Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA and the Department of the Army Repeal the 2015 “Waters of the United States” Rule

On September 12, 2019, the EPA and the Department of the Army (collectively, the “Agencies”) repealed the 2015 Clean Water Act (“CWA”) rule defining the “Waters of the United States” (“WOTUS”), fulfilling the first of several directives ordered by President Donald Trump in Executive Order (“EO”) No. 13778. In that EO, the President directed the Agencies to repeal the 2015 WOTUS rule, recodify the regulations to include the rule that existed prior to the 2015 WOTUS rule, and promulgate a new definition of WOTUS.

The EPA released a pre-publication document detailing four primary reasons for the decision to repeal the 2015 WOTUS rule. First, the 2015 rule did not implement the legal limits on the Agencies’ authority that were intended by Congress and reflected in Supreme Court rulings. Second, in enacting the 2015 rule, the Agencies failed to give proper weight to the policy that Congress represented in the CWA. Third, the Agencies reasoned that some of the interpretations of the CWA “push the envelope” of their Constitutional and legislatively granted authority, and repealing the 2015 rule avoids these encroachments. Fourth, the Agencies found that the rule’s “distance-based limitations” were burdened by procedural errors.

The next step of this process requires the Agencies to implement a new definition of WOTUS. In December of 2018, the Agencies proposed a new definition of WOTUS, and the public comment period for this new definition closed in April 2019. At this point, the next step in the rulemaking process will be for the Agencies to promulgate a final definition for this critical defined term.

EPA Approves the 2016 Texas Integrated Report of Surface Water Quality. On August 6, 2019, the EPA approved Texas Commission on Environmental Quality’s (“TCEQ”) 2016 Texas Integrated Report of Surface Water Quality. Pursuant to § 303(d) of the CWA, the TCEQ submits this report to the EPA every two years, and it includes a list of Texas’ impaired surface waters. A copy of the report may be found here: https://www.tceq.texas.gov/waterquality/assessment/16twqi/16txir/.

In addition to identifying impaired waters, TCEQ sets water quality standards with the goal of bringing those impaired waters back to levels that are healthy and safe for the public, aquatic species, and other wildlife. TCEQ is in the process of developing a schedule to identify Total Maximum Daily Loads (“TMDLs”) for impaired waterbodies. TMDLs are levels of the maximum amount of a pollutant that is allowed to enter a waterbody, and are used to restore water quality in waterbodies. The TMDL schedule will be initiated over the next two years.

The report includes an index identifying waterbodies that have one or more impairments. The waterbodies themselves are divided into two categories. The first category, category 4, includes waterbodies burdened with impairments that are not suitable for the development of a TMDL and waterbodies with impairments that already have a TMDL. The second category, category 5, includes waterbodies that are burdened with impairments that are suitable for a TMDL.

According to the 2016 report, 547 waterbodies in Texas are classified as category 5 impairments, which constitute a 15-waterbody reduction from the 562 category 5 waterbodies reported in 2014.

EPA Promulgates Three Final Endangered Species Act Rules. On August 12, 2019, the United States Fish and Wildlife Service (“FWS”) and the National Marine Fisheries Service (“NMFS”) announced three final revisions to the Endangered Species Act that became effective as final rules on August 26, 2019.

The first revision, Revision of the Regulations for Prohibitions to Threatened Wildlife and Plants, removes the “blanket rule,” among other changes. The blanket rule is a rule that automatically extends the protections granted to endangered species to threatened species. Historically, the FWS and NMFS jointly administer the ESA, but they implement the blanket rule differently, with FWS opting to implement the blanket rule, and NMFS opting not to implement the blanket rule. The revisions repeal the blanket rule and instead encourage the use of species specific rules. To view the revision in the Federal Register, click here: https://www.federalregister.gov/documents/2019/08/27/2019-17519/endangered-and-threatened-wildlife-and-plants-regulations-for-prohibitions-to-threatened-wildlife.

