Air Pollution Control Equipment Services, Policy & Regulations

Texas Regulators Develop GHG Permitting Program

Issue 2 and Volume 118.

Charles Nixon   By Charles Nixon and Tim Wilkins, Bracewell & Giuliani LLP   Tim Wilkins
Charles Nixon Tim Wilkins

In October 2013, the Texas Commission on Environmental Quality (TCEQ) launched an important rulemaking initiative to establish a greenhouse gas (GHG) permitting program for the state of Texas and take over permitting authority from the U.S. Environmental Protection Agency (EPA). The rulemaking will shape the future of GHG regulation in Texas and likely influence other states as well. Thanks to Texas’s varied industrial landscape, TCEQ will be at the forefront of determining “best available control technology” (BACT) for a wide range of GHG-emitting sources. As such, it will likely be a frequent reference point for other states going forward, especially as EPA continues to strengthen its climate change regulations and expand them to new industrial sectors. As a result, the rulemaking has drawn considerable attention from leading environmental groups like Sierra Club and Public Citizen, as well as Texas industry. Both sides have strong, divergent views on the types of GHG reduction strategies TCEQ should include in its BACT analysis and other aspects of the proposed program.

Apart from these key differences, most stakeholders agree that the transition of GHG permitting authority from EPA to TCEQ is a positive change. For three years now, Texas companies have been subject to two different permitting authorities for Prevention of Significant Deterioration (“PSD”) air permits: EPA issues GHG PSD permits under a Federal Implementation Plan, while TCEQ issues PSD permits for all other regulated pollutants. The dual permitting scheme has not been a model of efficiency. In addition to the administrative burden of pursuing two separate permit applications, applicants have experienced substantial project delays and cost increases. Last spring, in an attempt to resolve the situation, the Texas Legislature passed legislation requiring TCEQ to begin developing rules to issue GHG PSD permits. This proposed rule seeks to implement that mandate.

TCEQ’s approach to authorizing GHG emissions will differ from its approach to permitting conventional pollutants in a few key respects. First, the GHG portion of a PSD permit application will not be subject to a contested case hearing, the present means of challenging a major Texas air permitting action. Instead, interested persons will be able to submit written comments on the GHG aspects of a PSD air permit application, and can appeal TCEQ’s decision to issue a GHG permit to state district court. Second, TCEQ will not consider climate change or local air quality impacts from an individual source’s GHG emissions, consistent with EPA’s GHG permitting guidance. Neither of these aspects have drawn much controversy in the rulemaking process to date.

Where TCEQ’s program will likely be most controversial is in how it provides for determining best available control technology (BACT) for GHGs. So far, TCEQ has indicated it will probably limit its BACT analysis to fuel efficiency requirements and in-process controls—an approach supported by industry. In contrast, environmental activists are pushing TCEQ to consider a much broader range of possible GHG reduction strategies, including carbon capture techniques, gas turbine inlet air chilling, and renewable energy components as part of generating units to reduce fuel needs. They want specific language in the TCEQ regulations ensuring that the BACT analysis will take an “all of the above” approach.

The environmental groups put particular emphasis on carbon capture and sequestratin. CCS is a costly—and often infeasible—proposition, due to the limited options for transportation and underground sequestration of sources’ CO2 output. However, Sierra Club, for example, has repeatedly argued, in comments on GHG permit applications at EPA, that carbon capture is more feasible in Texas than in other states. Sierra believes CO2 can be used in enhanced oil recovery (EOR) operations, or sequestered in depleted oil-and-gas reservoirs, which are purportedly more common in Texas.

So far, Sierra Club’s position has not gained traction at EPA—suggesting it will not likely resonate with TCEQ either. Still, the environmental activists hope their proposed rule changes will ensure that TCEQ considers carbon capture in every permit application, or risk being overturned on judicial appeal. Thus, whether TCEQ decides to adopt such a provision could have an impact on the breadth of the BACT analysis and, consequently, the length of the GHG permitting process.

TCEQ aims to adopt its rules in March 2014. Before TCEQ can begin issuing permits for GHGs, EPA must rescind its existing Federal Implementation Plan, which will most likely be associated with approving the TCEQ rules and incorporating them into the Texas State Implementation Plan. How these rules develop in the process will have long-term implications for GHG emissions sources in Texas and beyond.

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