Agency Highlights

United States Environmental Protection Agency (“EPA”)

Texas’s Clean Water Act Permitting Under Investigation by the EPA. EPA is conducting an “informal investigation” of the state of Texas’s National Pollutant Discharge Elimination System (“NPDES”) permitting program. The investigation is in response to alleged violations of the Clean Water Act (“CWA”) brought in a suit by environmentalists. In a letter from EPA Region 6 to the Texas Commission on Environmental Quality, the EPA states that the CWA’s implementation rules permit the EPA to conduct an informal investigation of the alleged violations to determine if there is cause to withdraw approval of the state’s NPDES program. The investigation has focused on allegations relating to the state’s public participation process and further allegations of burden shifting in permit proceedings and roadblocks to the public’s ability to obtain judicial review of issued permits. The Region 6 office will review the claims and supporting information to decide whether to take action, which could entail limiting or withdrawing the state’s NPDES authority.

Updates Made to EPA Water Finance Guide. EPA has updated its guidance for the calculation of community ability to pay for CWA requirements and compliance with enforcement deadlines. The updated guidelines retain measures endorsed by environmentalists, including more accelerated compliance schedules. The updated Financial Capability Assessment (“FCA”) guidance establishes a revised framework for calculating community financial capability during the negotiation of implementation schedules for CWA compliance. The updated FCA guidance includes revised recommended compliance schedule benchmarks for “high” and “medium” impact communities, the use of a lowest quintile poverty indicator as a new calculation metric, and other key measures. The new guidance also retains requirements under the CWA from the Combined Sewer Overflow Policy as part of FCA, including the consideration of median household income (“MHI”) and other household costs as a percentage of MHI. These updates finalize agency efforts to respond to the fiscal year 2016 congressional mandate to update the 1997 affordability guidance, and the new FCA guidance will replace the 1997 guidance and supplement the public sector sections of the 1995 Water Quality Standards Guidance. Despite this effort, water utilities have stated that this could increase negative impacts on low-income households by making the process more onerous. The National Association of Clean Water Agencies, representing municipally-owned wastewater and stormwater utilities, contends that a household-level approach should be taken to avoid payment of disproportionately higher amounts of income on clean water bills by environmental justice communities. The guidance is available for download at: https://www.epa.gov/system/files/documents/2023-01/cwa-financial-capability-assessment-guidance.pdf.

EPA Adds Cybersecurity Requirements to Sanitary Surveys. Addressing cybersecurity vulnerabilities in the water sector is a top priority for the Biden Administration in the face of warnings of activity targeting the technology that supports the U.S. Water and Wastewater System. In response to a 2022 Congressional mandate to produce a water systems cybersecurity support plan, EPA plans to develop a checklist of best practices for utilities and to create technical support resources. EPA has also stated that it intends to add cybersecurity requirements to the triennial sanitary survey program, a move opposed by water sector groups that view sanitary surveys as the wrong tool for cybersecurity efforts and charge that the approach is legally flawed. The EPA’s draft Memorandum to State Drinking Water Administrators on Public Water System Cybersecurity has not been released to the public but was reviewed and approved by the Office of Management and Budget on February 14, 2023. The final memorandum was issued to state drinking water administrators on March 3, 2023. An EPA fact sheet has been issued that outlines the requirements for water systems to take cybersecurity into account during sanitary surveys with a number of options for systems to choose from in order to comply. The memorandum, fact sheet, and guidance are available at: https://www.epa.gov/waterriskassessment/epa-cybersecurity-water-sector#rule.

EPA Proposed Clarification to MS4 Rule due to Census Bureau Definition Change. EPA has released a proposed new final rule aimed at clarifying decades-old requirements for small municipal separate storm sewer system (“MS4”) discharges in urbanized areas. The original 1999 rulemaking contained a “once in, always in” provision in its preamble that is now being argued to exceed the agency’s authority under CWA by a coalition of cities in Minnesota. The new rule, which retains the “once in, always in” policy, accounts for last year’s move by the Census Bureau to remove the term “urbanized area” and replace it with a category for “urban areas with a population of 50,000 or more people.” Contrastingly, a group of state agencies, the Association of Clean Water Administrators, supports the new change for its allowance of the National Pollutant Discharge Elimination System permitting authorities to use 2020 and future Census data. The proposed rule clarification and guidance on the Census Bureau’s change are available at: https://www.epa.gov/npdes/stormwater-discharges-municipal-sources.

