Below is the HillCo client report from the May 13 House Environmental Regulation Committee.
The Committee met on May 13 to hear invited testimony on Interim Charge #1:
Study the environmental permitting processes at the Texas Commission on Environmental Quality (TCEQ), specifically the contested-case hearing process at the State Office of Administrative Hearings (SOAH) and the timelines associated with the process. Study the economic impact that the state's permitting processes have on Texas manufacturing sectors and how neighboring states' and the federal permitting processes and timelines compare to those in Texas.
Robert Martinez, Director of TCEQ Environmental Law Division
- Gave overview of history programs – he noted full detail was provided in his prepared testimony which was provided to the committee
- The TCEQ will continue to meet requirements even if there are changes to the TCEQ contested case process or if it is eliminated
- Contested case hearing requests are a relatively small portion of permits – Approx. 7% of applications that were subject were heard and 2% were sent to SOAH
- Rep. Isaac asked if public can let TCEQ know about concerns before it goes to contested case hearing process
- Yes because notice is provided
- An application can take 1.5- 2yr for a contested case referral – if it goes through entire process
- In response to a question, Martinez noted SOAH has recommended to deny permits before but rare
- About 25% of cases may have revised terms after the contested case process
- Rep. Isaac wonders if contested cases have larger economic impact
- Locality, perceived impact and size means greater chance for contested case hearing
- Rep. Marquez asked about the expedited air permitting process and if TCEQ is in the process of proposing rules
- The TCEQ will be proposing rules during the 5/14 Commissioners’ Agenda
- The expedited process only applies to the technical review process according to witness recollection and not to the process at SOAH
- The TCEQ can limit the duration of the hearing unless there is a direct referral to SOAH
- The administrative review process starts when an application is sent in as they ensure the application is complete and then first notice is sent out
- Then technical review starts
- The air, water, waste permits division will review accordingly and then draft permit (permit divisions at that point will have determined they meet the requirements – some vetting is done during that process)
- The draft permit is issued
- At same time a request for response and then 30 day request to file contest
- Rep. Reynolds asked if once a contested case hearing has a final decision order issued, is it final even upon appeal which is different from EPA
- Correct says witness
- However the decision could be reversed
- Therefore, a company could proceed at final decision but they do so at own risk as decision could be reversed
Bill Newchurch, Administrative Law Judge of Natural Resources at SOAH
- SOAH conducts numbers of hearings and much like a courthouse trial
- They only hear environmental cases when referred to them by TCEQ – which can happen one of two ways
- It can happen when commission grants a request, or
- once TCEQ reviews and applicant chooses direct referral
- The ALJs do not decide if permit will be issued but propose a decision which will include analysis of law, evidence presented and proposed findings of fact and legal conclusions
- SOAH will implement policies and legal decisions – precedent
- They are not developing policies
- There is a narrow opportunity for ALJ to add issues but this happens almost never and maybe never at all
- TCEQ deadline of 60-90 days
- SOAH does abide by this but here is one narrow exception – if the timeline harms due process
- This has only happened once that witness knew of
- However, if case is directly referred to SOAH for hearing, deadline will not be set since the case did not go before the commissioners
- SOAH will develop schedule in consultation with the parties
- Once a hearing request is granted, there may be additional individuals who will show up at preliminary hearing and they may ask to be admitted
- SOAH applies same standard to those who were granted the original hearing request
- They need to apply at preliminary hearing
- There is a very limited possibility for someone to be included later if no one will be unduly disrupted and there is a really good excuse
- Witness says this is more of a theatrical possibility than real possibility
- Parties are entitled to conduct discovery so they can prepare for the hearing
- Almost always require pre-filed evidence which shortens length of hearing
- Longest hearing in a decade was 2 weeks (short time frame in part due to pre-filing)
- A party can move for dismissal or summary judgment after discovery no less than 20 days before scheduled hearing – does not happen frequently, maybe once a year
- TCEQ has mediators and most judges with SOAH are trained as mediators
- One affected person could trigger this hearing
- Can get back to committee more information on adjustments made by ALJ
- In 2012 – 200 cases disposed (also includes enforcement cases)and 181 dismissed according to SOAH report and no significant changes
- Why so many dismissed asked Isaac
- The witness said all types of settlements
- The numbers above could also include TCEQ water rate cases which are actually bulk of cases
- The environment cases are also settled but settlements are not typically shared with judge (such as adding another monitoring site he also stated there could be a financial settlement in response to a members question but again noted judges really have no idea since that information is not shared with them)
