Agency Highlights

U.S. Environmental Protection Agency (“EPA”)

EPA Announces Final Rule Designating Two PFAS as Hazardous Substances Under CERCLA and Issues Enforcement Discretion Policy. On April 17, 2024, EPA posted a “pre-publication” copy of a final rule designating perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”), including their salts and structural isomers, as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”). PFOA and PFOS are categories of per- and polyfluoroalkyl substances (“PFAS”) which are widely used, long-lasting chemicals which break down very slowly over time. This action is based on EPA’s finding that PFOA and PFOS “may present a substantial danger to the public health or welfare or the environment when released” and serves to further EPA’s environmental goals of remediating contaminated properties in a timely manner and holding the polluters accountable for the contamination. The rule is set to be effective 60 days after it is published in the Federal Register.

The proposed rule was published on September 6, 2022, and received approximately 64,000 comments, including significant interest by solid waste and wastewater industry leaders who sought an exemption for passive receivers such as landfills and wastewater treatment plants. Rather than address the request for a passive receiver exemption, EPA instead supplemented the proposed final rule with an enforcement discretion policy published in a guidance document on April 19, 2024, just two days after posting the pre-publication version of the final rule. In this policy, EPA asserts that the focus of the final rule is to hold responsible the parties who “significantly contributed to the release of PFAS into the environment, including parties that manufactured PFAS or used PFAS in the manufacturing process, federal facilities, and other industrial parties.” EPA further asserts that it will consider equitable factors when seeking response actions or costs under CERCLA and that it does not intend to pursue facilities such as “community water systems and publicly owned treatment works, municipal separate storm sewer systems, publicly owned/operated municipal solid waste landfills, publicly owned airports and local fire departments, and farms where biosolids are applied to the land.” Although the policy may give some comfort to passive receivers of PFAS, such receivers should keep in mind that the policy does not shield them from third party claims brought under CERCLA, and that EPA is not generally bound by such policies.

It should also be noted that the rule does not classify PFOA or PFOS as hazardous wastes. EPA cites to interim guidance published by EPA on April 8, 2024 regarding destruction and disposal of PFAS which acknowledges that PFAS contaminated wastes could be sent to either hazardous waste or municipal landfills, and EPA specifically states that “waste containing PFOA and PFOS is not necessarily hazardous waste (unless the particular wastes are hazardous for some other reason).” EPA further states that “for CERCLA cleanups, only hazardous wastes listed or identified under the Resource Conservation and Recovery Act Section 3001 (or any authorized State program) are required to be managed at RCRA subtitle C facilities” and that no PFAS are currently listed or being proposed to be listed as RCRA hazardous wastes.

PFAS regulation is continually evolving, and Lloyd Gosselink continues to follow changes as they occur.

EPA Proposes Revisions to Performance Standards for New Stations Sources and Emission Guidelines. Under Clean Air Act (“CAA”), EPA is required to review emission standards for municipal waste combustors every five years. The initial standards were originally set in 1995, and despite the CAA mandate, they have not been updated since 2006, in part due to significant lobbying from differing interests and ever-changing administrations. However, in June 2023, EPA entered a consent decree that required the agency to publish a proposed rule by December 31, 2023, and finalize it by November 20, 2024. EPA published its proposed rule shortly after the deadline, on January 23, 2024. The proposed rule would strengthen emission standards for existing large municipal waste combustors and new source performance standards for new combustors. EPA also proposes to remove exemptions for pollution during startups, shutdowns, and malfunctions (“SSM” exemptions) although the D.C. Circuit Court recently ruled that EPA cannot require states to revise air pollution plans solely to remove such exemptions. The proposed rule is published in
89 Federal Register 4243, and EPA is reviewing comments.

