Agency Highlights

by Maris Chambers, Tricia Jackson, and Jamie Mauldin

White House Council on Environmental Quality

Kathleen Hartnett White is now a Senate vote away from leading the White House Council on Environmental Quality. On October 13, 2017, President Donald Trump nominated the former Texas Commission on Environmental Quality (“TCEQ”) Chairwoman to chair the White House Council on Environmental Quality. On November 29, 2017, a U.S. Senate committee voted to advance White’s nomination to the full Senate, putting her one step away from coordinating environmental policy for the Trump Administration. Prior to her nomination, White served as Chairwoman and Commissioner of the TCEQ from 2001 to 2007. White has also served as a Director of both the Lower Colorado River Authority and the Texas Water Development Board.

United States Environmental Protection Agency (“EPA”)

EPA and the Army Corps of Engineers propose to amend the effective date of the 2015 rule defining “waters of the United States.” On November 16, 2017, the EPA and the U.S. Army Corps of Engineers (“USACE”) proposed to amend the effective date of the 2015 rule defining “waters of the United States” (the “2015 WOTUS Rule”) for purposes of jurisdiction under the Clean Water Act (“CWA”). Under the above-mentioned proposal, the 2015 WOTUS Rule—currently stayed in pending litigation—would not go into effect until two years after extension of the effective date is finalized and published in the Federal Register. The delay would give the agencies the time needed to reconsider and redevelop the definition of “waters of the United States.” The 2015 WOTUS Rule, which redefined the scope of CWA jurisdiction, had an original effective date of August 28, 2015. Although implementation of the 2015 WOTUS Rule is currently on hold as a result of the Sixth Circuit’s nationwide stay of the 2015 WOTUS Rule while litigation is pending as well as a stay imposed by a North Dakota District Court on related litigation, it is uncertain how long those stays will be in place. Though the comment deadline for this expedited rulemaking has closed, EPA and the USACE have taken this action in an effort to provide certainty and consistency to the regulated community. This proposal to amend the effective date of the rule is separate from the two-step process the agencies are currently undertaking in order to repeal and replace the 2015 WOTUS Rule.

EPA awards $600,000 grant to TCEQ to help restore Texas coast. The EPA awarded $600,000 to the Texas Commission on Environmental Quality (“TCEQ”) on November 28, 2017 to help restore coastal habitats in Texas. The funds will support the Galveston Bay Estuary Program’s Comprehensive Conservation and Management Plan. Established in 1989, the Galveston Bay Estuary Program is one of two estuary programs in Texas, one of twenty-eight National Estuary Programs in the United States, and is administered by the TCEQ. According to EPA Administrator Scott Pruitt, “[t]his project will support vital and diverse initiatives in the Galveston Bay Estuary and throughout the region, especially as the area recovers from the impacts of Hurricane Harvey.” The project focuses on the implementation of the Comprehensive Conservation and Management Plan’s restoration of disappearing coastal habitats of the estuary through applied research components that address restoration from an economic and ecological perspective.

On December 11, 2017, EPA Administrator Scott Pruitt announced the appointment of Anne Idsal as Region 6 Administrator. Anne Idsal officially joined the EPA on December 18, 2017, having most recently served as Chief Clerk and Deputy Land Commissioner for the Texas General Land Office (“GLO”). Idsal received her B.A. in Politics from Washington and Lee University in 2005 and her J.D. from Baylor Law School in 2010.

EPA issues a decision for Superfund cleanup in the San Jacinto River Waste Pits. In October 2017, the EPA issued a Record of Decision (“ROD”) regarding the San Jacinto River Waste Pits Superfund site located in Channelview, Texas. An ROD is a public document issued after the EPA holds a public notice and comment period on the proposed decision explaining the remediation plan for the cleanup of a Superfund Site. In the San Jacinto River Waste Pits ROD, the EPA identified both International Paper and McGinnes Industrial Maintenance Corp. as potentially responsible parties (“PRPs”). The ROD requires the PRPs to excavate 160,000 cubic yards of contaminated waste that was generated during the process of bleaching wood in order to make paper. The two companies previously installed a protective cap on the waste pits, but the site was impacted by Hurricane Harvey, requiring the companies to repair the cap in September 2017. The EPA stated that excavation of the cap and full removal of the waste is necessary to protect the public health or welfare from releases of hazardous substances. The PRPs and EPA are currently developing a plan to implement the remaining ROD requirements.

