The House Select Committee on Federal Environmental Regulation met on March 29 to hear invited testimony from TCEQ, PUC, and ERCOT over several recent EPA regulation and their impact on the economy and environment of Texas.
 

  • Chair Morrison – Purpose of hearing to analyze effects of federal environmental regulation, the economic impacts of environmental standards, and also consider economic impact on Texas’ emissions plan and the state’s response

 
Dr. Bryan Shaw, Texas Commission on Environmental Quality

  • Presents several environmental plans
  • Clean Power Plan, initiative from EPA to remove carbon emissions from power plan, would require lower limits on existing sources than what could be obtained through traditional methods
    • Would shut down up to 16% of current coal-generated power
    • Would require a change from Texas’ former energy dispatch mechanism based on cost of generation to one based upon environmental impact
    • Rule is currently stayed by the supreme court, work in Texas agencies have thus ceased changes to deadlines will take place after ruling
  • Regional Haze, plan that combats haze in national parks
    • 2009 plan to implement this was rejected by EPA, EPA drafted a federal emission plan with changes to several coal power plants in Texas
    • First deadline is in 2017, Texas has filed a complaint and a motion to stay this plan
    • EPA has commented that this would likely cost $2 billion, benefit is no human-perceptible improvement
    • Texas’ current plan is aimed at achieving certain targets by 2018 and Texas has achieved goals based upon this plan
    • Texas’ compliance dates begin in 255, this issue is complex
    • Environmental groups across the US predict many states will fail to meet EPA’s compliance date of 2064
  • Cross-State Air Pollution Rule, ensures states address their inadvertent pollutant transport across state lines, targets pollutants like SO2
    • Primarily targets a set of 23 eastern states
    • Phase I expected to be implemented 2015, Phase II expected in 2017
    • Texas has been involved in litigation as EPA’s timeline would have only granted 4 months to improve emissions
    • DC circuit has remanded the budget plan and EPA is expected to issue a new budget plan
    • Texas is meeting all cross-state budgets, individual companies may need to purchase allowances
    • Wu – What is the main reason for regulating SO2
      • SO2 can form particulate matter with detrimental health effects
      • Texas does not have any nonattainment areas for this
    • Wu – When SO2 comes into contact with water, does it become sulfuric acid?
      • It does not always, primarily ends up with particulate sulfates
    • Wu – Are there particular health impacts of SO2 being in the air
      • No, it is not based on specific SO2 health impacts, rule based on particulate matter standards
    • Wu – What about NOx?
      • NOx is a precursor for ozone, NOx reacts with volatile organic compounds
      • Primary benefit in Texas is reducing NOx as Texas has abundant VOCs
    • Wu – Is Texas sending or receiving more pollutants?
      • Texas has ozone impacts on certain areas of Louisiana
      • SO2 is included because of Illinois, but that area was in attainment regardless
  • Mercury and Air Toxic standard
    • Rule for certain EGUs effective in April of 2012 targeting mercury, non-mercury metal, acid gases, etc.
    • Extension was granted in Texas until April of this year, all EGUs will be held to standard as of April 16, 2016, so far all will be in compliance
    • Litigation is in process to press EPA to consider costs before promulgating rules
    • Expected benefit is around $4 million annually and cost is around $9.6 billion
    • Rodriguez – Are there any fish consumption advisories in Texas?
      • Sources of mercury in lakes in Texas is very small component of mercury emissions in Texas, eliminating mercury emissions from power plants would be negligible
  • Ozone Standard
    • Last year EPA revised ozone standard from 75 PPB to 70 PPB
    • Governor must issue attainment report in October of this year
    • 2020 – 2023 timeframe is the final deadline for compliance
    • Texas filed complaint in Court of Appeals
    • Accurate costs are not available until compliance strategies are developed, however EPA’s own modeling suggest no public health benefits
    • Remaining options for controls are either very expensive and/or life-changing
    • DFW, Houston, Galveston, Beaumont, Bexar County, El Paso County would likely be nonattainment
    • EPA’s nonattainment assessment would be based on more up-to-date data and more areas may be added
    • Collier – What is DFW doing to try and come into attainment
      • DFW is in nonattainment for looser ozone standards as well
      • 60% of NOx in DW area is vehicular traffic, Texas only has regulatory authority over stationary sources so is looking at incentive programs to address this issue
      • Incentive programs have seen a 70% reduction in NOx emissions from these sources over the last 10-20 years
    • Collier – Does the speed of the vehicle impact the emissions
      • It does, but less today than it used to, some vehicles have a much higher “sweet spot” for emissions
      • Likely this will not come back as a control mechanism
    • Wu – What is the breakdown of stationary and mobile sources for NOx?
      • Roughly 30%-40% stationary to 60%-70% mobile
      • As state works to reduce emission from stationary sources, their emissions go done and ratio shifts towards mobile sources