Proposed Rule on PFAS Announced. The first-ever national drinking water standard for per- and poly-fluoroalkyl substances (“PFAS”) was announced on March 14, 2023. The announcement comes after the completion by the Office of Budget and Management of their review of the proposed rule on March 3, 2023. This major step by EPA to protect public health from PFAS pollution builds on other key milestones of the Biden Administration to combat PFAS, including an EPA proposal to designate two PFAS substances as Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) substances. The proposed rule, once finalized, will regulate perfluorooctanoic acid (“PFOA”) and perfluoro octane sulfonic acid (“PFOS”) as individual contaminants and four other PFAS as a mixture. The proposed rule will also require public water systems to monitor these chemicals as well as notify the public and reduce PFAS contamination if levels exceed the proposed regulatory standards. The proposed rule is available for download at: https://www.federalregister.gov/documents/2023/03/29/2023-05471/pfas-national-primary-drinking-water-regulation-rulemaking#addresses. EPA requests input on the proposed rule from stakeholders and the public. Comments may be submitted through the public docket, identified by Docket ID No. EPA-HQ-OW-2022-0114, at www.regulations.gov. Verbal comments can be made at the public hearing, to be held on May 4, 2023, for those registered by April 28, 2023. Registration is available at: https://www.eventbrite.com/e/proposed-pfas-npdwr-public-hearing-tickets-549335536377.

Push for PFAS CERCLA Liability Exemption. Water utility groups have begun to push Congress for a statutory exemption from CERCLA liability concerning PFAS traveling through their systems in light of EPA lack of authority to provide such protection. The Water Coalition Against PFAS has said that efforts to address PFAS must appropriately assign liability to those responsible for creating the contamination. CERCLA follows the “polluter pays” principle, which holds those responsible for releasing hazardous chemicals into the environment liable for clean-up costs. The Coalition contends that this principle will effectively result in “public pays” scenarios where, without a statutory exemption for drinking water and wastewater systems that merely passively receive PFAS, polluters can pass cleanup costs on to customers. Although EPA has pledged to use enforcement discretion when addressing liability concerns, water utilities maintain that such efforts will be insufficient to shield them from liability because of EPA’s limited authority. Public listening sessions were held on March 14 and 23, 2023, to help draft a PFAS enforcement discretion policy.

EPA Issues New WOTUS Rule. The new Waters of the United States (“WOTUS”) rule was published in the Federal Register on January 18, 2023, and went into effect on March 20, 2023 for all jurisdictions except Idaho and Texas. The new rule codifies proposed modifications to the ever-changing definition of WOTUS. Finalized back in December 2022, EPA and U.S. Army Corps of Engineers (“USACE”) have attempted to create a durable policy that will return to pre-2015 standards while simultaneously introducing several new exclusions from federal jurisdiction, including six new waivers for agricultural land. The new rule broadens the Trump-era rule and attempts to bring additional clarification to wetland jurisdictional determinations. Most notably, the new rule endeavors to apply both competing tests set out in the Rapanos v. United States plurality decision that created the favored Justice Scalia’s narrow test for jurisdiction based on a “continuous surface connection” between “relatively permanent waters” and the solo Justice Kennedy concurrence that provided a broader “significant nexus” standard. As previously stated, officials plan for this definition to merely be the first phase in a two-part repeal and replace effort, with a second, more durable, and long-term definition planned in the coming future. Further changes to the definition of WOTUS are expected by some in light of the ongoing Supreme Court Sackett v. EPA case that takes up the issue of wetland jurisdictional determination, the outcome of which is still pending post-October 3, 2022 oral arguments.