Revised Clean Air Act (“CAA”) Section 608 Refrigerant Management Regulations will take effect January 1, 2018. Starting on January 1, 2018, the revised provisions of Section 608 of the CAA regarding refrigerant management regulations will go into effect. Section 608 of the CAA prohibits the knowing release of refrigerant during maintenance, service, or disposal of air conditioning and refrigeration equipment. The revised rules will include new recordkeeping requirements for the disposal of appliances containing five to fifty pounds of refrigerant, and a requirement to recover 80–90% of not only ozone-depleting substances, but also any substitute refrigerant from appliances using certified recovery and/or recycling equipment. The revised rules also require facilities to maintain records of recovery or recycling of refrigerant for three years.

EPA proposes rule to repeal Clean Power Plan, 82 Fed. Reg. 48035 (Oct. 16, 2017). On December 16, 2017, EPA issued a Notice of Proposed Rulemaking, proposing to repeal the Clean Power Plan (“Plan”) on the grounds that it was not consistent with the CAA. The Plan was adopted in 2015 and aimed at fighting climate change by reducing carbon emissions. However, in 2016, the U.S. Supreme Court halted implementation of the Plan. Following an overwhelming public response to the proposed repeal, the EPA announced that it would schedule additional public listening sessions and extend the public comment period to January 16, 2018. Comments should be identified by Docket ID No. EPA-HQ-OAR-2017-0355 and may be submitted electronically
at: https://www.regulations.gov/document?D=EPA-HQ-OAR-2017-0355-0002.

EPA issues regional haze final rule, 82 Fed. Reg. 45481 (Sept. 29, 2017). EPA issued a final rule, effective on September 29, 2017, allowing Texas coal plants to participate in an intrastate sulfur dioxide emissions trading program instead of installing costly pollution controls. This rule established an alternative to the Best Available Retrofit Technology (“BART”) standard required by the previous federal implementation plan and state regional haze rules. The BART rule requires coal industry leaders with the highest levels of sulfur dioxide emissions to install costly pollution control systems. Affected utilities argued that the installation of the pollution controls could put them out of business, but the new rules will allow Texas coal plants to avoid such costs. However, environmental advocacy groups argue that the new rule will not facilitate the goal of reducing sulfur dioxide emissions in Texas. The National Parks Conservation Association and Sierra Club filed a petition for review of the final rule in the D.C. Circuit Court of Appeals on November 28, 2017, and the petition is currently still under review.

Federal Communications Commission (“FCC”)

On December 14, 2017, the FCC reversed its prior decision in 2015 to regulate broadband internet access service as a telecommunications service. The reversal removes internet access service providers from the restrictions against showing favoritism to websites, or from charging extra fees for faster service. The 200-plus page Declaratory Ruling and Order also rejected some of the FCC’s own authority over the broadband industry, in what critics claim is a politicization of what had traditionally been a bipartisan policy to protect consumers’ use of online platforms. The FCC’s decision is a major policy shift for the agency and has been criticized by consumer groups and tech companies as opening the door for pricing schemes that would steer consumers toward specific content. Supporters of the decision claim the internet will continue to work as it always has, and consumers’ daily internet experiences will not change. Legal challenges are being threatened, and legislation is already being introduced to attempt to settle the issue.

Texas Commission on Environmental Quality (“TCEQ”)

Texas’ Multi-Year Implementation Plan for RESTORE grants accepted. Millions of dollars in grant funds under the federal RESTORE Act, the law created to respond to the 2010 Deepwater Horizon blowout and oil spill, are coming to Texas. Texas’ Multi-Year Implementation Plan (“MIP”) was accepted by the U.S. Department of Treasury on December 17, 2017. The plan lays out how funds for Texas under the federal RESTORE Act will be distributed. Twenty-six projects are included in the MIP, with an estimated total cost of $114.2 million. Currently, approximately $85.6 million is available to Texas with projects directly affecting twelve coastal counties, in compliance with the RESTORE Act requirement that activities directly benefit the coastal area. While planning for these funds began long before Hurricane Harvey developed and are not necessarily related to hurricane relief, many areas devastated by the storm will also benefit from the receipt of these funds.

