ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 1. ADMINISTRATION Part IV. Office of the Secretary of State Chapter 91. Texas Register Filing of Documents 1 TAC sec.91.26 The Office of the Secretary of State, Texas Register, adopts new sec.91.26, concerning policies and procedures, without changes to the proposed text as published in the May 3, 1994, issue of the Texas Register. The section is being adopted to implement a new provision, concerning cross- reference to statute, that was added to the Administrative Procedure Act, Texas Government Code, sec. sec.2001.004, 2001.024, and 2002.011. This provision, as House Bill 2057, General and Special Laws Chapter 482, was passed during the 72nd Legislature Regular Session, 1991, effective September 1, 1993. This new section is being adopted because the Secretary of State's Office is required to keep a cross index of agencys' rules to the statutes that are affected by the rules. One comment was received from the Texas Department of Human Services (DHS). In its interpretation of the Texas Government Code, sec.2001.024(3), as amended by House Bill 2057, DHS said that a state agency cannot have an effect on a statute passed by the legislature. In House Bill 2057 the reference to "code affected" means the Texas Administrative Code. The Register disagrees. For the legislature to require a reference to the Administrative Code would be redundant as this information is already contained in an agency's notice. The Register interprets the reference to "code affected" to mean the section of the code or statute upon which the agency is taking action by adopting a rule to implement its provisions. By requiring the agency to include in its notice a statement that the rule acts upon a specified law assures the public that the rule is tied to and implements a particular code or statutory provision and that the agency is not legislating by rule. The new section is adopted under the Government Code, Chapter 2002, Subchapter B, Texas Register, sec.2002.017, which provides the secretary of state with the authority to promulgate rules consistent with the Code. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443594 Machree Garrett Gibson Assistant Secretary of State Office of the Secretary of State Effective date: July 28, 1994 Proposal publication date: May 3, 1994 For further information, please call: (512) 463-5561 TITLE 4. AGRICULTURE Part II. Texas Animal Health Commission Chapter 35. Bovine Brucellosis Subchapter A. Eradication of Brucellosis in Cattle 4 TAC sec.35.1 The Animal Health Commission adopts an amendment to sec.35.1 without changes to the proposed text as published in the May 6, 1994, issue of the Texas Register (19 TexReg 3398). It was necessary to amend the rule to remove the requirement for an adult vaccination permit for cattle since such a permit is no longer needed. No adult vaccination permit will be required for cattle. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Agriculture Code, sec.161.081, which provides the Texas Animal Health Commission with the authority to promulgate rules regulating the movement of animals into the State, and sec.163. 061 and sec.163.064, which provide the Commission with the authority to adopt rules that relate to the testing or vaccination of cattle or to the movement of cattle into and within an area. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9443452 Terry Beals, DVM Executive Director Texas Animal Health Commission Effective date: July 22, 1994 Proposal publication date: May 6, 1994 For further information, please call: (512) 719-0714 4 TAC sec.35.2 The Texas Animal Health Commission adopts an amendment to sec.35.2 with changes to the proposed text as published in the May 6, 1994, issue of the Texas Register (19 TexReg 3399). It was necessary to amend the rule to require heifers in infected herds to be tested prior to being vaccinated for brucellosis and if classified as reactors to be handled as any other reactors. The amendment was also necessary to remove obsolete language regarding adult vaccination. Heifers in infected herds will be tested prior to being vaccinated for brucellosis. If classified as reactors, the heifers will be handled as any other reactors. No comments were received regarding adoption of the amendments. The amendment is adopted under the Texas Agriculture Code, sec.161.041, which provides the Texas Animal Health Commission with the authority to promulgate rules to eradicate or control any disease affecting livestock, and sec.163.061 and sec.163.064, which provide the Commission with the authority to require brucellosis testing and vaccination. sec.35.2. General Requirements. (a)-(k) (No change.) (l) Requirements following classification of a dairy or a beef animal or a bison as a reactor or a suspect. (1)-(4) (No change.) (5) The plan will consist of the following: (A) Testing Procedures: (i) all eligible cattle in the herd including all nonvaccinated heifers over six months of age shall be presented for testing or retesting at intervals stated in the herd plan until the quarantine is released; (ii) all cattle to be added to the herd shall be tested prior to commingling with the herd; (iii) all stray cattle found in the herd shall be presented for testing; (iv) cattle identified as reactors shall be removed in accordance with subsection (j) of this section; (v) heifers born in the herd shall be removed in accordance with subsection (k) of this section; (vi) upon release of quarantine, the owner/caretaker shall retest all test- eligible cattle in the herd in not less than six months nor more than 12 months from the releasing test. (B) Vaccination Procedures. (i) All nonvaccinated heifers shall be presented as soon as possible after they reach the age of four months and before the age of six months for dairy heifers and eight months for beef heifers to be tested for brucellosis and vaccinated with Strain 19, B. abortus vaccine. In the event heifers tested at the time of vaccination disclose reactor level titers, they will be classified and handled as reactors. (ii) All female cattle over eight months of age in beef herds and six months of age in dairy herds shall be presented to be adult vaccinated within ten days of their negative serological test with Strain 19 B. abortus vaccine. (iii) Replacement female cattle over eight months of age for beef or over six months of age for dairy shall be presented within ten days after a negative test, to be adult vaccinated prior to their addition to an already vaccinated herd. The epidemiologist will determine if adult vaccination of replacements must continue if the quarantine extends past 18 months, or if only calfhood vaccinates may be added. (iv) Previously vaccinated negative female cattle shall be presented for revaccination with Strain 19, B. abortus vaccine as determined by the epidemiologist. (6)-(8) (No change.) (m) Official vaccination requirements. (1) All official vaccinations will be conducted by Approved Personnel only. (2) Calfhood vaccinated animals shall be permanently identified as vaccinates by tattoo and by official vaccination eartag. Vaccination tattoos will be applied to the right ear. The tattoo will include the United States Register Shield and "V" which will be preceded by a number indicating the quarter of the year and will be followed by a number corresponding to the last digit of the year in which the vaccination was done. Official vaccination eartags will be applied to the right ear. The eartag will include the State prefix and a "V," followed by two letters and four numbers. Individual animal registration tattoos or brands may be substituted for official eartags. (3) Adult vaccinated cattle shall be permanently identified as vaccinates by tattoo or by hot "V" brand and by official eartag. Tattoos will be applied to the right ear. The tattoo will include the letters AV, which will be preceded by a number indicating the quarter of the year and will be followed by a number corresponding to the last digit of the year in which the vaccination was done. Hot "V" brands will be applied to the right jaw, or high on the hip near the tailhead, open end of the "V" up. An official eartag will be placed in the right ear. (4) Vaccination will be done by State/Federal personnel following a negative test within ten days prior to adult vaccination. A hold order will be placed on adult vaccinates at time of vaccination. Each animal may be released following its negative classification. (n)-(u) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9443453 Terry Beals, DVM Executive Director Texas Animal Health Commission Effective date: July 22, 1994 Proposal publication date: May 6, 1994 For further information, please call: (512) 719-0714 4 TAC sec.35.4 The Texas Animal Health Commission adopts an amendment to sec.35.4 without changes to the proposed text as published in the May 6, 1994, issue of the Texas Register (19 TexReg 3400). The amendment is necessary to specify that the type of permit required to enter from a foreign country as an "E" Permit and to update language regarding requirements for calfhood vaccination in Texas that had previously been changed. Cattle entering Texas from foreign countries must obtain an "E" permit prior to entry. It is recommended that all female cattle between four and twelve months of age that are purchased or sold be officially vaccinated. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Agriculture Code, sec.161.081, which provides the Texas Animal Health Commission with the authority to promulgate rules regulating the movement of animals into the State, and sec.163. 061, which provides the Commission with the authority to adopt rules relating to the movement of cattle into an area. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9443454 Terry Beals, DVM Executive Director Texas Animal Health Commission Effective date: July 22, 1994 Proposal publication date: May 6, 1994 For further information, please call: (512) 719-0714 Chapter 41. Fever Ticks 4 TAC sec.41.2 The Texas Animal Health Commission adopts an amendment to sec.41.2, without changes to the proposed text as published in the May 6, 1994, issue of the Texas Register (19 TexReg 3400). The amendment is necessary to expand the tick quarantine line in Webb County. The double fence, which encompasses the H. B. Zachary Ranch, is no longer believed to be an effective barrier against the spread of ticks. The H. B. Zachary Ranch, known as the Rancho Blanco, located south of Laredo will be included inside the permanent tick quarantine line. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Agriculture Code, sec.167.003, which provides the Texas Animal Health Commission with the authority to promulgate rules regulating eradication of all ticks capable of carrying Babesia in the state and protect all land, premises and livestock from ticks and exposure to them; and sec.167.006, which provides the Commission with the authority to adopt rules that relate to the designation of a county or a part of a county that the commission determines may contain ticks. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 23, 1994. TRD-9443451 Terry Beals, DVM Executive Director Texas Animal Health Commission Effective date: July 22, 1994 Proposal publication date: May 6, 1994 For further information, please call: (512) 719-0714 TITLE 16. ECONOMIC REGULATION Part III. Texas Alcoholic Beverage Commission Chapter 35. Enforcement 16 TAC sec.35.11 The Texas Alcoholic Beverage Commission adopts an amendment to sec.35.11, concerning possession of bottle-capping devices not being per se illegal, unless they are used to perform an illegal activity; and adding the new brewpub license to the section, without changes to the proposed text as published in the May 20, 1994, issue of the Texas Register (19 TexReg 3873). The justification for this section is to remove the prohibition of possession of bottle-capping devices. The section will allow possession of bottle-capping devises by retail license or permit holders, but will still prohibit their being used for any illegal purpose. No comments were received regarding adoption of the rule. The section is adopted under Alcoholic Beverage Code, sec.5.31, which provides the Texas Alcoholic Beverage Commission with the authority to promulgate rules necessary to carry out provisions of the Alcoholic Beverage Code. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443672 Doyne Bailey Administrator Texas Alcoholic Beverage Commission Effective date: July 28, 1994 Proposal publication date: May 20, 1994 For further information, please call: (512) 206-3204 Part VIII. Texas Racing Commission Chapter 303. General Provisions Subchapter F. Licensing Persons with Criminal Backgrounds 16 TAC sec.303.202 The Texas Racing Commission adopts an amendment to sec.303.202, concerning guidelines for licensing persons with criminal backgrounds, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2813). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of licensees, patrons, and race animals will be secure. The amendment adds offenses to the list of crimes the Commission finds directly relate to the types of occupational licenses issued by the Commission and revises the chart that correlates the various types of licenses of the offenses. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.7.02, which authorizes the Commission to adopt rules specifying the qualifications and experience required for licensing; and Texas Civil Statutes, Article 6252-13d, which requires the Commission to adopt guidelines relating to criminal offenses and occupational licenses. The adopted rule implements Texas Civil Statutes, Article 6252-13d as it relates to the Texas Racing Commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443692 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Chapter 305. Licenses for Pari-mutuel Racing Subchapter B. Individual Licenses Specific Licensees 16 TAC sec.305.43 The Texas Racing Commission adopts an amendment to sec.305.43, concerning lessees and lessors of race animals, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2818). The amendment is adopted to ensure the commission'ss occupational licensing program will operate efficiently and effectively. The amendment deletes the requirement that a lease for a race animal be in a format subject to Commission approval. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.7.02, which authorizes the Commission to adopt rules specifying the qualifications and experience required for licensing. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443693 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Chapter 309. Operation of Racetracks Subchapter B. Horse Racetracks Facilities for Horses 16 TAC sec.309.152 The Texas Racing Commission adopts an amendment to sec.309.152, concerning the isolation area at pari-mutuel horse racetracks, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2818). The amendment is adopted to ensure horses racing at Class 1 facilities will have quality care at an economical cost. The amendment decreases from eight to four the minimum number of stalls required in the isolation area of a Class 1 racetrack. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443694 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Chapter 311. Conduct and Duties of Individuals Subchapter A. General Provisions 16 TAC sec.311.1 The Texas Racing Commission adopts an amendment to sec.311.1, concerning the applicability of Chapter 311 of the Commission's rules without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2819). The amendment is adopted to ensure the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the provisions in Chapter 311 apply to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443695 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.2 The Texas Racing Commission adopts an amendment to sec.311.2, concerning the use of best effort in pari-mutuel races, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2819). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the section applies to include patrons and other people on the grounds of pari-mutuel racetracks and clarifies its applicability to pari-mutuel races. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443696 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.4 The Texas Racing Commission adopts an amendment to sec.311.4, concerning prohibition of bribes relating to pari-mutuel racing, without changes to the proposed text published in the April 19, 1994 issue of the Texas Register (19 TexReg 2819). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the section applies to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443697 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.5 The Texas Racing Commission adopts an amendment to sec.311.5, concerning illegal wagering at pari-mutuel racetracks and pari-mutuel wagering by certain licensees, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2819). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the prohibition of illegal wagering applies to include patrons and other people on the grounds of pari- mutuel racetracks. The amendment also deletes references to racetrack and association officials to be consistent with other Commission rules. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; sec.11.04, which authorizes the Commission to adopt rules regulating wagering by occupational licensees; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443698 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.6 The Texas Racing Commission adopts an amendment to sec.311.6, concerning the prohibition against improperly influencing the outcome of a race, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2820). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the prohibition applies to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443699 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.8 The Texas Racing Commission adopts an amendment to sec.311.8, concerning the prohibition against giving false information regarding a race animal's performance or eligibility, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2820). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the prohibition applies to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443700 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.9 The Texas Racing Commission adopts an amendment to sec.311.9, concerning the prohibition against giving false information to the commission or its agents, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2820). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the prohibition applies to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and Government Code, sec.2001.004, which authorizes the Commission to adopt rules of practice for all formal and informal procedures. The adopted rule implements Government Code, Chapter 2001. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443701 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.10 The Texas Racing Commission adopts an amendment to sec.311.10, concerning the conduct of individuals on association grounds, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2821). The amendment is adopted to ensure be that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the requirements apply to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443702 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 16 TAC sec.311.11 The Texas Racing Commission adopts an amendment to sec.311.11, concerning the prohibition against possessing weapons on association grounds, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2821). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment expands the group of people to whom the prohibition applies to include patrons and other people on the grounds of pari-mutuel racetracks. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; and sec.14.03, which authorizes the Commission to adopt rules to prohibit the illegal influencing of a race. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443703 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Subchapter B. Specific Licensees Licensees for Horse Racing 16 TAC sec.311.157 The Texas Racing Commission adopts an amendment to sec.311.157, concerning the procedure for appointing a substitute trainer, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2822). The amendment is adopted to ensure that the integrity of pari-mutuel racing will be assured and the health and safety of occupational licensees, patrons, and race animals will be secure. The amendment requires the substitution to be approved by the Commission. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443704 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Chapter 313. Officials and Rules of Horse Racing Subchapter A. Officials General Provisions 16 TAC sec.313.1, sec.313.2 The Texas Racing Commission adopts amendments to sec.313.1 and sec.313.2, concerning the officials at horse racetracks, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2822). The amendment is adopted to ensure that the Commission's rules are consistent with state law, are more easily understood by licensees, and are more effectively enforced. The amendments eliminate the distinction between racetrack and association officials, thereby making all officials racetrack officials. No comments were received regarding the proposal. The amendments are adopted under Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.3.02, which authorizes the Commission to adopt rules specifying the authority and duties of each official; and sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety. The adopted rules implement Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443705 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Subchapter A. Officials Duties of Other Officials 16 TAC sec.313.41 The Texas Racing Commission adopts an amendment to sec.313.41, concerning the duties of the racing secretary, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2822). The amendment is adopted to ensure that the Commission's rules are internally consistent. The amendment deletes the reference to "association official" to remain consistent with other Commission rules. No comments were received regarding the proposal. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.3.07, which authorizes the Commission to adopt rules specifying the authority and duties of racetrack officials; and sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443706 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 Chapter 321. Pari-mutuel Wagering Subchapter C. Simulcast Wagering Simulcasting at Horse Racetracks 16 TAC sec.321.234 The Texas Racing Commission adopts an amendment to sec.321.234, concerning the allocation of purses and funds from simulcast wagering for Texas Bred Incentive programs, without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2823). The amendment is adopted to ensure that the horse breeding industry in Texas will be enhanced, thereby enhancing all supporting and collateral agricultural industries. The amendment requires an association that sells a simulcast signal to an out- of-state receiving location to set aside for Texas Bred Incentive programs at least 10% of the gross amount paid for the signal. No written comments were received regarding the proposal. Representatives from the Texas Horsemen's Benevolent and Protective Association, the Texas Thoroughbred Breeders' Association, the Texas Quarter Horse Association, Sam Houston Race Park, and Retama Park spoke in favor of the amendment at the commission meeting held on June 27, 1994. A representative from Lone Star Park asked the commission to defer consideration of the amendment until a later date. The amendment is adopted under Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the planning, construction, and operation of a racetrack to preserve and protect the public health, welfare, and safety; sec.11.01, which authorizes the Commission to adopt rules to regulate pari-mutuel wagering; and sec.11.011, which authorizes the Commission to adopt rules to regulate pari-mutuel wagering on simulcast races. The adopted rule implements Texas Civil Statutes, Article 179e. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443707 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: August 1, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 794-8461 TITLE 22. EXAMINING BOARDS Part XXV. Structural Pest Control Board Chapter 591. General Provisions 22 TAC sec.591.11 The Structural Pest Control Board adopts an amendment to sec.591.11 without changes to the proposed text as published in the March 15, 1994, issue of the Texas Register (19 TexReg 1765). The justification is the rule will reduce abuse of the administrative hearing process. The rule allows the cost of hearing to be assessed as penalties on requestors who then fail to appear. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 135b-6, which provide the Texas Structural Pest Control Board with the authority to license and regulate persons who provide structural pest control services. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 20, 1994. TRD-9443174 Benny M. Mathis, Jr. Executive Director Structural Pest Control Board Effective date: July 20, 1994 Proposal publication date: March 15, 1994 For further information, please call: (512) 835-4066 Chapter 593. Licensing 22 TAC sec.593.5 Structural Pest Control Board adopts an amendment to sec.593.5 without changes to the proposed text as published in the March 22, 1994, issue of the Texas Register (19 TexReg 2048). The justification is the rule gives noncommercial employees greater opportunity to become fully licensed applicators. The rule allows noncommercial technicians with specified experience to take the noncommercial applicator examination. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 135b-6, which provide the Texas Structural Pest Control Board with the authority to license and regulate persons who provide structural pest control services. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 20, 1994. TRD-9443176 Benny M. Mathis, Jr. Executive Director Structural Pest Control Board Effective date: July 20, 1994 Proposal publication date: March 22, 1994 For further information, please call: (512) 835-4066 22 TAC sec.593.6 The Texas Structural Pest Control Board adopts an amendment to sec.593.6 without changes to the proposed text as published in the March 15, 1994, issue of the Texas Register (19 TexReg 1765). The justification is the rule prevents abuse of expired licenses. The rule requires return of any license for which there is a name or address change. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 135b-6, which provide the Texas Structural Pest Control Board with the authority to license and regulate persons who provide structural pest control services. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 20, 1994. TRD-9443177 Benny M. Mathis, Jr. Executive Director Structural Pest Control Board Effective date: July 20, 1994 Proposal publication date: March 15, 1994 For further information, please call: (512) 835-4066 22 TAC sec.593.24 The Structural Pest Control Board adopts an amendment to sec.593.24 without changes to the proposed text as published in the March 22, 1994, issue of the Texas Register (19 TexReg 2048). The justification is the rule clarifies requirements for course submission for continuing education. The rule requires learning objectives as a part of the course submissions. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 135b-6, which provide the Texas Structural Pest Control Board with the authority to license and regulate persons who provide structural pest control services. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 20, 1994. TRD-9443175 Benny M. Mathis, Jr. Executive Director Structural Pest Control Board Effective date: July 20, 1994 Proposal publication date: March 22, 1994 For further information, please call: (512) 835-4066 Chapter 595. Compliance and Enforcement 22 TAC sec.595.3 The Texas Structural Pest Control Board adopts an amendment to sec.595.3 without changes to the proposed text as published in the March 15, 1994, issue of the Texas Register (19 TexReg 1765). The justification is the rule clarifies when the technician training course is required for technicians. The rule allows technician-apprentices to operate without physical supervision before they take the technician training course. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 135b-6, which provide the Texas Structural Pest Control Board with the authority to license and regulate persons who provide structural pest control services. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 20, 1994. TRD-9443178 Benny M. Mathis, Jr. Executive Director Structural Pest Control Board Effective date: July 20, 1994 Proposal publication date: March 15, 1994 For further information, please call: (512) 835-4066 TITLE 25. HEALTH SERVICES Part I. Texas Department of Health Chapter 29. Purchased Health Services Subchapter G. Hospital Services 25 TAC sec.29.609 On behalf of the State Medicaid Director, the Texas Department of Health (department) submits an adopted amendment to sec.29.609, with changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2826). The section covers reimbursement methodology for disproportionate share hospital programs. Specifically, the section defines words and terms commonly used within the document; sets the conditions of participation; identifies qualifying formulas for determining disproportionate share status; establishes methods for reimbursement; allows for review of agency determination of eligibility that may be affected by the state's ongoing review of data elements used in the formulas for determining eligibility; and allocates disproportionate share funds held in reserve. The amendment is adopted to clarify rules in response to questions from the public and as a result of the department's experience in operating the new program. Specifically, the amendment expands and clarifies definitions, conditions of participation, current administrative practices relating to low income utilization rates, agency determinations regarding data changes that may affect a hospital's eligibility, and the closure and loss of licensure/ certification of a disproportionate share hospital. Also, the amendment includes guidelines for use when disproportionate share hospitals merge. The department received no public comments during the comment period for these amendments. However, the department is making the following minor changes due to staff comments to clarify the intent and improve the accuracy of the section. CHANGE: Concerning adopted subsection (b),(1), 4),(6),(10),(18), the department changed these definitions to read exactly as the definitions for disproportionate share hospital program rule read in Senate Bill 427. CHANGE: Concerning adopted subsection (b)(18), two changes were made. The reference to the Maternal and Infant Health Improvement Act was deleted because the Act is obsolete. In addition, the last two sentences of the paragraph concerned calculating inpatient revenues and were found to be redundant. One of the sentences was deleted for clarity. CHANGE: Concerning adopted subsection (b)(2), the definition of charity charges was inadvertently deleted. The department is retaining the definition. CHANGE: Concerning adopted subsection (b)(15)-(16), the number of months after the end of the fiscal year for calculating total Medicaid inpatient days and total Medicaid inpatient hospital payments has been changed from ten months to nine months. CHANGE: Concerning subsection (c)(5), the phrase "Or group of hospitals" has been added to the conditions of participation to clarify what is required of hospitals participating in the program. CHANGE: Concerning subsection (d)(3), information concerning a hospital's low income utilization rate has been moved to this paragraph. The information was previously found in subsection (f). CHANGE: Concerning subsection (g), language was changed for clarity and to correct redundancies. CHANGE: Concerning subsection (h)(4), language was changed for clarity and accuracy. The amendment is adopted under the Human Resources Code, sec.32.021 and Texas Civil Statutes, Article 4413 (502), sec.16, which provide the Health and Human Services Commission with the authority to adopt rules to administer the state's medical assistance program and is submitted to the Texas Department of Health under its agreement with the Health and Human Services Commission to operate the purchased health services program and as authorized under Chapter 15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). sec.29.609. Additional Reimbursement to Disproportionate Share Hospitals. (a) Introduction. Hospitals participating in the Texas Medical Assistance (Medicaid) program that meet the conditions of participation and that serve a disproportionate share of low- income patients are eligible for additional reimbursement from the disproportionate share hospital fund. The single state agency or its designee establishes each hospital's eligibility for and amount of reimbursement as specified in this section. For purposes of Medicaid disproportionate share eligibility determination, a multisite hospital is considered as one provider unless it has separate Medicare cost reports for each site. To verify data referred to in this section, hospitals must allow state personnel access to the hospital and its records. (b) Definitions. For purposes of this section, the following words and terms, shall have the following meanings, unless the context clearly indicates otherwise. (1) Charity care-The unreimbursed cost to a hospital of providing, funding, or otherwise financially supporting health care services on an inpatient or outpatient basis to a person classified by the hospital as financially or medically indigent or providing, funding, or otherwise financially supporting health care services provided to financially indigent patients through other nonprofit or public outpatient clinics, hospitals, or health care organizations. (2) Charity charges (excluding bad-debt charges)-Total amount of hospital charges for inpatient and outpatient services attributed to charity care in a cost reporting period. The total inpatient and outpatient charity charges attributable to charity care do not include contractual allowances and discounts (other than for indigent patients not eligible for medical assistance under an approved Medicaid State Plan); that is, reduction or discounts, in charges given to other third-party payers such as, but not limited to, Health Maintenance Organizations (HMOs), Medicare, or Blue Cross. The amount of total charity charges must be consistent with the amount reported on the Texas Department of Health's (department's) annual hospital survey. (3) Cost-to-charge ratio-Hospital's overall inpatient cost-to-charge ratio, as determined from its Medicare cost report it submitted for its fiscal year ending in the previous calendar year. (4) Financially indigent-An uninsured or underinsured person who is accepted for care with no obligation or a discounted obligation to pay for the services rendered based on the hospital's eligibility system. (5) Gross inpatient revenue-Amount of gross inpatient revenue (charges) reported by the hospital in the appropriate part of the Medicare cost report it submitted for its fiscal year ending in the previous calendar year. Gross inpatient revenue excludes revenue related to the professional services of hospital-based physicians, swing bed facilities, skilled nursing facilities, intermediate care facilities, and other revenue that is unidentified. (6) Hospital eligibility criteria-The financial criteria and procedure used by a hospital to determine if a patient is eligible for charity care. The system includes income levels and means testing indexed to the federal poverty guidelines; provided, however, that a hospital may not establish an eligibility system that sets the income level eligible for charity care lower than that required by counties under the Texas Health and Safety Code, sec.61.023 or higher, in the case of the financially indigent, than 200% of the federal poverty guidelines. A hospital may determine that a person is financially or medically indigent pursuant to the hospital's eligibility system after health care services are provided. (7) Low-income days-Number of days derived by multiplying a hospital's total inpatient census days by its low-income utilization rate. (8) Low-income utilization rate-The result of the following computation: ((Title XIX inpatient hospital payments plus total state and local revenue) divided by (gross inpatient revenue multiplied by cost-to-charge ratio)) plus ((total inpatient charity charges minus total state and local revenue) divided by (gross inpatient revenue)). (9) Medicaid inpatient utilization rate-Title XIX inpatient days divided by total inpatient census days. (10) Medically indigent-A person whose medical or hospital bills after payment by third-party payors exceed a specified percentage of the patient's annual gross income, determined in accordance with the hospital's eligibility system, and the person is financially unable to pay the remaining bill. (11) Medicare inpatient utilization rate-Medicare inpatient days divided by total inpatient census days. (12) Rural area-Area outside a Metropolitan Statistical Area (MSA) or a Primary Metropolitan Statistical Area (PMSA). MSA and PMSA are defined by the Office of Management and Budget. (13) Total inpatient census days-Total number of a hospital's inpatient census days during its fiscal year ending in the previous calendar year. (14) Total inpatient charity charges (excluding bad debt charges) -Total amount of the hospital's charges for inpatient hospital services attributed to charity care (care provided to individuals who have no source of payment, third- party or personal resources) in a cost reporting period. The total inpatient charges attributable to charity care will not include contrac- tual allowances and discounts (other than for indigent patients not eligible for medical assistance under an approved Medicaid State Plan); that is, reduction or discounts, in charges given to other third-party payers such as but not limited to HMOs, Medicare, or Blue Cross. The amount of total inpatient charity charges must be consistent with the amount reported on department's annual hospital survey. (15) Total Medicaid inpatient days-Total number of billed Title XIX inpatient days based on the latest available state fiscal year data for patients entitled to Title XIX benefits. Total Medicaid inpatient days includes days with dates of admissions between September 1 and August 31 (state fiscal year) and dates of payments within the fiscal year and for nine months after the end of the fiscal year (May 31). (16) Total Medicaid inpatient hospital payments-Total amount of Title XIX funds, excluding Medicaid disproportionate share funds, a hospital received for admissions during the latest available state fiscal year for inpatient services. Total Medicaid inpatient hospital payments includes payments associated with dates of admissions between September 1 and August 31 (state fiscal year) and dates of payments within the fiscal year and for nine months after the end of the fiscal year (May 31). (17) Total operating costs-Total inpatient operating costs of a hospital during its fiscal year ending in the calendar year before the start of the current federal fiscal year, according to the hospital's Medicare cost report (tentative, or final audited cost report, if available). (18) Total state and local revenue-Total amount of state and local revenue a hospital received for inpatient care, excluding all Title XIX payments, during its fiscal year ending in the previous calendar year. Sources of state and local revenue include but are not limited to County Indigent Health Care, Chronically Ill and Disabled Children, Kidney Health Care, and tax funds. Sources of revenue that are not included in state and local inpatient revenue include but are not limited to Office of Substance Abuse Program, Ryan White Title II, Ryan White Title III, State Legalization Impact Assistance Grant, Civilian Health and Medical Program of the Uniformed Services, Medicare, and Medicare/Medicaid contractual funds and allowances. The department adjusts inpatient tax revenues for hospitals that report all of their tax revenues as inpatient revenue. To make adjustments, the hospital uses the appropriate parts of the Medicare cost report that the hospital submitted for its fiscal year ending in the previous calendar year. (19) Urban-Area inside an MSA or PMSA. (20) Weighted low-income days-Low-income days multiplied by an appropriate weighting factor. (21) Weighted Medicaid days-Medicaid days multiplied by an appropriate weighting factor. (c) Conditions of participation. Before the beginning of each state fiscal year, which begins September 1, the single state agency or its designee surveys Medicaid hospitals to determine which hospitals meet the state's conditions of participation. Hospitals must allow state personnel access to the hospital and its records to ensure compliance with the conditions of participation. Failure to meet all of the conditions of participation results in ineligibility for participation in the program. These conditions of participation do not apply to state-owned teaching hospitals as specified in sec.29.610 of this title (relating to Disproportionate Share Hospital Reimbursement Methodology for State-Owned Teaching Hospitals). The conditions of participation are as follows. (1)-(4) (No change.) (5) Community health care assessment. Each hospital, or group of hospitals, must annually furnish to the state Medicaid director a copy, developed at the direction of the hospital's governing board, of its assessment of the health care needs of its community. The assessment must contain a socioeconomic and demographic description of the hospital's service area and an assessment of the service area's existing health care resources. The assessment must demonstrate how the hospital is using its disproportionate share funds to address its community health needs. Exceptions: State mental hospitals and state chest hospitals are exempt because their expenditures are governed by state law. (6) Alternative access to primary care. Each hospital must annually report to the state Medicaid director the availability of alternative access (other than emergency care) to primary care in its community. Alternative access to primary care includes, but is not limited to, primary care physician offices, minor emergency centers, and primary care clinics. Hospitals must have plans to arrange for nonemergency patients to receive care that is not in their emergency rooms, unless they can demonstrate that there is no feasible alternative in the community. This kind of plan includes, but is not limited to, a hospital-based clinic for nonemergent patients referred to after triage. Hospitals also must report their progress in treating nonemergency patients apart from their emergency rooms. Exceptions: The following hospitals are exempt from this condition: State mental and state chest hospitals; psychiatric hospitals licensed by the Texas Department of Mental Health and Mental Retardation (TXMHMR); and certain hospitals licensed as "special" by the Texas Department of Health (department) (i.e., long term care hospitals, ventilator hospitals, burn institutes, and alcohol-chemical dependency hospitals); rehabilitation hospitals; maternity hospitals; college infirmaries; contagious disease hospitals; and hospitals for the terminally ill. (7)-(9) (No change.) (d) Qualifying formulas for determining disproportionate share status. The single state agency or its designee identifies the qualifying Medicaid disproportionate share providers from among the hospitals that meet the two- physician requirement and the state's conditions of participation, as specified in subsection (c)(1)-(8) of this section, by using the following formulas. In the case of hospitals that have merged to form a single Medicaid provider, the single state agency or its designee aggregates the data points from the individual hospitals that now make up the single provider to determine whether the single Medicaid provider qualifies as a Medicaid disproportionate share hospital. Medicaid disproportionate share hospitals receive payments if they merge with other hospitals during the fiscal year, if they continue to meet the two-physician requirement, and if they meet the other conditions of participation. Children's hospitals that do not otherwise qualify as disproportionate share hospitals are deemed disproportionate share hospitals. The formulas are as follows. (1)-(2) (No change.) (3) A low-income utilization rate exceeding 25% but not more than 100%. For a hospital, the low-income utilization rate is the sum (expressed as a percentage) of the fractions calculated as follows: (A)-(B) (No change.) (4) (No change.) (e) (No change.) (f) Reimbursing Medicaid disproportionate share hospitals. The single state agency reimburses Medicaid disproportionate share hospitals on a monthly basis. Monthly payments will equal one-twelfth of annual payments unless it is necessary to adjust the amount because payments will not be made for a full 12- month period, to comply with the annual state disproportionate share hospital allotment, or to comply with other state or federal disproportionate share hospital program requirements. Payments will be made in the following manner. (1) (No change.) (2) For the remaining hospitals, payments will be based on both weighted inpatient Medicaid days and weighted low income days. The single state agency weights each hospital's total inpatient Medicaid days and low income days by the appropriate weighting factor. The state defines a low income day as a day derived by multiplying a hospital's total inpatient census days from its fiscal year ending in the previous calendar year by its low income utilization rate. Hospital districts and city/county hospitals with greater than 250 licensed beds in the state's largest MSAs would receive weights based proportionally on the MSA population according to the 1990 United States census. MSAs with populations greater than or equal to 150,000, according to the 1990 census, are considered as the "largest MSAs." Children's hospitals also receive weights because of the special nature of the services they provide. All other hospitals receive weighting factors of 1.0. The inpatient Medicaid days of each hospital will be based on the latest available state fiscal year data for patients entitled to Title XIX benefits. The available fund is divided into two parts. Two-thirds of the available fund will reimburse each qualifying hospital on a monthly basis by its percent of the total inpatient Medicaid days. One-third of the available fund will reimburse each qualifying hospital by its percent of the total low income days. Reimbursement for the remaining hospitals is determined monthly as follows. (A)-(C) (No change.) (g) Review of agency determination. The single state agency or its designee notifies hospitals of their tentative eligibility or ineligibility and the estimated amount of payment before the beginning of the state fiscal year. Any hospital, including those hospitals that do not qualify or that contend the amount of payment is incorrect, is allowed to request a review by the single state agency or its designee. The actual amount of payment also may vary if a successful review request by one or more hospitals necessitates an adjustment in the amount of payments to the other hospitals in the program. Because of the state's ongoing review of data elements used in the formulas before the first monthly payment, it is possible that a hospital may either gain or lose eligibility after receiving tentative notification, which would also affect payment amounts. (1)-(3) (No change.) (h) Disproportionate share funds held in reserve. (1)-(3) (No change.) (4) If a hospital that is already receiving Medicaid disproportionate share funds closes, loses its license, loses its Medicare or Medicaid eligibility, that hospital's disproportionate share funds are reallocated among the remaining disproportionate share hospitals. If the hospital reopens, as the same hospital type, regains similar licensure or Medicare and Medicaid eligibility during the same fiscal year, that hospital receives monthly disproportionate share payments for the remaining months in the state fiscal year, as determined by the appropriate reimbursement formula and from available funds. (i) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443543 John T. Richards Assistant General Counsel, Office of General Counsel Texas Department of Health Effective date: July 27, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 338-6511 Subchapter CC. Lone Star Select Contracting Program 25 TAC sec.29.2801 On behalf of the State Medicaid Director, the Texas Department of Health (department) submits adopted new sec.29.2801, with changes to the proposed text as published in the April 5, 1994, issue of the Texas Register (19 Tex Reg 2358). The new section implements Senate Bill 79, 73rd Texas Legislature, 1993, which mandates medical assistance selective contracting for non-emergency inpatient hospital services. The department will have increased ability to assure adequate access to appropriate, high quality, cost effective services for all medical assistance beneficiaries; containment of overall expenditures for hospital inpatient services reimbursed by the Medical Assistance Program; and the facilitation of an orderly transition to a Medical Assistance Program design philosophy using an approach emphasizing primary care to minimize unnecessary use of hospital care. Generally, the new section enables the department to contract selectively with hospitals for non-emergency inpatient services for Medicaid recipients, thereby improving the department's ability to act as a prudent purchaser of services and manage the program in a more effective and efficient manner. Specifically, the section includes its purpose, definition, and the department's requirements associated with the general design, proposal process for selective provider agreements, evaluation criteria and methodology, and the execution of provider agreements used in the selective contracting process. The department received verbal and written comments from a total of 18 commenters. The department conducted a public hearing on the proposed rules on April 18, 1994. A summary of comments received and the department's responses are as follows. COMMENT: Concerning the proposed rules in general, six of the commenters stated that while selective contracting could save the state $35 million, it will result in the loss of an additional $65 million in federal matching funds. The additional cuts which will be imposed on the hospital industry may discourage providers from participating in the Medicaid program. RESPONSE: The department acknowledges the concern of the commenters but the legal mandates found in Senate Bill 79 and in Senate Bill 5, Article V, State Appropriations Act require the department to implement selective contracting in the Medicaid program. COMMENT: Concerning the proposed rules in general, a number of commenters