Updated EPA Effluent Guidelines. This past January 2023, EPA announced its plans to propose rules revising effluent limitation guidelines and pretreatment standards to address rapidly growing the Per-and Polyfluoroalkyl Substances (“PFAS”) concerns. In collecting data for this plan, EPA analyzed various PFAS sources and determined that revisions to 40 Code of Federal Regulations Part 445, Landfills Point Source Category, are warranted to address PFAS in landfill leachate. EPA has held stakeholder meetings with various organizations in the industry such as the National Wildlife Rehabilitators Association, the Solid Waste Association of North America, and the Association of State and Territorial Solid Waste Management Officials and intends to initiate a publicly owned treatment works influent study, including for landfills. While commencement and pace of these activities depend on EPA’s 2023 Fiscal Year appropriations and operating plan, a future rule would potentially impact landfill discharges to surface waters and sanitary sewers.

United States Department of Defense (“DOD”)

DOD released specifications for PFAS-free replacement of Aqueous Film-Forming Foam (“AFFF”). In October 2022, DOD announced its plan to replace AFFF with a PFAS-free alternative at military bases. On January 6, 2023, DOD released its plan to transition to Fluorine-Free Foams (“F3”) along with specifications for F3. While F3 may not currently be capable of meeting these specifications, [this plan is an important step in having all DOD foams bought after the October 2023 deadline to cease buying AFFF be met,] and DOD must cease using all PFAS-based foam by October 2024. Civilian use of the AFFF alternative remains discretionary.

Texas Commission on Environmental Quality (“TCEQ”)

Draft Guidance for Post Closure Care (“PCC”). As the thirtieth anniversary of Subtitle D of the Resource Conservation and Recovery act approaches, municipal solid waste (“MSW”) landfills that closed on or soon after October 9, 1993 will soon be seeking exit from PCC. In preparation for this, TCEQ published a draft guidance document to address how it handles landfills requesting to exit PCC in October 2022. The guidance would require that an engineer submit a certification that the facility is ready to exit PCC or notify and explain to TCEQ why it is not. The guidance also lays out what must be submitted to determine if landfill gas monitoring, groundwater monitoring, and leachate collection and removal may be discontinued, as well as whether the final cover and surface drainage control system are functioning properly. While the guidance provides various specific requirements and parameters, it leaves room for TCEQ discretion in several instances. TCEQ held several informal stakeholder meetings and accepted comments on the draft document. TCEQ is reviewing comments and there is no estimated timeframe for a final document or revised draft to be published.

Electric Reliability Council of Texas (“ERCOT”)

ERCOT Technical Advisory Committee has Two New Officers. In late January, the Technical Advisory Committee (“TAC”) held its first meeting of 2023 where officer elections were held. TAC makes recommendations to the ERCOT board regarding policies and procedures and is responsible for prioritizing projects. Clif Lange was elected unanimously for Chair, and Caitlin Smith was elected for Vice Chair. Clif Lange is the General Manager for the Generation and Transmission Cooperative at South Texas Electric Cooperative. Caitlin Smith works for Jupiter Power in their Trading, Analytics, and Market Operations team. The most recent TAC meeting was held on March 21, 2023.

Public Utility Commission of Texas (“PUC”)

Electric Market Redesign Discussion Continues. The Senate Business and Commerce Committee held two hearings in February to continue their evaluation into the electric market redesign options. The first hearing focused on assessment of the Performance Credit Mechanism (“PCM”) model, which PUC and many generators throughout the industry support. The second hearing focused on the other proposals.

At the first hearing on February 7, 2023, PUC Chairman Peter Lake, Zachary Ming, a Consultant with Energy + Environmental Economics (“E3”), and Carrie Bivens, ERCOT’s Independent Market Monitor Director, testified. Chairman Lake, a major proponent of the PCM model, was adamant that if PCM is approved, it will result in construction of dispatchable power plants. Ms. Bivens emphasized that market incentives are currently in place to promote investment, but the legislature did not seem convinced by this approach. The biggest take away from the hearing was the legislature’s desire to implement financing from the state to reduce the cost of capital for investment.
The hearing on February 16, 2023 had six witnesses present to speak, including former PUC Chair Becky Klein, who spoke about her perspective and experience from deregulation. The two main issues at the hearing were operational performance and long-term resource adequacy. At this hearing, PCM was met with greater skepticism from the legislature. However, PCM was supported by witness Michele Richmond with Texas Competitive Power Advocates. The other witnesses provided new proposals for dispatchable reliability ancillary service and a state funded emergency reserve program.