Caroline Sweeney steps down as Deputy Director of the TCEQ’s Office of Legal Services (“OLS”). Effective December 1, 2017, Sweeney returned to the OLS Remediation Section as a part-time attorney. The Deputy Director role has been filled by Margi Ligarde, who brings a wealth of knowledge and experience to the position. Most recently, Ligarde served as the Special Counsel to the OLS Deputy Director. However, Ligarde has more than twenty-one years of experience in various other roles within OLS and worked in the private sector as an environmental attorney prior to joining the OLS. Ligarde is a graduate of the University of Texas and received her law degree from St. Mary’s University.

TCEQ will require registration for air permits-by-rule (“PBRs”) and standard permits (“STDP”) to be submitted via ePermits. In its Interoffice Memorandum dated August 8, 2017, the TCEQ announced that as of February 1, 2018, the Air Permits Division will require all applicants to submit registrations for PBRs and STDPs through the agency’s ePermits system. The agency reasoned that the change will facilitate more efficient, effective, and environmentally friendly processing of air permits. The requirement will not immediately apply to concrete batch plants, rock and concrete crushers, hot mix asphalt plants, polyphosphate blenders, or portables, because submission of these types of permits is not yet available through the system.

TCEQ proposes rules to consolidate public notice for certain air permits, 42 Tex. Reg. 6676 (Dec. 1, 2017). On November 15, 2017, the TCEQ published proposed rules regarding the consolidation of public notice for certain case-by-case air permit applications. The proposed rules implement Senate Bill 1045 from the 2017 Texas legislative session and amend 30 Texas Administrative Code (“TAC”) Chapter 39 regarding Public Notice and Chapter 55 regarding Requests for Reconsideration and Contested Case Hearings. The proposed rules require individuals applying for a new permit, or amending an existing permit, under 30 TAC Chapter 116, Subchapters B or G (New Source Review Permits and Flexible Permits), to publish one consolidated notice, rather than two: Notice of Receipt of Application and Intent to Obtain Permit, and Notice of Application and Preliminary Decision. This consolidated notice is required only when the TCEQ declares the application administratively and technically complete, and the executive director prepares a draft permit, all within fifteen days of receipt of the application. The public comment period for this proposed rule ended on January 3, 2018.

Texas Water Development Board (“TWDB”)

The Texas Water Development Board approves amendments to Intended Use Plans making $90 million available for disaster recovery. On October 17, 2017, TWDB approved amendments to the State Fiscal Year 2018 State Revolving Funds Intended Use Plans, making $90 million in financial assistance available for disaster recovery. The approval will enable the TWDB to provide immediate funding options to communities impacted by Hurricane Harvey. The changes will make $12 million available in principal forgiveness and $78 million available in zero-interest loans through the Clean and Drinking Water State Revolving Funds for emergency relief and urgent needs projects. A total of 20% of the zero-interest loans and 50% of the principal forgiveness will be reserved for disadvantaged, small, and rural communities. Water supply facilities that suffered damage from flood or other catastrophic events are eligible for funding through the Drinking Water State Revolving Fund. Projects eligible for financial assistance through the Clean Water State Revolving Fund include wastewater and stormwater management facilities. To apply for assistance, facilities must complete and submit a Project Information Form, which can be found at http://www.twdb.texas.gov/financial/programs/pif.asp.

Bech Bruun, Chairman of the TWDB, resigns. On Thursday, December 7, 2017, in a letter written to Governor Greg Abbott, Bruun explained: “Recent events, namely the impacts of Hurricane Harvey, have led my family and me to the belief that the time has come for me to focus my passion for public service closer to home.” Bruun will run as a Republican for Texas’ 27th Congressional District, which includes the Corpus Christi area where he grew up. District 27 is currently represented by House Republican Blake Farenthold. Bruun, based in Austin, previously held jobs under former Governor Rick Perry and state Representative Todd Hunter, before becoming a member of the TWDB in 2013. He was later appointed to chair the TWDB by Governor Abbott in 2015.