stated that the department should clarify how it will reimburse the hospitals (contracted and non-contracted) for services to patients who are admitted through the emergency room. RESPONSE: The department agrees with the comment and has made the following changes to clarify how the department intends to reimburse contracted and non- contracted hospitals for services to patients that are admitted through the emergency room. New subsection (h)(1) and (2) provides the clarification. Further clarifications of the reimbursement procedures for patients requiring transfer and/or hardship exemptions in non-contracting hospitals have been added in subsection (h)(2)(A) and (B). COMMENT: Concerning subsection (b), one commenter requested that the department define "hardship exemption procedure." RESPONSE: The department agrees and has added an appropriate definition. COMMENT: Concerning subsection (b), one commenter requested that the department define "emergency inpatient services" and "non-emergency inpatient services." RESPONSE: The department agrees and has added appropriate definitions. COMMENT: Concerning subsection (b)(4), one commenter recommended that the term "adult psychiatric services" be replaced by the term "psychiatric services" because the proposed term is too restrictive. RESPONSE: The department agrees and has removed the word "adult." COMMENT: Concerning subsection (b)(9), one commenter stated that the term "health care provider" should be replaced with the term "hospital." RESPONSE: The department disagrees. The definition of "health care provider" indicates that only hospitals providing inpatient services are affected by this rule. The department feels that the definition is sufficient as proposed. COMMENT: Concerning subsection (c), one commenter has stated that the rule is unclear as to how and why the department will divide the market areas into two groups for solicitation purposes. RESPONSE: The department has limited resources available to conduct the solicitation workshops and proposal analyses. The department will decide which markets to enter and when to enter them based on what the department deems to be the most efficient and cost-effective use of these limited resources. Dividing the market areas into two solicitations refers more directly to the timing of when the department sends out solicitation packages and then conducts workshops for hospitals interested in the LoneSTAR Select Contracting Program (i.e.,-12 Metropolitan Statistical Area's (MSA's) in the middle of July and then 12 MSA's in the middle of August). COMMENT: Concerning subsection (c)(2), one commenter suggested that requiring each hospital to submit a separate proposal in conjunction with its cooperative bid proposal is meaningless. RESPONSE: The department disagrees. The provisions of subsection (c)(2) are designed to ensure that joint efforts by hospitals to submit cooperative proposals do not limit the department's ability to obtain independent, competitive proposals from each hospital applying for a selective provider agreement COMMENT: Concerning subsection (d)(2), one commenter questioned whether the department was suggesting that a selected hospital "provide care above its proposed level of services". RESPONSE: The department needs the information to assess the capability that each hospital seeking a contract has to provide the necessary resources to provide care to its Medicaid eligible patients. The information will also be used to assure that the contracted network of hospitals will have a combined service capacity equal to at least 115% of the most recently available historic service volume experience for the market. COMMENT: Concerning subsection (d)(2), one commenter requested that this paragraph be revised to protect the confidential nature of the data from all hospitals. RESPONSE: The department does not believe the data it needs will require hospitals to submit data that is either confidential or proprietary in nature; however, the department will keep data confidential to the extent authorized by Senate Bill 79. COMMENT: Concerning subsection (e), one commenter stated that the provision requiring hospitals to respond to the proposal package within one month is unrealistically short. RESPONSE: The department, upon obtaining necessary federal waiver approvals, will transmit a solicitation package to each hospital in the market areas selected for the first round of contracting, following the process described in subsection (c)(1). Within seven-ten days thereafter, the department intends to conduct workshops for potential submitters of proposals, at which department officials will answer questions about the LoneSTAR Select Contracting Program, and about the procedures established for submitting a proper application. Applications, for each of the markets selected for each round of contracting, will be due on a defined date that will be established in the solicitation package. As provided in this rule, that date will be approximately 30 days after the date of transmittal of solicitation packages to hospitals. Since the department will not require elaborate or lengthy proposals from hospitals, the department believes that this time frame should be more than adequate for hospitals to evaluate the information required to prepare and submit the required applications. As the majority of information the department is going to request was published in the waiver and/or included in this rule, hospitals may rely on that information if they wish to begin preparation of their applications prior to the release of the submission packages. Hospitals are particularly encouraged to consider the requirements of subsection (d)(6), which will require hospitals to offer evidence that the submission of a binding application for a selective provider agreement has been duly authorized by the corporate governance of the hospital. COMMENT: Concerning subsection (e)(2), one commenter stated that the full disclosure of the evaluation criteria is essential in order to make the proposal process meaningful and to assure hospitals that the selection process will be fair. RESPONSE: Subsection (e) describes the evaluation methodology to be employed, and provides a general description of the criteria that will be used to evaluate hospital submissions in each market. The solicitation packages that will be transmitted to hospitals under subsection (c) will provide an explicit listing of the criteria to be employed in evaluating hospital submissions in light of the department's requirements to ensure recipient access to services. The department does not, however, plan to disclose the scoring methodology that will be employed to evaluate each hospital's application against those criteria. COMMENT: Concerning subsection (f), one commenter stated that the department should request a second proposal from all hospitals that submitted a proposal originally rather than allowing the department to selectively negotiate with individual hospitals. RESPONSE: The department disagrees. The department maintains that it needs and has the flexibility to accept or reject any initial offer and to proceed to the negotiation phase, or any phase applicable in the rule, if it were in the department's best interest. COMMENT: Concerning subsection (f), one commenter stated that the department should specify a time frame for the evaluation and negotiation process. RESPONSE: The department will conclude the evaluation and negotiation process as quickly and efficiently as possible in order to fully consider all of the numerous factors and to implement selective contracting in each market. COMMENT: Concerning subsection (f), one commenter stated that the rule should specify that the department will provide all applicant hospitals that are not awarded a contract with a full explanation of the reason(s) why the hospital was not selected. RESPONSE: The department disagrees. Senate Bill 79 provides that upon completion of all negotiations and selection decisions, data submitted by hospitals, and the reimbursement terms arrived at between the department and each selected hospital, will be available for public inspection. The department believes that hospitals whose applications are not accepted will, under this requirement, have access to substantially more information about the reason for their non-selection than would be contained in the notice this commenter suggests. COMMENT: Concerning subsection (f), one commenter suggested that the rule should provide an appeal process by which a non-selected hospital might question the department's rejection of its proposal. RESPONSE: The department disagrees. The language of Senate Bill 79 makes no provision for an appeal process once negotiations have been completed and selective provider agreements have been executed. COMMENT: Concerning subsection (g)(2), one commenter suggested that the rule be amended to make clear that any extension of any agreement with a selected hospital could be amended only on the mutual consent of both the hospital and the department. RESPONSE: The department disagrees since the language of the rule is clear regarding the nature of the department's right to execute options to extend the contract. The pricing terms of the options will be negotiated with each hospital prior to execution of the initial selective provider agreement. The provisions of that agreement will govern any subsequent proposal by either party to amend any provision of the agreement affecting the terms under which the option would be executed. COMMENT: Concerning the proposed rules in general, one commenter stated that in the department's request for federal waivers, the department states that it is seeking waivers "to enable the state to contract selectively with hospitals for non-emergency inpatient services." The department has now publicly stated its intention to selectively contract for all inpatient services for Medicaid recipients. This represents a substantial expansion of the selective contract program, an expansion not contemplated in the waiver request. RESPONSE: The department disagrees. The waiver, page 4, states that: "Hospitals with contracts will be paid contract rates for all Medicaid recipients they treat as inpatients." As stated in both the waiver application and the proposed rules, however, restrictions on recipient freedom of choice of provider will be limited to non-emergency services only. COMMENT: Concerning the proposed rules in general, three commenters stated the department should consider access and quality of care, beyond "minimally acceptable" standards, in assessing network combinations. RESPONSE: The department agrees with the intent of this comment, and has designed its process to ensure that there will be no diminution in recipient access to high quality medical services. For the purposes of evaluation, however, the department finds it necessary to establish minimum criteria to ensure that this objective will, in fact, be met. It is these defined minimum criteria for service access to which the phrase "minimally acceptable" in the proposed rule refers. COMMENT: Concerning the proposed rules in general, one commenter stated that the department should modify the rule to include evaluation of provider networks based upon participation by disproportionate share hospitals. RESPONSE: The department disagrees with the specific approach recommended in the comment. The language of Senate Bill 79 requires the department to offer each disproportionate share hospital the opportunity to negotiate for a contract. The process established in this rule will, in fact, afford each disproportionate share hospital that opportunity. Under the federal rules for obtaining selective contracting waivers under sec.1915(b)(4) of the Social Security Act, the Health Care Financing Administration (HCFA) will not approve a selective contracting program that discriminates among providers on the basis of differing classes of providers. COMMENT: Concerning the proposed rules in general, one commenter stated that the department should modify the rule to provide that the department during its Phase Two analysis, rank networks on the basis of the number of participating disproportionate share hospitals. RESPONSE: As noted in its response to the preceding comment, the department disagrees with this comment, since the department believes that the process established in this rule is fully consistent with both Senate Bill 79, and applicable federal law and regulations. COMMENT: Concerning the proposed rules in general, three commenters stated that the proposed rules should be amended to designate a limited number of high volume disproportionate share hospitals as "essential community providers" (ECP's); and that the "essential community providers" then would automatically receive a contract. RESPONSE: The department disagrees and will not designate hospitals as ECP's which must then be contracted within the selective contracting program. COMMENT: Concerning the proposed rules in general, one commenter stated that in order to allow for a fair comparison of comparable standard dollar amounts (SDA's), teaching costs should be excluded from SDA's in evaluating proposed discounts. Selective contracting should not endanger or undermine the teaching mission of academic medical centers. RESPONSE: The department disagrees that, for financial comparison purposes, teaching costs should be removed from the evaluation of the proposals. This type of proposal process would result in unnecessarily complex proposals and the same argument could be applied to every type of specialty care provided by any provider. The resulting implementation delays would diminish the program's ability to achieve the necessary savings. COMMENT: Concerning the proposed rules in general, two commenters stated that there currently was a wide variation in the SDA's in each MSA that the department was contemplating entering; and that a hospital with a much smaller SDA might not be able to offer as large of a discount off their SDA as a hospital with a much larger SDA. As such, the department should not primarily consider the size of a hospital discount during the evaluation phase of the selective contracting process. RESPONSE: The department disagrees with the specific recommendation of this comment. The department cannot ignore the magnitude of potential budget savings in selective contracting without violating the intent of Senate Bill 79. It should be noted, however, that the evaluation methodology described contained in this rule does not call for making decisions to include or exclude hospitals solely on the grounds of the percentage discount offered by a hospital. Rather, the department intends to select a network of hospitals which, taken together, offers the department the most cost-effective network of service providers consistent with the overall objectives of the Medicaid program. COMMENT: Concerning the proposed rules in general, one commenter stated that they felt it was not appropriate nor fair for large urban hospitals to be able to bid against a small rural hospital for the patients outside the urban hospital's MSA. RESPONSE: Nowhere in the rule does it indicate that an urban hospital will be allowed to submit a proposal against a rural hospital for the patients in a rural county. COMMENT: Concerning the proposed rules in general, two commenters stated that the outpatient reductions that have already been put in place by the program were creating dis- incentives for physicians to treat Medicaid recipients and that the new rule pertaining to selective contracting could adversely affect physicians willingness to continue to treat Medicaid patients. RESPONSE: The department intends to retain most, if not all, of the physicians who are currently providing services to Medicaid recipients. The department will be working with state medical associations and local county medical societies to provide information to all of the physicians in the communities affected by the new LoneSTAR Select Contracting Program. A physician's ability to apply for hospital privileges must be maintained in accordance with any requirements mandated by the HCFA. COMMENT: Concerning subsection (b)(5)(C), one commenter believes that the definition of "specialized services" should include "rehabilitation services and psychiatric services" for children and adolescents. RESPONSE: The department disagrees. The department considers the rehabilitation services and psychiatric services offered by acute medical/surgical hospitals as normal services to be contracted for in the waiver. Inpatient psychiatric services in freestanding facilities will be contracted for under a separate waiver. COMMENT: Concerning subsection (b)(5)(A), one commenter stated the selective contracting should assure that hospital services are as conveniently located for Medicaid recipients as possible. RESPONSE: The department will apply reasonable access standards for Medicaid recipients when entering into selective contracting agreements with hospitals. COMMENT: Concerning subsection (b)(5)(B), one commenter suggested that instead of basing future capacity on past usage, capacity should be defined and evaluated by the Medicaid Programs' actual need for hospital services in the market area. The use of historical data paints an inaccurate picture of future hospital capacity because it does not account for changes in available hospital services in the market. Accordingly, the department should review actual capacity - not past capacity. RESPONSE: The department disagrees. The department will be considering the total service capacity in a market area and also the actual capacity available in the market through the receipt of offers from hospitals desiring to be in the program. The department believes utilizing data on historical usage patterns is sufficient for the LoneSTAR Select Contracting Program. COMMENT: Concerning subsection (b)(5)(B), one commenter suggested an excess capacity of only 15% (115% total) is not enough to assure that Medicaid recipients have adequate access to in-patient hospital care. As such, the rule should be changed to reflect the combined service capacity to equal 300% of Medicaid recipients' need for hospital care in a market area. RESPONSE: The department disagrees with the comment. Given current projections of Medicaid program growth, hospital capacity greater than or equal to 115% of recent historic utilization appears to the department to be more than adequate to serve the needs of Medicaid recipients. Should unanticipated program growth (e.g., the result of new federal eligibility mandates) result in a finding that the provider capacity actually selected in each market may not prove adequate, the process described in this rule provides the department with the flexibility to reopen the competition at the end of each contract year in order to obtain agreements with a wider network of providers. COMMENT: Concerning the proposed rules in general, one commenter stated that the rules should be changed to provide limited state action immunity from antitrust liability and joint bids should be encouraged. RESPONSE: The department disagrees with this comment. The rules do provide for joint bids in subsection (c)(2) and the department believes that no further encouragement is necessary. Further, state law already provides for situations in which cooperative agreements among hospitals are considered lawful and not in violation of antitrust laws (See Health and Safety Code, sec.313.001 et seq.). Limited state action immunity from antitrust liability is not necessary or appropriate for this situation. COMMENT: Concerning the proposed rules in general, two commenters suggested that the rules be changed to not allow the state to include contiguous counties surrounding an MSA because they felt this would limit the access of care for Medicaid recipients, that it could create such a healthcare vacuum that all patients located in these counties could experience a loss of access as the local hospitals could be forced to close their doors and physicians and other health care providers would possibly leave the area. RESPONSE: The department disagrees. In those markets (if any) where the department elects to expand the market area beyond the boundaries of an MSA to include contiguous counties, the evaluation methodology proposed in these rules would explicitly take into account the service needs of Medicaid recipients presently being served by hospitals located in such counties. COMMENT: Concerning the proposed rules in general, one commenter urged that the proposed rules be amended so as to explicitly require that any contracting hospital must give an assurance that it will accept every Texas Medicaid recipient needing the hospital's services and seeking them. RESPONSE: The department currently expects hospitals to provide services to Medicaid recipients subject to capacity limitations and ability to provide services. The department's "requirements for access to services" referenced in subsection (f)(2) includes that expectation. In addition, the department will require hospitals to provide assurances in their proposals, as required in subsection (d)(4), that the hospital will provide services to Medicaid recipients subject to capacity limitations and ability to provide the service. Such assurances will be included in any provider agreement entered into with the hospital under selective contracting. COMMENT: Concerning subsection (b)(10), one commenter stated that nurse hotlines do not seem to be an appropriate Medicaid expenditure because it is not possible to determine if callers are Medicaid recipients. The commenter wants the department to clarify whether it intends to finance nurse hotlines or if they are included in the proposed rules as an example of activities that the department may consider in evaluating selective contracting offers. RESPONSE: The department intends to have optional volume management programs such as nurse hotlines be one of the items that will be considered in evaluating offers from hospitals. COMMENT: Concerning subsection (f), one commenter recommended that the department should evaluate the percentage of physicians who accept Medicaid and who have privileges at each hospital and include that measure as one of the evaluation criteria in determining which network of hospitals is chosen. RESPONSE: The department disagrees. The department believes that sufficient criteria are included in the rule to make informed decisions. COMMENT: Concerning subsection (f), one commenter suggested that the department evaluate how long Medicaid recipients must wait at each hospital to get services that Medicaid recipients use frequently and include that measure as one of the evaluation criteria in determining which network of hospitals is chosen. RESPONSE: The department disagrees. The department believes that sufficient criteria are included in the rule to make informed decisions. COMMENT: Concerning the proposed rules in general, one commenter stated that Medicaid recipients should not be required to travel more than 30 minutes for general inpatient hospital care and that standards may vary for specialized services because facilities are fewer and farther apart. RESPONSE: The department disagrees. During the course of the development of the program implemented by this rule, the department considered, and rejected, access standards defined as maximum permissible travel times. Instead, the department elected to judge the accessibility of each hospital's services to Medicaid recipients residing in each zip code area of the market based on empirical evidence that Medicaid recipients residing in those zip code areas have, in fact, been served by that hospital. The department believes that this approach is more inclusive of all the factors that affect access to hospital services than an approach based solely on travel time. In particular, it takes into account those circumstances where Medicaid recipients face non-geographic barriers to care. COMMENT: Concerning the proposed rules in general, one commenter stated that if a Medicaid recipient's provider certifies that contracting hospitals cannot provide care that a Medicaid recipient needs, the Medicaid recipient should be allowed to seek appropriate care at non-contracting facilities. Also, if appropriate care is not available within the market area, Medicaid recipients should be able to seek care outside of their market area. RESPONSE: The department has a hardship exemption procedure that would allow a Medicaid recipient to seek non-emergency inpatient services at a non-contracted hospital if an undue travel burden will be experienced by the Medicaid recipient. The appropriate subsection to review is adopted subsection (h)(2)(B). Although the department anticipates that needed services will be available from contracting hospitals, if that is not the case, the hardship exemption for undue travel burden does include the situations referenced in the comment. COMMENT: Concerning the proposed rules in general, one commenter stated that if a Medicaid recipient's provider certifies that contracting hospitals cannot provide timely care-even though they in theory can provide the needed service eventually-a Medicaid recipient should be able to receive care at a non- contracting hospital that can provide care in a timely manner. RESPONSE: The department disagrees. While it is the desire to have services provided in a timely manner, circumstances which are out of the control of the department are constantly being experienced by providers which make some service delays unpredictable and/or unavoidable. COMMENT: Concerning the proposed rules in general, one commenter