The TCEQ-EPA fight: an industry view, a governor's view
Sun June 27, 2010 9:46 am

The first article below is from the Oil Price Information Service (OPISnet.com), an industry newsletter. It is an informational publication, not an advocacy publication. A typical article is, "Flattening Ethylene Forwards Curve Reflects Declining Demand, Rising Supply." The second article appeared in the Corpus Christi Caller-Times under Rick Perry's byline.

TEXAS REFINERS BRACE FOR LEGAL BATTLE OVER PLANT PERMITS

The dispute between Texas oil refiners and the federal Environmental
Protection Agency over operating permits and air pollution has the potential to become a political firestorm, oil interests say, and is most likely headed for legal challenge.

Far from a run-of-the-mill bureaucratic snag, the EPA's recent notification to Flint Hills Resources about its application to amend a permit for its Corpus Christi refinery is a game-changing shot across the bow in the battle over climate change, refining and legal sources said. Denied a legislative solution after Congress failed on its first attempt to pass a climate change bill in late 2009, EPA is said to have turned against Texas' permitting process in favor of an approach that could force large reductions in greenhouse gases (GHGs).

"This is a backdoor way of cutting greenhouse gas emissions," said Patricia Braddock, an environmental lawyer with Fulbright & Jaworski in Austin, Texas. If the EPA successfully invalidates the Texas program, oil refiners (and other large GHG emitters) will have to spend many millions of dollars to install additional pollution controls, add equipment and pay penalties.

"If it's determined that refiners have been emitting more (pollution) than what they should have in the past, they'll have to reduce emissions even further (as offsets)," said Braddock, who has had extensive experience with both the EPA and Texas regulators in the area of air pollution. The financial burden will be significant, she added, to both companies and consumers.

As previously reported, the EPA maintains that it has undertaken to finalize Texas permit approvals to make sure they are consistent with the federal Clean Air Act (CAA). Meanwhile, the Texas Commission on Environmental Quality (TCEQ) says it is making a good faith effort to meet EPA's objections to flexible permits "even though our program does meet requirements" of CAA.

At the heart of the conflict is Texas' use of flexible permits. Conceived of 15 years ago by the TCEQ as a way to entice older facilities in its massive industrial infrastructure into a program to reduce air pollution, the flexible permits took an approach to standards that was different from EPA's. In exchange for the ability to adjust unit operations to match market conditions, refiners let go their grandfathered status and installed best available control technology to reduce emissions beyond those spelled out by CAA. Every modification thereafter had to meet a prevention of significant deterioration standard which could be achieved by staying under an overall
emissions cap.

While the EPA never approved Texas' implementation plan for CAA, it also didn't formally object to it until the current administration entered the White House. Having proposed its disapproval, the agency is expected to take final action by June 30. Refiners have received subpoenas to produce all of their files on flexible permits and all correspondence on them by the same date.

Refiners expect that the EPA would like to subject large Texas emitters to New Source Performance Standards and have them address their GHG emissions. The agency could do this if it invalidates flexible permitting and operating permits aren't granted before early 2011.

"Come Jan. 2 (under the new GHG 'tailoring' rule), one of our big concerns is EPA will take the position that facilities didn't have proper permits ... and so are new sources," said one refining official working on the issue. The uncertainty surrounding a new permit process is huge, the official said, and inimical to refiners' long-term planning.

"Right now I can't promise management I can get a permit and I can't say what that permit will require," he said. If, for example, the EPA were to require that all pumps in a refinery be electrified instead of running off the fuel gas generated as a byproduct of the refining process, "we'd have to replace every pump, some of which are the size of Volkswagens and are hugely expensive," the official said.

The official spoke on the condition of anonymity because of his fear, widely shared in the industry, that any publicly voiced opposition to EPA's actions is a certain invitation to an enforcement action, including shutdowns.

Fulbright & Jaworski's Braddock said the concern had merit. EPA's "having taken over permits is an indication they will force their agenda," she said, which could mean shutting facilities to prove to companies that they have to negotiate. "This administration is committed to seeing climate change enacted during its tenure," she added.

"My sense is that EPA will go forward until Congress or the courts tell them to stop," Braddock said.

This opinion piece by Governor Perry ran in the Corpus Christi Caller-Times on June 4, after EPA had indicated its intention to challenge Texas's compliance with the Clear Air Act (CAA) -- in particular, at the Flint Hills refinery in Corpus Christi.

Clean air and good jobs; When it comes down to it, that’s the legacy of Texas’ existing air permitting program.