Public Utility Commission (“PUC”)

Governor Abbott Appoints Arthur D’Andrea as PUC Commissioner. On November 14, 2017, Governor Greg Abbott appointed Arthur D’Andrea as Commissioner of the Public Utility Commission with a term set to expire September 1, 2023. Before his appointment, D’Andrea served as assistant general counsel for the Office of Governor Abbott, and previously served as an assistant solicitor general for the Office of the Attorney General of Texas. He is a member of the State Bar of Texas and is an officer for the Kealing Middle School PTA. D’Andrea received a Bachelor of Science from The University of Texas at Austin and a Juris Doctor degree from The University of Texas School of Law. D’Andrea first sat as Commissioner at the PUC’s November 17, 2017 Open Meeting.

Docket No. 46831, Application of El Paso Electric Company to Change Rates. On December 14, 2017, the PUC approved the Final Order addressing the application of El Paso Electric Company (“EPEC”) for authority to change rates. An uncontested agreement was executed that resolves all of the issues between the parties to this proceeding. Consistent with the agreement and the PUC’s Final Order, the application was approved.

The agreement provides that EPEC should receive an overall increase of $14.5 million in Texas-base-rate and other revenues, effective for electricity consumed on and after July 18, 2017. Notably, the agreement also provides a mechanism to capture a reduction in the federal income-tax rates for corporations. If the federal income-tax rate for corporations is decreased before EPEC files its next base rate case, then EPEC will record, as a regulatory liability, taking into account changes in billing determinants, the difference between (a) the amount of federal income-tax expense that EPEC collects through the revenue requirement approved in this proceeding and reflected in its rates and (b) the amount of federal income-tax expense calculated using the new federal income-tax rate, taking into account any other federal corporate-tax changes, such as the deductibility of interest costs.

Docket No. 47898, Petition of East Texas Electric Cooperative to Transfer 35 MW Load to ERCOT. On December 21, 2017, East Texas Electric Cooperative (“ETEC”) filed a petition to transfer 35 megawatts (“MW”) of load into the Electric Reliability Council of Texas (“ERCOT”). ETEC’s service territory in east Texas is uniquely located along the seams of three Regional Transmission Organization (“RTO”) markets, which include ERCOT, Southwest Power Pool (“SPP”), and the Midcontinent Independent System Operator (“MISO”). Currently, the east Texas cooperatives serve approximately 1,000 MW of load in SPP, approximately 450 MW of load in MISO, and approximately 150 MW of load in ERCOT. This proposed transfer would increase ETEC’s load in ERCOT to about 185 MW in total.

Specifically, ETEC requests authority to transfer two wholesale delivery points, consisting of approximately 35 MW of load, out of SPP and into ERCOT. The transfer is expected to benefit ETEC’s cooperative members and ultimately the retail customers by reducing power costs and better balancing ETEC’s load amongst the three RTOs, thereby diversifying ETEC’s exposure to each market. This transfer is expected to result in energy savings for each of the 330,000 member consumers served by ETEC’s distribution cooperative members.

This requested transfer was made possible by Oncor Electric Delivery Company’s plan to rebuild its 138 kilovolt Jewett-Lufkin transmission line. This line is in close proximity to ETEC’s load and offers ETEC the opportunity to transfer load into ERCOT at minimal cost. In fact, the total estimated construction cost for the transfer and the work at the two delivery points is estimated to be approximately $2.5 to $3.0 million.

Docket No. 47472, Commission Staff’s Petition to Determine Requirements for Smart Meter Texas. In August 2017, the PUC opened a proceeding to determine the new requirements for Smart Meter Texas (“SMT”) 2.0. SMT 1.0 is an interoperable, web-based information system that stores electric usage data and provides access to advanced meter usage data for premises served by advanced meters for customers, Retail Electric Providers (“REPs”), and authorized third parties. SMT is operated by several transmission and distribution utilities (“TDU”) (Oncor, CenterPoint Energy Houston Electric, LLC (“CenterPoint Energy”), American Electric Power (“AEP”), and Texas New Mexico Power Company) that have entered into a Joint Development and Operations Agreement (“JDOA”), which provides for the joint ownership, development, operation, and maintenance of SMT. SMT was created in 2008 to provide a standard web portal and data repository for meter usage data regardless of utility service territory, consistent with the requirements of the Public Utility Regulatory Act and the PUC’s substantive rules. SMT provides a single point of access for customers without the need to develop individual TDU web portals.