EPA Proposes Listing Nine PFAS as Hazardous Constituents Under RCRA and Amending the Definition of Hazardous Waste to Expand Corrective Actions. EPA published two rules that go hand in hand in allowing the agency to address historical per- and polyfluorinated substances (“PFAS”) contamination on February 8, 2024. EPA first proposes listing nine specific PFAS as “hazardous constituents” in 40 CFR Part 261, Appendix VIII. Second, EPA proposes amending the definition of Hazardous Waste as it applies to the Corrective Action Program to clarify EPA’s authority to address releases of emerging contaminants, which includes, but is not limited to, PFAS. Specifically, the proposed rule would expressly apply the Resource, Conservation, and Recovery Act (“RCRA”) section 1004(5) statutory definition of hazardous waste to corrective actions and other necessary locations such as in the hazardous waste facility permitting regulations. The scope of both rules is intended to be very narrowly tailored to the RCRA Corrective Action Program, and EPA explicitly states that making certain PFAS hazardous constituents does not make them, or wastes containing them, RCRA hazardous wastes. EPA’s intent is to allow for PFAS to be considered in the RCRA Corrective Action Program, which requires facilities that treat, store, or dispose of hazardous waste to investigate and clean up contaminated soil, groundwater, and surface water. Comments are no longer being accepted on the second rule, but will be accepted until April 9, 2024, on the first.

Final PFAS Drinking Water Rule Announced. On April 10, 2024, EPA announced the final version of its first ever rule on enforceable Safe Drinking Water Act (“SDWA”) limits for per- and polyfluoroalkyl substances (“PFAS”). This announcement comes well ahead of EPA’s September 2024 statutory deadline to finalize the rule. The National Primary Drinking Water Regulation (“NPDWR”) is the first federally enforceable drinking water regulation to address any PFAS substances. During its formulation, EPA evaluated 120,000 public comments and considered input received from consultants and stakeholders. EPA anticipates the rule will prevent PFAS exposure in drinking water for approximately 100 million people, prevent deaths and reduce serious PFAS-attributable illnesses. NPDWR establishes legally enforceable maximum contaminant levels (“MCLs”) for six PFAS: perfluorooctanoic acid (“PFOA”), perfluorooctane sulfonic acid (“PFOS”), hexafluoropropylene oxide (“HFPO”) dimer acid, perfluorononanoate (“PFNA”), perfluorohexanesulfonic acid (“PFHxS”), and perfluorobutane sulfonic acid (“PFBS”). The final MCLs set for PFOA and PFOS are 4.0 parts per trillion (“ppt”). The MCLs for PFHxS, PFNA, and HFPO-DA are 10 ppt. EPA also finalized a hazard index for mixtures containing two or more PFHxS, PFNA, HFPO-DA, and PFBS that has a MCL of a unitless 1. The final rule requires public water systems (“PWS”) to conduct PFAS monitoring, with an initial monitoring deadline of 2027. And by 2029, PWS must also implement PFAS reduction solutions if their monitoring shows drinking water levels exceed the MCLs. In conjunction with the new rule, $1 billion in funding has been made available through the Bipartisan Infrastructure Law to assist states and territories with PFAS testing and treatment. Despite this funding, states have raised concerns over the financial impact of the new rule, flagging that the funding and resources needed for PFAS implementation will be in competition with other drinking water mandates such as cybersecurity, infrastructure updates, and the updated lead and copper rule.

EPA Proposes Clean Water Maui Guidance. In November 2023, EPA released a draft guidance titled Applying the Supreme Court’s County of Maui v. Hawaii Wildlife Fund decision in the CWA Section 402 National Pollutant Discharge Elimination System Permit Program to Discharges through Groundwater (“Maui Guidance”). The draft Maui Guidance outlined the factors to be considered when evaluating whether discharges through groundwater are subject to the CWA. The Maui Guidance is available online at: https://www.epa.gov/system/files/documents/2023-11/maui-draft-guidance.pdf. States and industry groups have expressed concerns over the Maui Guidance, particularly over EPA’s proposal to use pollutant constituents as indicators for prohibited pollutants due to the possibility of misleading results. The Maui Guidance pertains to the application of the Supreme Court’s “functional equivalence” to direct discharges that necessitate a National Pollutant Discharge Elimination System (“NPDES”) permit. The draft includes the ability of regulators to evaluate constituents of identified pollutants to support the finding of a functional equivalent to a direct discharge. Critics of the guidance have called into question the use of constituents as indicators due to a lack of factual information regarding the factors for determining a functional equivalent laid out in Maui. These factors are: transit time, distance traveled, the nature of the material through which the pollutant travels, the extent to which the pollutant is diluted or chemically changed as it travels, the amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source, the manner by or area in which the pollutant enters the navigable waters, and the degree to which the pollution at that point has maintained its specific identity. While industry groups dubbed the draft as overbroad and unclear, environmentalists have urged EPA to expand the guidance to include additional pathways for systems and facilities to meet the functional equivalent standard. This includes the use of a rebuttable presumption that permeable impoundments of wastewater treatment systems of a certain size that are designed to leak and are within a certain distance from protected surface waters meet the functional equivalence standard.