    • Farrar – What is TCEQ proposing for increasing LIRAP and TERP during the next budgeting cycle
      • Has not put these numbers together yet, TERP funds have never been more important as EPA continues to lower the standard; further reductions in emissions will become increasingly costly
      • TCEQ has never had an issue finding good projects to fund to lower reductions, it is state’s duty to determine if this will be beneficial
    • Farrar – Sees heavy burning vehicles and machinery, plenty of opportunities exist for TCEQ to tackle to worst sources
      • Mobile sources are mobile and these are voluntary program, TCEQ works to ensure money is spent to bring benefit, but the issue is challenging
    • Farrar – When ozone is high in Houston, asthma rate and heart attacks increase. People living near stationary sources tend to be lower-income households and the costs tend to be shifted to taxpayers
      • EPA’s data suggests the new lower standards will not reduce asthma issues and hospitalizations significantly
      • Convinced that other issues must be affecting these issues and Texas is wasting resources tackling standards that are not beneficial
    • Farrar – What other factors could there be and is TCEQ trying to inform EPA about them?
      • Studies to determine this are very costly, TCEQ does not have the research to discover this
      • TCEQ has instead looked at existing data showing that health impacts to do not raise with lowering ozone after a certain point, EPA’s studies show that ozone at very low levels will not affect citizens so there must be another explanation
    • Farrar – EPA deadlines are constantly combated, every time Texas attempts to delay or avoid deadlines it makes the problem more urgent, would like to see Texas help solve the problem rather than fund litigation
      • TCEQ is advocating for good science and for EPA to identify the actual cause of health effect, however Texas is also making great strides in combating ozone issues regardless of these efforts
      • As ozone rates continue to fall, asthma rates across the nation continue to rise
    • Rodriguez – How does the Volkswagen lawsuit play into this?
      • Not sure how class action plays into this, here Volkswagen cars would turn off emissions controls during testing to avoid emissions standards
      • This puts an undue burden on everyone else
    • Wu – Are you saying that ozone is not the cause of respiratory issues for people with compromised or reduced immune systems
      • Depends on the level of ozone, reducing the standard from 75 PPB to 70 PPB will not reduce asthma issues
      • High enough ozone levels does negatively impact asthma sufferers
    • Wu – Ozone doesn’t necessarily cause asthma, but ozone does have a negative impact on asthma sufferers
      • With sufficiently high levels when the ozone cannot be metab9olized by the body
    • Wu – Does any research currently suggest the cause?
      • No research shows relationship between ozone and heart disease
    • Wu – So what the EPA is trying to do would not have a significant impact on the reduction of asthma or respiratory illness?
      • Correct, unsure what EPA would be trying to tackle aside from these
      • Implicating the 24 hour acute exposure standard
    • Wu – Would like to see studies that suggest other causes for the problem
    • Farrar – Rice University research shows that asthma rates increase by 10% if ozone rises from 50 PPB to 70 PPB and by ~20% if ozone rises from 70 PPB to 90 PPB
      • This does not seem to be in line with EPA’s own ozone research
  • Methane
    • Last year EPA proposed new source performance standard 0000A, effective October of 2016 and will expand methane and volatile organic compound controls
    • Only DFW will be impacted by this, will require rulemaking and definitions
    • Permitting sources will be a significant TCEQ staff burden
    • Not currently litigating over these rules, cost expected to be $150 million by 2020 and up to $450 million by 2025
    • EPA expects no incremental benefits that they have quantified
    • These regulations will have a large impact on Texas’ oil and gas operations
    • Darby – These rules affect probably the most important industry in Texas, however RRC regulates oil and gas in Texas, so how will this be implemented and paid for?
      • Would not be under $100 million and so EPA would not be able to avoid budget analysis
    • Darby – And this only affects the DFW area right now?
      • The performance guidelines would affect DFW, but other areas of the state would be affected by other portions of the rule
    • Darby – If this is allowed to stand, how would the federal government or TCEQ implement this
      • Ideally ensure compliance in the least costly manner
      • For oil and gas, TCEQ tries to develop permit by rule or standard permits to avoid too many hoops to jump through
    • Darby – But flaring is a safety issue
      • Flaring is important, part of this rule would require additional flaring
      • EPA has not articulated the benefits of this rule
    • Darby – Suggests TCEQ get in touch with RRC at the earliest possible moment
    • Darby – How close to Big Bend are the east Texas coal plants?
      • Considerable distance
    • Darby – EPA believes that air affected by these plants affect Big Bend?
      • This is the assumption yes
    • Darby – Do you need to give EPA a geography lesson?
      • These kind of control seem strange as they work to effect hardly measurable controls