stated that if a Medicaid recipient seeks care from a provider who does not have admitting privileges at an appropriate contracting hospital, the Medicaid recipient should be allowed to receive care at the non-contracting hospital where the physician can admit. RESPONSE: The department disagrees. The department believes that concerns about hospital admitting privileges for Medicaid providers can be better addressed by a policy under which contracted hospitals would be required to accept applications for admitting privileges from Medicaid providers who meet the requirements of each hospital's medical staff by-laws for staff privileges. The department believes that this policy, described more fully in the department's federal waiver application, obviates the need for an exception based solely on physician staff privileges. COMMENT: Concerning the proposed rules in general, one commenter suggested that the department establish a system to approve requests for non-emergency inpatient care at non-contracting hospitals. The system should include an automatic approval if a denial is not received within 24 hours of the request for approval. RESPONSE: The department disagrees. Additional explanation of the hardship exemption procedure can be found at subsection (h)(2)(B). COMMENT: Concerning the proposed rules in general, one commenter recommended that the department require all selective contracting hospitals grant admitting privileges to any provider who accepts Medicaid. RESPONSE: The department disagrees. Under Texas law, hospitals have an affirmative responsibility to create, or direct the creation of, medical staff credentialing requirements to meet their duty to ensure quality medical care to the public. The department believes that establishing contractual rules that would require hospitals to override those quality safeguards and admit all applicant physicians regardless of their qualifications would not be in the interest of Medicaid recipients, or other patients in the State of Texas. COMMENT: Concerning the proposed rules in general, one commenter recommended that the department should require contracting hospitals to assist patients to apply for benefits to which they may be entitled. RESPONSE: The department disagrees. All hospitals face significant financial incentives to ensure that uninsured patients who are eligible for medical assistance are enrolled in the Medicaid program, so that reimbursement for their services can be obtained. COMMENT: Concerning the proposed rules in general, one commenter suggested that the department should require contracting hospitals to care for all Medicaid recipients who seek care at the facility unless a bed is not available or the hospital does not offer the needed service. RESPONSE: The department currently expects hospitals to provide services to Medicaid recipients subject to capacity limitations and ability to provide the service. The department's "requirements for access to services" referenced in subsection (f)(2) includes that expectation. In addition, the department will require hospitals to provide assurances in their proposals, as required in subsection (d)(4), that the hospital will provide services to Medicaid recipients subject to capacity limitations and ability to provide the service. Such assurances will be included in any provider agreement entered into with the hospital under selective contracting. COMMENT: Concerning the proposed rules in general, one commenter recommended that the department should not institute "caps" or limits on the number of reimbursable Medicaid patient days for each contracting hospital. Contracting hospitals should receive Medicaid reimbursement for needed inpatient services provided to any Medicaid recipient at any time, as long as the services are otherwise subject to reimbursement by the Medicaid program. RESPONSE: The department agrees and has never intended that the program limit the number of patient days that a hospital could provide or be reimbursed for, as long as the services rendered were otherwise reimbursable by the Medicaid program. COMMENT: Concerning the proposed rules in general, one commenter suggested that the department should require all hospitals in market areas that received Hill- Burton funds to become selective contracting hospitals. RESPONSE: The department will not make this a requirement. Many hospital's Hill- Burton obligations have long since been completed. Senate Bill 79 authorizes and directs a selective contracting program under which the department and hospitals would mutually agree to the terms and conditions of an agreement. The department has no authority to direct a hospital to offer a proposal, or to agree to particular payment terms, without its consent. COMMENT: Concerning the proposed rules in general, one commenter stated that the department must make reasonable decisions about reimbursement to contracting hospitals for planned care and other hospitals for emergency care. Reimbursement should be sufficient to allow hospitals to remain Medicaid providers. RESPONSE: The department agrees, and believes that the program implemented under this rule achieves the intent of this comment. By definition, the terms and conditions of a selective provider agreement will be established by mutual agreement between the department and each hospital. The department expects that hospitals will propose, and/or accept after negotiations, payment terms that are adequate to ensure their continued financial viability. COMMENT: Concerning the proposed rules in general, one commenter suggested that the department and contracted hospitals should make coordinated, aggressive efforts to inform Medicaid recipients and providers about the new contracting hospitals and the purpose that they serve. As part of this effort, the department should develop a logo that easily identifies contracting hospitals. RESPONSE: The department agrees with the intent of this comment. The department plans an active communication initiative designed to inform every Medicaid recipient and provider about the LoneSTAR Select Contracting Program. At the present time, the department has no plans to devise a logo to facilitate identification of contracted hospitals. It is expected that hospitals themselves will make active efforts to inform Medicaid recipients and other providers about their designation as participating providers. COMMENT: Concerning the proposed rules in general, one commenter requested that the regulations should provide that non-contracting hospitals that admit Medicaid recipients in emergencies should provide care as required by the Emergency Medical Treatment and Active Labor Act and according to the state laws concerning emergency care. RESPONSE: The department agrees. Nothing in the LoneSTAR Select Contracting Program will relieve any hospital in Texas of its duties to emergency patients under applicable State laws. These rules prescribe requirements for handling emergency admissions at non-contracted hospitals that are fully consistent with all of these requirements. COMMENT: Concerning the proposed rules in general, one commenter suggested that the department should incorporate much of the information that was included in the waiver into the rule. RESPONSE: The department disagrees. Many elements of the department's waiver application to HCFA address issues at a level of detail that is inappropriate for a rule making designed to inform the public about the requirements of the program. In those instances where information elements in the waiver, as finally approved by HCFA, affect providers or patients, the department will undertake affirmative efforts, through amendments to its provider manuals and direct communications with Medicaid recipients, to inform such individuals regarding these elements of the program. COMMENT: Concerning the proposed rules in general, one commenter stated the department should establish a valid method to study the quality of care that Medicaid recipients receive at contracting and non-contracting hospitals. RESPONSE: The department agrees. The waiver application to the Health Care Financing Agency (HCFA) contains assurances that the department will actively monitor critical indicators of hospital performance under this initiative and take corrective action wherever quality problems are identified. COMMENT: Concerning the proposed rules in general, one commenter recommended that the department should develop a system to evaluate the ongoing capacity and effectiveness of contracting networks. The department should regularly evaluate waiting times, number of requests for services at non-contracting hospitals, and the number/percent of physicians who accept Medicaid and who also have admitting privileges at contracting hospitals to determine if networks have adequate capacity. In addition, the department should require contracting hospitals to log all Medicaid recipients' complaints and forward complaint logs to the department for review. Further, the department should survey Medicaid recipients, physicians who care for them, contracting and non-contracting hospitals and key community leaders who are familiar with the needs of the Medicaid population in each market area. The surveys should inquire into satisfaction with the network system, problems and potential improvements. RESPONSE: The department agrees and has provided assurances to HCFA that it will actively monitor hospital performance. Contracting hospitals will be required to maintain grievance procedures, and make available to the department evidence of how complaints are handled. HCFA may also commission, or require the department to commission, an independent program evaluation that would address many of the issues, such as the effects of the program on recipient satisfaction, of concern in this comment. COMMENT: Concerning the proposed rules in general, one commenter suggested that due to the potential and unknown impact of selective contracting on the Medicaid population, the department should implement the initiative in only one or two market areas at first. Cautious implementation will allow the department and others to assess the impact of selective contracting before implementation occurs in all major metropolitan areas in the state. RESPONSE: The department disagrees. The provisions of Senate Bill 5, Article 5, State Appropriations Act require the department to undertake a selective contracting program of sufficient scope as to be able to achieve the budgetary targets for selective contracting established in that legislation. Limiting application of the program to only one or two markets would prevent the department from complying with this legislative mandate. COMMENT: Concerning the proposed rules in general, one commenter requested a more clear definition of the Executive Oversight Committee and the role the committee was to perform in approving the contracts with hospitals. RESPONSE: The department has clarified the role of the Executive Oversight Committee in subsection (b)(3) and (g)(1). COMMENT: Concerning subsection (e)(1), one commenter requested a more clear description of what exactly would be considered as the release date as it relates in the following statement "Hospital proposals shall be due to the department within one month of the release of proposal packages." RESPONSE: As indicated in subsection (e)(1), the department intends to send solicitation packages to hospitals in each market selected for selective contracting as soon as is practicable after HCFA approves the requested waiver. Those solicitation packages would, in significant part, establish a specific calendar date on or before which hospitals interested in applying for selective provider agreements must return applications for such agreements. As stated in this rule, the department intends to establish a date for submission of the required responses that provides a 30-day period, after the date on which the solicitation package is sent by the department to hospital, during which hospital may prepare their responses. COMMENT: Concerning subsection (g)(2), one commenter wanted more clarification as to if a selective contract is not renewed, what are the capabilities of the hospital to continue under the original hospital provider agreement? What termination and appeal procedures will be used for selective contracts that are not renewed? RESPONSE: Under the LoneSTAR Select Contracting Program implemented by these rules, hospitals whose contracts were not extended by the department would receive reimbursements in the manner provided under the State Plan in effect for the period following the period during which the hospital was bound by the selective provider agreement. Procedures to be followed in the event of contract termination will be established by the terms of the selective provider agreement; the department does not contemplate establishing any independent mechanism governing terminations or appeals. If the department elected to continue selective contracting with other hospitals in that market, a hospital whose agreement had not been extended would become a non-contracted hospital within the meaning of this rule. In the event that the department elected to completely discontinue selective contracting in a market, however, recipient freedom-of-choice limitations would no longer apply to such a hospital. COMMENT: Concerning the proposed rules in general, one commenter requested that the department review both the Federal and the state transfer laws and rules to make sure that the rules relating to selective contracting are written accordingly. RESPONSE: The department has reviewed applicable state and federal laws and believes that the selective contracting program to be in compliance. Nothing in the selective contracting waiver and this rule is intended to modify existing legal requirements concerning transfer of Medicaid patients. The department made minor editorial changes throughout the rule for clarification purposes. The following organizations provided comments on the proposed rules: Texas Association of Public and Nonprofit Hospitals; Texas Hospital Association; Texas Organization of Rural and Community Hospitals; Texas Rural League Aid, Inc.; Texas Legal Services Center on behalf of the Houston Welfare Rights Organization; Parkland Memorial Hospital-Dallas; Providence Memorial Hospital-El Paso; AMI Park Plaza Hospital -Houston; AMI Twelve Oaks Hospital-Houston; Brackenridge Hospital-Austin; San Jacinto Methodist Hospital- Baytown; East Texas Medical Center-Athens; and Parkview Center -Houston. Several other individuals also provided written and/or oral comments, and while none of the commenters were against the rules in their entirety, they expressed concerns, questions, and made recommendations. The new section is adopted under the Human Resources Code, sec.32.027 which provides authority for the adoption of rules on selective contracting; the Human Resources Code sec.32.021, and Texas Civil Statutes, Article 4413 (502), sec.16, which provide the Health and Human Services Commission with the authority to adopt rules to administer the state's medical assistance program and is submitted by the Texas Department of Health under its agreement with the Health and Human Services Commission to operate purchased health services programs and as authorized under Chapter 15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). sec.29.2801. Lone Star Select Contracting Process for Inpatient Hospital Services. (a) Introduction. This section implements the provisions of Senate Bill 79, 73rd Texas Legislature, Regular Session, 1993, mandating selective contracting for non-emergency inpatient hospital services. (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Market area-A geographic subdivision of the State of Texas defined as a group of geographically contiguous counties in which the Texas Department of Health (department) determines that hospitals will be invited to apply for selective contracting agreements. In general, each Metropolitan Statistical Area (MSA) in the state will be considered for designation as a market area. Where warranted by historical patient migration patterns, the department may designate certain non-MSA counties that are geographically contiguous to an MSA to be included with MSA counties within a market area. (2) Effective service area-For each hospital in a market area, the geographic area, as defined on a zip code basis, in which the hospital has historically provided inpatient hospital services to Medicaid patients. For purposes of subsection (f) of this section, the effective service area will be determined based on historical Medicaid inpatient claims data. (3) Executive Oversight Committee-The executive committee established by the department to direct the selective contracting initiative. (4) Hospital capacity to provide specialized service offerings-The presence or absence of specific hospital services, including but not limited to, trauma centers, burn units, neonatal intensive care unit services, and psychiatric services, that are required to be available in the market to ensure adequate access to quality care. (5) Potential network-Any combination of applicant hospitals (whether the result of a joint proposal or determined by the department) that offer a: (A) combined effective service area that provides geographic coverage of the market area to the same extent that coverage is provided under current practice; (B) combined service capacity equal to at least 115% of the most recently available historic service volume experience for the market area; and (C) combination of specialized services available within the market area that is at least as broad as the range of specialized services presently available to Medicaid recipients in that market area. (6) Selective contracting-A method of contracting, granted through waivers of certain provisions of the Social Security Act, that allows the department to contract selectively with hospitals for non-emergency inpatient services, thereby improving its ability to act as a prudent purchaser of services and to manage the Medical Assistance Program in a more effective and efficient manner, as required by Senate Bill 79. (7) Selective provider agreement-An agreement which includes an amendment to a hospital's existing provider agreement with the department and involves selective contracting. (8) Disproportionate share hospital-A hospital participating in the Medicaid program that, according to state Medicaid criteria, meets the conditions of participation and serves a disproportionate share of indigent patients. Additional requirements for disproportionate share hospitals are specified in sec. 29.609 of this title (relating to Additional Reimbursement to Disproportionate Share Hospitals) and sec.29.610 of this title (relating to Disproportionate Share Hospital Reimbursement Methodology for State-Owned Teaching Hospitals). (9) Health care provider-Any hospital that is eligible to provide inpatient hospital services to Medicaid recipients. (10) Optional volume management activities-Those activities that hospitals may propose to furnish to Medicaid recipients in a market area to expand access to primary care services and ensure more appropriate use of hospital facilities. Such activities may include, but not be limited to, furnishing ambulatory primary care clinic services to Medicaid recipients and furnishing nurse hotlines which Medicaid recipients may call to receive professional advice about the most appropriate means to obtain medical care. (11) Hardship exemption procedure-A method for non-contracted hospitals to obtain prior authorization from the department to provide non-emergency inpatient services to Medicaid recipients who would experience an unreasonable travel burden under the LoneSTAR Select Contracting Program (12) Emergency inpatient services-An admission into a hospital with a diagnosis meeting the definition of a medical emergency. (13) Non-emergency inpatient services-An admission into a hospital with a diagnosis not meeting the definition of a medical emergency. (c) General design. The department shall select that subset of market areas that appears to indicate the most effective competition for selective provider agreements to serve Medicaid patients. The market areas shall be divided into two groups of solicitations that will avoid an overlap of contract evaluation and negotiation of solicitations. (1) The department shall implement selective contracting by executing amendments to each hospital's existing provider agreement with the department. Hospitals that were not parties to provider agreements before implementation of the department's selective contracting are eligible to apply; however, they must enter into a provider agreement that ensures they are subject to all terms and conditions of the Medical Assistance Program. The amendments to the provider agreements, and the process by which the department solicited, evaluated, negotiated, and executed the amended agreements with hospitals under selective contracting are not subject to the laws and regulations governing acquisition of goods and services by state agencies. (2) Hospitals shall be required to apply for selective provider agreements on an individual basis. Proposals by combinations of hospitals under common ownership in a market area shall be considered as individual proposals if the hospitals elect to apply on that basis. Proposals by combinations of hospitals in a market area that are not under common ownership will also be considered, provided that each hospital that is a party to a joint application in a market area also submits an independent application for a selective contracting agreement in that market area; and each such hospital provides written assurances that the terms of its individual proposal were arrived at independently without consultation with any other hospital or combination of hospitals, and have not been communicated to any competitor or group of competitors. The department does not intend any action by the State of Texas in the contracting process to require or sanction any form of communication or joint action by competitors in the market for inpatient hospital services (with respect to either individual or joint applications) that fails to comply with the provisions of this section. (3) The department shall send solicitation packages, inviting proposals for selective provider agreements, to each health care provider serving residents of the counties selected for participation. Hospitals will be required at all times to be eligible to participate in the Medicare and Medicaid programs. Hospitals that are not sent solicitation packages for medicaid recipients of a particular market will be able to request a package after demonstrating their intent to offer services to Medicaid recipients in those markets. (d) Proposals for selective provider agreements. Hospitals seeking selective provider agreements shall be required to submit the following information in their proposals: (1) a schedule of proposed payment rates to be applied to all covered hospital inpatient services during the term of the agreement; (2) a proposed level of volume of services to Medicaid recipients that the hospital would agree to serve during the contract period (this proposed level shall serve only as an estimate of services to assist the department in evaluating the availability of services within the relevant market area; it shall not serve as a limit on the amount of reimbursable services to be supplied by a contracting hospital); (3) data to assist the department in evaluating the effective service area and specialized service offerings of the hospital; (4) assurances and certifications required to ensure hospital compliance with the requirements of Federal and Texas law and regulations, and the requirements of the department's selective contracting process; (5) a narrative description of the proposed plans (if any) of the hospital to furnish optional volume management programs for Medicaid recipients; and (6) evidence that the application of the hospital constitutes a binding quotation authorized by the corporate governance of the hospital. (e) Evaluation of proposals for selective provider agreements. The department shall evaluate hospital proposals according to the following criteria. (1) Hospital proposals shall be due to the department within one month of the release of proposal packages. All hospital materials submitted to the department during the proposal process, and materials developed by the department or its contractors during the course of evaluation and negotiation, shall be confidential until all agreements are executed for all market areas in the state. (2) The department shall evaluate hospital proposals on a market-by-market basis and determine a negotiation strategy to pursue in each market area following its evaluation of all market areas. Based on the application of pre- specified evaluation criteria for each market area, the department shall prepare a recommended strategy for contracting in each market area. Each market area strategy shall be subject to approval by the Executive Oversight Committee established by the department. (3) The department shall retain the option to make awards without negotiation. In some circumstances, the department may accept the proposals offered by every hospital in the market area. In most cases, however, the department expects to enter into negotiations with those hospitals whose proposals, taken together, appear to represent the best combination of providers consistent with the overall objectives of the Medical Assistance Program. After negotiation, the department reserves the right not to award an agreement in