Joint Agency Guidance on Water Cybersecurity. EPA, the Federal Bureau of Investigation (“FBI”), the Office of the Director of National Intelligence and the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (“CISA”) issued a joint guidance to water and wastewater utilities in the wake of a cyber attack on a Pennsylvania utility, and EPA’s withdrawal of its policy proposal to mandate certain cyber requirements. The Cybersecurity Advisory encourages water and wastewater facilities to bolster cybersecurity defenses with planning tools and security elements focused on preparedness, response, and mitigation. The Cybersecurity Advisory is available online at: https://www.cisa.gov/sites/default/files/2024-01/WWS-Sector_Incident-Response-Guide.pdf. The guidance highlights security tools and services offered by CISA, and the first responders and rapid response teams of the FBI. It also encourages multi-level reporting, as well as tailored containment, eradication, and recovery responses. Post-incident retention of data and evidence is emphasized for prevention of future incidents with the use of a lessons-learned approach. Also following the attack on the Pennsylvania utility, the House Energy and Commerce Committee planned a January hearing on cybersecurity safeguards for drinking water systems. The hearing presented an opportunity for lawmakers to discuss safeguarding water infrastructure from attacks. These events came just months after the EPA withdrew its controversial policy that attempted to mandate state review of water system cybersecurity measures under the SDWA. Discussion at a February Homeland Security CISA hearing on cybersecurity focused on administrative agency collaboration rather than the possibility of new legislation.

Combined Sewer CWA Proposed Guidance. On February 20, 2024, EPA released a proposed draft guidance meant to clarify and inform future CWA permitting for combined wastewater and storm sewer systems. As proposed, the guidance clarifies permit terms for combined sewer overflow (“CSO”) communities nearing completion of CWA long-term control plans (“LTCP”). The guidance recommends these communities allow adequate time for monitoring, assessing, and planning by beginning the process laid out in the guidance several years in advance. The guide is also meant to incorporate new policy decisions and environmental considerations since EPA’s last CSO policy for combined sewer which was released in 1994. The guidance adds that permitting authorities and permittees should take climate change impacts into consideration. It also recommends the prioritization of projects that will improve water quality in underserved or overburdened communities.

EPA Urged to Assist Small Systems with Water Funding. EPA financial advisors have been urged to conduct research projects aimed at helping smaller drinking water systems better use federal funding dollars due to a lack of capacity of small communities to take advantage of increased infrastructure aid, such as that from the Bipartisan Infrastructure Law. During a February session, EPA’s Environmental Financial Advisory Board (“EFAB”) was asked to address smaller systems’ struggles to utilize federal funding initiatives, such as state revolving funds. The main subjects presented for EFAB’s focus were innovation, multi-benefit analysis, consolidation and regionalization of smaller systems, potential gains from water quality trading, and other market-based approaches; as well as financial incentives for systems. Some of the recommended study topics included expanding technology assistance, including for water recycling and reuse. EFAB was also urged to conduct more research on innovative infrastructure improvements with cooperation between federal, state, and local authorities. EFAB was also urged to address the multi-benefit analysis of conservation and efficiency to meet water challenges and how a long-term approach could help with lead service line replacements and other mandates under EPA’s Lead and Copper Rule Improvements.

Texas Commission on Environmental Quality (“TCEQ”)

New Commissioner Appointed to TCEQ. On February 8, 2024, Governor Greg Abbott announced the appointment of Catarina Gonzales as next Commissioner of the TCEQ. Commissioner Gonzales joins TCEQ from the Office of the Governor, where she served as a budget and policy advisor. She assumes the position previously held by Commissioner Emily Lindley. Commissioner Gonzales’ term is set to expire August 31, 2029.

Public Utility Commission of Texas (“PUC”)

PUC Opens Rulemaking to Address Market Abuse. PUC, in Project No. 55948, opened a rulemaking to implement recent legislation passed by the 88th Legislature related to generator Voluntary Mitigation Plans (“VMPs”)—plans voluntarily submitted by generators regarding market abuse regulation compliance. The rule, as contemplated, removes the VMP compliance absolute defense provision, which absolved a generator of all market abuse liability if the generator complied with its VMP. The rulemaking appropriately removes the absolute defense provision and directs PUC to consider VMP compliance, together with other factors, to determine administrative penalties. The rulemaking, however, maintains the “small fish” exemption, which automatically excludes generators that control less than 5% of installed ERCOT generation capacity from market abuse regulation.

