AIR POLLUTION:

EPA issues final plan for auditing rejected Texas permits

For the roughly 130 power plants, refineries and other facilities embroiled in the air permitting dispute between U.S. EPA and the Texas Commission on Environmental Quality, a new program being finalized by EPA could allow them to get on with business as usual.

The world's two largest environmental agencies have been scrapping for months over "flexible permitting," a 16-year-old system used by Texas to craft permits for some of the state's largest industrial facilities. Rather than placing an emissions limit on each source of pollution -- at larger plants, there can be thousands of them -- the permits set an overall cap and let companies decide how to get there.

EPA argues that the permits stifle public comment, make it hard for EPA officials to verify emissions reductions and allow more pollution than standard federal New Source Review (NSR) permits allow. Texas has challenged the agency's rejection of the program in court, claiming that the program yields the same emissions reductions and helps businesses meet federal requirements at a lower cost.

In an effort to let facilities with flexible permits sidestep Texas regulators, EPA released a final rule yesterday that would let companies check whether their permits meet federal rules. In exchange for going through a voluntary audit, as was originally proposed in June, the businesses would get a promise from EPA not to pursue civil penalties for any failure to comply with federal requirements (Greenwire, June 16).

In an interview yesterday, EPA Region 6 Administrator Al Armendariz tried to soothe businesses worried about the consequences of undergoing an audit. The agency does not intend to focus on enforcement actions, he said.

"Our objective is to get good permits," Armendariz said. "If a company works with us to get a federally enforceable permit, we're willing to absolve them from any NSR violations that happened while they were holding the flexible permits."

Facilities with permits under the state's program had been operating in limbo for years because EPA never made a decision on flexible permitting. Those businesses have been under particularly intense pressure ever since EPA formally "disapproved" the program in June.

Under the final audit program rule, which hasn't yet been published in the Federal Register, the third-party audits would determine federally required emissions limits and operational conditions, as well as monitoring, record-keeping and reporting requirements.

Texas Gov. Rick Perry (R) and TCEQ Chairman Bryan Shaw have described EPA's challenge to flexible permitting as an effort to assert federal control and push the state aside. State officials have not yet reviewed the details of EPA's final audit program, TCEQ spokesman Terry Clawson said yesterday.

"Individual companies will have to judge for themselves whether or not this is a viable option," Clawson said in a statement. "The state of Texas vigorously defends its flexible permits program and expects to prevail in court. Flexible permits are legal and effective."

Will businesses buy in?

The question now is how Texas businesses will receive the final audit program. EPA has already started talks with about a dozen companies holding flexible permits, Armendariz said, but many others have been waiting to see what their options are.

When the agency proposed the program, many businesses feared that the audits would expose them to lawsuits, an attorney representing holders of flexible permits said last month.

"Companies are saying, 'We don't want to leave this harbor. It's not exactly a safe harbor, but we're not stepping on that rock in the river until we know that's not really an alligator in there,'" said the attorney, who asked not to be identified because of concerns that speaking openly could harm negotiations. "'It's going to have to be really bad here before I go there'" (Greenwire, Aug. 10).

The biggest change made to the proposed audit program was the elimination of a clause outlining the fines for companies that did not comply with federal requirements. Businesses had criticized the proposal during the public comment period, so the final rule does not "prejudge" any penalties, Armendariz said.

"Some companies may have acted in good faith and never circumvented federal NSR requirements, but perhaps other companies did," Armendariz said. "Rather than presuppose that everybody who had a flexible permit did the exact same kinds of things, we said, 'Let's just do the audit,' and for those companies who did not violate NSR rules, the discussions will be very different."

Though EPA would promise not to bring lawsuits under the audit program, businesses are also worried that going through an audit would prompt lawsuits from environmental groups and members of the public, experts say. Environmental groups such as the Sierra Club and Environmental Integrity Project have filed multiple lawsuits accusing flexible permit holders of violating federal rules (Greenwire, July 15).

Armendariz said those groups would think twice before challenging a company going through the audit, because that could dissuade other companies from making the emissions reductions that would be required by an audit.

If a company has come forward and agreed to review its emissions, Armendariz said, "my sense is that the environmental community will feel that problem has largely been solved."

Click here to read the final rule.

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