The second revision, Revision of the Regulations for Listing Species and Designating Critical Habitat, includes altering the designation of critical habitat to align with the Supreme Court’s holding in Weyerhaeuser Co. v. U.S. Fish and Wildlife Service, 139 S. Ct. 361, revising the definition of “physical or biological features,” and removing the “economic impact” language. Prior to the revision, this section included language forbidding the services from considering economic impact when making listing decisions.

Because of the removal of this language, the Services may consider the projected economic impact of listing actions, although the economic impact of the proposed listing cannot ultimately influence the Services’ determination. To view the revision in the Federal Register, click here: https://www.federalregister.gov/documents/2019/08/27/2019-17518/endangered-and-threatened-wildlife-and-plants-regulations-for-listing-species-and-designating.

The third revision, Revisions of Regulations for Interagency Cooperation, addresses alternative consultation mechanisms, revises portions of the formal and information consultation processes, and makes several other changes designed to streamline the consultation process. To view the revision in the Federal Register, click here: https://www.federalregister.gov/documents/2019/08/27/2019-17517/endangered-and-threatened-wildlife-and-plants-regulations-for-interagency-cooperation.

EPA Issues Revised Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) Landowner Defense Guidance. On July 29, 2019, the EPA released new guidance entitled, “Enforcement Discretion Guidance Regarding Statutory Criteria for Those Who May Qualify as CERCLA Bona Fide Prospective Purchasers, Contiguous Property Owners, or Innocent Landowners.” This is the first update to the CERCLA landowner defenses to be published since March of 2003. CERCLA imposes liability on certain parties in relation to contaminated property. The 2003 EPA guidance is intended to address uncertainty surrounding these defenses and CERCLA liability in general.

Specifically, EPA’s new guidance attempts to clarify the “continuing obligations” required for maintaining a statutory defense. The guidance discusses what qualifies as “disposal” of hazardous substances under CERCLA, clarifies what an owner must do to satisfy the standard of “all appropriate inquiries,” requires that the owner show that no hazardous substances were disposed on the property after the owner acquired the property, and confirms that the owner should ensure that any institutional controls that are implemented remain effective.

EPA Seeking to Revise Texas Air Designations. On August 22, 2019, the EPA published a draft rule which would change the categorization of certain east Texas counties from “nonattainment” to “unclassifiable” with regard to sulfur dioxide emissions. These counties include Freestone, Anderson, Rusk, Panola, and Titus Counties. EPA issued the draft rule in order to “correct an error” in designating the identified counties; specifically, the Agency explained that it erred in not giving greater weight to Texas’ preference to characterize air quality through monitoring, and steps undertaken by Texas to begin monitoring in these areas. The comment period expired in September 2019 and it is unclear when EPA will revisit the designation of these counties, as the revised designation only indicates that the agency could not determine “based on available information at the time” whether the identified counties were in compliance with sulfur dioxide emissions standards.

EPA Proposes Revisions to Clarify New Source Review Permitting Process. In August 2019, EPA proposed changes to the New Source Review (“NSR”) applicability regulations, originally proposed in March 2018. The changes would clarify that both increases and decreases in emissions from an existing source should be considered in the first step of the NSR test. This step, originally referred to as “project netting,” will now be known as “project emissions accounting.” This change is intended to remove an obstacle that “regularly discouraged” companies from implementing new energy efficient technology. The proposed rulemaking was published in the Federal Register on August 9, 2019 and the comment period closed on October 8, 2019.