Stakeholders, including city representatives, filed comments expressing support for the VMP absolute defense amendment. Because the ERCOT market is increasingly complex and constantly evolving, a VMP cannot realistically capture all market abuse mechanisms. As such, VMP compliance is more appropriately a factor—together with factors including the gravity of the violation, previous violations, and efforts to correct the violation—PUC should consider for administrative penalties. Cities, however, urged PUC to remove the “small fish” exemption. As reported by the ERCOT Independent Market Monitor, generators exempt under the small fish exemption may possess sufficient market power to engage in abusive behavior. PUC, therefore, should not shield these generators from administrative penalties. PUC Staff will now consider stakeholders’ comments before issuing its Proposal for Adoption later this spring.

Oncor Electric Delivery Company, LLC Files its Third Distribution Cost Recovery Factor Application in Nine Months. Oncor filed an application to increase its DCRF by approximately $81,323,915. Transmission and Distribution Utilities (“TDUs”) file DCRF applications to recover investment related to distribution poles, wires, and other equipment items that serve end-use customers. PURA, however, authorizes a TDU to adjust its DCRF “not more than twice per year.” Although Oncor’s DCRF application is the Company’s first DCRF in the calendar year 2024, it is the Company’s third DCRF in less than nine months. Collectively, the Company has sought an additional $290,369,280 of distribution revenue in less than one year.

Intervening parties filed a motion to dismiss Oncor’s DCRF, asserting PURA only authorizes two DCRFs in a twelve-month period. Principles of statutory interpretation and other PURA provisions support this interpretation. Oncor responded that a “year” refers to a “calendar year.” PURA, therefore, authorizes this DCRF—the Company’s first DCRF filing in calendar year 2024. PUC Administrative Law Judge has not issued an order addressing the motion to dismiss.

AEP Texas Inc. Files Rate Case at the PUC. On February 29, 2024, AEP Texas Inc. (“AEP Texas”), a transmission and distribution investor-owned utility, filed an application at the PUC to change its rates. In its filing, AEP Texas seeks to increase system-wide distribution rates by $100.4 million per year (an increase of 13.1%) and increase system-wide transmission rates by $63.1 million (an increase of 9.29%). The impact of an approval of this proposed increase on an average residential customer would be an increase of about $4.59 per month. As filed, the rates would go into effect on April 4, 2024. On March 1, 2024, the Cities Served by AEP Texas filed a Motion to Intervene in this proceeding and has begun reviewing the application. More information can be found on PUC’s website under Docket No. 56165.

CenterPoint Houston Electric LLC (“CenterPoint”) Files Rate Case Seeking $60 Million Rate Increase. On March 6, 2024, CenterPoint filed with PUC and with cities retaining original jurisdiction an application to change rates. CenterPoint’s last electric rate case concluded in March 2020. CenterPoint seeks an overall increase to its base rates equating to $60 million per year, or $17 million for retail customers and $43 million for wholesale transmission service. If approved, this would be an approximate 1% increase in wires charges to distribution customers and an approximate 6.6% increase for transmission service customers. The Company estimates that the monthly increase for an average residential customer would be $1.25 if the application is approved in its entirety. More information is available on PUC’s Interchange under Docket No. 56211.

PUC Rulemaking Update. PUC Staff’s current rulemaking calendar for 2024 can be found under Docket No. 56060.

As of February 15, 2024, the following projects are being prioritized:

• Project No. 55566 – Generation Interconnection Allowance
• Project No. 55826 – Texas Energy Fund In-ERCOT Generation Loan Program
• Project No. 55812 – Texas Energy Fund Completion Bonus Grant Program
• Project No. 55948 – Review of Voluntary Mitigation Plans
• Project No. 55955 – Review of Administrative Penalty Authority Related to VMPs
• Project No. 53924 – Water and Sewer Utility Rates after Acquisition
• Project No. 53404 – Power Restoration Facilities and Energy Storage Resources for Reliability