Additionally, two Senate Bills relating to the electric market reliability were filed on March 9, 2023, sponsored by Senator Schwertner and Senator King. Senate Bill 6 establishes the Texas Energy Insurance Program, which supports and maintains current dispatchable generation through a state-backed low-cost loan program. Senate Bill 7 allows power generators to bid a day ahead on dispatchable reliability reserve services to account for market uncertainty and allocates costs for providing ancillary and reliability services procured under this section among dispatchable and non-dispatchable generation facilities, and load serving entities.

Sunset Bill Affecting ERCOT and PUC- SB 1368/HB 1500. Senate Bill 1368 and its companion bill, House Bill 1500, are the Sunset Review Bills for PUC and Office of Public Utility Counsel. The bills’ major amendments to the Public Utility Regulatory Act include the requirement of PUC to include public testimony on each non-contested case meeting item in the agenda for each regular PUC meeting; the requirement of PUC to prepare a biennial report that includes scope of competition in the electric and telecommunications market; and the requirement of PUC to develop a strategic communications plan.

The bills also made changes to the independent organization certified for the ERCOT power region. The changes include providing clarification of PUC’s authority over the independent organization, establishing how PUC may make directives to the independent organization, and requiring two members of the independent organization to include the Commission Chairman and a Commissioner picked by the Chairman. Finally, the bills require PUC and independent organization submit an electric industry report to the legislature in January on every odd-numbered year.

PUC Rulemaking Update. PUC Staff’s current rulemaking calendar for 2023 can be found under Docket No. 52935. As of February 7, 2023, the following projects are being prioritized:

• Project No. 54212 – Terms and Conditions of Access by a Competitive Retailer to the Delivery System of Certain MOUs and Electric Cooperatives
• Project No. 52796 – Review of Market Entrant Requirements
• Project No. 52059 – Review of Commission’s Filing Requirements
• Project No. 54589 – Review of Chapter 26

Other rulemaking projects that are being prioritized but do not yet have a determined schedule include:

• Project No. 53924 – Water and Sewer Utility Rates After Purchase or Acquisition
• Project No. 53404 – Restoration of Electric Service After a Widespread Outage
• Project No. 54233 – Technical Requirements and Interconnection processes for Distributed Energy Resources (“DERs”)
• Project No. 54224 – Cost Recovery for Service to DERs
• Project No. 54585 – Emergency Pricing Program
• Project No. 52301 – ERCOT Governance and Related Issues
• Project No. 51888 – Critical Load Standards and Processes
• Project No. 53981 – Review of Wholesale Water and Sewer Rate Appeals.
  

Texas Railroad Commission (“RRC”)

Investigation into ATMOS after Power Outage in December. RRC began examining Atmos Energy late last year after more than 2,300 customers lost service or had their service curtailed during a December 22-26, 2022 winter storm. Both Governor Greg Abbott and local city officials have complained about what they described as the company’s lack of planning and have called for the inquiry.

On February 7, 2023, RRC’s Oversight and Safety Division (“OSD”) closed its investigation into Atmos Energy’s service disruptions during the cold weather event that occurred in late December 2022. In its investigation, OSD found Atmos Energy’s extensive, localized service interruptions experienced by Atmos customers due to low pressure on localized areas of the Mid-Tex distribution system on December 22 through December 26, 2022 were a violation of RRC’s Rules on Quality of Service, which establishes minimum service standards like the continuity of service. The violation occurred due to the insufficiency of Atmos Energy’s cold weather contingency plan in preventing serious interruptions in eight primary localized communities of its Mid-Tex distribution system.

As a result of the investigation, RRC staff will refer the violation of the Quality of Service to the RRC’s Enforcement Section of its Office of General Counsel to enforce penalties on Atmos Energy.

“Agency Highlights” is prepared by Chloe Daniels in the Firm’s Water and Districts Practice Groups; Mattie Isturiz in the Firm’s Air and Waste Practice Group; and Samantha Miller in the Firm’s Energy and Utility Practice Group. If you would like additional information or have questions related to these agencies or other matters, please contact Chloe at 512.322.5814 or chloe.daniels@lglawfirm.com, or Mattie at 512.322.5804 or misturiz@lglawfirm.com, or Samantha at 512.322.5808 or smiller@lglawfirm.com.