C.S.H.B. 638 78(R) BILL ANALYSIS C.S.H.B. 638 By: Chisum Environmental Regulation Committee Report (Substituted) BACKGROUND AND PURPOSE In 2001, the Texas legislature adopted a program for the mandatory permitting of all grandfathered facilities in Texas. Generally, grandfathered facilities are required to file applications for permits and install pollution abatement equipment by certain dates depending on whether the facility is located in east or west Texas. Should owners and operators of grandfathered reciprocating internal combustion engines that are connected to a pipeline have to comply with these general permitting standards they will loose a significant amount of their pipeline capacity and deliverability of natural gas will be dramatically impaired. Accordingly, the legislature adopted a special permit called the Pipeline Facilities Permit applicable to grandfathered reciprocating internal combustion engines that are a part of processing, treating, compression, or pumping facilities connected to or a part of a gathering or transmission pipeline. Under that permit a grandfathered reciprocating internal combustion engine is required to achieve up to a 20% reduction in its hourly emissions of nitrogen oxides, expressed in terms of grams per brake horsepower-hour, if the engine is located in west Texas, and a 50% reduction of its hourly emissions of nitrogen oxides, expressed in terms of grams per brake horsepower-hour, if the engine is located in east Texas. In this manner the legislature protects the pipeline's capacity, permits the engine and achieves a reduction in the engine's hourly emissions rate. To help defray the costs of achieving emissions reductions for east Texas grandfathered pipeline engines and in the context of a settlement of a lawsuit over the provisions of the Houston-Galveston state implementation plan, the legislature created an emissions reductions incentives program and a related Account, the proceeds from which will be used to provide a partial reimbursement for the cost of achieving reductions of emissions of nitrogen oxides that exceed 30 % but do not exceed 50 % of the engine's hourly emissions before modification. The Texas Commission on Environmental Quality (TCEQ) was given the authority to develop the remaining criteria for eligibility for reimbursement from the Account. The TCEQ rules developed included a concept that was considered and rejected by the legislature in the development of the Pipeline Facilities Permit. H.B. 638 would clarify legislative intent. The Account will be funded in three separate installments. Because those installments will not be made in the same biennium, this bill also dedicates the proceeds and interest in the Account to its statutory purpose and protects it from being put to use for some other purpose. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. However, SECTION 1. of the bill amends Sections 382.051865(a) to make mandatory rulemaking authority that is permissive under existing law. ANALYSIS SECTION 1. Section 1 of the bill amends Tex. Health & Safety Code, 382.051865 (a), (c), and (d) to clarify legislative intent that the emissions reductions incentives program, created by that section, is applicable to grandfathered reciprocating internal combustion engines that are required to reduce by 50% the engine's hourly emissions rate of nitrogen oxides, expressed in terms of grams per brake horsepowerhour. In addition, subsection (d) is further amended to clarify legislative intent that the TCEQ, in developing rules and criteria for eligibility for reimbursement from the Emissions Reductions Incentives Account, may not require more stringent emissions reductions than that expressed in the statute. SECTION 2. Section 2 of the bill codifies the provisions of Section 78(b), Chapter 1158, Acts of the 77th Legislature, Regular Session, 2001, creating the Emissions Reductions Incentives Account, in Tex. Health & Safety Code 382.051866. It also clarifies the language creating the Account to more clearly express legislative intent that the Account is a dedicated fund and shall only be expended for the purposes delineated in the statute. It provides that interest earned on money in the Account shall remain in the Account and be dedicated for the same purposes as the Account. Finally, this section codifies legislative intent that a person, or an affiliate of a person, who pays or contributes money to the account is ineligible to receive disbursements from the Account. "Affiliate" is defined as a person that directly or indirectly controls, is controlled by, or is under common control of another person and is intended to refer to ownership of 50% or greater or to a person who has the power to cause activities of another person to be conducted as he desires. SECTION 3. Amends Section 382.05186, Health and Safety Code, by adding Subsection (j) which stipulates that a reciprocating internal combustion engine that is subject to this section is considered permitted under this section under stated conditions. SECTION 4. Provides that the Act will take effect immediately if it receives a vote of two-thirds of all members elected to each house. If not, the Act will take effect on September 1, 2003. EFFECTIVE DATE Provides that the Act will take effect immediately if it receives a vote of two-thirds of all members elected to each house. If not, the Act will take effect on September 1, 2003. COMPARISON OF ORIGINAL TO SUBSTITUTE CSHB 638 amends Section 382.05186, Health and Safety Code, by adding Subsection (j) which stipulates that a reciprocating internal combustion engine that is subject to this section is considered permitted under this section under stated conditions.