Texas Commission on Environmental Quality Proposes Major Revision of Statewide Penalty Policy

Texas companies may soon see increasing penalties for noncompliance with Texas environmental laws. On September 30, 2020, the Texas Commission on Environmental Quality (TCEQ) announced significant proposed changes to the existing Penalty Policy (the Policy), which was last revised on April 1, 2014. TCEQ is accepting comments on the revised Policy until October 30, 2020. Received comments will be summarized and presented to the Commissioners for their consideration at future Commissioners’ Work Sessions.  For additional explanation of the proposed revisions, or for assistance in preparing comments to the TCEQ, please contact Foley & Lardner LLP.¹

TCEQ also announced that it is beginning the rulemaking process to propose revisions to 30 Texas Administrative Code (TAC), Chapter 60, Compliance History, by adding a new section, which will allow TCEQ to reclassify a site’s compliance history classification to “under review” if the site has caused, suffered, allowed, or permitted the creation of exigent circumstances, such as a major explosion or fire that impacts the surrounding community and environment. TCEQ has not yet released the fully proposed Compliance History rule, but when it does, a public hearing will be held during the 30-day public comment period. Compliance History Classification is a factor considered under the Policy, and may be used to increase or decrease a penalty, depending on the classification.

In introducing the stricter Policy, TCEQ pointed to statutory changes that have occurred since 2014, as well as the increased demand for environmental accountability caused by recent disasters. Most significantly, TCEQ has proposed changes to penalty calculations to increase assessed penalties, with the goal of deterring future noncompliance. To accomplish this, TCEQ has increased the percentages of the maximum statutory penalty applicable to certain types of violations.

Specifically, percentages for actual releases in the Environmental, Property and Human Health Matrix have been increased across the board, and percentages for Major Violations in the Programmatic Penalty Matrix have also been increased. Additionally, under the proposed Policy, TCEQ may now increase the number of violation events for continuous violations. Together, these changes will result in increased maximum assessed penalties, because the increased base penalty may be multiplied by the increased number of violation events to arrive at a higher Subtotal 1 Total Base Penalty.

Below are the key details of the proposed Policy changes:

• The percentages in the Environmental/Property and Human Health Matrix and the Programmatic Penalty Matrix, used to calculate total assessed penalty, have been increased.
  • Percentages in the Environmental/Property and Human Health Matrix have been increased for all actual releases, as summarized below:
    • Major Harm: 100% (major source)/30% (minor source) increased to 100% (major source)/50% (minor source)
    • Moderate Harm: 30% (major source)/15% (minor source) increased to50% (major source)/25% (minor source)
    • Minor Harm: 15% (major source)/5% (minor source) increased to 30% (major source)/15% (minor source)
  • Percentages of Major Violations in the Programmatic Penalty Matrix have been increased from 15% (major source)/5% (minor source) to 20% (major source)/10% (minor source).
    

     

• TCEQ increased the number of violation events that may be assessed for continuous violations. For example, actual releases of moderate harm may now be considered weekly events (instead of monthly), and potential releases of moderate harm may now be considered monthly events (instead of quarterly).

   

• An upward adjustment has been added to “Other Factors That Justice May Require”, allowing enhanced penalties for reportable emissions events that occur in a county with a population of 75,000 or greater would now receive a 20% upward adjustment to the base penalty.

   

• Penalty applicability language for Aggregate Production Operations, Dry Cleaners, and Public Water Supplies have been updated and clarified.
  • For Aggregate Production Operations, total penalty limits have been increased.
  • For Dry Cleaners, administrative penalties have been added for failure to pay registration fees and failure to file registration applications.
  • For Public Water Supplies, administrative penalties have been added for violations of laws protecting drinking water, public water supplies, and bodies of water.
    

     

• The 20% deferral provided for expedited enforcement has been removed for respondents that have two or more prior administrative penalty orders.

   

• The Petroleum Storage Tank major and minor source threshold has been revised. The 2014 Policy categorized underground storage tank facilities that had a monthly throughput of more than 50,000 gallons as major sources and those that had a monthly throughput of 50,000 gallons or less as minor sources. The proposed Policy changes the throughput to more than 100,000 gallons or major sources, and less than 100,000 gallons for minor sources.