The Texas Natural Resource Conservation Commission (TNRCC or commission) proposes amendments to §117.105, concerning Emission Specifications, §117.113, concerning Continuous Demonstration of Compliance, §117.205, concerning Emission Specifications, §117.211, concerning Initial Demonstration of Compliance, §117.213, concerning Continuous Demonstration of Compliance, §117.451, concerning Applicability, §117.510, concerning Compliance Schedule for Utility Electric Generation, §117.520, concerning Compliance Schedule For Commercial, Institutional, and Industrial Combustion Sources, §117.530, concerning Compliance Schedule For Nitric Acid and Adipic Acid Manufacturing Sources, §117.540, concerning Phased Reasonably Available Control Technology (RACT), and §117.601, concerning Gas-Fired Steam Generation.

EXPLANATION OF THE PROPOSED RULES. In the Fall of 1997, the TNRCC staff completed a major modeling analysis of the airshed of the upper Texas Gulf Coast. This study indicated that nitrogen oxides (NO _x ) reductions are a necessary step toward the area's attaining the federal air quality standard for ozone. Because of the modeling and the need to continue steady reductions of the pollutants that contribute to ozone smog, on November 24, 1997, the commission determined not to seek further federal waivers from the NO _x reduction requirements of the 1990 Federal Clean Air Act for the Houston/Galveston (HGA) and Beaumont/Port Arthur (BPA) areas.

The purpose of this rulemaking is to smooth the transition to an ozone control strategy for HGA and BPA which includes NO _x reduction. The most important proposed revision is to extend the compliance date of the Chapter 117 NO _x RACT requirements by six months, to November 30, 1999. The extension would provide a two-year period to implement NO _x reductions, from the November 24, 1997 date that the commission decided to implement a NOx -based strategy. A two-year period is necessary for industry to purchase, install, and test the emission control equipment and monitoring systems required by Chapter 117.

The other proposed revision to smooth the implementation of the Chapter 117 RACT requirements would eliminate the requirement to monitor carbon monoxide (CO) continuously for certain units. While CO emissions in some cases may increase as a result of NO _x abatement, checking CO emissions periodically will also be an effective, but less expensive, means of avoiding problems with excessive CO.

The proposed revision to §117.105(j) adjusts the compliance averaging period for CO for any electric utility unit which does not use continuous emissions monitors (CEMS) or predictive emissions monitors (PEMS) for CO. The proposed alternative, an hourly compliance period, is necessary for these units since compliance must be determined by manual stack sampling methods. Twenty-four hours of continuous manual sampling is impractical.

The proposed new §117.113(k) adds an option to conduct periodic sampling of CO instead of using CEMS or PEMS for CO for electric utility units. In addition to the initial compliance demonstration for CO, indicator of compliance sampling for CO with a hand-held analyzer would be required following manual combustion tuning or burner adjustments. This procedure would identify any excessive emission that could occur as a result of an effort to minimize NOx emissions. In addition, the acid rain monitoring rules require an annual stack test (relative accuracy test audit) for NOx emissions. A concurrent test of CO emissions during this audit will not add to expense and will confirm compliance on a periodic basis.

The proposed revisions to §117.205(e) and §117.211(f)(3) add the option of a 24-hour compliance averaging period for CO for any industrial unit which uses a CEMS or PEMS for CO. A 24-hour compliance period, which is practical for units which use CEMS or PEMS, is somewhat easier to comply with than an hourly period. Adding this option would create a minimal incentive to use CEMS or PEMS for CO.

The proposed addition of §117.213(l) would add an option to conduct periodic sampling of CO from industrial units instead of using CEMS or PEMS for CO. In addition to the initial compliance demonstration for CO, indicator of compliance sampling for CO with a hand-held analyzer would be required following manual combustion tuning or burner adjustments. This procedure would identify any excessive emission that could occur as a result of an effort to minimize NO _x emissions. A concurrent test of CO emissions during the annual relative accuracy test audit would confirm compliance on a periodic basis.

The proposed revisions to §§117.451, 117.510, 117.520, 117.530, 117.540, and 117.601 would extend the specified dates of the NO _x RACT rules by six months. The compliance date would become November 30, 1999. As previously discussed in this preamble, this would create a two-year implementation time period, which industry needs. This period is consistent with the original two-year implementation time frame for the rule and will act to minimize the use of the case-specific phased RACT provisions of §117.540. The proposed revisions to §117.510(5) and §117.520(4) would consistently extend by six months, to January 31, 2000, the submittal date for 30-day rolling average compliance data from CEMS or PEMS. Various other dates in §117.540 would also be consistently extended by six months.