- Legislators do appear at preliminary hearing and the statement is entered into record of case but not evidentiary
- Commission rules allow judge to expand issues/scope when it is concluded the parties could not have reasonably anticipated it was going to be an issue but something the commission would have likely included – so yes but it almost never happens
- Rep. Lewis asked about staffing and what could help speed up the process
- Witness said they have never had problems handling caseload
- Written said written testimony could help speed up process once it comes out of TCEQ
- Maybe they could share process of pre-filed testimony
- TCEQ is not familiar of prefiling with application – unless an attorney also practiced at PUC
Bob Allen, Harris County Pollution Control Department
- Very little cases have contested case hearing opportunities
- Over the last five years they have had only 5 contested case hearing requests
- Only one of those went to hearing and that it lasted only 2 days
- His personal experience with TCEQ is that comments are largely ignored (ie comments such as needing applicant to provide a pave or concrete road to control odor and/or dust)
- If application meets technical requirements, then they will get permits but as noted above sometimes a little more than just meeting technical requirements is needed
- Harris county goes in as affected party
- If SOAH was not a possibility, they do have another avenue open such as going to the courts
- 95% of issues are corrected with violation notice but if not, then they will then file a civil lawsuit
Rock Owens, City County Attorney in Houston
- To echo this is not something that happens often but it is a very important tool
- Yes, they could file suit if they did not have this process but it would be costly undertaking for both individual and applicant
- Pre-filed testimony would not be available so it could take years to resolve
David Wise, VP of Manufacturing Shintech
- Familiar with Louisiana permitting process
- In Texas the contested case process can extend the permit process up to one year – the delay can cost significant revenue
- Louisiana and Texas have a very similar process up until the technical review process
- In Louisiana the expedited process can reduce review to 45-60 days and very positive environment
- Louisiana accepts comments on the draft permit itself and then they can issue permits in 8-10 months
- In response to a member question he noted he believes a contested case issue have any impact on bank lending
- Because of credibility and viability of borrowing party – higher level of risk
- Isaac asked if Louisiana guarantees process lasting certain number of days
- Wise does not think it possible to make such a “guarantee” as there are a few variables out of the state’s control but he has found that if a good application is submitted – permit is out in 6-10 months
- Wise estimated his company could lose $400 million in revenue with Texas slower permitting process (taking 1 yr) – which would equate to $4 million in lost revenue to the state in taxes pointed out Isaac
- Water, electricity power pricing, infrastructure – are all huge impacts on bottom line so the siting group will put spreadsheet/matrix together to cover a number of issues which would also include permitting
- Isaac asked witness if he could share any of those details/spreadsheets to see where Texas stacks up in
Pete Schenkkan, Graves Daugherty Hearon & Moody
- Pointed out time when RRC was a powerful agency since it regulated 1/3 of world’s oil supply and forced some discussions on administrative law
- Texas has explicit separation of powers guaranteed – most other states do not
- He claimed Texas violates this as the legislature grants agencies all powers since the legislature does not have any choice but to delegate the job to those who do it day to day
- Argued it is the legislature’s job to limit and set powers
- Cautioned against locking process into statute
Eric Allman, Frederick, Perales, Allman & Rockwell
- Hearings serve an important purpose in uncovering facts that the preliminary process does not
- It is not necessarily the case that large facilities receive hearings, it all depends on the case
- Rep. Turner asked if for direct referrals, the agency recently directed SOAH to limit a hearing to a certain period of time
- In an application for Exxon, the agency directed SOAH to limit a case to 4 months, this was in the past few months
- Turner asked about a particular situation when the agency disregarded comments as well as staff recommendations to side with an applicant
Bob Thompson
- Contested case hearing process is viewed by private property owners as an indispensable private property right
- Many times rural landowners work in tandem with private entities when dealing with mineral rights, transmission lines and pipelines on their property; contracts are always scrutinized to ensure environmental protections
- Contested case hearings could be improved at TCEQ by taking lessons from the Railroad Commission process
- Technical staff at TCEQ has not performed any independent technical analysis in cases the witness has been involved in, they essentially did clerical work and presumed the application was correct
Leslie Kerry, Colorado County Landowner
- Found out that an adjacent landowner filed for an application to apply sewage sludge on their land
- The land is located in a major floodway of the Colorado River
- The SOAH process is necessary to ensuring landowners’ rights are maintained
Steven Minick, Texas Association of Business
- 15 years ago in HB 801, a much more aggressive comment and notice process were implemented
- It seems there are still some reasons to go back and visit those processes