Operating from a position mired in bureaucracy, however, the EPA is determined to “federalize” our 16-year-old system. It’s a move that will kill tens of thousands of Texas jobs and effectively kick the legs out from under one of the strongest economies in the country during a time when our national economy remains on shaky ground.

They certainly can’t find fault with what Texas has accomplished under our system:

- Texas reduced ozone 22 percent and slashed NOx emissions by 46 percent between 2000 and 2008. That beats the nationwide trend, with ozone declining 8 percent and NOx falling just 27 percent.

- Despite a population that grows by 1,000 people a day, since 2000, Texas has cut carbon dioxide emissions more than every other state in the union, except for Louisiana, and more than any other country in the world except for Germany.

- Every county in Texas is within federal standards for fine particulate matter, which are among the pollutants with the greatest effect on human health.

- We’ve added more wind power generation capacity than any state, more than all but four other countries.

- During roughly the same time frame, Texas employers have created more jobs than any other state in America.

Any one of those accomplishments alone should compel Washington to commission studies on what we’re doing right in the Lone Star State. Viewed as a whole, our environmental efforts tell a success story unparalleled anywhere in the nation.

However, instead of replicating our successful formula, the EPA has instituted a crackdown on the very policies that have enabled us to lead the nation in improved air quality and job creation.

Attacking us has nothing to do with environmental protection.

This isn’t even a partisan issue. The Texas System that the EPA is condemning was put into place under Gov. Ann Richards, a Democrat, and operated in full under the watch of President Bill Clinton’s administration.

Today’s EPA has adopted an activist mindset that energy jobs are bad and crippling regulations are good.

Like many activists, it appears the EPA has decided the traditional energy industry must be put out of business, no matter the catastrophic damage that would be done to our economy and national security.

Texas’ success is a problem for those who feel that way, because we’re proving you can improve the environment and diversify your energy portfolio without gutting the existing system.

Even the words used by EPA Regional Director Al Armendariz betray this fact, when he says that our permitting system is not “federally consistent.” He doesn’t say “ineffective,” because that’s demonstrably false. Instead, he indicates that our system is unacceptable simply because it’s different from what he interprets as the federal standard.

Never mind that our system is working better than the rest of the country.

Part of the power of a republic is each state is constitutionally free to deal with challenges their own way, since they generally have a far better grasp of the local landscape than some unelected bureaucrat in a DC office.

States must be free to experiment with new ideas and new approaches that can lead to breakthroughs and an increased competitive edge. If appropriate, these breakthroughs can be replicated, as other states seek workable solutions to challenges they face.

When the federal government – as it’s doing in our case – stamps out the ability of states to search for their own solutions, that source of innovation is stamped out, as well. When that happens, everybody loses, from Maine to California.

In our case, however, they’re not just stamping out something that might work, they’re crushing a system that’s been proven successful for nearly a generation.

Texas has cleaner air and more jobs under our system. Those are undisputed facts.

However, EPA officials aren’t looking for results; they want federal control.

My comments:

I believe, as Rick Perry believes, that the EPA's action is arbitrary, that the "flex permit" system that EPA has allowed Texas to use for fifteen
years -- with considerable success -- should not now be declared invalid because of a change in administration. I see nothing wrong with our State Implementation Plan that calls for averaging high- and low- polluting facilities so long as the average is at or below what is necessary to comply with the Clean Air Act.

But this article is the wrong piece at the wrong time with the wrong message. I think Perry is right that EPA is out to make an example of Texas, that Texas has a target painted on its back -- but it is Perry who is the artist. He has called Obama a socialist, he has hinted at secession, he has challenged federal supremacy by brandishing the Tenth Amendment, and even in the article, under the shadow of the gallows, he continues to attack the executioner. Under the circumstances, with a hostile EPA administrator looking over Texas's shoulder, this article borders on recklessness. It is designed for domestic political consumption, but the result is going to be that it is certain to antagonize EPA and make life harder for Texas industry. I fear that Perry, and Texas, are about to discover the meaning of the Supremacy Clause.

Assuming that what Perry wants is a robust Texas energy industry, how does he help achieve that goal by saying things like:

* Today's EPA has adopted an activist mindset that energy jobs are bad and crippling regulations are good.

* It appears the EPA has decided the traditional energy industry must be put out of business, no matter the catastrophic damage that would be done to our economy and national security.

* ...EPA officials aren't looking for results, they want federal control.

I wonder if it has occurred to TXOGA, the Texas Oil and Gas Association, that if they are going to be in a fight for their economic lives, they might be better off with a governor who is a skilled negotiator instead of one who cherry-picks statistics and plays politics. Can anybody in the industry post a comment explaining how Perry's article is helpful?

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