FISCAL NOTE. Stephen Minick, Strategic Planning and Appropriations, has determined that for the first five-year period the revised sections are in effect, there will be no significant fiscal implications for state or local government as a result of administration or enforcement of the proposed compliance extension and monitoring revisions to Chapter 117.

PUBLIC BENEFIT. Mr. Minick also has determined that for each year of the first five years the sections are in effect, the anticipated public benefit will be reductions of NO _x , ozone, and other air pollutants. This rulemaking would affect existing major stationary sources of NO _x in the HGA and BPA areas. Early estimates of the cost of complying with Chapter 117 NO _x RACT requirements, which were as high as $900 million, have been substantially reduced as the result of rule changes before proposal in 1992 and information provided in 1994 in sources' initial control plans. The cost of implementing the rule has been revised as a result of information from control plans and is now estimated at $280-350 million.

DRAFT REGULATORY IMPACT ANALYSIS. The commission has reviewed the proposed rulemaking in light of the regulatory analysis requirements of Texas Government Code (the Code), §2001.0225, and has determined that the rulemaking is not subject to §2001.0225 because, while meeting the definition of a "major environmental rule" as defined in the Code, it does not meet any of the four applicability requirements listed in §2001.0225(a).

This proposal does not exceed a standard set by federal law and is not specifically required by state law. This proposal does not exceed an express requirement of state law. The purpose of the proposal is to smooth the transition to an ozone control strategy that includes NO _x reductions for the HGA and BPA areas.

This proposal does not exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program. There is no delegation agreement or contract directly applicable to the proposed rules, and the rules do not exceed any requirement of an affected delegated program.

This proposal does not adopt a rule solely under the general powers of the agency instead of under a specific state law. This proposal is adopted under the authority of the commission found in Texas Health and Safety Code, §382.012 and §382.017.

TAKINGS IMPACT ASSESSMENT. The commission has prepared a Takings Impact Assessment for the proposed sections under Texas Government Code, §2007.043. The following is a summary of that assessment. The specific purpose of the amendments is to extend the compliance date for NO _x RACT requirements and reduce the cost of emission monitoring. If adopted, sources located in the HGA and BPA ozone nonattainment areas of the state will have less expensive monitoring requirements and additional time to comply with the rules. However, there is no restriction or taking of private real property associated with the proposed amendments.

COASTAL MANAGEMENT PLAN. The commission has determined that this rulemaking action relates to an action or actions subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources Code, §§33.201 et. seq.), and the commission's rules in 30 TAC Chapter 281, Subchapter B, concerning Consistency with the Texas Coastal Management Program. As required by 31 TAC §505.11(b)(2) and 30 TAC §281.45(a)(3) relating to actions and rules subject to the CMP, commission rules governing air pollutant emissions must be consistent with the applicable goals and policies of the CMP. The commission has reviewed this rulemaking action for consistency with the CMP goals and policies in accordance with the rules of the Coastal Coordination Council, and has determined that this rulemaking action is consistent with the applicable CMP goals and policies. Adoption of these proposed amendments should result in reductions of ambient NO _x and ozone concentrations.

PUBLIC HEARING. A public hearing on this proposal will be held February 9, 1998, at 10:00 a.m. in Room 2210 of Texas Natural Resource Conservation Commission (TNRCC) Building F, located at 12100 Park 35 Circle, Austin. The hearing is structured for the receipt of oral or written comments by interested persons. Individuals may present oral statements when called upon in order of registration. Open discussion within the audience will not occur during the hearing; however, an agency staff member will be available to discuss the proposal 30 minutes prior to each hearing and will answer questions before and after the hearing.

SUBMITTAL OF COMMENTS. Written comments may be mailed to Lisa Martin, TNRCC Office of Policy and Regulatory Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to (512) 239-4808. All comments should reference Rule Log Number 97181-117-AI. Comments must be received by 5:00 p.m., February 9, 1998. For further information or questions concerning this proposal, please contact Randy Hamilton, Air Policy and Regulations Division, (512) 239-1512.

Persons with disabilities who have special communication or other accommodation needs who are planning to attend the hearings should contact the agency at (512) 239-4900. Requests should be made as far in advance as possible.