a specific market area. In most cases, however, the department shall proceed to finalize and execute agreements with some subset of the hospital providers in each market area. In that event, coverage restrictions associated with the use of non- contracted hospitals by Medicaid recipients shall apply. (f) Evaluation criteria and methodology. The department's evaluation of proposals for selective provider agreements for each market area shall be conducted in two phases. Phase One shall include determining minimally acceptable network combinations and Phase Two shall include cost evaluation. A description of each phase follows. (1) In Phase One, the department shall enter the information included in hospital proposals in each market area into a personal computer based (PC-based) micro-simulation model designed to aid in the evaluation of the department's contracting options for each market. Data from hospital proposals shall be combined with data from the department's eligibility systems and claims processing records to construct the data base required for this phase of the evaluation. Each hospital's record in the data base shall contain information necessary to determine each hospital's: (A) effective service area for Medicaid recipients in that market area; and (B) capacity to provide specialized hospital services required by Medicaid recipients in the market area. (2) The PC-based micro-simulation model shall be used to test all possible combinations of hospitals applying for selective provider agreements to determine potential networks that shall meet the department's requirements for access to services for Medicaid patients. Where hospitals have submitted a joint proposal for selective provider agreements, the department shall evaluate the proposed provider network and the proposed network in all possible combinations with remaining hospitals that submitted proposals. (3) In Phase Two, each potential network shall be eligible for further consideration. If the Phase One evaluation fails to identify a potential network of applicant hospitals that meet the department's specified criteria, the department reserves the right to enter into direct negotiations with any hospital serving the market area. The purpose of these negotiations shall be to develop a minimally acceptable potential network, and allow the department to initiate negotiations with a hospital that failed to submit a proposal during the proposal period. (4) In Phase Two, each potential network identified in a market area in Phase One shall be evaluated to determine the estimated reduction in program costs that would result from entering into selective provider agreements with all of the hospitals in that potential network, while excluding all other hospitals from serving non-emergency cases. The department shall use the PC-based micro- simulation model to produce an estimate of the total change in Medicaid program costs that would result by entering into agreements with those hospitals during the base contract period. The estimate by the department shall consider: (A) changes in unit prices to be paid to providers for inpatient services; (B) changes in the distribution of service volumes (and case mix) across hospitals that would result from the reallocation of service volume from non- selected to selected providers; and (C) savings in Medicaid program costs likely to result from the changes in service volumes induced by optional volume management activities proposed by hospitals, including both savings in aggregate hospital service use and offsetting increases in non-hospital service costs. (5) The result of the evaluation by the department will be a range of values for each potential network. The ranges shall be constructed using best case, worst case, and expected value assumptions about the distribution of service volumes across hospitals in the network. (6) Following the evaluation, the department shall prepare a recommendation to the Executive Oversight Committee that includes the outcome of both phases of the evaluation for each market area, as well as a proposed strategy for the department to meet the best interests of the Medical Assistance Program. Department options shall include: (A) making an award without negotiations, including an award at the proposed price schedules to all hospitals in the market; (B) entering into negotiations with hospitals in a single potential network to improve proposed pricing, if possible, and to finalize an agreement about key program features; or (C) entering into negotiations with one or more hospitals to influence the department's choice among multiple potential networks by lowering the pricing terms offered by individual hospitals. These negotiations may result in identifying a single potential network that would differ in its hospital composition from potential networks initially identified in Phase One. (g) Execution of selective provider agreements. The department shall execute selective provider agreements at the conclusion of negotiations by: (1) requesting applicants to submit a binding revised application including the terms and conditions agreed to during negotiations with the department. The best and final offer of each hospital shall be forwarded to the department for approval. The provider agreements shall be executed following the approval of the department; and (2) structuring the agreements as one year amendments to the provider agreement of each hospital, with an option to the department of extending the amendments for up to two option years. The effective date of the reimbursement rates under the amendments may, by mutual agreement, be made retroactive to a date before the date of execution. At the conclusion of the first year, the department may adjust its exercise of options on a market-by-market basis so as to place the system on a three-year rolling system of renegotiations. If the performance of any hospital under the contract is considered unsatisfactory, however, the department may elect not to exercise any subsequent options, even if it exercised options with all other selected hospitals in the market. (h) Reimbursement. Hospitals in MSA's where the LoneSTAR Select Contracting Program awards amended provided agreements will have their inpatient services reimbursed as follows: (1) Hospitals awarded selective provider agreements will be reimbursed for all inpatient services (emergency and non-emergency) according to the proposed rates they submitted with their proposals or according to the final negotiated rates that all parties agree will serve as the reimbursement mechanism for all inpatient services rendered by the hospital. (2) Hospitals not awarded selective provider agreements will be reimbursed for emergency inpatient services as currently stated in the State Plan until the patient is stabilized. After a patient is stabilized in a non-contracted hospital, inpatient services are no longer covered unless the non-contracted hospital receives an exception for the remaining number of days of stay required. A non-contracted hospital will not be reimbursed for non-emergency inpatient services to Medicaid recipients unless it receives a hardship exemption from the department. Further explanation of the payment methodology for emergency patients in non-contracted hospitals and the hardship exemption policy are as follows. (A) After a patient is stabilized in a non-contracted hospital, after being admitted with a diagnosis meeting the definition of a medical emergency, additional inpatient services are no longer covered, unless the non-contracted hospital receives an exception for the remaining number of days required. Any and all DRG's with an average length of stay less than three days (72 hours) will be eligible to be paid the full reimbursement amount without an exception being granted. Any and all DRG's with an average length of stay in excess of three days (72 hours) will be eligible to be paid the full reimbursement amount without an exception being granted if the patient is stabilized and discharged home within 72 hours from the initial admission. If an exception is not granted by the department, the hospital will no longer be eligible to receive reimbursement for services rendered to the patient. (i) A non-contracted hospital must contact the department prior to patient stabilization or as soon as is practicable after stabilization for determination of further reimbursable services provided by the non-contracted hospital. (ii) If a non-contracted hospital does not contact the department before the patient is discharged, the non-contracted hospital will be reimbursed on a per diem basis as though the patient were transferred upon stabilization. (I) The non-contracted hospital will not receive full reimbursement for the inpatient services rendered to the patient. (II) The initial claim will be denied; the non-contracted hospital will then be required to submit a complete copy of the patient's medical record to the department or its designee. (III) The department or its designee will determine when the patient was stabilized and establish a per diem reimbursement amount. (iii) As in current policy, each case will continue to be subject to all utilization review criteria. (B) Non-contracted hospitals will not be reimbursed for the non-emergency inpatient services provided to Medicaid recipients as stated in the current State Plan unless the hospital receives prior authorization from the department through a hardship exemption procedure. The hardship exemption procedure is developed for Medicaid recipients who might experience an unreasonable travel burden under the LoneSTAR Select Contracting Program. The exemption procedure requires the non-contracted hospital or the admitting physician to contact the department by telephone, facsimile or written communication and provide an explanation as to the particular circumstances that the department should be considering in determining the prior authorization of the non-emergency inpatient service(s) being requested. The Medicaid patient can not be admitted for reimbursable non-emergency inpatient services unless a hardship exemption is granted by the department. In all circumstances, the Medicaid patient must be subject to an unreasonable travel burden under the Medicaid program for the request to be considered. The department will provide a decision on all requests for the hardship exemption procedure as soon as is practicable after receiving the request (usually within 36 hours). The department will contact the requesting non-contracted hospital or attending physician by telephone with the decision; and subsequently provide a written communication. (i) The non-contracted hospital will be responsible for including the particular circumstances to be considered by the department in the patient's medical record; with this information being a permanent part of the medical record. (ii) Should a medical condition develop or be discovered that necessitates a change in the original admitting diagnosis to a more severe diagnosis, which would require additional hospital services above and beyond the non-emergency inpatient services authorized through the initial hardship exemption procedure, any additional inpatient services rendered will not be covered unless the hospital receives an authorization for subsequent inpatient services to be rendered. (I) Should an emergency medical condition develop or be discovered, the procedures for a non-contracted hospital providing emergency inpatient services as explained at subparagraph (A) of this paragraph must followed. (II) Any emergency case in a non-contracted hospital with a normal DRG Length- of-Stay of 72 hours or less; or any normal DRG Length-of-Stay over 72 hours that is stabilized and discharged home within 72 hours from the initial admission will be granted an automatic exception. (III) Should a medical condition develop or be discovered that necessitates a transfer of the patient to a contracted hospital, the non-contracted hospital will be reimbursed, utilizing the current transfer methodology. (iii) As in current policy, each case will continue to be subject to all relevant utilization review criteria. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443545 John T. Richards Assistant General Counsel Texas Department of Health Effective date: July 27, 1994 Proposal publication date: April 5, 1994 For further information, please call: (512) 458-7236 Chapter 41. Utilization Review Waiver for Utilization Review Procedures 25 TAC sec.41.102, sec.41.104 On behalf of the State Medicaid Director, the Texas Department of Health (department) adopts amendments to sec.41.102 and sec.41.104 without changes to the proposed text as published in the April 19, 1994, issue of the Texas Register (19 TexReg 2829). The sections cover waivers for utilization review procedures. Specifically the sections cover the case selection process and the Texas Medical Review Program; and the diagnosis related group assignment for secondary diagnoses in newborns. The amendments improve the sampling methodology for utilization review and conform to guidelines of the American Hospital Association. The amendments include the Texas Medical Review Program which will review cases where admission denials for a given diagnosis-related group are 5.0% or greater. The amendments will also more closely follow Coding Clinic Guidelines published First Quarter 1994 by the American Hospital Association. The department received one written comment on the proposed amendments during the public comment period. COMMENT: The commenter expressed concern that the proposed rules were not specific enough to communicate what conditions defined a normal newborn. The comment attempted to define, through examples, these conditions; however, the department believes that the comment did not address routine procedures that are disregarded for diagnosis related group assignment. RESPONSE: The department contends that the proposed wording is appropriate and adequate and made no changes as a result of the comment. The comment was received from the Texas Hospital Association. The amendments are adopted under the Human Resources Code, sec.32.021 and Texas Civil Statutes, Article 4413 (502), sec.16, which provides the Health and Human Services Commission with the authority to adopt rules to administer the state's medical assistance program and is submitted to the Texas Department of Health under its agreement with the Health and Human Services Commission to operate the purchased health services program and as authorized under Chapter 15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443544 John T. Richards Assistant General Counsel, Office of General Counsel Texas Department of Health Effective date: July 27, 1994 Proposal publication date: April 19, 1994 For further information, please call: (512) 338-6511 TITLE 30. ENVORINMENTAL QUALITY Part I. Texas Natural Resource Conservation Commission Chapter 103. Procedural Rules The Texas Natural Resource Conservation Commission (Commission) adopts the repeal of sec.sec.103.1-103.6, 103.11, 103.12, 103.21-103.24, 103.31-103.34, 103.41-103.66, 103.71-103.74, 103.81-103.87, and 103.91-103.94, concerning procedural rules of the former Texas Air Control Board (TACB), which continued in effect after that agency's merger with the Texas Water Commission (TWC) to become the Commission, without changes to the proposed text as published in the February 8, 1994, issue of the Texas Register (19 TexReg 885). The repeal of Chapter 103 was necessitated by the statutorily-mandated survival of the rules of both the TACB and the TWC upon the merger of the two agencies. The purpose of this refinement of the rules is to eliminate confusion and create one broad set of rules to cover the procedure of hearings under the enabling statutes of both former agencies. As a consequence, these changes are expected to aid in the speedy and orderly progression of hearings while preserving the due process rights of the parties. A public hearing was held February 28, 1994, in Austin. The comment period closed on March 14, 1994. There was no oral testimony given during the public hearing. However, the Commission received written testimony on the repeal proposal from two commenters, Brown McCarroll and Oaks Hartline and the Texas Chemical Council. The commenters took the position that one rule from Chapter 103 should be retained, sec.103.33(b)-(d), and relocated to proposed new sec.263.37. Proposed sec.263.37 provides the criteria for determining an air hearing request while sec.103.33(b)-(d) is a process by which the Commission staff gathers information on hearing requests. The commenters suggested the proposed new section be changed by the addition of the text of the former TACB rule. The commenters suggested the retention and relocation would complete the new section by adding a necessary process. The Commission disagrees and does not believe that the process described in sec.103.33(b)-(d) is necessary. Hearing requests in the consolidated agency are not determined by the staff but instead, by the Office of Hearings Examiners, and where appropriate, reviewed by the Commission. General 30 TAC sec.sec.103.1-103.6 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443580 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Public Hearing-General 30 TAC sec.103.11, sec.103.12 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443579 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-1500 Rulemaking Hearings 30 TAC sec.sec.103.21-103.24 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443578 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Initiation of Other Than Rulemaking Hearings 30 TAC sec.sec.103.31-103.34 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443577 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Adjudicative Hearings 30 TAC sec.sec.103.41-103.66 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443576 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Board Agenda 30 TAC sec.sec.103.71-103.74 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443575 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Miscellaneous 30 TAC sec.sec.103.81-103.87 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443574 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Alternate Dispute Resolution Procedures 30 TAC sec.sec.103.91-103.94 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. The repeals are also adopted under the Health and Safety Code, Subtitle B, Chapter 382, sec.382.017, which authorizes the Commission to adopt rules consistent with that chapter. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443573 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Rules 30 TAC sec.sec.263.2, 263.25. 263.36, 263.37 The Texas Natural Resource Conservation Commission (Commission) adopts amendments to sec.263.2 and sec.263.25 and new sec.263.36 and sec.263.37, concerning the procedure of hearings; specifically, providing for authority to the hearings examiners to align parties, set preliminary conferences and require preliminary orders, establish time for presentation and confine testimony to subjects within the jurisdiction of the Commission, and require transcripts. The rules are adopted with changes to the proposed text as published in the February 8, 1994, issue of the Texas Register (19 TexReg 885). The proposed changes are necessitated by the merger of the Texas Air Control Board and the Texas Water Commission in order to combine and refine the rules to meet the needs of a broad range of hearing types at the new agency. The proposed changes are consistent with current practices at the agency. A public hearing was held on February 28, 1994, in Austin. The comment period closed March 14, 1994. There was no oral testimony given during the public hearing. Written comments were received from the Texas Lone Star Chapter of the Solid Waste Association of North America, USA Waste Services, Inc., the City of Arlington, the City of Irving, the City of Garland, ASARCO, Inc., Texas Chemical Council, Valero Petroleum Company, Henry, Lowerre, Hess and Frederick, Kelly, Hart and Hallman, and Brown McCarroll and Oaks Hartline. No written testimony was received regarding the proposed changes to sec.263. 2 or sec.263.36. Some commenters did not support adoption of sec.263.25(e) and challenged the basis for this rule. This provision states that in contested hearings expected to last three days or more, the applicant may be required by the examiner or the Commission to pay for the hearing transcript up front, subject to reimbursement from other parties upon assessment of costs. Two commenters stated that the Commission already has authority to assess transcript costs, that all parties benefit from transcripts, and that the result will be that applicants will pay the full cost in all hearings. One commmenter suggested that it is arbitrary to impose this cost on applicants. The Commission responds that in a lengthy hearing, a transcript provides a written record for: the examiner to review in order to prepare the best proposal for decision; and the parties to prepare briefs and replies. The comment that the Commission already has the authority to assess transcript costs is correct (sec.263.25(d) and sec.263.27), and the addition of sec.263.25(e) , which is not a mandatory provision, serves primarily to allow that the transcript be prepared early in the process so that it can be made available to the examiner and the parties prior to final Commission decision. Section 263.27(c) allows the parties an opportunity to present evidence and argument on this cost assessment. This provision is not changed. Examiners will-as they have in the past-assess costs if warranted. The effect of the rule relates more to the timing of the preparation of the transcript rather than putting an additional burden on any party. Several commenters urged the deletion of sec.263.35. The proposed changes to sec.263.35 are withdrawn and this issue will be addressed in a subsequent rulemaking proceeding. Section 263.36 is changed so that the process for appeal of decisions on air quality permits will generally conform to that of other program areas. Several commenters urged the Commission to retain the rules in sec.103.33(b) - (d) relating to the reasonableness of the hearing request. The Commission responds that the repeal of sec.103.33 is intended to make the procedures for determination on requests for hearings on air quality applications consistent with procedures in the other program areas. In doing so, the Commission does not forego the authority to inquire as necessary to make objective, reasoned decisions regarding the reasonableness of a hearing request. One commenter opposed adoption of sec.263.37, a rule listing seven factors to be considered in determining the reasonableness of the hearing request on air quality permit applications, stating that it provides no guidance, and that the factors have been inconsistently applied and improperly used by the Commission to deny hearing requests. Further, the commenter stated that application of the sec.263.37 factors would result in denial of public participation in a hearing. The Commission responds that the rule is intended to implement the statute by establishing objective criteria for determining whether hearing requests are reasonable. A request alleging potential adverse impact on the requestor will be evaluated fairly, and the request and not the requestor will be evaluated, except insofar as information about the requestor is relevant to the factors, e.g., the extent to which the requestor is likely to be impacted by the emissions and the project's location. According to one commenter, sec.263.27(1), whereby net emissions reductions is a factor to be considered, does not address net reductions due to combined facility expansion, where such proposals often involve complex issues deserving review. The Commission responds that all relevant facts will be reviewed to ascertain whether other factors or issues in such a case warrant a contested case hearing. One commenter urged that sec.263.37(2)-(4) are of little value because they provide no guidance as to what significance and weight are to be given to each factor, and whether other factors can be more or less important in the determination. The Commission responds that the factors are of value in making a determination regarding an air quality hearing request, as they provide guidance regarding relevant issues that should be considered. Several commenters noted the omission of the word "air" in sec.263.37(5), a provision that contains factors relevant only in the decision to grant or deny a hearing request for air quality permits. The Commission has corrected the rule in accordance with these comments and added the word "air." One commenter stated that sec.263.37(5) requires speculation in determining the requestor's motivation, and could lead to harassment of persons in the guise of determining motivation. In response, the Commission intends sec.263. 