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

• Project No. 52059 – Review of PUC’s Filing Requirements
• Project No. 56199 – Review of Distribution Cost Recovery Factor
• Docket TBD – Water Financial Assurance
• Project No. 54233 – Technical Requirements and Interconnection Processes for Distributed Energy Resources (“DERs”)
• Project No. 54224 – Cost Recovery for Service to DERs
• Project No. 52301 – ERCOT Governance and Related Issues
• Project No. 55249 – Regional Transmission Reliability Plans
• Project No. 54584 – Reliability Standard for the ERCOT Market
• Project No. 51888 – Critical Load Standards and Processes
• Project No. 53981 – Review of Wholesale Water and Sewer Rate Appeal

Texas Railroad Commission (“RRC”)

Texas Railroad Commission Primary Election Results. The Texas 2024 primary election occurred on March 5. Texas voters chose party nominees for statewide seats, and those nominees will face off in the general election on November 5.

Three elected commissioners oversee RRC, and one of their seats is up for election every two years. This year, Commissioner Chair Cristi Craddick, who has served on the RRC since 2012, faces re-election. She won the Republican primary, receiving just more than 50 percent of the vote against challengers Christie Clark, Corey Howell, James Matlock, and Petra Reyes. In the Democratic primary, process safety engineer Katherine Culbert won with 67.7 percent of the vote, beating drilling engineer Bill Burch, who received 32 percent. Culbert has worked in the oil and gas industry for more than two decades.

Atmos Energy’s (“Atmos”) Gas Reliability Infrastructure Program Filings. What is a Gas Reliability Infrastructure Program (“GRIP”) filing? GRIP filings allow gas utilities to recover costs related to additional invested capital without filing a comprehensive rate case. These interim rate adjustment filings can be made by natural gas utilities with newly invested capital not already included in that utility’s exiting rate base. However, the gas utility must have filed a full rate case within the previous two years. Below are two recent GRIP filings by Atmos’ two utility divisions – Atmos Mid-Tex and Atmos West Texas.

Mid-Tex

Atmos Mid Tex has requested a $173.6 million increase under the GRIP statute for the environs in the Mid-Tex region and in the regions covered by the Atmos Texas Municipalities Coalition Cities (“ATM Cities”). The residential charge set in the last environs base rate case was $17.00, while the one set in the last base rate case for ATM Cities was $18.85. Since then, GRIP has added $29.06 to the customer charge (including $6.73 in the current filing). Ultimately, if this GRIP filing is approved, the residential customer charge in the environs will be $46.11, and the residential customer charge in the ATM Cities will be $47.96.

Atmos West Texas

Atmos West Texas has requested a $15.7 million increase under the GRIP statute for its environs in that region and for the Amarillo, Lubbock, Dalhart, and Channing Cities (“ALDC”). The residential charge set in the last environs base rate case was $16.10, while the residential charge in the last rate case for ALDC cities was $15.00. Since then, GRIP has added $19.06 to the environs customer charge (including $3.67 in the current filing) and added $9.36 to the ALDC cities customer charge (including $3.34 in the current filing). Ultimately, if this GRIP filing is approved, the residential customer charge in the environs will be $35.16, and the residential customer charge in the ALDC will be $24.36.

Atmos Request for Dallas Would Increase Rates Nearly 30 Percent. On January 12, 2024, Atmos submitted its 2024 Dallas Annual Rate Review Mechanism filing, where the gas utility proposed an annual review increase of $43.1 million for Dallas. Moreover, Atmos proposed recovering securitization regulatory expenses of $4.8 million for Dallas. These combined requests represent an increase in annual revenues of $47.9 million. If the filing is approved without changes, the average residential customer would see a monthly rate increase of $13.72 with gas costs included, which represents a 29.98 percent increase excluding gas costs. The statutory deadline to take action on this matter is May 26, 2024.

“Agency Highlights” is prepared by Chloe Daniels in the Firm’s Water and Districts Practice Groups; Mattie Neira in the Firm’s Air and Waste Practice Group; and Rick Arnett, Samantha Miller, Jack Klug, and Roslyn Dubberstein 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 mneira@lglawfirm.com, or Rick at 512.322.5855 or rarnett@lglawfirm.com, or Samantha at 512.322.5808 or smiller@lglawfirm.com, or Jack at 512.322.5837 or jklug@lglawfirm.com, or Roslyn at 512.322.5802 or rdubberstein@lglawfirm.com.