Subchapter B. Combustion at Existing Major Sources

Utility Electric Generation

Nitric Acid Manufacturing-General

The Texas Natural Resource Conservation Commission (commission) proposes amendments to §§293.5, 293.11-293.13, 293.15, 293.41, 293.47, 293.48, 293.51, 293.54, 293.62, 293.64, 293.65, 293.67, 293.69, 293.70, 293.80, 293.81, 293.83, 293.84, 293.94, 293.96, 293.101, 293.125, 293.131, 293.133, 293.145, 293.171, 293.173, 293.174, 293.180, 293.361, 293.365, and new §293.89 and §293.112 relating to Water Districts.

EXPLANATION OF PROPOSED RULE

The purpose of the proposed amendments and new rules are to incorporate new requirements relating to the administration of water districts and the commission's supervision over their actions as provided by SB 1865, Acts of the 75th Legislature, 1997 which related to the administration, management, operation, and authority of water districts. The proposed amendments would also incorporate new references and requirements related to priority groundwater management areas required by SB 1, Acts of the 75th Legislature, 1997. The proposed amendments would also make several procedural changes related to the agency's oversight of water districts designed to clarify the responsibilities of water districts, or to clarify the intent of the rules. Additionally, these amendments update definitions to conform to 30 TAC Chapter 3 and make other wording changes to generally conform to agency usage.

The proposed amendment to §293.5, will extend the time for the commission to hold a hearing on the filing of a request from 10 days to 19 days to give staff time to process and review the request prior to the hearing.

The proposed amendments to §293.11(b) would update references to conform to SB 1, 75th Legislature, 1997. Proposed amendments to §293.11 delete subsection (d)(8) because the requirements are duplicated in subsection (d)(7). Section 293.11(d)(7) remains in effect. All applicants subject to the Texas Water Code, §54.016 will have to continue to insure that the municipal consent fully complies with that statute. The proposed amendment to §293.11(h)(9) clarifies the requirements for dissolution of a water supply corporation that is converted to a special utility district.

The proposed amendments to §293.12 and §293.13 consolidate notice and hearing requirements for creation of various types of districts pursuant to the statutory changes made by SB 1865. The proposed amendments will create one procedure for the creation of most types of water districts and also allow the commission to create districts, which are not protested, without having to hold a hearing. The proposed amendments to former §293.12(f), which is to be renumbered as §293.12(e), clarify the additional notice requirements for creation of a special utility district and approval of an impact fee, if requested.

The proposed amendments to §293.15 are to make the rule conform to statutory requirements for conversion of a district to a municipal utility district under Texas Water Code, §54.030.

The proposed amendments to §293.41 would require Drainage Districts and Levee Improvement Districts to obtain commission approval before issuance of bonds and also add a reference to provide that the bond approval requirements apply to proceeds of a contract tax that are used to reimburse a developer. In addition, the proposed amendments clarify that the definition of bond applies to the entire subchapter and that all of the subchapter related to issuance of bonds applies to revenue notes or contract tax revenues used to reimburse developers. The proposed amendment to §293.41(c) is to clarify that districts meeting the test of that subsection are exempt from all the commission rules related to the issuance of bonds.

The proposed amendments to §293.47(d)(5) clarify the intent of the commission to consider costs associated with constructing lift stations and force mains connecting the district's system to regional wastewater trunklines the same as connecting to a regional wastewater facility and therefore eligible for 100 percent reimbursement on a sale of the system to the district by the developer.

The proposed amendment to §293.48(a)(1) deletes the reference to a hearing which is no longer required.

The proposed amendment to §293.51(b) clarifies that the basis of reimbursement to a developer for land can include the interest on any borrowed funds the developer used to acquire the land, at the rate of the lesser of the net effective interest rate on the bonds sold, or the interest rate actually paid by the developer. If the developer did not use borrowed funds, the net effective interest rate on the bonds may be used to calculate eligible interest reimbursement expense. The proposed subsection also clarifies that taxes as well as interest on the land are eligible reimbursable expenses.

The proposed amendments to §293.67 and §293.69 address repairing or accounting for damages to project facilities prior to purchase and immediately after purchase by the district, during the transfer of the project facilities.

The proposed amendments to §293.80 exempt those districts issuing revenue notes to other governmental agencies from having to obtain commission approval.

The proposed new §293.89 would require approval of the executive director for obligations to collect taxes for debt that exceed three years, if the district is required under the Texas Water Code, §49.181 to obtain commission approval for bond issuance. The proposed rule also sets out the information requirements of the application for this type of approval.

