Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA Launches New Study Into “Produced Water” From Drilling Projects. EPA updated its website to announce plans for a study to investigate treatment technologies to reduce “produced” water from oil and gas drilling. “Produced” water is a term used in the oil industry to describe water that is a byproduct of the extraction process. This water is typically brackish, saline, and is considered a pollutant. The EPA announcement contains little information about the study’s specifics, only that there will be one conducted. Current rules of Subpart E, initially regulated in 1979, allow for the discharge of some “produced” water in lands west of the 98th meridian, which encompasses parts of west Texas. The study will aim to examine whether there is a greater ability to reduce “produced” water contamination due to the recent technologies and developments in the extraction industry. The results of this study may impact future oil and gas production, but any policy shift stemming from the findings of a study, if any, will likely not be implemented for several years.

Office of Management and Budget Begins Review of EPA’s Lead Pipe Rule. EPA has submitted its final rules setting a ten-year timeline for utilities to replace all lead service lines (“LSL”) to the Office of Management and Budget (“OMB”) for final review. This proposed rule would override the currently pending proposal from the Trump Administration’s EPA, which set lower targets for lead pipe removal. The Trump era proposal set a thirty-three-year window for lead pipe removal, compared to the more aggressive push of ten years by the Biden Administration’s EPA. The Trump Administration proposal is set to go into effect by October 16, 2024, unless the OMB finalizes its decision before that date.

Environmental groups are concerned that the proposed rule still has shortfalls regarding adequate protection from lead exposure. Lead pipes that utilities do not “control” such as the pipes in homes, are not within the scope of the proposed rule. Additionally, the proposed rule does not require a water system to pay the full cost of LSL replacements, which could lead to heavy cost shifting onto consumers, and further slow the pace of LSL replacement. Additionally, although the proposed rule gives a timeline of ten years, cities can get extensions, pushing back total LSL replacement, potentially by decades. Despite these caveats, the primary concern for EPA is feasibility in implementing the broad program. The program will cost billions and will require heavy cooperation between local municipalities, services providers, the states, and the federal government.

Army Agrees to using EPA’s PFAS MCL as Testing Threshold. The U.S. Army is committing to a joint pilot project with EPA’s enforcement office for sampling PFAS at private drinking wells surrounding nine bases and will respond if the results exceed EPA’s maximum containment levels (“MCL”). This is the first time a military service branch has used EPA’s MCL standards for PFAS exposure for private wells near military bases. Currently, the Department of Defense (“DOD”) follows EPA guidance for PFAS exposures inside of bases, but not for areas surrounding the base.

The program emerged as a compromise between EPA and the service branches when EPA sought to exercise jurisdiction over all DOD cleanups. The nine bases were selected out of a list of 235 locations where the DOD has identified contamination from PFAS. Current DOD regulations regarding PFAS are based on a 2016 EPA drinking water regulation, but the MCL standards have gotten significantly more stringent with the newest rule. Although the move is an EPA-Army initiative, not all armed service branches support further partnership with EPA. The U.S. Air Force is in dispute with EPA over the agency requiring the Air Force to develop a PFAS wastewater treatment facility for exposure in a site in Arizona. The Air Force argues EPA lacks legal jurisdiction to enforce a cleanup program, and that the superfund process is sufficient in cleaning up environmental waste.

EPA and the Army will weigh expanding the pilot program to other bases following the results of the current survey.

EPA Supports Calls to Bolster Water Systems Cybersecurity Measures. EPA is agreeing with calls from the Government Accountability Office (“GAO”) to bolster its cybersecurity program regarding water and wastewater systems. EPA has been making moves to improve its cybersecurity programs, such as imposing mandatory cybersecurity requirements on utilities in their “sanitary surveys” mandated by the Safe Drinking Water Act. This plan faced challenges in federal courts and was ultimately blocked, and EPA retracted the policy altogether.