    • Darby – There is a federal agenda in pushing these rules onto the state, what resources does TCEQ need to continue to protect Texas business and regulatory certainty?
      • Biggest resource is maintaining the quality of personnel in the TCEQ, ability to increase compensation would be appreciated
    • Darby – Texas has made great strides in many environmental areas, there is an assault on coal by the federal government and companies are incurring debt and industry will be negatively impacted, proud of TERP and utilizing resources available to help cities and counties
      • Texas has one of the cleanest coal fleet in the US because of investment and agency cooperation
    • King – DFW is a dry gas area, wells decline really quickly, even a little added cost would eliminate the value of some wells
    • Cook – Only way Texas can mitigate pricing is with a balanced portfolio, taking base load generation out will ensure consumers will pay much more for energy
    • Cook – Nonattainment based on real world monitoring is one thing, but currently Texas is subject to nonattainment decisions based upon modeling
      • EPA has tried to move towards modeling instead of monitoring under the justification that local areas do not have accurate monitoring
      • Physical data should be required to make such determinations, modeling by itself has many inherent issues
    • Wu – Who is responsible for deploying monitors?
      • TCEQ is under EPA’s guidance
    • Wu – So if you don’t like the models or being forced to use the models, what is stopping TCEQ from deploying more monitors?
      • That is what TCEQ tries to do to combat this, but EPA apparently does not like the number of monitors required by EPA rules, perhaps EPA should change their own rules
    • Wu – How long does it take TCEQ to deploy monitors in a new area?
      • At least and 18 month time frame to run through all formal requirements
    • Wu – So models would be used for 2 years and then afterwards monitoring?
      • It is difficult to switch back from modeling to monitoring
      • Models are notoriously wrong
    • Wu – So if models are wrong why does anyone use them?
      • Useful to site for monitors, not useful for determining attainment
    • Wu – How long does it take EPA to determine attainment?
      • You need multiple years of data
    • Wu – So TCEQ cannot ask EPA for time to collect the data for attainment determination?
      • Can certainly ask legislature for funding to collect the relevant data
      • EPA is speculatively determining attainment based on models without ever collecting real world data
    • Wu – Thinks that modeling can be used to determine and infer attainment and nonattainment, if state is willing to put up resources to do physical modeling can we not ask them for time?
      • EPA has the ability to give time, currently legislature did indeed provide resource to site monitors
      • However, EPA requirements are very confusing, EPA had a date certain for monitor placement, but had not issued sitting criteria
    • Wu – I don’t understand the problem then
      • The problem is that without state resources, EPA finally issuing monitoring site data, or time being given to conduct monitoring, etc. EPA could have still used modeling to inaccurately determining attainment
      • Dangerous precedent issue mostly
  • SO2
    • EPA promulgated standard of 75 PPB in 2010, 2013 nonattainment was based upon monitoring data
    • Texas did not have any monitors above the standard, EPA did not designate attainment without monitors
    • Several lawsuits against EPA for not designating areas occurred, by Texas was not able to be part of the consent decree
    • Areas designated nonattainment will have 5 years to reach attainment, compliance requires data collection
    • Areas with certain source rates needed to have an attainment designation by July of 2016, EPA identified 12 sources and declared 3 areas in nonattainment
    • Texas’ legal objection to the consent decree were dismissed, deploying monitors by January of 2017 unless EPA issues a designation
    • 84th legislature appropriated funds for 31 monitors to meet this challenge
    • Additional controls in areas in question are costly and will have a small impact on SO2
  • Coal Combustion Residual
    • Effective October 19th of 2015, implemented and enforced through citizen suits so no requirement for EPA or TCEQ
    • Requires regulated information to provide certain information on their websites and submit information to the EPA
    • Texas has not initiated legal action over this rule
    • Cost-benefit anticipate $440 million nationwide
  • Waters of the US
    • Advocated and announced to clarify existing EPA policy, planned to go into effect of August of 2015
    • Rule included expansions of federal power, extent of which not known until ambiguities have been worked out
    • Litigation pending in the 6th Circuit Court of Appeals, implementation on hold until conclusion
    • Texas and Louisiana filed suit in the 5th Circuit, judge determined that the court has jurisdiction over the case, rule has effectively been stayed
    • Cost estimated at up to $309 low-end and up to $465 million high-end, benefits are estimated at roughly $350 million low-end and $550 million high-end
    • Texas is similar to a majority of states in that §404 permitting will see roughly 4% increase of federal power exertions
    • Will impact and development near headwaters, playas, ephemeral streams, etc., failure to maintain proper permit incurs roughly $37,000 fine per day