However, participation in SMT 1.0 is very low. There are 100,695 residential accounts, representing approximately 1.4% of active meters in SMT. There are approximately 5,260 small business accounts, representing approximately 0.007% of active meters in SMT. And the costs have been significant. Through the end of 2016, Oncor and CenterPoint Energy areas alone have paid over $96 million for SMT costs. This new proceeding was opened to determine which requirements should be revised, deleted, or kept as the Joint TDUs bid out a new contract for SMT 2.0. Several parties intervened and filed testimony. Parties spent two days in hearings litigating the proceeding. However, parties have been working hard to settle this proceeding and identify what attributes customers need and want for a lower cost to ratepayers. Briefs were due January 5, 2018.

Docket No. 47199, Project to Assess Price-Formation Rules in ERCOT’s Energy-Only Market. In response to a lengthy report submitted by NRG Energy, Inc. (“NRG”) and Calpine Corporation (“Calpine”), the PUC has opened a project to assess price-formation rules in ERCOT’s energy-only market. The report proposes a number of significant changes to ERCOT’s market design, and to the way that wires utilities collect revenue from large commercial and industrial customers. The PUC held a workshop on August 10, 2017, where the authors of the report submitted by NRG and Calpine gave a presentation to the Commissioners and stakeholders on their recommendations for changes to ERCOT’s energy-only market.

The authors of the report discussed their list of recommendations, noting the level of difficulty each would present to implement. These recommendations include: (1) making adjustments to the operating reserve demand curve to address reliability impacts of changes in the generation supply mix and price impacts of reliability deployments; (2) including the marginal costs of transmission losses in market pricing; (3) introducing Local Scarcity Pricing to provide a market solution to properly set prices when there are limited generating reserves in a local region; and (4) adopting market-oriented policies for transmission investment as a replacement for Texas’ socialized transmission planning, and development of alternatives for transmission cost recovery.

Dr. David Patton from the MISO Independent Market Monitor (“IMM”) also presented his proposals for improving the design of the ERCOT market, but focused on the value of co-optimization. Dr. Patton believes the benefits of co-optimization clearly exceed the costs and should be implemented as soon as possible. ERCOT also gave a presentation, after Dr. Patton, and claimed that it would cost approximately $40 million and take four to five years to implement co-optimization technology into the market.

Commissioners and stakeholders had the opportunity to ask questions of the presenters. The Commissioners ultimately decided that this was the first of many workshops to discuss these proposals and asked for stakeholder comments on the report. ERCOT and other stakeholders filed comments on the proposals on December 1, 2017 and reply comments on December 22, 2017. The Commission will likely determine next steps in early 2018.

Railroad Commission of Texas (“RRC”)

GUD No. 10669, Statement of Intent of CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy Entex and CenterPoint Energy Texas Gas to Increase Rates in the South Texas Division. On November 16, 2017, CenterPoint Energy Entex and CenterPoint Energy Texas Gas (“CenterPoint”) filed a Statement of Intent to change gas rates in its South Texas service territory. Within its South Texas Division, CenterPoint provides service to 142,288 customers (132,129 residential customers). CenterPoint is requesting a rate increase of $540,000, which is a 1.0% increase in revenues, excluding gas costs. CenterPoint is also asking for a $0.39 surcharge related to Hurricane Harvey. Together, these increases will raise the average residential bill by $1.13.

Two different coalitions of cities have intervened, along with RRC Staff. The first Prehearing Conference was held December 7, 2017. Parties are currently engaging in discovery.

Agency Highlights is prepared by Maris Chambers in the Firm’s Districts and Water Practice Groups, Tricia Jackson in the Firm’s Air and Waste Practice Group, and Jamie Mauldin in the Firm’s Energy and Utility Practice Group. 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, Tricia at 512.322.5825 or tjackson@lglawfirm.com, or Jamie at 512.322.5890 or jmauldin@lglawfirm.com.