EPA Proposes Removing Oil and Gas Entities from GHG and VOC Standards. In August 2019, EPA proposed excluding certain entities from air emissions standards governing greenhouse gases (“GHGs”) and volatile organic compounds (“VOCs”), including natural gas and oil storage and transmission facilities. The proposed rule change would also remove certain methane emission standard requirements applicable to production and processing of natural gas and oil. In addition, the proposed change would remove VOC standards only for storage and transmission facilities. However, production and processing facilities would still be bound by the existing standards. EPA has also proposed an alternative rule change that would remove methane requirements for oil and natural gas, but would not affect the existing VOC regulation. With regard to this alternative, EPA is requesting comment on its statutory authority to regulate these pollutants. This request may be aimed at challenging the 2016 EPA rule that determined the Agency was not required to make a GHG endangerment finding. The proposed rulemaking was published in the Federal Register on September 24, 2019 and the comment period closes on November 25, 2019.

Update on EPA Landfill Emissions Rule. The court-mandated deadline for states to submit compliance plans for the 2016 Emissions Guidelines (“EG”) landfill rule passed on August 29, 2019. EPA has received plans from six states: Arizona, California, Delaware, New Mexico, West Virginia, and Oregon.

As previously reported in the July edition of The Lone Star Current, the EPA is required to promulgate a federal plan for states that have not submitted their own plans by November 6, 2019, per a California federal court’s order. However, the EPA issued a final rule in August 2019, delaying the deadlines for both states and EPA by more than two years, until August 30, 2021.

In addition, the EPA filed a motion in August 2019 to vacate the court’s existing order that obligates the Agency to promulgate regulations for the federal plan by the November deadline, arguing that the EPA has until August 2021 to issue the federal plan.

EPA funds university research on PFAS in waste streams. In September 2019, the EPA announced plans to fund $1.3 million in research to be conducted by Texas A&M AgriLife and Texas Tech University over the environmental risks posed by per- and poly-fluoroalkyl substances (“PFAS”) in waste streams. The Universities will also work to identify approaches to manage potential impacts of PFAS in the environment.

EPA announced plans this past spring to implement a PFAS Action Plan to address PFAS, which may classify PFAS as “hazardous waste” under CERCLA. A number of states have already begun implementing their own plans to address PFAS, but Texas has not.

Texas A&M AgriLife plans to investigate the feasibility of electron beam technology for the destruction of PFAS compounds while Texas Tech University plans to identify and quantify the occurrence of PFAS in landfill leachate, investigate the fate of PFAS passing through typical landfill liner systems, and test the ability to break down PFAS in landfill leachate using soundwaves.
Please refer to the April and July editions of The Lone Star Current for further information about PFAS.

Texas Commission on Environmental Quality (“TCEQ”)

Bobby Janecka Appointed TCEQ Commissioner. On Monday, September 16, 2019, Governor Greg Abbott selected Robert “Bobby” Janecka to fill the vacant Commissioner seat at the TCEQ. Janecka, along with Chairman Jon Niermann and Commissioner Emily Lindley, will serve as the leaders of the TCEQ. Janecka will serve a six-year term.

Janecka, who has served as a policy advisor for Governor Greg Abbott since 2018, brings nuclear and radioactive materials experience, as well as significant policy experience, to the position. During his time with the Governor, Janecka served as the State’s liaison to the Nuclear Regulatory Commission, an agency of the federal government tasked with protecting public health and safety related to nuclear energy.

Janecka worked for the TCEQ in the past, most recently as a section manager in the Commission’s Radioactive Materials Division. Prior to his work with the Governor and the TCEQ, Janecka worked as a legislative aide for two state representatives, Geanie Morrison and Tryon Lewis.

Read the press release here: https://www.tceq.texas.gov/news/releases/bobby-janecka-appointed-as-new-commissioner.

In Response to HB 2771, TCEQ Hosts First Oil and Gas Wastewater Stakeholder Group Meeting. Governor Greg Abbott signed House Bill (“HB”) 2771 on June 14, 2019, and this new law went into effect on September 1, 2019. HB 2771 is a delegation bill, meaning that it requires the TCEQ to seek authority from the EPA to issue discharge permits for produced water, hydrostatic test water, and gas plant effluent. Over the next two years, the TCEQ will apply for delegation authority to issue discharge permits through the Texas Pollutant Discharge Elimination System (“TPDES”).