- Public is frustrated that the agency cannot grant many things that they put into permits
- The permit process should not be used as a way to get things done that they agency does not have the authority to do
- Process sometimes serves as a disincentive to capital improvements and economic development
- Perhaps more binding mediation requirements should be put into place
- Objective should be to minimize risk to bringing capital to the state
- Isaac asked if the Texas Association of Business has any numbers on how many times SOAH processes have hindered economic development
- Not formal numbers; it does happen a lot that businesses ask how long permitting, etc. will take and it is hard to tell them how long
- Last session a plan was developed to implement a notice and comment period and do away with hearings; it would have been manageable; if the current process is going to be upheld it needs to be strengthened
- Turner asked for an example when a company may have decided not to come to Texas because of the hearing process
- Many times companies won’t give specific reasons for not coming to Texas because they may want to bring business to Texas later on
Laura Blackburn, League of Women Voters of Texas
- Nobody has brought up public health which is what this is all about
- Supports keeping the contested case process
- Opposes any additional weakening of the process; would prefer strengthening it
- An affected party can only be a directly affected person, not the public interest or the public good or public health
Cyrus Reed, Sierra Club
- Some states have the same notice and comment process as EPA; 10 or 11 states
- Some states allow administrative hearings after a notice and comment process
- Some states allow notice and comment periods after the administrative hearing
- Many standard permits and general permits do not allow for administrative hearings
- Contested case hearings are allowed for matter like water rates, gas rates, enforcement, etc.; private entities are not looking for these hearings to be abolished because the process can benefit them
- Very few permits receive contested case hearings and very few are denied after a contested case hearing
- Through legislation, administrative hearings have been limited in many permit/license instances in the past
- There may be a need to look at codes pertaining to administrative hearings to align definitions, etc.
- May need to make it more clear, statutorily, who has standing in certain contested case hearings
Tom “Smitty” Smith, Public Citizens Texas
- The question should not be how do we limit the process to prevent economic development, but, how do we make the process better to prevent poorly planned or dangerous facilities from being developed in the state
- The contested case hearing brings in experts to sit down and look at what the very best pollution control technologies are to be implemented in facilities when the company may be only trying to implement what worked in their last permit
- People opposing the current process who like the EPA notice and comment process have not mentioned using a process similar to the Environmental Appeals Board process used in tandem with the notice and comment process
- Even though administrative hearings are only used in 2% of permits, those are the ones that genuinely need checks and balances
- Rep. Ron Reynolds asked how to make the process more efficient
- If applicants would submit full permits more often, the process would be more efficient
- There have been significant reduction in who can be an affected party, should allow general public interest as an affected party
- TCEQ needs more staff and funding for administrative hearing purposes
- Lewis asked for thoughts on ways to cut out some of the time that isn’t useful to anyone
- Submitting complete applications to begin with is one way; putting companies on short timeframes to submit that info could save some time; rejecting incomplete applications is another way
Derrick Seal, Balanced Energy for Texas
- Former TCEQ general counsel
- The threat of a contested case hearing does affect the way business is done in Texas
- TCEQ is charged to protect human health and environmental safety; things should not be added to permits through administrative hearings that are not required; if they should be required, change the requirements
- The witness has never seen TCEQ rubber stamp a permit; many times they can be approved quickly because the business hires professionals to put the applications together and they have already been reviewed thoroughly
- Sometimes mediation can be used to move projects along more quickly
- Rep. Kyle Kacal asked for suggestions to improve the process
- Last session the legislature gave the agency the option to approve greenhouse gas permits without an administrative hearing; that can be done more
- Burden of proof is an issue; narrowing down the issues and making objectors do more than just raise an issue of concern
- Reynolds asked if the witness has experience with the Environmental Appeals Board; is that a favorable process
- Have not tried one of those cases personally; things about the process are better than the TCEQ process
- Isaac asked if TCEQ staff is involved with a contested case hearing
- Yes, if a staff member is involved in the application process the will be involved in the hearing; they may have already looked at the permit in the agency then must defend what their recommendations were during a hearing
- Isaac asked if any members of Balanced Energy for Texas have been through a settlement where something about the permit changed
- Not sure if they have made settlements; they have assuredly been through contested case hearings