Texas Advances its Greenhouse Gas Permitting Authority while the U.S. Supreme Court Considers the Validity of the Underlying Law

On Oct. 23, 2013, the Texas Commission on Environmental Quality proposed a rule that will allow the state to issue greenhouse gas permits to stationary sources in Texas. The proposed rule implements House Bill 788 by Rep. Wayne Smith (R-Baytown) from the 83rd Legislative Session and directs TCEQ to adopt rules for the authorization of emissions of GHGs to the extent required by federal law. The legislation was passed to alleviate the burden felt by the state's industrial sources by having to obtain a GHG permit authorization from the U.S. Environmental Protection Agency, while obtaining all other air pollutant permit authorizations from TCEQ prior to the construction or modification of a facility. However, while the state moves forward to adopt rules to issue GHG permits, the fate of nationwide GHG regulation for stationary sources rests in the hands of the U.S. Supreme Court.

The dual permitting scheme in Texas stems from EPA's broader attempts to regulate GHGs nationwide. In 2007, the U.S. Supreme Court held in Massachusetts v. EPA, 549 U.S. 497 (2007) that GHGs fall within the definition of an "air pollutant" under the Federal Clean Air Act. Specifically, the Court's ruling in that case gave EPA the authority to regulate GHG emissions from new motor vehicles if EPA also made a finding that the GHGs in question endanger public health and welfare. Accordingly, on Dec. 15, 2009, EPA issued its formal "endangerment finding" supporting its conclusion that GHGs endanger public health and welfare and should be subject to regulation. Soon thereafter, EPA adopted a series of GHG regulations in succession – the Tailpipe Rule, the Timing Rule and the Tailoring Rule – the joint purpose of which was to eventually regulate GHG emissions from stationary sources.

The most contentious of the regulations for the state of Texas and the regulated community is the Tailoring Rule, which requires any entity emitting more than 100,000 tons per year or more of GHGs to obtain a Prevention of Significant Deterioration permit for those emissions. The Tailoring Rule is controversial in large part because EPA changed the PSD permitting threshold in the statute from 250 tons per year to 100,000 tons per year to accommodate GHG permitting without Congressional authority to do so. As a result, since Jan. 2, 2011, EPA has had the permitting authority for GHGs in Texas due to the state's opposition to the Tailoring Rule and its position that TCEQ does not have the statutory authority to issue GHG permits for stationary sources in Texas.

Texas, in conjunction with other states and state and national coalitions, has challenged EPA's actions on every front throughout the agency's attempts to regulate GHGs from stationary sources. All legal attempts to challenge EPA have failed at the D.C. Circuit Court, but on Oct. 15, 2013, the U.S. Supreme Court granted several petitions for review challenging the federal GHG regulations. However, the Court consolidated the cases and granted review limited to the following question: "Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases." The prevailing view of the petitioners is that EPA overstepped its regulatory bounds by changing the permitting thresholds in statute without Congressional authority to do so and that GHG emissions should never be part of EPA's PSD permitting program. One petitioner, the American Chemistry Council, is taking a more liberal position arguing that EPA's GHG permitting requirements should apply only to those stationary sources that are already subject to the PSD permitting program due to their emissions of criteria pollutants. All the differing legal opinions and arguments will be presented to the Court sometime next year. The date for the one-hour oral argument has not yet been scheduled, but it is expected to take place in early 2014.

In the meantime, TCEQ is moving forward to implement legislation intended to provide some relief for industrial sources who are currently subject to a dual air permitting scheme in Texas. The proposed rule will shift the workload of issuing GHG PSD permits from EPA to TCEQ and provide a mechanism for those permit applicants with applications pending at EPA to transfer them to the state for processing. TCEQ is accepting comments on the proposed rule through Dec. 9, 2013, with an anticipated adoption date of March 26, 2014. After EPA approves the state rule and lifts its federal mandate to issue GHG permits in Texas, TCEQ will again return to its role as the sole PSD permitting authority in Texas. It remains to be seen how or whether any action taken by the U.S. Supreme Court will influence the state rulemaking in the coming months.

If you have any questions regarding the TCEQ's GHG permitting rule or the pending litigation at the U.S. Supreme Court, please contact a member of Gardere's environmental team.