EPA pokes holes in plan to waive industry’s pollution bill

A Texas plan that would allow Houston’s biggest sources of smog-forming emissions to avoid tens of millions of dollars in fines may not pass federal review.

The Environmental Protection Agency hinted for the first time this week that the state’s plan is inadequate because it fails to raise new money to help the eight-county region finally meet ozone, or smog, limits set in 1979. The area had until 2007 to comply.

Federal law requires the state to collect fines from major polluters and use the money to improve air quality until an area is in compliance.

Rather than penalize industry, Texas regulators are asking their federal counterparts to consider a substitute — money the state already raises for smog-fighting programs through vehicle inspection fees and sales taxes for diesel equipment, among other revenue sources.

For years, the fees and taxes have funded programs that help cover the cost of replacing or retrofitting dirty, old vehicles and equipment, such as locomotives, trucks and tugboats. The programs have helped to improve air quality in the state’s smoggiest cities.

In formal comments filed this week, the EPA said the Texas Commission on Environmental Quality, or TCEQ, could use an alternative for industry fines, but it must generate new money specifically for clean-air programs. The vehicle inspection fees cannot be credited, but the sales taxes may be if the state can show they are used to improve air quality, wrote Guy Donaldson, chief of air planning in EPA’s regional office.

If TCEQ is unable to satisfy the EPA’s concerns, the federal agency could impose the fines itself. Donaldson wrote that TCEQ must show that a substitute “is not less stringent” than industry fines.

What about wildfires?

The state estimates the penalties could reach $90 million a year for oil refiners, chemical makers and other large sources of smog-forming pollution.

Industry groups insist the penalties should not be imposed until state and federal regulators confirm that the region is in violation of the smog limits.

The most recent data shows the area is out of compliance by the slimmest of margins, and wildfires and emissions emanating from outside Texas may be to blame.

If the penalty program cannot be avoided, then EPA should give TCEQ the flexibility to use fees already collected from motorists and heavy-equipment operators to replace fines, industry representatives contend in comments filed with the TCEQ this week.

The use of the vehicle fees and sales taxes as a substitute is reasonable because mobile sources account for most of the smog-forming emissions in the region, wrote Zachary Craft, a Baker Botts attorney representing BP America, Dow Chemical, Exxon Mobil, NRG and Valero, among others.

Smog is created when sunlight cooks a mixture of chemicals – volatile organic compounds and nitrogen oxides – emitted mostly by tailpipes and smokestacks. Chronic exposure to ozone can cause asthma attacks, chest pain and premature death.

Incentives at issue

Environmentalists and public health advocates argue that the state’s plan would not push industry to further reduce smog-forming emissions.

“There will be no incentive for reductions of ozone because those responsible for air pollution will be subsidized by the public and will not have to use their own resources to pay for their own air pollution,” said Brandt Mannchen, a Houston-based air quality expert for the Sierra Club. “Which side is TCEQ on? Is TCEQ on the side of the public or the polluters?”

The agency has said the penalties would result only in higher costs to consumers without any environmental benefit. It also has noted that the EPA previously approved the use of vehicle inspection fees to offset industry fines in California.

TCEQ estimates that the penalty, which is based on the amount of smog-forming emissions, could be as high as $7.4 million for a single industrial site. The average fee could be between $266,000 and $347,000 for about 260 facilities in Houston.

The city of Houston did not file formal comments before Monday’s deadline, and spokeswoman Janice Evans said it would take no position on the plan.