Texas, Industry Groups Sue EPA Over Disapproval of State Air Program

By Nancy J. Moore

AUSTIN, Texas—Three lawsuits filed against the Environmental Protection Agency June 11 and 14, challenging its rejection of a state air permit program, have been combined into one action before a federal appeals court (Texas Oil & Gas Ass'n v. Environmental Protection Agency, 5th Cir., No. 10-60459, filed 6/11/10).

The litigation comes as EPA is conducting a broad review of air permits issued by the Texas Commission on Environmental Quality. An EPA spokesman told BNA June 15 that the agency is currently weighing objections to permits for 39 companies in the state.

The action, an original proceeding filed in the U.S. Court of Appeals for the Fifth Circuit, was brought by the state of Texas, the Texas Oil & Gas Association, the Texas Association of Manufacturers, and the BCCA Appeal Group, an organization of companies that had sued EPA previously to force action on the qualified facilities permit rule and other proposed state rules that had been pending at EPA for a number of years.

The lawsuits are the latest development in an ongoing battle between EPA and the Texas Commission on Environmental Quality over a revised qualified facilities rule the commission on submitted to EPA for approval in 1996 as part of its Clean Air Act State Implementation Plan. The rule allowed companies with a permit less than 10 years old to make modifications related to minor sources of pollution as long as their overall emissions limits did not change.

EPA announced its disapproval of the rule March 31.

The lawsuit seeks review of the EPA action under the Clean Air Act (42 U.S.C. Section 7607(b)(l)) and the Administrative Procedure Act (5 U.S.C. Sections 702, 704, and 706). The initial pleadings are short documents that attach the Federal Register notice rejecting the rule (75 Fed. Reg. 19,468). Detailed briefs will be filed at a later date, according to sources familiar with procedures in this type of litigation.

Going Directly to Industry

EPA has recently begun going directly to Texas companies that have permits the agency considers defective. On June 15, EPA directed chemical company Chevron Phillips, which has its headquarters just north of Houston, and Garland Power & Light, a city-owned power company near Dallas, to prepare permit applications that set out Clean Air Act requirements, including requirements dealing with stack-specific emissions limits.

EPA explained that it chose those two companies because it had issued formal objections to their Texas-proposed draft operating permits. EPA acted on the Chevron Phillips permit for its Cedar Bayou facility in October 2009 and on the Garland Power & Light permit for a project in neighboring Colin County in January.

EPA earlier took similar action with respect to the Flint Hills East Corpus Christi refinery in Corpus Christi.

EPA proposed on Sept. 23, 2009, the disapproval of the Texas flexible permit program, which applies to major pollution sources and differs from the qualified facilities rule. Under the flexible permit program, a facility can set a site-wide cap on emissions that will allow slightly higher emissions from one or more locations on the site so long as the entire site stays beneath the limit.

The flexible permit program was also an amendment to the Texas SIP. EPA is widely expected to issue its final disapproval of the permit program by the end of June. It is likely that official disapproval of the program will trigger more lawsuits by Texas officials and by industry groups.

Audit Program

Declaring that it is “working with Texas to address deficiencies in the state's air permitting program,” EPA on June 10 proposed a voluntary audit program designed to help companies that have flexible permits issued by TCEQ get permits that meet “the protections of the Clean Air Act.” The proposed rule has not yet appeared in the Federal Register, but will soon be open for public comment.

Under the proposed rule, permit holders would undergo an independent third-party review of their permit for deficiencies. The findings would be sent to EPA.

EPA has set out a proposed audit agreement and states in its notice that the terms are nonnegotiable. In addition to hiring the auditor, companies using the program would be required to fund a community-based project. The projects would range in cost from $50,000 to $4 million, with the amount required for each participant calculated on a tier system that takes into account the changes that did not meet federal requirements, the impact on community and environment, and the facility's complexity.

Companies that agree to address any noncompliance will receive from EPA a covenant not to sue under the Clean Air Act. However, the proposed audit agreement does not give participants a full release, leaving them vulnerable to private actions.

Texas Response

In a press release announcing the lawsuit, the Texas attorney general's office noted that TCEQ submitted its qualified facilities rule to EPA in 1996. The rule was adopted under a law passed by the Texas Legislature. According to the attorney general's office, EPA was required to act on the rule within one year.

In its statement, the attorney general's office said, “The EPA's decision not only imposes significant uncertainty on entities that employ thousands of Texans, but it threatens the livelihood of their employees—who depend on those facilities for their jobs.” The statement went on to say, “The EPA's decision also threatens a regulatory program that has successfully reduced harmful emissions in the state of Texas.”

In a statement issued June 14, TCEQ said it “will continue to defend its air permitting program while proactively working with EPA to resolve its concerns to provide legal certainty to regulated entities and the public.”

Texas Gov. Rick Perry (R) expressed his disapproval of the EPA action in a May 28 letter to President Obama that asserted that Texas was improving its air quality “much faster than the nation as a whole.”

Meanwhile, former Houston Mayor Bill White, the Democrat running against Perry in this year's governor's race, criticized Perry's handling of environmental issues.

In a June 2 news release, White spokeswoman Katy Bacon said, “The bottom line is that if Rick Perry and the TCEQ were doing their jobs, Texas businesses wouldn't be dealing with the EPA right now.”

In the lawsuit against EPA, the Texas Oil & Gas Association and Texas Association of Manufacturers are represented by Claudia Wilson Frost of Pillsbury Winthrop Shaw Pittman in Houston. The BCCA Appeal Group is represented by Van Beckwith of Baker Botts in Dallas. Texas is represented by Attorney General Greg Abbott along with Senior Counsel Bill Cobb and Assistant Solicitor General J. Reed Clay Jr., all of the Attorney General's office in Austin, Texas.

The EPA's proposed audit program is available at http://www.epa.gov/region6/6xa/pdf/frn_tx_flex_permit_audit_program_061010.pdf.
A proposed audit agreement for that program is at http://www.epa.gov/region6/6xa/pdf/audit_agreement_tx_flex_atach_061010.pdf.

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