These changes are part of a larger national security effort pushed by the Biden Administration to promote “critical infrastructure security and resilience.” The GAO notes that while EPA is taking steps to assess aspects of cybersecurity risk, the agency has failed to conduct a comprehensive sector-wide risk assessment to guide its actions. EPA wrote in a response to GAO that a water sector risk assessment is forthcoming in its upcoming 2025 plan. The risk assessment will be released in January 2025 and updated biannually. EPA has convened a Water Sector cybersecurity task force comprised of local, state, and federal representatives, as well as industry input to develop further risk-informed decisions on cyber security issues.

EPA Proposes Advisory Screening for 6PPD Chemical. EPA has released water screening values for the chemical 6PPD—a chemical used in the manufacture of tires—and its byproducts. In high enough concentration, the substance has been linked to fish kills. The data of 6PPD toxicity is not sufficiently robust enough to support binding water quality criteria, however, and EPA guidance remains purely advisory. The screening levels are expected to support protection of marine life in freshwater sources and function as a tool for states and local governments to keep their water quality clean. The advisory notes levels of 6PPD exceeding 8,900 nanograms per liter and just eleven nanograms of 6PPD-Q (a byproduct of 6PPD) could pose dangers for marine life. These non-binding screening values only address freshwater as EPA found insufficient data for 6PPD and 6PPD-Q in non-freshwater sources. Ensuring proper data quality for these sources remains a goal, but there is insufficient empirical data to make any binding decisions for any body of water.

United States Occupational Safety and Health Administration (“OSHA”)

OSHA Proposes New National Heat Rules. On August 30, 2024, OSHA published a proposed rule for new heat related regulations. This proposed rule, if finalized as proposed, would require employers subject to OSHA to implement a Heat Injury and Illness Prevention Plan (“HIIPP”) which must include compliance policies, designation of heat safety coordinators, and a response strategy. As part of their HIIPP, employers would be required to track the local heat index for outdoor workers and identify heat-exposed areas and update monitoring plans based on changes in temperature for indoor workers. The proposed rule would also require employers to provide an acclimation period for new employees, cool potable water (one quart per hour to each employee), and break areas with air conditioning or increased air movement for the initial heat trigger. For the secondary, higher heat trigger, employers would need to remind employees of heat safety protocols, implement a buddy system or check in with employees every two hours, and provide 15-minute paid rest breaks every two hours. Comments will be accepted until December 30, 2024.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ Anticipates Publication of Proposed Rule on Reclaimed Water Disposal Issues. Soon, the TCEQ will be accepting public comments and holding a public hearing on its proposed rulemaking for disposal of reclaimed water to a wastewater collection system. The rule is said to simplify the ability of reclaimed water production facilities (“RWPFs”) to dispose of treated wastewater through a traditional wastewater collection system by simplifying the permitting process for disposal of reclaimed water. The rulemaking would amend 30 Tex. Admin. Code Chapter 321 and essentially allow RWPFs to cut out TCEQ as the middleman by obtaining consent directly from the owner of a wastewater treatment plant (“WWTP”) or collection system to dispose of water through the WWTP rather than an RWPF obtaining a separate Texas Pollutant Discharge Elimination System permit to discharge to the separate WWTP. There will be separate design elements required if a RWPF has consent to dispose of wastewater to a WWTP.

TCEQ anticipates that the proposed rule will be published in the Texas Register on October 11, 2024, thereby commencing the public comment period which will be open for 30 days. Further, TCEQ anticipates a public hearing on or around November 12, 2024 for the proposed rule.

Texas Water Development Board (“TWDB”)

Bryan McMath is New Executive Administrator for the TWDB. On September 4, 2024, the TWDB announced that Bryan McMath was selected as the new head of the agency. Mr. McMath has served as TWDB’s Interim Executive Administrator since March 2024. In 2021, Mr. McMath joined the TWDB as the Director of Governmental Relations after working at the Texas State Capitol for fifteen years in a variety of roles for lawmakers and gaining expertise in natural resources law and policy. The TWDB is the state agency responsible for gathering and sharing water-related data, supporting regional water and flood planning, and developing the state’s water and flood plans. TWDB also oversees affordable financial assistance programs for projects related to water supply, wastewater treatment, flood mitigation, and agricultural water conservation.