37(5) for use only where it may be determined that the sole motivation for the hearing request is unrelated to air pollution concerns. The Commission has reworded the rule accordingly. One commenter objected to sec.263.37(6), stating that any person alleging air pollution impacts has a right to prove that interest, and that it is improper to have the Commission decide, without calling a contested case hearing, whether to allow the person to present evidence of a justiciable interest. The Commission responds that such a hearing would be necessary only to resolve disputed facts. One commenter argued that sec.263.37(7) provides no guidance on the underlying issues regarding the applicant's compliance history. This commenter states that this factor does not go to the issue of whether a request is reasonable. In response, the Commission believes that if there is a known compliance history, it is a factor which should be considered along with all the other factors in deciding whether to call a hearing. The amendments and new rules are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its power and duties under the code and other laws of this state and to establish and approve all general policy of the Commission. sec.263.2. Powers of the Examiner. The presiding examiner shall have authority to do the following: (1) set hearing dates; (2) convene the hearing at the time and place specified in the notice for the public hearing; (3) establish the jurisdiction of the Commission concerning the subject matter under consideration; (4) rule on motions and on the admissibility of evidence and amendments to pleadings; (5) designate and align parties and establish the order for presentation of evidence; (6) administer oaths to all persons presenting testimony; (7) examine witnesses; (8) issue subpoenas when required to compel the attendance of witnesses, or the production of papers and documents related to the hearing; (9) commission and require the taking of depositions, to compel other forms of discovery in accordance with these sections, and to issue sanctions under these sections for noncompliance with discovery rulings; (10) set prehearing conferences and require prehearing orders; (11) ensure that information and testimony are introduced as conveniently and expeditiously as possible, including limiting the time of presentation without prejudicing any rights of parties to the proceeding; (12) limit testimony to matters under the Commission's jurisdiction; (13) recess any hearing from time to time and from place to place; (14) reopen the record of a hearing, prior to issuance of a proposal for decision, for additional evidence where necessary to make the record more complete; and (15) exercise any other appropriate powers necessary or convenient to carry out his or her responsibilities. sec.263.25. Requests for Hearings Reporter Services. (a)-(d) (No change.) (e) In hearings expected to last three days or more, the applicant may be required to pay for the transcript up front, by the hearings examiner or the Texas Natural Resource Conservation Commission, subject to reimbursement from other parties upon assessment of costs. sec.263.36. Appeal of Air Quality Permits. (a) Any person, including the applicant, affected by a decision of the executive director made under the Texas Health and Safety Code, sec.sec.283. 051-382.055, may appeal any such decision to the Texas Natural Resource Conservation Commission (Commission), with the exception of a decision regarding a federal operating permit, not later than the 30th day after the date on which notice of the decision was mailed. Any person filing an appeal under this section must identify with specificity the issues that form the basis of the appeal. (b) The Commission, at the hearing held to consider the appeal, may take appropriate action, including: (1) affirm, modify, stay, or reverse the executive director's decision; (2) remand the matter to the Office of Hearings Examiners for an evidentiary hearing; (3) remand the matter for alternative dispute resolution or mediation; (4) remand the matter to the executive director; or (5) continue the matter to a future date. (c) A decision made by the executive director, including a permit issued by the executive director, is not affected by the filing of an appeal under this section unless expressly so ordered by the Commission. A final order by the Commission reversing or modifying the executive director's decision takes effect when it becomes final and appealable. sec.263.37. Factors for Consideration in Calling Air Quality Hearings Prior to Issuance of Permit. Upon receipt of a request for an air quality hearing prior to issuance of a permit, the Office of Hearings Examiners shall consider at least the following factors in determining whether to grant a request for such hearing: (1) whether the project is an emissions reduction project including: (A) whether there are no increases in emissions of any contaminants and the reduction project is not driven by a non-compliance situation; and (B) whether the project will have both emission reductions and incidental increases where the net effect is an emission reduction; (2) whether the project is mandated by Texas Natural Resource Conservation Commission rule; (3) the location of the proposed project; (4) whether the applicant requests authority to substitute an equivalent or more efficient control device; (5) whether the request for a contested case hearing is based solely on something other than concerns about air pollution; (6) the extent to which the person requesting a hearing is likely to be impacted by the emissions; and (7) the applicant's compliance history. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443572 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Chapter 265. Procedures Before Public Hearing 30 TAC sec.265.6, sec.265.20 The Texas Natural Resource Conservation Commission (Commission) adopts amendments to sec.265.6 and sec.265.20, concerning hearing procedures and matters preliminary to hearings; specifically, providing for additional prehearing conferences and allowing, within the reasonable discretion of the hearings examiner, admission of "new evidence" not previously disclosed during discovery procedures. Section 265.20 is adopted with changes to the proposed text as published in the February 8, 1994, issue of the Texas Register. Section 265.6 is adopted without changes and will not be republished (19 TexReg 885). The proposed changes are necessitated by the merger of the Texas Air Control Board and the Texas Water Commission in order to combine and refine the rules to meet the needs of a broad range of hearing types at the new agency. The proposed changes are consistent with current practices at the agency. A public hearing was held on February 28, 1994 in Austin. The comment period closed March 14, 1994. Comments were received from the City of Arlington and the City of Irving. No written testimony was received regarding the proposed changes to sec.265. 6. The commenters stated that sec.265.20(c)(8)-(9) would authorize an examiner to impose two additional types of sanctions after finding a party has abused discovery. Both stated that the rule needs to be made clear that it is to allow a victim of discovery abuse to present such evidence or witnesses. The Commission concurs and amends the proposed rules as follows: sec.265.20(c)(8) allows evidence to be introduced against a party abusing discovery which would otherwise be excluded for not meeting the deadline for exchange of such evidence. Section 265.20(c)(9) allows the testimony against a party abusing discovery which would otherwise be excluded for not meeting the deadline for listing potential witnesses. The amendments are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its power and duties under the code and other laws of this state and to establish and approve all general policy of the Commission. sec.265.20. Sanctions for Failure to Comply with Discovery Ruling. (a)-(b) (No change.) (c) If the presiding officer finds a party is abusing compelled discovery initiated pursuant to sec.sec.265.11(b), 265.16, or 265.19 of this title (relating to Compellable Discovery; Dis- covery of Documents and Things; or Requests for Information); (or the Administrative Procedure Act, the Government Code, Chapter 2001), in seeking, making, or resisting discovery, the presiding officer may do any of the following: (1)-(7) (No change.) (8) allow evidence to be introduced against a party abusing discovery which would otherwise be excluded for not meeting the deadline for exchange of such evidence; and (9) allow testimony against a party abusing discovery which would otherwise be excluded for not meeting the deadline established for listing potential witnesses. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443570 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Chapter 265. Procedures Before Public Hearings The Texas Natural Resource Conservation Commission (Commission) adopts new sec.sec.265.21-265.24, 265.26-265.35, concerning Special Procedures for Freezing the Process; sec.sec.265.36-265.49, concering Discovery; and sec.sec.265.50, 265.51, 265.53-265.55, concerning Sanctions. Sections 265.21-265.24, 265. 26- 265.29, 265.31, 265.33-265.34, 265.36-265.37, 265.42, 265.45, 265.49-265.55 are adopted with changes to the proposed text as published in the February 4, 1994, issue of the Texas Register (19 TexReg 763). Sections 265.30, 265.32, 265.35, 265.38-265.44, and 265.46-265.48 are adopted without changes and will not be republished. Sections 265.25 and 265.52 are withdrawn. Current sec.sec.265.1-265.20 have been divided into Subchapters A and B, with Subchapter A, sec.265.1-265.9, entitled "General Procedures" and Subchapter B, sec.265.10-265.20, entitled "General Discovery Rules." The rules as proposed in the February 4, 1994, issue of the Texas Register were based on recommendations of the Permit Hearing Task Force (Task Force), a group composed of attorneys, representatives for industry-related interests, individuals representing environmental interests and other interested persons. The purpose of the revisions is to streamline and expedite the hearing process for complex cases, reduce the costs associated with the process and promote certainty and fairness in the process. The rules serve these goals by requiring parties to list and narrow issues during the discovery process, and by freezing the process prior to hearing. It is anticipated that generally the contested hearing process will take from 156 to 343 days. In some cases the process may take much less time. It should be noted that the longer time periods provided for in these rules are envisioned as the maximum time-frames in the most complex cases. It is anticipated that most cases will not require the maximum time allowable. Most changes to text of rules as published in the February 4, 1994, issue of the Texas Register were made as a result of commentary. Other changes, however, were made by commission staff for an improved and fairer process, or to provide for internal consistency or for proper reference and grammar. Comments were received orally or in writing from the following commenters: City of Arlington; Asarco; Texas Chemical Council; Texas Lone Star Chapter of the Solid Waste Association of North America; City of Brownwood; Brown McCarroll and Oaks Hartline; Citizens to Save Lake Waco; Kelly, Hart and Hallman; North Texas Municipal Water District; Waste Management of Texas, Inc.; USA Waste Services, Inc.; City of Garland; GASP; City of Wilmer; City of Carrollton; Henry, Lowerre, Hess and Frederick; Coastal Bend Council of Governments; City of Plano; Harris County Attorney Mike Driscoll; Texas Municipal League; City of Lubbock; City of Brownwood; Phillips Petroleum Company; Laidlaw Waste Systems, Inc.; City of Irving; City of Tyler; Texas Mid-Continent Oil and Gas Association; City of Beaumont; City of Argyle; Sanders, Mumm, O'Hanlon and Motley; and the Public Interest Counsel of the Texas Natural Resource Conservation Commission. Comments received regarding the overall effect of the proposed rules are as follows: Many commenters voiced strong support in favor of streamlining the permit process and indicated that the proposed rules will improve the process. Such efforts may be especially critical once the State begins issuing Title V Clean Air Act permits, according to one commenter. One commenter noted that streamlining the hearing process will address concerns of all parties. On the one hand, according to one commenter, applicants have been concerned about proceeding in good faith to identify problems with their application and proposed facility, only to have a fatal issue raised at the last moment with no chance to respond. On the other hand, protestants have been justifiably concerned about exhausting their financial and other resources, only to see an application amended at the last moment to address issues known to the applicant from the beginning. The rule changes address both concerns. Some commenters critiqued the option of freezing the hearing process under the proposed rules. Some commenters observed that the existing hearing process is complex and expensive; however, they also expressed concern about "Freezing the Process," as imposing new obstacles to the permitting of facilities such as municipal landfills. One commenter opposed the concept of freezing the hearing process because it could have the effect of requiring an applicant to pay costs to protestants in order to withdraw its application. Another commenter noted that the freezing process could cause delays and thereby cause excessive expense to applicants, especially in the highly technical area of municipal solid waste. The commission would note that the new rules and particularly sec.265.24 as now revised, are intended to streamline the hearing process and avoid costly delays. Some commenters praised the existing hearing process which has allowed amendment to an application throughout the hearing. They perceive that the new rules may lengthen the process and add risk such that companies will be discouraged from making applications. One commenter noted that Subtitle D (Federal Resource Conservation and Recovery Act (RCRA) issued by the EPA on October 9, 1991) currently provides for a reasonable freeze while not disrupting a process that can be enhanced to the benefit of the environment. Nor does Subtitle D, in its view, preclude improvements as they become available or known. The commission would note that these rules do allow for some amount of flexibility with regard to amendments and limit amendments where such amendments would be disruptive of the process. Some commenters disagreed with the concept of streamlining the hearing process. Some opposed any acceleration of the process, which they believe could result in inhibiting effective public participation. They concluded that efforts to accelerate the hearing process could adversely affect persons not represented by an attorney. The commission intends that the new rules will apply fairly to all parties. Further, because the new rules bring greater certainty to the hearing process, participation will be facilitated. Some commenters disagreed with the fiscal impact of the proposed rules, stating that rules which include three discovery periods could subject applicants to burdensome costs. One commenter recommended that the cost analysis should be re- evaluated and republished for comment, stating that applicants, especially small businesses, will experience increased costs. The commission disagrees with these commenters and concludes that the revised rules will streamline the process and produce cost savings for all affected participants. In sec.265.21, some commenters suggested that the provision allowing the examiner to include or exclude applications for "good cause" should be more narrowly defined. They added that the term "lack of complexity" should also be defined. They also suggested that permit hearings be exempted from this rule if the number of parties is small or, added two commenters, where technical issues are relatively straightforward. It is finally suggested that sec.265.21(b) delineate the specific rules that do not conflict with Subchapter C, partiicularly any procedural rules dealing with discovery. la The commission responds by amending the rule to clarify the applicability of the subchapter, and by preserving the provision allowing the examiner to include or exclude applications for good cause. Some commenters provided opinions on proposed sec.265.22(a)(1) which requires the executive director to develop an initial position on the application and also to specify in a separate document any provisions that are different from those espoused in its initial position. Many of these commenters recommended that the rule explicitly state that all parties may offer evidence in support of or in opposition to such provisions, which resemble special provisions. Certain commenters expressed concern that the rule allows the executive director to take a position on a permit and still reserve his right to make a final decision after all evidence is heard. Another commenter noted that this paragraph also seems to require the executive director to prepare a permit even if he is recommending denial. The commenter recommended that the rule require the executive director to prepare an "initial draft recommendation" rather than a "proposed permit." Another commenter suggested that sec.265.22(a)(1), which requires the executive director to issue a document summarizing the basis for his position if his recommendation is that a permit be denied, be clarified to require the executive director to either issue a draft permit or a statement denying the application once the application is deemed technically complete. The commenter further favored explicit language that issuance of a draft permit is not an endorsement of the application by the executive director. The commission responds that because the executive director must tender special provisions prior to commencement of the procedural schedule and hearing on the merits, any proposed special provisions are thereby subject to discovery and evidence during the hearing process. The intent of the rule is that the executive director will take a position insofar as possible after technical review and prior to commencement of the hearing. Should the executive director subsequently change his position, the executive director is required to timely notify all parties on the record or in writing and the other parties are afforded an opportunity to respond. Regarding the comment that the rule should require the executive director to issue a draft permit or issue a statement declining to issue a permit, the commission disagrees. The rule provides for the preparation of a proposed permit that is based on the contents of the application submitted. The proposed permit is to be prepared based on the application and may or may not, depending on the circumstances, embody the position of the executive director. In any event, the executive director's position will be made clear so that all parties understand whether the executive director's initial position is to issue the permit, issue the permit with additional or different permit provisions or deny the permit. Several comments were received regarding sec.265.22(a)(2), providing that the executive director may change his position based on evidence or other new information. One commenter noted that the executive director should be allowed to change his position if environmental and public health concerns are rethought and greater risks perceived as well as for "new" information, as currently provided for in the rule. Some commenters requested that "timely" notification of a change in the executive director's position be more clearly defined. They suggested that an applicant be allowed to respond to changes in the executive director's staff position with revised proposed findings of fact and, if appropriate, a major amendment or a proposed special permit provision. Further, they proposed that the executive director be allowed to change position only for good cause. The commission believes that the rule's provision authorizing the executive director to change his position based "on evidence or other new information" allows for a change in position if environmental and public health concerns are rethought and greater risks perceived. TNRCC notes that the term "timely" as used in the rule is sufficiently clear. The commission believes that allowing the executive director to change position for "good cause" may broaden the rule rather than restricting its use. The commission agrees that all parties should be kept abreast of the executive director's position during prehearing discovery where there is opportunity for amendment. To this extent the commission adds language to sec.265.23 related to first preliminary hearing, allowing the executive director to file responses or issues lists in accord with the time periods set out in sec.265.24. Comments were also received on sec.265.22(b), which provides that the Public Interest Counsel shall comply with all time-frames and procedures required of protestants pursuant to this chapter. The commenters recommend that the Public Interest Counsel as a statutory party be given all rights afforded all other statutory parties. The commission responds that this rule is promulgated only for procedural convenience and is in no way meant to abrogate any rights of the Public Interest Counsel. The commission has, however, amended sec.265.22(b) to provide that the Public Interest Counsel shall comply with all time-frames relevant to protestants, rather than just those required of protestants, unless otherwise determined by the examiner. In connection with sec.265.23, some commenters noted that the rule may force parties immediately into discovery rather than allowing a period of time for mediation under Chapter 264. One commenter recommended a 21-day mediation period rather than the 45-day period currently provided for in Chapter 274. Some commenters further observed that mediation, in some instances, is an appropriate way to address issues without going to full hearing. Two commenters state that the rule seems to be inconsistent with the recent practice of taking early jurisdiction over municipal solid waste applications. They claim that the taking of early jurisdiction may limit the amount of time to respond to reviewing agencies and force reviewing agencies to become parties to a hearing without the opportunity to adequately consider the application. Other commenters concurred, stating that jurisdiction should only be taken after an application is technically complete. The commission notes that the promulgation of these rules incorporates a process whereby jurisdiction is taken after technical review is completed. Some commenters noted that no mention is made of the public meeting required by sec.3261.088(d) of the Texas Health and Safety Code. The commission notes that the public meeting requirement contained in the Texas Health and Safety Code does not apply to all hearings held pursuant to these rules and therefore the provision will not be incorporated into these rules. The commission also states that parties may engage in mediation from receipt of earliest filed protest letters and throughout the prehearing and hearing process. A formal provision within the rules for a 21-45-day period for mediation would be in conflict with the rules' purpose of streamlining the process. It is envisioned that the process may be abated on agreement of all parties for purposes of mediation and serious movement toward resolution of all issues in controversy. In sec.265.23, where there were references to findings of fact, reference to conclusions of law has been added. Many commenters provided opinions on sec.265.23(3), which has been redesignated as sec.265.23(4), recommending that an applicant should not be forced to incur the substantial cost of preparing proposed findings of fact prior to the jurisdictional hearing. They reasoned that this rule implies that a person requesting a public hearing will be able to prove standing. It is agreed that if no persons are admitted as protesting parties, then the applicant should not be forced to prepare proposed findings of fact. Some commenters concurred that applicants should submit proposed findings of fact later in the process, and emphasized that protestants may wish to have their own findings of fact. Three commenters state that they believe all findings of fact should be submitted after the evidence is heard. Similarly, these commenters believe that sec.265.23(5), which has been redesignated as sec.265.23(6), unfairly requires applicants to identify witnesses at the jurisdictional hearing without any knowledge of the scope of the opposition to the application, potentially resulting in unnecessary costs to all parties. Accordingly, these commenters suggested that the deadline for the applicant to file its witness list should occur later in the process, at least after parties have been admitted. The commission acknowledges that the applicant is required to prepare findings of fact and conclusions of law and identify witnesses at the jurisdictional hearing for applications proceeding under these rules. The commission notes, however, that these rules will generally apply to more complex cases and cannot be held to be applicable until invoked with reasonable notice. It is intended that reasonable notice that the application will proceed under Subchapter C of Chapter 265, will be provided prior to the jurisdictional hearing, where there is a large degree of certainty that the matter will go to the hearing. Otherwise, findings of fact and conclusions of law and witness lists will be required to be submitted only after the rules have been invoked with reasonable notice. Many comments were received on sec.265.23(4), which has been redesignated as sec.265.23(5), which requires the applicant to identify at the First Preliminary Hearing what constitutes the application and to provide two copies for use by all of the protestants. One commenter argued that this section does not relieve the applicant of the responsibility to provide a copy of the application in a public location when filed. Certain commenters stated that a copy of the application, each notice of deficiency by the executive director and the applicant's response to each notice should be provided to each protesting party (or representative of aligned protesting parties) and the Office of Public Interest Counsel. Another commenter maintained that a copy of the application should be provided to all protestants and one copy each should be provided to local governments within which the proposed facility lies. The commission agrees that the rule in no way abrogates other statutory and regulatory requirements. The requirement of two copies for all protestants was negotiated in the Task Force as a reasonable requirement of the applicant. In sec.265.24, where there were references to findings of fact, reference to conclusions of law has been added and various time-frames have been modified in order to streamline and expedite the process. Section 265.24(o) has been added, which provides for the sake of fairness that no party may raise new issues in its motion for rehearing, except those related to procedural irregularity or changed circumstance. Many comments were received in reference to sec.265.25(b)(3) and sec.265.24. The rule originally provided for three discovery periods with the protestant identifying issues based on the proposed findings of fact submitted by the applicant on the last day of the first discovery period. Many commenters viewed sec.265.25, as originally drafted, as allowing protestants to intentionally delay raising new issues until the point at which the applicant's ability to respond is limited to "minor amendments." While sec.265. 