On September 17, 2019, the TCEQ held a stakeholder meeting to explain HB 2771’s implications, upcoming challenges, and next steps. In the meeting, TCEQ officials discussed the various steps that TCEQ must take before individuals can begin submitting applications for permits to the TCEQ, as well as the initial challenges TCEQ and EPA will have to overcome in order for the TCEQ to begin issuing discharge permits. Additionally, the TCEQ discussed what will be required of individual applicants when they apply for a discharge permit. The TCEQ will likely require the same information the EPA required when it was the issuing body for these permits, which includes site information, applicant information, discharge location, notice information, and affected landowner information. Applicants will also likely be required to submit a technical report, which will likely include the type of wastewater in question, the treatment process, and a pollutant analysis.

A full video of this meeting may be found on TCEQ’s YouTube page: https://www.youtube.com/user/TCEQNews.

In the Matter of the Application of MedCare Environmental Solution for a New Medical Waste Registration No. 40294, TCEQ Docket No. 2019-0202-MSW. On August 28, 2019, the TCEQ denied MedCare Environmental Solution’s (“MedCare”) application for a registration to operate a medical waste facility in El Paso, Texas, based on a discrepancy between the number of residences in a one-mile radius of the site and the number listed in the application. In June 2019, the TCEQ approved the application, which would have allowed MedCare to process 100,000 pounds of medical waste per day. However, hundreds of protestants filed Motions to Overturn (“MTOs”) at the TCEQ, arguing the Commission should change its decision and deny the application. Many of these MTOs alleged that the application contained false information and misrepresented the number of residences within a one-mile radius of the facility. The TCEQ overturned the previous decision and denied the application based on incompatible land-use.

In the Matter of the Application of Altair Disposal Service, LLC for New Hazardous Waste Permit No. 50407, SOAH Docket No. 582-18-1960. On September 27, 2019, the TCEQ denied Altair Disposal Service’s (“Altair”) application for a new hazardous waste permit for a noncommercial, hazardous waste landfill in Colorado County. The proposed landfill would take waste from an incineration facility near Houston to Colorado County.

The Administrative Law Judge recommended denial of the application on several bases, including one finding that the application failed to demonstrate that the soils were protective of groundwater. However, TCEQ denied the application based solely on the geology issue, finding that the soil was not dense enough to protect the underlying aquifers below the site.

Public Utility Commission of Texas (“PUC”)

Proposal for Decision Issued in CenterPoint Rate Case. On April 5, 2019, CenterPoint Energy Houston Electric, LLC (“CenterPoint”) filed its application to increase system-wide transmission and distribution rates by $161 million per year. Later, CenterPoint amended that total to $154.6 million, consisting of (1) a net annual increase in retail rates of about $149.2 million over adjusted test-year revenues and (2) an annual increase of about $5.4 million for wholesale transmission service.

Following the hearing on the merits in June and briefing by parties in July, the hearings examiners issued their Proposal for Decision (“PFD”) on September 16, 2019. The Administrative Law Judges (“ALJ”) recommend an overall revenue increase of $2,644,193, or 0.11%, over CenterPoint’s present base revenues. Additionally, the ALJs recommend a 9.42% return on equity, substantially lower than the 10.4% return on equity proposed by CenterPoint.

The PUC will soon determine whether to adopt the ALJs’ PFD at an open meeting.

Parties Await SOAH Decision in AEP Rate Case. The PUC and interested parties have completed their review of AEP Texas Inc.’s (“AEP Texas”) recent rate case filing. Parties submitted their Reply Briefs last week as they await the State Office of Administrative Hearings (“SOAH”) ALJ’s PFD.