The proposed amendments to §293.94 would exempt those districts which collect taxes, if total revenues, including tax revenue, is less than $100,000, from having to file audited financial reports, as provided in Texas Water Code §49.198, as amended.

The proposed new §293.112 would require districts to adopt rules providing for notice to the district before starting any construction or improvement on property in the district, pre- and post-construction inspection of district facilities, and repair of any damages prior to connection for service by the district.

The proposed amendments to §293.145 are to establish notice requirements for standby fee applications as provided in SB 1865 and will also allow the commission to approve standby fees, which are not protested, without having to hold a hearing.

Proposed amendments to §293.171 are intended to exempt certain tap fees and retail or wholesale service, financed by revenue bonds, to nontaxable entities, from the notice and approval process required for impact fees.

Proposed amendments to §293.173 and §293.174 are intended to establish notice requirements for impact fee applications similar to those as provided for standby fees in SB 1865 and will allow the commission to approve impact fees, which are not protested, without having to hold a hearing.

Other proposed amendments would change word usage to conform to the definitions in 30 TAC Chapter 3, word usage in this chapter generally, and to correct references.

FISCAL NOTE

Stephen Minick, Strategic Planning and Appropriations Division, has determined that, for the first five years these sections as proposed are in effect, there will be no significant fiscal implications for state or local government as a result of enforcing and administering the sections. The effects on state government will be a reduction in cost due to allowing the commission to create certain water districts and approve certain impact fees that are not protested without having to hold a hearing. In addition there would be a cost reduction due to the elimination of commission approval for water district revenue notes issued to other governmental agencies. However, these cost reductions are not anticipated to be significant. The general law water districts subject to these regulations are local governments. The effect on these units of local government is a slight decrease in costs because notice and hearing procedures are proposed to be streamlined and commission approval of those water districts issuing revenue notes to other governmental agencies is eliminated.

PUBLIC BENEFIT

Mr. Minick has also determined that for the first five years these sections as proposed are in effect the public benefit anticipated as a result of enforcement of and compliance with these sections will be the clarification of existing state regulations for districts, increased consistency between state regulations and statutory authority, and more consistent management of the financial operations of districts. The proposed rules do not affect small businesses. There are no other anticipated costs to any person required to comply with these sections as proposed.

DRAFT REGULATORY IMPACT ANALYSIS

The commission has reviewed the proposed rulemaking in light of the regulatory analysis requirements of Texas Government Code, §2001.0225 and has determined that the rulemaking is not subject to §2001.0225 because it does not meet the definition of "major environmental rule" as defined in the act.

TAKINGS IMPACT ASSESSMENT

The commission has prepared a Takings Impact Assessment for these rules pursuant to Texas Government Code Annotated, §2007.043. The following is a summary of that Assessment. The specific purpose of the rule is to adopt new requirements relating to the administration of water districts and the commission's supervision over their actions as provided by SB 1865, Acts of the 75th Legislature, 1997, and to incorporate new references and requirements related to priority groundwater management areas required by SB 1, Acts of the 75th Legislature, 1997, to clarify the intent of the rules, to streamline the agency's procedures, and to update definitions to conform to 30 TAC Chapter 3 and make other wording changes to conform to general agency usage. The rules will substantially advance this specific purpose by providing a procedure for public notice and hearing for applications for creation of water districts, delegating routine functions to the executive director, allowing the commission to create districts and approve standby fees that are uncontested without a hearing, and exempting districts issuing revenue notes to other governmental agencies from having to seek agency approval. Promulgation and enforcement of these rules will not burden private real property because private real property is not subject to these rules.

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM (CMP)

The executive director has reviewed the proposed rulemaking and found that the rule is neither identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11, relating to Actions and rules subject to the Coastal Management Program, nor will they affect any action/authorization identified in Coastal Coordination Act Implementation rules, 31 TAC §505.11. Therefore, the proposed rules are not subject to the CMP.

SUBMITTAL OF COMMENTS

No public hearing is planned for this proposed rule. Written comments on the proposal should mention Rule Log No. 97143-293-WT and may be submitted to Lutrecia Oshoko, Texas Natural Resource Conservation Commission, Office of Policy and Regulatory Development, MC-205, P.O. Box 13087, Austin, Texas 78711-3087, (512) 239-4640, or faxed to (512) 239-5687. Written comments must be received by 5:00 p.m., February 9, 1998. For further information or questions concerning this proposal, please contact Sam Jones, Water Utilities Division, at 239-6167.

General Provisions