 
Brian Lloyd, Exec. Dir., Public Utilities Commission

  • PUC is concerned about rules when they create real issues for the reliability of the grid
  • Substantial legal infirmities exist in these rules, but PUC has been focused mostly on reliability issues
  • PUC is largely hands-off for building, retirement, and rate setting for many municipalities customers
  • PUC only regulates ERCOT’s transmission business, PEC does ensure the reliability of the grid
  • Outside of ERCOT, PUC regulates the entirety of businesses
  • Environmental regulations should take into consideration the time needed to implement changes to the grid
  • PUC is primarily interested in 3 rules: Cross-State Pollution, Regional Haze, and Power Plants
  • Cross-State rule did not initially include Texas and had a compliance deadline of 6 months to perform significant emissions reductions, would have prevented around 1,400 megawatts of capacity during high load periods if rule had been implemented
    • Non-ERCOT providers submitted application to raise rates by up to 7% to accommodate for the negative impact of the rule
  • Regional Haze rule is a different timing conundrum, within ERCOT power plants targeted by this rule were critical to local reliability, without time to add new capacity there would have been massive reliability issues
    • Fundamental flaws exist in this rule, PUC hesitant to implement a rule that may not be upheld, however if PUC waits for a decision on the rule then there is no time to implement the rule
    • PUC and ERCOT have continually asked for reliability safety valve to allow time to bring resources online
  • Clean Power Plan, PUC provided an extensive document on this rule previously
    • Rule intruded upon state’s sovereign authority to manage electricity systems, was not reflective of how power markets work, and plan was dangerously cavalier about reliability
    • PUC does not expect this rule to be upheld
  • Rules working together become extremely problematic, even with long lead times on the implementation deadlines, other rules would be constantly enforcing operational barriers
  • Can destroy basis for investment decisions as rules destroy favorable economic conditions
  • PUC responds to these rules by devoting a tremendous amount of time and resources, would like to continue to discuss these issues with the legislature
  • Morrison – These rules would have caused massive reliability issues, correct?
    • Yes, with time reliability problems are solvable, but rules do not often leave time
  • Darby – Has PUC or ERCOT done an analysis of the existing coal plant debt structure?
    • Not specifically, many plants are owned by coops, much of the financing initially came from the federal government and implicates the issuance of restrictive rules
    • All plants will reach a point where they must speculate heavily on future revenues, problems mean shutdown
  • Darby – Understand the cost to be roughly $25-$30 billion and Texas is around $8 billion of that
    • Those numbers are around that, first is from EPA’s analysis, second number leads PUC to believe the cost is much greater nationwide
  • Darby – Who pays for all this?
    • In ERCOT, consumers will see rate increases, outside of ERCOT rates will also need to be adjusted

 
Warren Lasher, Electric Reliability Council of Texas

  • Supports PUC’s testimony regarding the EPA rules