On May 1, AEP Texas filed its application to increase system-wide transmission and distribution rates. AEP Texas seeks to consolidate the rates of its Texas Central Company and Texas North Company divisions into a single rate under the business name “AEP Texas,” reflecting the PUC’s approval to merge the management and operation of the divisions in Docket No. 46050. In its filing in PUC Docket No. 49494, AEP Texas asserts that it is entitled to an increase of $38.3 million in retail distribution rates (an increase of about 4.2%) and a decrease of $3.16 million in wholesale transmission rates (a decrease of about 0.7%). According to AEP Texas, the impact on an average residential customer in the Central Division would be an increase of about $4.75 or 9.8% per month. The impact on an average residential customer in the North Division would be an increase of about $5.01 or 10.6% per month.

Once the SOAH ALJs review all of the information submitted by the parties and issue their PFD, the PUC Commissioners will determine whether to adopt the PFD at an open meeting.

SPS Files Rate Case. On August 8, 2019, Southwestern Public Service Company (“SPS”), a non-ERCOT utility, filed an application with the PUC for authority to change rates. On August 8, 2019, the PUC issued an order referring this docket to the State Office of Administrative Hearings (“SOAH”).

SPS is seeking approval of a total retail base rate revenue requirement of $695,083,391 and a base rate increase of $141,284,640. SPS also requests that the final rates set in this case be effective for consumption occurring on and after September 12, 2019. The SOAH ALJ granted SPS’s request for temporary rates beginning on September 12, 2019, and there will be a refund or surcharge applicable for usage during the temporary rate period.

The parties are currently conducting discovery in anticipation of filing testimony in February 2020. A hearing on the merits is currently scheduled to take place from March 30-April 8, 2020.

PUC’s Cleanup of SPCOAs Continues. The PUC’s quest to clean up its Service Provider Certificate of Operating Authority (“SPCOA”) files continues. A petition filed in August 2018 by the PUC Staff against Vitcom, LLC, has been finally resolved. The PUC’s order in Docket No. 48643 was approved on September 2, 2019. The revocation was based on an alleged pattern of not responding to Commission inquiries, failing to comply with reporting requirements, and failing to actively provide telecommunications services. The stated basis for the order was a failure to provide telecommunications services.

Other pending revocations have been finalized. The Commission approved Mitel Cloud Services’ application to relinquish its SPCOA on September 30, 2019, and Sunesys’ application on October 11, 2019. The Commission has ordered both Legacy Long Distance and Talk America Services to provide additional notice of their relinquishment applications to the Commission on State Emergency Communications (“CSEC”) and the Office of Public Utility Counsel (“OPUC”). Legacy Long Distance has since provided proof of notice to OPUC, but not to CSEC. Talk America Services, however, has provided proof of notice to both OPUC and CSEC.

A new round of SPCOA terminations have been filed at the Commission. Local Access, ThinQ, USA Fiber, Cbeyond, and Local Access have all filed applications to discontinue service or terminate their SPCOAs. ThinQ (Docket No. 50044), and USA Fiber (Docket No. 50045) submitted applications to relinquish their certificates. Cbeyond has filed an application to amend its SPCOA to discontinue service, but retain its SPCOA. Local Access originally filed a simple letter to relinquish its SPCOA (Docket No. 50035), but when ordered by the Commission to use the Commission’s forms, Local Access reapplied (filed in both Docket No. 50035 and new Docket No. 50093), indicating that it will discontinue service, without relinquishing its certificate. The PUC has yet to review these applications.

PUC Reviews, Readopts, and Revises its Telecommunications Rules. Late last year, the PUC instituted a review of its Chapter 26 rules related to telecommunications service providers. The Administrative Procedures Act, Tex. Gov’t Code § 2001.039, requires that each state agency review its rules every four years and readopt, readopt with amendments, or repeal the rules. These reviews must include, at a minimum, an assessment by the agency as to whether the reason for adopting or readopting the rules continues to exist. A few associations representing telecommunications providers, 9-1-1 providers, and telephone cooperatives filed comments recommending that the rules be readopted. There were some requests for the PUC to open new rulemaking proceedings to address various issues, but generally, amending the rules to catch up with technology. In its Order adopted on September 12, 2019 (Project No. 48979), the PUC found that the reasons for adopting the rules in the first place continue to exist, and it thus readopted Chapter 26. The PUC also acknowledged that some of the suggestions have merit, and the agency will consider amending the rules “as resources permit.”

