Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA Releases Guidance on Air Quality Monitoring.

On December 3, 2019, the EPA released new guidance updating prior guidance from 1980 regarding air quality monitoring of industrial plants engaged in expansions and/or new construction.

The 1980 guidance did not require air quality monitoring where an actual, physical barrier, such as a fence, existed between the industrial plant and the public. Such barriers help define “ambient air” where pollution could be measured, meaning outdoor areas where the public had access. This revised guidance now goes one step further by only requiring air quality monitoring from industrial facilities which the public can access.

EPA Rescinds Risk Management Program Rule. On December 19, 2019, the EPA released its final rule amendments to the Accidental Release Prevention Requirements under the Clean Air Risk Management Program (“RMP Rule”), which seek to rescind many prior RMP Rule amendments made during the Obama Administration and to delay the effective dates for some provisions that are not proposed to be deleted.
According to the final rule amendments, the EPA will rescind the following requirements (among others): (1) all requirements relating to third-party compliance audits; (2) requirements for safer technology and alternatives analyses for facilities with Program 3 regulated processes; (3) requirements to include findings from incident investigations in hazard reviews; (4) requirements to include in incident investigations a root cause analysis and a schedule for completion of actions on recommendations within 12 months; and (5) requirements to include process supervisors in required training programs.

EPA Finalizes Rule Classifying Aerosol Cans as Universal Waste. On December 9, 2019, the EPA issued a final rule adding aerosol cans to the list of hazardous waste substances regulated under the universal waste program of the Federal Resource Conservation and Recovery Act (“RCRA”). The rule will take effect on February 7, 2020 and will affect those who generate, transport, treat, recycle, or dispose of aerosol cans. EPA estimates that as many as 25,000 industrial facilities in 20 different industries could be affected.

Aerosol cans have historically been classified as hazardous waste because of their ignitability and thus are often subject to stringent regulations related to handling, transportation, and disposal. Under this new rule, aerosol cans will now be subject to less stringent regulation under the universal waste program.

The rule is intended to ease regulatory burdens on retail stores and others that discard hazardous waste aerosol cans by providing an optional pathway for streamlined waste management. However, because this rule will be less stringent than the current federal program, states are not required to adopt these regulations.

EPA Proposes Rule to Streamline Procedures for Permit Appeals. On December 3, 2019, the EPA issued a proposed procedural rule intended to streamline and modernize part of the Agency’s permitting process by creating a new, time-limited alternative dispute resolution (“ADR”) process as a precondition to judicial review.

Under this proposal, the parties in the ADR process may agree by unanimous consent to either extend the ADR process or proceed with an appeal before the Environmental Appeals Board (“EAB”). If the parties do not agree to proceed with either the ADR process or an EAB appeal, then the permit would become final and could be challenged in federal court.

The EPA also proposes to (i) amend the current appeal process to clarify the scope and standard of EAB review, (ii) remove a provision authorizing participation in appeals by amicus curiae, and (iii) eliminate the EAB’s authority to review regional permit decisions on its own initiative, even absent an appeal. To promote internal efficiencies, the EPA also proposes to establish a 60-day deadline for the EAB to issue a final decision once an appeal has been fully briefed and argued and to limit the length of EAB opinions to only as long as necessary to address the issues raised in an appeal; EPA also proposes to limit the availability of extensions to file briefs.

In addition, EPA proposes to set twelve-year terms for EAB Judges and also proposes a new process to identify which EAB opinions will be considered precedential. Finally, the EPA is proposing a new mechanism by which the Administrator can issue a dispositive legal interpretation in any matter pending before the EAB.

The proposed rule would apply to permits issued by or on behalf of the EPA under the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, and the Resources Conservation and Recovery Act. The comment period closed on January 2, 2020.

EPA Issues Interim Recommendations to Address PFAS in Groundwater. In April 2019, the EPA released its draft Interim Recommendations for Addressing Groundwater Contaminated with Perfluorooctanoic Acid (“PFOA”) and/or Perfluorooctane Sulfonate (“PFOS”), which are two of the primary substances that fall under the larger category of per- and polyfluoroalkyl substances (collectively, “PFAS”).
In December 2019, the EPA issued the final Interim Recommendations after receiving nearly 400 comments. The Interim Recommendations set 70 parts per trillion (“ppt”) as the preliminary remediation goal for groundwater for PFOA and PFOS, combined with a screening level of 40 ppt to determine if PFOA or PFOS are present at a site. The Interim Recommendations are a significant component of the PFAS Action Plan, which was discussed in further detail in the April edition of The Lone Star Current. Also, these recommendations can serve as a tool for assessing toxicity information, laboratory and analytical methods, and exposure models, among other research efforts, to improve knowledge about PFAS.