TWDB Publishes & Approves State-wide Flood Plan. Texas has never had a state-wide flood plan—that is, until now. Due to a variety of geographical areas, topographical differences, and climate considerations, the flood plans for each of the fifteen water planning regions of Texas can present unique challenges. In 2019, the Texas State Legislature passed Senate Bill 8 (“S.B. 8”) that recognized that each region has some level of flood concern and tasked TWDB with developing a state-wide flood plan. S.B. 8 mandates that TWDB produce a new flood plan every five years. On August 15, 2024, TWDB published the 2024 State Flood Plan, which was subsequently approved by the TWDB. The plan presents over 4,000 recommendations for local, regional, and state entities as well as private property owners to address flooding concerns. The recommendations include proposed improvements to stormwater infrastructure, increased and targeted financial aid for recovery projects, reworking emergency response protocols, and implementing new modeling and supporting studies to better identify flood risks.

Public Utility Commission of Texas (“PUC”)

CenterPoint, Oncor, and Texas-New Mexico Power System Resiliency Plan Update. As previously reported, PUC recently established a rate recovery mechanism specific to transmission and distribution utility (“TDU”) system resiliency. Under the rule, TDUs file “Resiliency Plans” detailing resiliency related efforts and infrastructure, and PUC reviews and approves the plans in a contested case. Subsequently, the TDU applicant may charge the approved rate to recover costs associated with resiliency efforts.

CenterPoint Energy Houston Electric, LLC (“CenterPoint”) filed a Resiliency Plan in early May 2024. After Hurricane Beryl, however, PUC Staff initiated its “Investigation of Emergency Preparedness and Response by Utilities in Houston and Surrounding Communities.” CenterPoint ultimately withdrew its application on August 16, 2024.

Oncor Electric Delivery Company LLC (“Oncor”) similarly filed a Resiliency Plan in May 2024. During the contested case, intervening parties identified several investments and programs ineligible for Resiliency Plan recovery. Oncor, accordingly, agreed to reduce its resiliency request by approximately $30 million, defer $309.1 million for future recovery contingent on certain conditions, and implement reporting metrics that provide greater transparency for future Resiliency Plan requests. The settlement entitles Oncor to $3.073 billion in rate recovery, and depending on the recovery period, would increase monthly residential bills by $4.85 to $6.29.

Texas-New Mexico Power Company (“TNMP”) filed its Resiliency Plan on August 28, 2024. TNMP’s Resiliency Plan requests $751.1 million over the next three years. PUC opened a contested case under PUC Docket No. 56954, and intervening parties have initiated review.

Oncor and Texas-New Mexico Power file Distribution Cost Recovery Factor Applications. TDUs continue to file periodic Distribution Cost Recovery Factors (“DCRFs”)—interim rate filings that authorize rate recovery related to distribution infrastructure. Due to a recent change in law, the Public Utility Regulatory Act (“PURA”) authorizes two DCRFs in a “year.” This spring, intervening parties moved to dismiss a DCRF application on the grounds that “year” refers to a 12-month period, and the TDU applicant filed three DCRFs in 12 months. PUC, however, clarified that “year” refers to “calendar year,” and thus authorized up to four DCRFs in a 12-month period.

Oncor proceeded accordingly. On August 16, 2024, it filed its second DCRF in the 2024 calendar year—but its fourth DCRF since its May 2022 comprehensive base-rate proceeding. In Oncor’s most recent DCRF, the TDU seeks to increase its DCRF by approximately $90.3 million. Because administrative rules authorize only four DCRFs between comprehensive base-rate proceedings, however, Oncor has now exhausted its DCRF recovery until its next base rate case. PUC is processing Oncor’s current DCRF in PUC Docket No. 56963.