Also on September 12, in Project No. 47668 the PUC adopted a new rule, Section 26.409, establishing the criteria and process for determining whether Texas Universal Service Fund (“TUSF”) support should be eliminated. The new rule captures some statutory changes from 2017, and it requires the PUC to review the per-line TUSF support under the statutory criteria, such as total number of access lines served by eligible telecommunications providers in the exchange, number of competitors in the exchange, and whether the continuation of TUSF support is in the public interest.

PUC Commissioner Botkin Reappointed. Governor Greg Abbott has reappointed Shelly Botkin to the PUC for a term set to expire on September 1, 2025. Botkin has served as a Commissioner at the PUC since June 2018. She was previously the Director of Corporate Communications and Government Relations for the Electric Reliability Council of Texas, where she served for eight years. Botkin received a Bachelor of Arts in anthropology from Washington University in St. Louis.

Railroad Commission of Texas (“RRC”)

TGS Harvey Update. On April 16, 2019, Texas Gas Service (“TGS”), a division of ONE Gas, Inc., filed its Statement of Intent to Increase Rates to Recover Hurricane Harvey Response Costs Within the Gulf Coast Service Area with the RRC. In its filing, TGS requested a total increase in revenue of $714,389 over a two-year period. This amounts to an annual increase of 1.22% including gas costs, or 1.98% excluding gas costs. Cities argued that the application, if approved, would result in piecemeal ratemaking; the expenses should have been presented with a comprehensive base rate case in order to be eligible for recovery.

The parties reached a settlement where TGS agreed to withdraw the filing but may ask for the expenses in a future rate case; and the parties will be free to object at that time. On October 1, the RRC approved the settlement.

CenterPoint Gas Refund. Last year, CenterPoint Gas made a filing to take into account the reduction in federal taxes they pay due to the Tax Cut and Jobs Act of 2017. On August 1, 2019, CenterPoint Gas made a filing for their Houston and Texas Coast divisions to take into account additional impacts associated with the legislation. Then, on August 16, CenterPoint Gas amended its filing. As part of this filing, CenterPoint Gas addressed Hurricane Harvey costs as well. Under the law, CenterPoint Gas is not allowed to combine Hurricane Harvey costs into the refund case.
On September 27, CenterPoint agreed to refile its application and remove costs associated with Hurricane Harvey system restoration. CenterPoint’s removal of the Hurricane Harvey system restoration costs does not prohibit the Company from requesting those costs in a future Statement of Intent proceeding; nor does the removal of the Hurricane Harvey costs prohibit any party from taking any position on the appropriate amount of, prudence of, or recoverability of those costs in that future proceeding.

On October 11, 2019, CenterPoint filed its 2nd Supplemental Filing to remove Hurricane Harvey related costs. The result of removing such costs is to increase the refund from $16,556,357 to $17,763,968. The refund will be effective on bills rendered on or after January 1, 2020 and will last for 36 months.

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“Agency Highlights” is prepared by Maris Chambers in the Firm’s Districts, Compliance and Enforcement, Energy and Utility, and Water Practice Groups; Sam Ballard in the Firm’s Air and Waste Practice Group; and Patrick Dinnin in the Firm’s Energy and Utility, Litigation, and Compliance and Enforcement Practice Groups. If you would like additional information or have questions related to these cases or other matters, please contact Maris at 512.322.5804 or mchambers@lglawfirm.com, Sam at 512.322.5825 or sballard@lglawfirm.com, or Patrick at 512.322.5848 or pdinnin@lglawfirm.com.