EPA takes Procedural Step towards PFAS Regulation. On December 4, 2019, the EPA signed an Advanced Notice of Proposed Rulemaking (“ANPR”) regarding (1) adding per- and polyfluoroalkyl substances (“PFAS”) compounds to the Toxic Release Inventory (“TRI”), (2) requiring PFAS release reporting under the Emergency Planning and Community Right to Know Act (“EPCRA”), and (3) requiring release reporting under the Pollution Prevention Act of 1990. PFAS are a group of man-made chemicals. Scientific evidence suggests these chemicals are persistent in the environment, meaning that they accumulate over time. Although scientists still disagree as to the effects of PFAS in humans, a body of evidence suggests that PFAS exposure can lead to adverse health effects, such as cancer and thyroid hormone disruption. Through the ANPR, EPA sought public comment regarding (1) which, if any, PFAS should be evaluated for listing, (2) how to list them, and (3) what would be appropriate thresholds for the PFAS, given their presence and their potential for bioaccumulation. For more information, visit: https://www.federalregister.gov/documents/2019/12/04/2019-26034/addition-of-certain-per–and-polyfluoroalkyl-substances-community-right-to-know-toxic-chemical.

EPA Office of the Inspector General (“OIG”) Issues Report Critiquing EPA’s Hurricane Harvey Response in Regards to Toxic Air Monitoring. On December 16, 2019, the EPA OIG, the office responsible for conducting independent audits, investigations, and evaluations of the EPA, released a report entitled, “EPA Needs to Improve its Emergency Planning to Better Address Air Quality Concerns in Future Disasters.” This report was released after the OIG conducted a year-long examination of air quality monitoring activities done by the Texas Commission on Environmental Quality in the Houston area in the year after Harvey made landfall. The report states that the EPA did not have air quality monitoring procedures in place to assess the impact of toxic emission incidents that occurred after a storm made landfall on August 17, 2017. Further, the report finds that EPA was not able to adequately inform the public about storm-related toxic pollutants from industrial sites. Ultimately, the report recommends that EPA develop guidance for emergency air monitoring and address the availability and use of remote and portable air quality monitoring methods. Additionally, the report recommends the EPA develop a plan for providing the public with access to air monitoring data. To see the full report, visit: https://www.epa.gov/sites/production/files/2019-12/documents/_epaoig_20191216-20-p-0062.pdf

United States Senate

The United States Senate Confirms Dan Brouillette as the New Secretary of the U.S. Department of Energy.

On December 2, 2019, the United States Senate confirmed Dan Brouillette as the 15th Secretary of the U.S. Department of Energy. Secretary Brouillette will be filling the vacancy left by former Energy Secretary and former Texas Governor Rick Perry. Governor Perry resigned from his post as Secretary of the Department of Energy in October 2019. Secretary Brouillette is a U.S. Army veteran from San Antonio, Texas, and he has a background that includes both public and private experience. Secretary Brouillette previously served as the Chief of Staff to the U.S. House of Representatives Committee on Energy and Commerce as the Assistant Secretary of Energy for Congressional and Intergovernmental Affairs, and as a member of the Louisiana State Mineral and Energy Board. Secretary Brouillette also worked in the private sector as the Senior Vice President and head of public policy for the United Services Automobile Association (“USAA”) and the Vice President of Ford Motor Company. For more information about Secretary Brouillette, visit https://www.energy.gov/contributors/dan-brouillette.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ Is Currently Proposing to Renew and Amend the Multi-Sector General Permit (No. TXR050000) and the Hydrostatic Test Water General Permit (No. TXG670000), and Is Developing a New Water Treatment Plant General Permit (No. TXG640000).

The Multi-Sector General Permit authorizes certain industrial activities to discharge stormwater. The Hydrostatic Test Water General Permit authorizes the discharge of water from (1) new vessels; (2) vessels that contain raw water, potable water, or elemental gases; and (3) vessels that contain petroleum substances. The comment period for the Hydrostatic Test Water General Permit closed on December 3, 2019, and the Commission is expected to take action on the permit on March 4, 2020. Finally, the new Water Treatment Plant General Permit would authorize the discharge of wastewater generated as a result of conventional water treatment at water facilities into or adjacent to water in the state. The changes to these permits is a result of House Bill 2771. For more information about the permits, visit: https://www.tceq.texas.gov/permitting/wastewater/general/index.html.