25 is now withdrawn, sec.265.24 now makes it clear that parties who do not identify issues, make amendments, propose findings of fact and conclusions of law or submit responses in accord with the schedules established under this subchapter and with the examiner's orders implementing it will be regarded as waiving the right to pursue them in an evidentiary hearing conducted pursuant to this subchapter. Section 265.24(d) and (i) have been ammended to specifically address these concerns. Four new subsections have been added to sec.265.24. The first new provision is sec.265.24(f), which requires protestants to submit a second list of issues on the last day of the third discovery period limited in scope to any amendments made by the applicant prior to the third discovery period. In turn, sec.265.24(g) allows the applicant to respond with a minor amendment upon a showing of good cause and by leave of the examiner. To further ensure that parties raise issues in a timely manner as contemplated by these rules, the commission has added sec.265.24(o), providing that a party may not raise for the first time in motion for rehearing an issue not included in that party's issue list except for procedural irregularity or changed circumstance. As previously mentioned, sec.265.23(8) has also been amended to allow the examiner to set a procedural schedule for the executive director to file responses or issues lists in accord with the time period set out in sec.265.24. Some commenters also took the position that Senate Bill 2 prohibits amendments "after the 31st day before the date on which a public hearing on the application is scheduled to begin." In contrast, another commenter noted that the preamble to the rules should address the issue of sec.12.016 of the Texas Health and Safety Code, which precludes amendments of municipal solid waste applications within 30 days of hearing. The commenter asserted that the statutory prohibition does not apply to hearings held at the commission. The commission responds that the provisions of these rules are not precluded by either Senate Bill 2 or sec.12.016 of the Texas Health and Safety Code. One commenter reported its concern that the allowance for three discovery periods will cause needless and lengthy delays even where the protestant may have no factually-based concerns to bring before the hearing examiner. Another commenter maintained that proposed sec.265.24(j), which has now been redesignated as sec.265.24(n), authorizing the examiner to extend the time periods, has the effect of inhibiting the establishment of time limits or constraints. It argued that any option to extend may be abused over time once the means for getting extensions becomes known. Other commenters recommended that this section also, be modified to allow discovery periods to be shortened as well as lengthened for good cause. In response, the commission amends sec.265.24(n) to provide that the time limits for scheduled periods may be, for good cause, "modified" rather than merely "extended" when the examiner determines that the complexity or lack thereof merits modification. This would mean that time-frames may be shortened as well as lengthened. In addition, the presumptive time limits have been reduced from 60-90 days to 30-80 days. One commenter suggested that the first discovery period contained in sec.265. 24, during which the applicant conducts limited discovery of the nature and funding of the protestant, should be carefully monitored so that applicants are prevented from using discovery to intimidate protestants. The commission responds that it has more clearly defined the applicant's limited discovery of protestants in sec.265.36(a)(1) to avoid chilling effects on citizen involvement in the process. Another commenter stated that sec.265.24(a)(2), which has been renumbered to sec.265.24(b), may result in requiring protestants to formulate, and later adhere to, a list of issues within 60-90 days after the jurisdictional hearing with no provision for amending the list of issues at any time. In response, commission has amended sec.265.24 to provide for protestants' second list of issues on the last day of the third discovery period. Another commenter stated that the rule as drafted does not make it clear that protestants may expand the issues beyond those raised by the applicant. The commission notes that adopted sec.265.24(b) states, "In addition, on the last day of the first discovery period, protestants may also raise new issues and proposed findings of fact and conclusions of law." One commenter believes that sec.265.24 may burden protestants, invade the attorney work product, and unconstitutionally invade a protestant's right of privacy where each protestant is to include a statement as to the basis of the protestant's dispute on each issue. The commission disagrees. A commenter noted that several of the time periods established in sec.265.24 may be unworkable. The requirement that the applicant may amend its application and respond to issues raised by the protestants no later than the last day of the second discovery period, may mean, according to the commenter, that the applicant has less than the full discovery period to explore and evaluate the merits of the protestants' issues. Further, it is argued that proposal, requiring the third discovery period to begin immediately following the second discovery period, is inconsistent, which authorizes further technical review of amendments by the executive director. The commssion has amended sec.265.24(d) to conclude that the deadlines should remain as provided for in these rules, noting that the discovery periods are more than adequate and may be modified for good cause. If amendments require further technical review by the executive director, the schedule may be suspended by ruling of the examiner. Many comments were received on sec.265.25(a)(1), now reorganized into sec.265. 24(d), which provides that the applicant may amend its application and proposed findings of fact on the last day of second discovery period and the application may be subject to remand or additional notice. The commenters assert that this provision should more specifically define the circumstances under which an application would be subject to additional notice. If the applicant's proposed change is a minor amendment, they argue that additional notice should not be required. The commission concludes that language remain as drafted in current sec.265. 24(d) to provide for all circumstances that may appropriately require further notice, regardless of whether there is a major amendment. Three commenters suggested that the prehearing meeting required to be held within three working days of the conclusion of the third discovery period pursuant to proposed sec.265.24(d), now sec.265.24(h), occur seven calendar days after the conclusion of the third discovery period. In addition, the commenters believe that the rule should require parties to exchange exhibits at the prehearing meeting so that parties can prepare objections before the prehearing conference. Other commenters oppose the prehearing meeting as unnecessary. The commission has amended proposed sec.265.24(e), which has now been redesignated as sec.265.24(h), to delete "prepared for submission of" and to add "bring for submission to the examiner and exchange among parties" to clarify that parties must exchange findings of fact, stipulations, and exhibits. The commission has also amended sec.265.24(h) to make the prehearing meeting discretionary among parties. Language has also been added to provide that if parties do not convene a prehearing meeting, they shall still exchange findings of fact, stipulations, and exhibits. One commenter noted that protestants should not be required to submit exhibits at the prehearing meeting, since they do not have the same resources as sophisticated applicants. While sympathetic to the limitations of protesting parties, the commission states that the hearings are legal proceedings in which all participants should be afforded due process and rules should be applied on a nondiscriminatory basis. A commenter requested clarification of the terms contained in sec.265.24(f), which has now been redesignated as sec.265.24(i), related to when objections to exhibits must be raised or timing of rulings on objection. The commission has amended sec.265.24, which provides only that exhibits would be submitted and marked. Section 265.24(i)(2) now provides clearly that exhibits will be "offered and marked, and the examiner will rule on their admissibility insofar as possible." The last sentence of the rules has been changed and now provides that the examiner will incorporate all "rulings and determinations in a written prehearing order." As previously discussed, proposed sec.265.25 has been withdrawn, but some of its provisions have been reorganized into sec.265.24. Some commenters disagreed with the requirement in proposed sec.265.26(1) that the applicant submit its witness list at the jurisdictional hearing. These commenters suggested that all parties be required to submit their witness lists simultaneously or, in the alternative, that protestants be required to submit witness lists much sooner than the end of the first discovery period as specified in sec.265.26(2), such as at least 15 days before the first discovery period is scheduled to end. The commission responds that the plan for exchange of witness lists, findings of fact and issues among parties was carefully considered by the Task Force to provide for fairness and equity for all parties. The provision of witness lists by the applicant at the first prehearing conference is discussed earlier in these comments as it related to sec.265.23. It is not recommended that sec.265.26(2) be amended to provide for submission of witness lists sooner than the end of the first discovery period because the second discovery period is considered more than adequate time, up to 80 days, to depose witnesses and respond. The commission further notes that sec.265.26(4) allows any party to amend its witness list upon a showing of good cause. A provision has been added to allow parties to conduct discovery on newly added witnesses as authorized in subsections (1)-(3). In response to concerns about whether the executive director, when it is the only protestant, is subject to the deadlines applicable to the executive director or the protestant, the commission notes that, under sec.265.21, applications may be excluded from applicability of this subchapter or any portion thereof by agreement of the parties with examiner approval or for good cause. This language would allow the examiner and parties to make necessary adjustments to the schedule or to exclude the application altogether from applicability when there are no protesting parties and when there is disagreement only between the executive director and applicant. Comments were received on sec.265.26(3) and (4) expressing the view that the subsections need to be expanded beyond allowing other parties to conduct additional discovery if the applicant identifies rebuttal witnesses. Commenters suggest that the applicant should be allowed reasonable additional discovery if a witness is added by the protestants or executive director. To provide for internal consistency, the commission deletes the last sentence of current sec.sec.265.26(1) and (2). It also revises the second sentence of current sec.265.26(4) to allow parties sufficient time, as determined by the examiner, to take discovery on newly added witnesses. One commenter asked whether the executive director will continue to identify witnesses along with the applicant on the day that jurisdiction is established pursuant to sec.265.26(1) if there are no protestants or if the executive director is the plaintiff. Section 265.21(a) states that this subchapter shall apply to permit hearings; consequently, the executive director would not be considered a "plaintiff" in any proceeding under Subchapter C. In accord with sec.265.23(b) the executive director will identify its witnesses at the first preliminary hearing. Many commenters endorsed sec.265.27 allowing the examiner to reduce excessive numbers of witnesses, because of its effect of streamlining a costly process. Other commenters stated that caution should be exercised in the use of the rule to preclude violations of due process, and to assure that the record is fully developed. Accordingly, they recommend deleting the examiner's discretion to strike witnesses' testimony. The commission notes that the rule allows the examiner to strike witnesses whose testimony would be unduly repetitious or irrelevant, or in order to render discovery and the hearing process manageable. Comments were received regarding proposed sec.265.27. The rule as originally drafted allows rebuttal by the applicant as a matter of right and, if the executive director presents evidence that could not have been reasonably anticipated at the time the protestants presented their case, by protestants. One commenter recommended that the applicant be allowed rebuttal only when it can demonstrate satisfactorily to the examiner that it has exercised due diligence in discovery of all parties, but nonetheless suffered surprise by the evidence presented in the direct case of another party. In turn, rebuttal by other parties should be allowed if necessary to assure a fair hearing process. Another commenter stated that the protestant's rebuttal rights should not be contingent upon the executive director's presentation of evidence which could not have been anticipated at the time that protestants presented their case. Section 265.28 has been modified to provide for a rebuttal case by parties other than the applicant in certain limited circumstances. The commission amends sec.265.28(a) to provide that the applicant, as the party with the burden of proof, is the only party allowed to present a rebuttal case and that in all cases the applicant shall be allowed to close with its rebuttal. Subsection (b) adds that if a party can demonstrate that evidence was presented by another party which could not have been reasonably anticipated at the time that party presented its direct case, the party may present a rebuttal case upon leave of the examiner. Some commenters disagreed with the requirement of proposed sec.265.29(a) providing that notice of intent to use prefiled testimony be given 60 days in advance of the hearing. They reason that it is unknown when the 60 days starts to toll, except after the second discovery period when the applicant must decide whether it will amend its application. The same commenters wished to have sec.265.29(b) amended to require prefiling of objections if prefiled testimony is required. The commission responds with sec.265.29(a), now providing that if a party decides to prefile testimony it shall notify other parties on or before the last day of the second discovery period. The examiner may or may not require prefiling of objections to required prefiled testimony as appropriate. Three commenters objected to the provision contained in sec.265.29(c) which limits live presentation of prefiled testimony to introductory material, corrections to the prefiled testimony, and a brief summary of not more than ten minutes. These commenters believe that if overall time limits are set, each party should be allowed to use time as they see fit, and, in addition, the examiner may benefit by supplementation of live presentation from expert witnesses. Another commenter generally opposed the use of prefiled testimony as too complex a tool for protestants and asks whether the limitation of 10 minutes for introductory material relative to prefiled testimony is for all prefiled or each prefiled testimony. Other commenters stated that they prefer live testimony within specified timeframes because prefiled testimony is a burden to protestants. The commission responds by amending the rule to limit live presentation of prefiled testimony "as provided by the examiner within the scope of the original prefiled testimony. . . ." Further, the timeframe for presentation has been extended to "generally . . . no more than 30 minutes for each witness. " One commenter expressed support for proposed sec.265.33 and sec.265.34, which potentially provide a penalty for uncooperative witnesses. Another commenter suggested that the "reasonably prudent person" standard rather than the "reasonably prudent man" standard be used in sec.265.34(b). The commission amends the rule to substitute "reasonably prudent persons" for the "reasonably prudent men" standard in current sec.265.34(b). A commenter objected to proposed sec.265.35 providing that the examiner may allow additional evidence to be offered at any time when it appears to be necessary to the administration of justice. The commenter stated that the rule as formulated will allow the tactic of withholding objections to the permit until after it is frozen and then bringing up the objection as a fatal flaw, putting the applicant in the position of having to anticipate any conceivable concern of the protestant. The commission responds that the rule is intended to allow for circumstances in which the examiner may wish to call on the expertise of an additional objective expert witness or to allow for inquiry by the examiner regarding the matters about which the expert has testified. With regard to sec.265.36, various timeframes have been modified in order to streamline and expedite the process. Also, with regard to sec.265.36 one commenter noted generally that the structure of discovery periods may adversely affect applicants in the permitting process. Many commenters discussed the limitation for the first discovery period described in sec.265.36(a)(1), which provides that such period is reserved for the protestant's discovery from the applicant and the applicant's limited discovery of the nature and funding of the protestant. These commenters request that all parties should be allowed to request documents from all other parties in the first discovery period. The commission responds that the first discovery period is designed to enable protestants to become familiar with the application drafted by the applicant and already reviewed by the staff. Two commenters recommended that "limited" be deleted from proposed sec.265. 36(a)(1) as it refers to applicant's right to conduct "limited discovery of the nature and funding of the protestant." These commenters noted that the rule limits the discovery of nature and funding issues instead of limiting discovery to nature and funding issues. One commenter recommended, as well, that "nature" be defined in the rule to include the type of legal entity, its address, names and addresses of officers, directors, owners, and all members, ownership interests, articles of incorporation, bylaws, rules, regulations, minutes, resolutions, etc. Several commenters stated that they will not disclose the identities of individual members of their groups to protect privacy but will provide information that assures that such groups are not funded by competitors or polluters. To make the intent of the rule clear, the commission amends sec.265.36(a)(1) to provide examples of the limited discovery intended and to state explicitly that discovery may be taken regarding whether source of funding is by a competitor. Two commenters oppose the limitation of sec.265.36(a)(2)(B) providing interrogatories available to the applicant during the second discovery period shall be reduced by the number of interrogatories submitted during the first discovery period. The commission declines to change the rule, as the purpose of limiting the number of interrogatories is to encourage the parties to focus on the contested issues. Several commenters urged that sec.265.36(b)(3)(A) limiting depositions of the executive director to last a total of four hours, should be amended to limit depositions of the applicant and the protestant to four hours. One commenter suggested that the rule may interfere with certain rights of parties under the Texas Administrative Procedure Act. These commenters recommended that, instead of a time limit, the rule should authorize the examiner to limit the depositions of the executive director when necessary to avoid excessive expense to the commission and loss of staff time. The commission notes that such limitations are included due to limited state resources and to ensure that staff of the executive director are available to pursue other permitting tasks and duties. Further, sec.265.36(b)(3) (F) provides that all of these requirements may be waived by agreement of the staff or by the examiner on a showing of good cause. However, the commission removes the restriction that the executive director will be subject to depositions only under certain conditions by deleting the word "only" from sec.265.36(b)(3). A comment was received that proposed sec.265.37(d) appears to conflict with subsection 265.37(g) to require a party resisting discovery to file a motion for protective order in every instance, which seems inefficient and wasteful. The commission responds by modifying sec.265.37(d) to add "a motion to compel" to "objection" and "motion for protective order" as not requiring a hearing to preserve error. Section 265.37(g) regarding discovery disputes merely indicates a process for responses and rulings to motions to compel and protective orders. It should be noted that to avoid unnecessary disputes in discovery and assist all parties to comply with the schedules, the Office of Hearings Examiners has proposed several forms. Disputes over access to confidential information and over entry to property have led to problems in past hearings. The examiners will encourage the use of the forms to avoid disputes, while allowing the parties to agree to alternative language or allowing any one party to seek alternative terms, for good cause. A guidance form Protective Order will be available to any party seeking to maintain information confidential or seeking to review information claimed as confidential. A guidance form Agreement for Entry, together with a form Release and Indemnification documents, will likewise be available to facilitate such discovery. The forms are available now from the Office of Hearings Examiners. At hearings to take jurisdiction, notice of the availability of such forms will again be provided. One commenter observed that there is an improper reference to "complex" hearings in sec.265.37(a). The commission responds by deleting the reference in sec.265.37(a) and substituting "for hearings under this subchapter." Three commenters stated that sec.265.37(b)(2) exempting the executive director and Public Interest Counsel of the commission from the requirement of producing certain materials for discovery if such materials are readily available in the commission's records, should be applicable to all parties. The commission disagrees. One commenter noted that the operation of sec.265.37(b)(3), regarding entry upon land, could have adverse effects to protestants. Another commenter advocated a limit to be imposed on the number of persons who may be given access to land, except for extraordinary circumstances. The commission responds with the language added to sec.265.36(b)(3)(A) providing that the examiner may impose other reasonable restrictions on right to entry upon land as necessary. Two commenters suggested that sec.265.36(b)(3)(A)(i) be clarified to state which party is releasing and which party is indemnifying. The commission notes that the Agreement for Entry Upon Land executed by the parties will make this clear. Of further note is the fact that there is a guidance form for such agreement available in the Office of Hearings Examiners. Two commenters asked that sec.265.36(b)(3)(B) be modified to require a parties to identify the types of samples, method and parameters of tests, in order allow the other parties an opportunity to timely replicate the tests. The commission concludes that since circumstances may vary from site visit to site visit this issue should be left to the discretion of the examiner during the hearing. A commenter stated