-specific, targets controls for CO2, SO2, NOx and mercury emissions from coal-fired power plants

Additional Federal Legislation Global Warming Pollution Reduction Act Climate Stewardship and Innovation Act Safe Climate Act

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ENFORCEMENT ISSUES

State (TCEQ) Responses to Executive Director's Preliminary Report and Petition

(EDPR) Timeline for Enforcement Actions Compliance Histories Field Citation Pilot Program

Federal (EPA) Most Common Enforcement Matters

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Responses to EDPR

General Denial vs. "Kitchen Sink" Determine whether raise specific defenses or simply plead a general denial Specific defenses can "send a message" to the other side

Affirmative Defenses Can be raised at any time Different than civil litigation

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TCEQ Enforcement Timeline

Action Pre-Enforcement Process Review

Post-Enforcement Process Review

Assignment of Enf. Coordinator

No enforced time limit 7 Days after referral to Enf. Division

Mailing of Proposed Order and PCW

120 days after referral to Enf. Division

60 days after referral to Enf. Division

Referral to Litigation Division

60 days after mailing of order

30 days after mailing of order

Referral to SOAH/ Filing of EDPRP

No enforced time limit 45 days after referral to Litigation Division

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Compliance Histories The TCEQ rates the compliance history of every owner or operator of a

facility regulated under any of the following State laws: Texas Water Code, Chapter 26 - Water Quality Texas Water Code, Chapter 27 - Injection Wells Texas Health & Safety Code, Chapter 361 - Texas Solid Waste Disposal Act Texas Health & Safety Code, Chapter 382 - Texas Clean Air Act Texas Health & Safety Code, Chapter 401 - Texas Radiation Control Act

A compliance history entails both positive and negative factors related to the environmental performance at a site over the past 5 years.

State regulations (30 T.A.C. Chapter 60, Compliance History) set forth the procedure for quantifying each factor in the compliance history; the resulting rating is a measure of the customer's distance from compliance

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Compliance Histories, cont. Ratings are converted to classifications, as follows:

If the calculated rating is below 0.10, the performance is classified as HIGH, meaning that, at this site, the customer complies with environmental regulations extremely well

If the calculated rating is 0.10 - 45.00, the performance is classified as AVERAGE, meaning that, at this site, the customer generally complies with environmental regulations

If the calculated rating is 45.01 or greater, the performance is classified as POOR, meaning that, at this site, the customer fails to comply with a significant portion of the relevant environmental regulations.

The assigned rating of 3.01 is classified as average by default.

Ratings and compliance classifications are updated each September 1st.

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Field Citation Pilot Program

This pilot program covers violations regarding: Petroleum storage tanks Stage I and II vapor recovery Storm water (industrial) Occupation certification

The TCEQ implemented this pilot program statewide on March 13, 2006

The TCEQ investigator may cite certain clear-cut violations on the field citation form

This program is intended to promote a quick resolution for specific violations documented during a TCEQ investigation, while offering a reduced penalty as compared to a penalty calculated through the traditional enforcement process

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Enforcement Issues: Federal

Listing of the most commonly encountered federal environmental laws enforced by the EPA:

Asbestos Hazard Emergency Response Act (AHERA) Clean Air Act Clean Water Act Comprehensive Environmental Response, Compensation, and Liability Act

(CERCLA/SUPERFUND) Emergency Planning and Community Right-to-Know Act (EPCRA) National Environment Policy Act Oil Pollution Act Resource Conservation and Recovery Act Solid Waste Disposal Act Rivers and Harbors Act Toxic Substances Control Act

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