Texas Water Development Board (“TWDB”)

As a Result of the Passage of Proposition 2, the TWDB was Granted the Authority to Issue up to $200 Million in Bonds for Economically Distressed Areas to Develop Water Supply and Sewer Services. On November 5, 2019, Proposition 2 passed in Texas with 65.62% of the vote. Proposition 2 was legislatively referred to the ballot after winning the majority in both the Texas House and Senate. Proposition 2 allows the TWDB to issue general obligation bonds on an ongoing basis to Texas’s Economically Distressed Area Program. (“EDAP”). TWDB has the authority to issue up to $200 million in bonds. For more information, visit: https://ballotpedia.org/Texas_Proposition_2,Water_Development_Board_Bonds_Amendment(2019).

Public Utility Commission (“PUC”)

Proposal for Decision Issued in CenterPoint Rate Case. As previously reported, CenterPoint Energy Houston Electric, LLC filed an application to increase system-wide transmission and distribution rates in April of 2019 (Docket No. 49421).

On September 16, 2019, the Administrative Law Judges (“ALJs”) issued their proposal for decision (“PFD”) in this matter. Specifically, the ALJs recommended an overall increase of $2,644,193, or 0.11%, over CenterPoint’s present base revenues. Additionally, they recommended a 9.42% return on equity. This recommendation is substantially lower than the 10.4% requested by CenterPoint.

At their November open meeting, the Public Utility Commission (“PUC”) Commissioners began to consider the Administrative Law Judges’ Proposal for Decision; however, they did not reach a conclusion and decided to continue the discussion until the December open meeting. On December 12, 2019, one day before the December 13 open meeting, CenterPoint requested that the PUC defer consideration of this Docket until the January open meeting. At the December 13 meeting, the PUC approved the request to defer consideration and encouraged the parties to try to reach an agreement independently on the issue. The parties have since reached an agreement in principle that would resolve the case on mutually satisfactory terms.

At the PUC’s January 16, 2020 open meeting, CenterPoint explained that the parties were actively working to settle the remaining items and finalize the documents. CenterPoint stated that the parties intended to present an agreement to the PUC for its approval before the next open meeting on January 31, 2020. Because of the similarity of issues in the CenterPoint and AEP’s rate cases, the PUC explained that it intends to decide both cases in the same open meeting.

Subsequently, on January 23, 2020, the parties filed their settlement agreement in the docket. The PUC will now determine whether to adopt the parties’ settlement, likely at the next open meeting. We will provide updates as this case is determined and finalized.

AEP Texas, Inc. Rate Case.

On May 1, 2019, AEP Texas Inc. filed an application to increase its rates by $56 million per year (Docket No. 49494). Additionally, AEP Texas is seeking to consolidate the rate of its TCC and TNC divisions under the name “AEP Texas.” AEP asserts that it is entitled to a $59.1 million (approximately 6.5%) increase in the retail transmission and distribution rates, and a decrease of $3.16 million (approximately 0.7%) in wholesale transmission cost of service. As a basis for its request, AEP Texas cites growth in the Rio Grande Valley, Laredo, Permian Basin, and Cline areas due to an increase in oil field activity. AEP Texas similarly cited growth in port areas attributable to new liquefied natural gas (“LNG”) facilities.

The State Office of Administrative Hearings ALJs issued their PFD, recommending an overall rate decrease of $59,741,451, or 4.49% below the present base revenues. The PFD also proposes a return on equity of 9.4% and a capital structure of 45% common equity and 55% long-term debt. In contrast, AEP Texas requested an increase of $35.14 million, a return on equity of 10.5%, and a capital structure of 45% common equity and 55% long-term debt.

The Parties filed Exceptions to the PFD on December 6, 2019 and Replies to Exceptions on December 20, 2019. The PUC will now determine whether to adopt the ALJ’s PFD at an open meeting. We will provide updates as this case is determined and finalized in 2020.

Oncor Sale of South Texas Assets Receives Public Utility Commission Approval.

On March 29, 2019, Oncor and AEP Texas (together, Joint Applicants) filed a Joint Application for the PUC to approve the transfer of Oncor’s McAllen and Mission area distribution assets, service areas, and associated retail electric delivery customers to AEP Texas Inc. (Docket No. 49402). The assets being sold are the same assets that were sold to Oncor from Sharyland Utilities, L.P. and Sharyland Distribution and Transmission Services, L.L.C. in October 2017. Approximately 3,000 customers will be affected by the transfer.

On August 7, 2019, the parties filed a Stipulation and Settlement Agreement resolving all issues in the matter. The settlement agreement provides many benefits for customers not included in the Joint Applicants’ original filing, including provisions that ensure:

1) AEP Texas will provide a one-time bill credit in the amount of $90,000 that will be equally allocated to each transition end-use customer within three months of the transition;

2) The Joint Applicants shall work with the Retail Electric Providers (“REPs”) to adequately train their service and call center representatives to properly address customer inquiries received during the transition;

3) The REP of record for each transition customer shall distribute a document that includes updated contact information for AEP Texas and the Joint Applicants shall post easily accessible and understandable information on their websites about the transaction; and

4) The Joint Applicants shall engage with the intervenors to plan and coordinate the transition.