TNMP also filed its second DCRF in the 2024 calendar year. On July 30, 2024, the TDU filed its application seeking an approximately $7.8 million increase to its DCRF. Cities Served by TNMP (“Cities”), Alliance of Texas-New Mexico Power Municipalities (“ATM”), and Alliance for Retail Markets (“ARM”) each filed direct testimony or recommendations. Cities argued that projects totaling approximately $6.4 million should be removed from TNMP’s DCRF, resulting in a revenue requirement reduction of approximately $735,000.00. ATM did not have any adjustments—but noted the lack of adjustments was in large part due to the limited review period. ARM requested that PUC set the DCRF’s effective date beyond TNMP’s 45 days’ retail electric provider notice. TNMP initially proposed an effective date of September 30, 2024, but agreed with ARM’s arguments and

proposed a new effective date of October 27, 2024. The Administrative Law Judge ultimately recommended approval of TNMP’s requested rates and upheld TNMP’s effective date adjustment. PUC is processing TNMP’s filing in Docket No. 56887.

PUC Rulemaking Update. PUC Staff filed the current 2024 rulemaking calendar in Docket No. 56060. Status updates on PUC’s outstanding rulemakings are below:

• Project No. 53404 – Power Restoration Facilities and Energy Storage Resources for Reliability; Proposal for Publication issued June 8, 2024; additional comments filed on August 2, 2024
• Project No. 54224 – Cost Recovery for Service to Distributed Energy Resources (“DERs”); Commissioner Glotfelty filed memorandum on August 28, 2024
• Project No. 54233 – Technical Requirements and Interconnection Processes for DERs; Commissioner Glotfelty filed memorandum on August 28, 2024
• Project No. 54584 – Reliability Standard for the ERCOT Market; PUC adopted the rule on August 29, 2024
• Project No. 55718 – Reliability Plan for the Permian Basin Under PURA § 39.167; Comments filed on August 9, 2024
• Project No. 55000 – Performance Credit Mechanism; Comments filed on June 20, 2024

Other rulemaking projects waiting next steps:

• Project No. 52059 – Review of PUC’s Filing Requirements
• Project No. 56199 – Review of Distribution Cost Recovery Factor
• Project No. 55249 – Regional Transmission Reliability Plans
• Project No. 51888 – Critical Load Standards and Processes
• Project No. 53981 – Review of Wholesale Water and Sewer Rate Appeal
• Docket TBD – Water Financial Assurance

Railroad Commission of Texas (“RRC”)

TGS CGSA Rate Case Update. On June 3, 2024, Texas Gas Service Company (“TGS”) filed an application to raise rates in its Central-Gulf Service Area (“CGSA”). TGS filed the application with RRC (GUD No. 00017471) and with cities retaining original jurisdiction. In its application, TGS proposed to increase revenues by $25.8 million (15.59% excluding gas costs) and increase its Return on Equity from 9.5% to 10.25%. TGS’s application proposed a decrease for commercial classes and an increase for residential customers. Additionally, TGS sought approval of several new rate riders, implementation of new depreciation rates, and a prudence finding regarding the TGS’s capital investment.

As of mid-September, TGS and other parties, including RRC Staff and city groups, reached a settlement in principle. If finalized and approved by RRC, the settlement would eliminate the need for the case to go to hearing. More details about the settlement will be available in the next edition.

RRC Approves CenterPoint Gas Settlement. On June 25, 2024, RRC Commissioners approved a settlement in CenterPoint Gas’s most recent rate case. The settlement significantly reduced CenterPoint Gas’s initial request. It entitles CenterPoint Gas to a $5 million overall revenue increase—$33.8 million lower than CenterPoint Gas’s request. Additionally, the settlement entitles the utility to a 9.8% Return on Equity, 0.07% less than originally requested.

“Agency Highlights” is prepared by Toni Rask in the Firm’s Water Practice Group; Mattie Neira in the Firm’s Air and Waste Practice Group; and Roslyn Warner 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 Toni at 512.322.5873 or trask@lglawfirm.com, or Mattie at 512.322.5804 or mneira@lglawfirm.com, or Roslyn at 512.322.5802 or rwarner@lglawfirm.com.