At the PUC’s November 14, 2019 Open Meeting, the Commissioners approved the agreement and issued an Order consistent with their memos. Their memos made minor, clerical changes to the Findings of Fact and Ordering paragraphs in order to mirror the intentions of the parties.

Sun Jupiter’s Purchase of EPE.

El Paso Electric Company (“EPE”), Sun Jupiter Holdings LLC (“Sun Jupiter”), and IIF US Holding 2 LP (“IIF US 2”) (together, the “Joint Applicants”) filed a Joint Report and Application for PUC approval of Sun Jupiter’s purchase of EPE (Docket No. 49849).

EPE, Sun Jupiter, and Sun Merger Sub (“Merger Sub”) executed an agreement, under which, Merger Sub would merge into EPE, with EPE continuing as the surviving entity. IIF US 2 will provide Sun Jupiter the equity necessary to purchase EPE and support the regulatory commitments described in the Application. The proposed transaction essentially results in Sun Jupiter directly replacing EPE’s public shareholders at closing, with IIF US 2 as the indirect sole shareholder of EPE.

A Hearing on the Merits was initially scheduled to take place on November 20-22, 2019. However, prior to the hearing, the ALJ granted a series of continuances, giving the parties the opportunity to settle. On December 18th, the Joint Applicants filed a non-unanimous stipulation. Two parties, Dr. Richard Bonart and the Rate 41 Group, did not join the stipulation. On December 30, Rate 41 Group and Dr. Bonart filed supplemental direct testimony and requested a hearing.

All parties participated in a hearing held on January 7-8, 2020. At the conclusion of the hearing, Counsel for the PUC raised several issues and sought clarifications regarding the Stipulation as well as the Proposed Order and Delegation of Authority (both attached to the Stipulation). The Joint Applicants, speaking for all of the signatories to the stipulation, filed a response to these issues, which included a revised Proposed Order. Any final order approving the Stipulation will control and the provisions contained therein cannot be modified without Commission approval. Accordingly, the Joint Applicants committed to provide an updated Delegation of Authority as a compliance filing reflecting any revisions and the Commission’s final order.

At the January 16, 2020 open meeting, the Commissioners discussed an issue with the parties’ revised Proposed Order regarding the initial terms of disinterested directors. The Commissioners wanted to clarify the wording to ensure that no more than two disinterested directors’ terms would expire in the same year. The PUC adopted the parties’ stipulation and revised Proposed Order consistent with the PUC’s discussion regarding the terms of disinterested directors. We will provide updates on this case as it progresses.

Railroad Commission of Texas (“RCT”)

CenterPoint Gas Beaumont/East Texas Rate Case. On November 14, 2019, CenterPoint Energy Entex and CenterPoint Energy Texas Gas (collectively, “CenterPoint”) filed its Statement of Intent to Change Rates with the RCT and with all municipalities exercising original jurisdiction within its Beaumont/East Texas division service area (Gas Utility Docket No. 10920). CenterPoint seeks to increase its system-wide distribution rates by $6.8 million per year, which amounts to an increase of 9.4%. The East Texas Coalition of Cities and the Alliance of CenterPoint Municipalities– Beaumont/East Texas, along with other interested parties, have intervened and have begun sending discovery requests to CenterPoint. The parties conducted a preliminary hearing on December 6, 2019, which set the procedural schedule for the case. CenterPoint had originally set its effective date for December 19, but agreed to a 30-day extension, making the new effective date January 18, 2020. A hearing on the Merits is set for March 4-5, 2020. We will provide updates on this case as it proceeds.

CenterPoint South Texas Issues Refund Related to Tax Cut (RRC Docket No. 10219). On November 15, 2019, CenterPoint filed its Statement of Intent in Gas Utilities with the RCT, proposing to decrease its gas rates in all municipalities exercising original jurisdiction within its South Texas Division (Gas Utility Docket No. 10928). In its filing, CenterPoint is seeking to decrease rates by $628,466 to take into account the reduction in federal taxes it pays due to the Tax Cuts and Jobs Act of 2017. The Steering Committee for Cities Served by CenterPoint South Texas engaged a consultant at no charge and conducted discovery requests in order to confirm CenterPoint’s calculations. In the discovery responses, CenterPoint discovered a small error in its calculations, which increased the total refund by $4,290. Accordingly, CenterPoint amended its requested total rate decrease to $632,756. The impact to each city is the same, regardless of whether the city takes action.

“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.