that sec.265.37(f) regarding duty to supplement discovery requests, should be modified to state that supplementation shall be undertaken promptly but in any event by the close of the third discovery period. The commission declines to change the language of the rule in accord with this comment as the duty to supplement is ongoing. Two commenters objected to sec.265.37(f) regarding the duty to supplement no less than 30 days before the hearing, stating that it cannot be known when 30 days prior to the hearing will occur and that the deadline will fall within the third discovery period. The commission responds that because the examiner will at the jurisdictional hearing set a schedule for the entire hearing process, 30 days prior to the hearing can be determined in practice. It is preferable that supplementation fall within the third discovery period, a period within which the examiner can expand discovery in the interest of fairness. Comments were received on sec.265.37(g)(3), that parties should be allowed to seek certification of discovery orders requiring the disclosure of material for which a privilege has been asserted, as an erroneous ruling of that type cannot be rectified on appeal. Another commenter suggested that certification to the commission should be appropriate when irreparable harm could be shown. The commission responds that the rule as written benefits those parties seeking resolution of claims of privilege. Once the examiner has ruled, pursuant to the rule, the party has exhausted its remedies at the agency level on the issue and may seek relief in court. Two commenters suggested that sec.265.39 be amended to permit parties to produce voluminous documents exceeding 30 pages in length by making them available for inspection and copying at the mutual convenience of the parties and at the requesting party's expense. Three commenters requested that sec.265.39(a)(4) be amended to provided that documents shall be made available in the general vicinity of the proposed facility, unless otherwise agreed by the parties participating in production. The commission responds without change to the rule by noting that the commission intends for all parties to pay their own costs. Many commenters expressed concern about sec.265.39(a)(9) providing that the examiner may reasonably allocate costs associated with production, because they interpret the rule to require one party to pay the costs of reproducing documents requested by another party. Such a rule, they asserted, could penalize the applicant whose application is unjustifiably protested and could discourage protestantsfrom focusing their discovery requests. The commenters recommended that the rule be amended to require the party requesting documents to pay costs and/or to require the examiner to reasonably allocate the costs among the parties seeking production. Some commenters stated that certain organizations' bylaws prohibit receiving payment for production costs by applicants. The commission responds by noting that it intends for parties seeking production to pay costs and, where necessary, for the examiner to reasonably allocate the costs among the parties seeking production. Comments were received on sec.265.39(b), recommending that 21 days is too long to allow for the service of a written response in light of the limited, fixed discovery periods established in sec.sec.265.24 and 265.36. The commenters suggested instead a 14-day limit. They also favored the same 14-day limitation to be applied to objections and responses pursuant to sec.265.40. By contrast, two commenters requested that the time limits of these rules be extended to 30 days consistent with time-frames used in Rule of Civil Procedure, 168(4). The commission responds that sec.265.24(n) has been revised to allow scheduled periods to be modified. One commenter discussed sec.265.49(a)(3) authorizing the use of a prior deposition against a late-joined party where the party joined late has the opportunity to redepose the deponent. The commenter pointed out that the rules are silent on the use of depositions to support the late-joined party's position. The commission responds by amending sec.265.49(a)(3) to provide that any deposition may be used by parties joined after deposition for any purpose against any party in accordance with paragraphs (1) and (2) of the rule. The commission has deleted all references to award of expenses as a sanction in sec.sec.265.50(a)(3) and (4), (b)(2)(B) and (F), and (d)(2) and (3). Comments were received on sec.265.50(a)(4), which imposes sanctions for the omission of material information from an application. The commenters stated that, under this rule, an applicant could be sanctioned even if the applicant was unaware that the information was material. Further, "material information" should be limited to information that is expressly required in Chapter 330 of Title 30. Three other commenters requested that the penalty for failing to disclose complete and accurate information be a mandatory, rather than permissive, grounds for denial of the application. The commission responds with the language of the rule to remain as written, noting that the examiner and commission should be allowed to weigh evidence and facts surrounding an allegation related to misrepresentations as the permissive language of the rule anticipates. A commenter stated that although sec.265.50 addresses abuse of discovery and sanctions committed primarily by parties and to some extent their counsel, it also addresses abuse of discovery by "other deponents." Because all those proposed to be deposed are not under the control of a party or the party's counsel, it would be unfair to sanction a party or the party's counsel if certain "other deponents" abuse discovery. The commission notes that fairness and due process are considerations in any ruling by an examiner and assures the commenter that any special facts or circumstances will be taken into account when sanctions are ordered. The commission has deleted all references to award of expenses as a sanction in sec.265.51(3) and sec.265.52. Comments were received regarding proposed sec.265.53, which provides that, absent good cause, a party may be barred from calling a witness who was not listed on that party's prehearing witness list or who failed to give prefiled testimony. Four commenters recommended that the rule be expanded to provide that a witness who was unprepared to testify in a properly noticed deposition regarding the subject matter of his or her anticipated testimony as described in the party's witness list, or who failed to give prefiled testimony if prefiled testimony has been required by the examiner, be barred from testifying. The commission notes that sanctions regarding failure of witnesses to comply with discovery requests are contained in sec.265.50(b) and that sec.265. 54 addresses failure to identify testimony. The commission has also changed sec.265.53 to provide for a bar to calling a witness who has not been identified pursuant to sec.265.26. Comments were received regarding sec.265.55. The rule bars exhibits not timely identified and prefiled but exempts cross- examination exhibits from the provision. Four commenters stated that the rule allows the protestants a basis on which to "lay behind the log." The commenters recommended that "good cause" be defined to avoid opportunity for abuse and that cross-examination exhibits should be barred unless they could not have been anticipated. The commission deletes the current text of the rule and adds language providing that absent good cause under sec.265.24(i)(2), an exhibit shall not be accepted into the record which was not offered at the prehearing conference. One commenter proposed to add a Subchapter F to Chapter 265, which would provide that if there are no parties other than statutory parties by the close of the first preliminary public hearing and no statutory party requests that a second public hearing be held, that the Executive Director may forward the application directly to the full commission for action without the necessity of a second public hearing. The commission disagrees, noting that all time periods and procedures may be modified by agreement of the parties with approval by the examiner. Subchapter C. Special Procedures for Freezing the Process 30 TAC sec.sec.265.21-265.24, 265.26-265.35 The sections are adopted under the Texas Water Code, sec.5.103 and sec.5. 105, which provides the Texas Natural Resource Conservation Commission with the authority to adopt any rules necessary to carry out its powers and duties under the Water Code and other laws of Texas and to establish and approve all general policy of the Commission. sec.265.21. Applicability. (a) The provisions of this subchapter shall apply to permit hearings in the areas of hazardous waste, industrial solid waste, municipal solid waste, and air quality, as well as to other hearings designated by the examiner on or before the date jurisdiction is established. Except by agreement of the parties, the provisions of this subchapter do not apply to permit hearings at which jurisdiction is established prior to the effective date of this subchapter. For permit hearings for which jurisdiction is established on or after the effective date of this subchapter, an application may either be included in, or excluded from, the applicability of this subchapter or any portion of this subchapter by agreement of the parties only with the approval of the examiner, or, for good cause, by the examiner. Good cause may include without limitation a finding that the lack of complexity of a proceeding in a hearing does not warrant the implementation of all or a portion of this subchapter. (b) The provisions of other chapters of this title and other subchapters of this chapter are inapplicable to proceedings to which this subchapter applies only to the extent that such provisions conflict with this subchapter. sec.265.22. Procedures Applicable to the Executive Director and Public Interest Counsel. (a) Executive Director. (1) Evaluation and assessment to issue or to deny. After the executive director has conducted his technical review of an application, the executive director shall prepare a proposed permit based on the application submitted. The executive director shall develop an initial position recommending issuance, issuance with additional or different permit provisions, or denial of the permit. If the executive director recommends issuance with additional or different permit provisions, he shall specify those provisions in a document separate from the proposed permit. If the executive director's recommendation is to deny, he shall issue a document summarizing the basis for his position. The proposed permit and additional documents prepared by the executive director shall be forwarded to the Chief Clerk's Office for filing and setting. This provision does not impair the executive director's ability to return applications pursuant to sec.281.18 and sec.281.19 of this title (relating to Applications Returned and Technical Review). (2) The executive director may change his position based on evidence or other new information. The executive director shall timely notify all parties on the record or in writing if he changes his opinion, and the other parties shall be afforded the opportunity to respond. (b) Public Interest Counsel. The Public Interest Counsel shall comply with all time-frames and procedures relevant to protestants pursuant to this chapter, unless otherwise determined by the examiner. sec.265.23. First Preliminary Hearing. After the required notice has been given and a request for hearing has been received, an examiner will convene a public hearing to take jurisdiction over the application, accept public commentary, designate parties, and set a discovery and procedural schedule. At this hearing the examiner shall address the jurisdiction of the commission over the proceeding. If jurisdiction is established, the following shall occur: (1) The examiner shall accept public commentary and name the parties; (2) The examiner shall set acceptable methods of service of pleadings, motions, and discovery; (3) The executive director shall provide his evaluation and assessment pursuant to sec.265.22(a)(1) of this title (relating to Procedures Applicable to the Executive Director and Public Interest Counsel), along with the proposed permit and any additional documents prepared by the executive director related to his assessment; (4) The applicant shall submit proposed findings of fact and conclusions of law; (5) The applicant shall identify what constitutes the application and shall provide a total of two copies of the permit application, for use by all of the protestants in the case. These copies shall include all notices of deficiency and the applicant's response to those notices; (6) The executive director and the applicant shall provide their witness lists; (7) The parties shall raise their claims of confidentiality of portions of the application or agency files in a request for a protective order; and (8) The examiner shall establish a procedural schedule for the hearing consistent with the provisions of sec.265.24 of this title (relating to Discovery Schedule and Freezing the Process for Hearings Conducted Pursuant to this Subchapter). Without limiting sec.265.22(a)(2), based on the executive director's position, the examiner may also set a procedural schedule for the executive director to file responses or issues lists in accord with the time periods set out in sec.265.24. sec.265.24. Discovery Schedule and Freezing the Process for Hearings Conducted Pursuant to this Subchapter. (a) First Discovery Period. The first discovery period shall extend 30 to 80 days beginning immediately after the date on which jurisdiction is established, as set out in full in sec.265.36(a)(1) of this title (relating to Discovery in Hearings Held under Subchapter C). (b) Protestants' First List of Issues. On the last day of the first discovery period the protestants shall identify issues based on the proposed findings of fact and conclusions of law submitted by the applicant pursuant to sec.265.23(4) of this title (relating to First Preliminary Hearing), and shall include a statement as to the basis of the protestant's dispute on each issue. In addition, on the last day of the first discovery period, protestants may also raise new issues and proposed findings of fact and conclusions of law. (c) Second Discovery Period. The second discovery period shall extend 30 to 80 days beginning immediately after the protestants' list of issues is submitted, as set out in full in sec.265. 35(a)(2) of this title (relating to Discovery in Hearings Held under Subchapter C). (d) Applicant's Response. The applicant may respond to issues raised by the protestants no later than the last day of the second discovery period by amending its application and/or proposed findings of fact and conclusions of law at this time, responses being limited to the issues raised by the other parties. Given the nature and degree of amendment, the application may be remanded by the examiner to the executive director for further technical review. The application may be subject to additional notice, discovery and hearing requirements. Subsequent to the time for filing a response pursuant to this subsection, the applicant may not file any amendment to its application except as provided in subsection (g) of this section. (e) Third Discovery Period. This period shall extend 20 to 45 days immediately following the conclusion of the second discovery period, and shall be limited in accordance with sec.265.36(a)(3) of this title (relating to Discovery in Hearings Held under Subchapter C). (f) Protestants' Second List of Issues. On or before the last day of the third discovery period protestants are entitled to submit a second list of issues. The protestants' second list of issues shall be limited in scope to the applicant's response as provided in subsection (d) of this section. (g) Applicant's Second Response. The applicant may respond to issues raised in the protestants' second list of issues within seven days after the third discovery period. The applicant may be allowed by the examiner to respond with a minor amendment and proposed findings of fact and conclusions of law limited to protestants' second list of issues, within seven days of the third discovery period. Issues related to any minor amendment filed by the applicant will be considered by the examiner at the prehearing conference for inclusion in the final issue list. Subsequent to the time for filing a response pursuant to this subsection, the applicant may not file any amendment except by agreement of the parties. (h) Prehearing Meeting. A prehearing meeting may be held within three or ten days after the conclusion of the third discovery period, depending upon whether protestants submit a second list of issues. The prehearing meeting is a meeting of the parties without the examiner. At this meeting, the parties shall bring for submission to the examiner and exchange among parties findings of fact, conclusions of law, stipulations, and exhibits. The parties may have the proceedings recorded. If parties do not convene a meeting pursuant to this subsection, they shall submit to the examiner and exchange among parties findings of fact, conclusions of law, stipulations, and exhibits within three or ten working days after the conclusion of the third discovery period. (i) Prehearing Conference and Order. Within 7-14 days after the conclusion of the third discovery period, the Examiner shall hold a prehearing conference. (1) All parties shall address the stipulations of the proposed findings of fact and conclusions of law beginning with the applicant. The examiner shall determine which issues remain and which findings of fact and conclusions of law have been stipulated. Proposed findings and conclusions shall be treated as follows: (A) A proposed finding or conclusion stipulated by all parties shall be regarded as established. (B) A proposed finding or conclusion that has not been stipulated, was on the other parties' issue list, and for which the other parties have a reasonable basis for continuing to contest the issue, may be raised as an issue at the hearing. The reasonableness of the other parties' basis for contesting the issue may receive further inquiry by the examiner during the prehearing conference. If the examiner determines that the other parties have not shown a reasonable basis for contesting the finding or conclusion and the executive director did not raise the issue as a basis for permit denial, the examiner shall deem the finding or conclusion stipulated. (2) Exhibits shall be offered and marked and the Examiner will rule on their admissibility insofar as possible. At hearing all objections to exhibits, which could have been cured if timely raised, shall be deemed waived if they were not raised during the prehearing conference. Parties wishing to offer exhibits at any time subsequent to the prehearing conference shall notify all other parties as soon as practicable of intention to seek leave to submit additional exhibits. The examiner has the discretion to permit the offer of exhibits not submitted at the prehearing conference for good cause. Good cause includes the need for one party to prepare an exhibit in response to another party's exhibit first seen at the prehearing conference, the need to prepare an exhibit in response to the direct testimony of another party and other cases which are justified by the party seeking to submit the exhibit. (3) The examiner shall set final case time limitations at or before the prehearing conference. (4) The examiner shall promptly incorporate all rulings and determinations in a written prehearing order. (j) Failure to Comply With Schedules. Parties who do not identify issues, make amendments, propose findings of fact and conclusions of law or submit responses in accord with the schedules established under this subchapter and with the examiner's orders implementing it will be regarded as waiving the right to pursue them in an evidentiary hearing conducted pursuant to this subchapter. (k) Final Preparation. Final preparation for hearing shall extend no more than 14 calendar days from the date of the prehearing conference. (l) Evidentiary Hearing. The evidentiary hearing shall extend from five to no more than 25 calendar days in duration immediately following final preparation for hearing, subject to extension by the examiner for good cause. The examiner shall set reasonable time limitations for the presentation of the cases of all parties in order to limit the hearing to this time period. (m) Proposal for Decision. The examiner shall issue a Proposal for Decision within 20-55 days from the conclusion of the evidentiary hearing. (n) Modification of Schedules. The scheduled periods set out in this section are presumptively the time limits but they may be modified in exceptional circumstances for good cause either by the examiner or by agreement of the parties with approval of the examiner for good cause. Good cause may include without limitation a finding that the complexity or lack thereof of a proceeding warrants modification of one or more of the scheduled periods. (o) Motion for Rehearing. A party may not raise for the first time on motion for rehearing an issue of fact or law which it has not previously raised as a contested issue unless the issue is related to: (1) a procedural irregularity; or (2) changed circumstance, where the issue is material and a party demonstrates good cause for failure to raise it as an issue prior to the prehearing conference. Notwithstanding the foregoing the Commission may exercise its discretion to address an issue not raised by the other parties or remand an issue depending on the evidence in the record. sec.265.26. Identification of Witnesses. The examiner shall require the parties to exchange lists of witnesses who will be called to testify at the evidentiary hearing. The witness lists shall include the names and addresses of the witnesses and a brief description of the subject matter of their anticipated testimony. (1) The witness lists of the applicant and the executive director shall be submitted on the day that jurisdiction is established over the proceeding, and may be amended by these parties to address the protestants' and Public Interest Counsel's list of issues. (2) The witness lists of the protestants and Public Interest Counsel shall be submitted when the protestants and Public Interest Counsel list their issues. (3) Parties may call rebuttal witnesses not identified on their witness lists only on a showing of good cause and after the parties are afforded a reasonable opportunity to conduct discovery. (4) The examiner may allow a party to amend its witness list upon a showing of good cause. The parties shall have sufficient time, as determined by the examiner, to take discovery on newly added witnesses, as authorized in this paragraph or by paragraphs (1)-(3) of this subsection. There is a continuing obligation to update witness lists as soon as the need for and identity of the new witness is reasonably known. sec.265.27. Limiting the Number of Witnesses. At the request of a party or on the examiner's own motion, the examiner may reduce excessive numbers of witnesses identified pursuant to sec.265.26 of this title (relating to Identification of Witnesses) as follows: (1) The examiner may direct the party to do one of the following: (A) voluntarily reduce its listed witnesses to a specified number; or (B) provide a summary of the expected testimony of each witness sufficiently specific to show the need for the testimony. (2) The examiner may use the witness lists and any summaries of testimony provided to strike witnesses whose testimony would be unduly repetitious or irrelevant, or in order to render discovery and the hearing process manageable. (3) If a party fails or refuses to comply with the directions of the examiner pursuant to this section, the examiner may limit or strike the testimony of witnesses called by the party in any reasonable manner. sec.265.28. Rebuttal. (a) Except as provided by subsection (b) of this section, the applicant, as the party with the burden of proof, is the only party allowed to present a rebuttal case. In all cases, the applicant shall be allowed to close with its rebuttal. (b) If a party can demonstrate that evidence was presented by another party which could not have been reasonably anticipated at the time that party presented its direct case, the party may present a rebuttal case upon leave of the examiner. (c) Rebuttal cases must be presented within the time limitations set by the examiner in the prehearing order. sec.265.29. Prefiled Testimony. (a) Unless otherwise directed by the examiner, any party shall have the option to prefile all or any part of the testimony of all or any one of its witnesses. One party's election to prefile shall not control another party's decision regarding whether to prefile testimony. If a party decides to use prefiled testimony, it shall notify the other parties and the examiner on or before the last day of the second discovery period, identifying the relevant witness(es). (b) The examiner may direct all parties to prefile their entire direct cases. If all direct testimony is prefiled, whether by examiner's order or by agreement of the parties: (1) No party shall be allowed to go beyond the scope of its prefiled testimony on direct examination; and (2) The examiner may limit or prohibit non-adverse cross-examination if unnecessary to the development of a complete evidentiary record. (c) The live presentation of prefiled testimony at the evidentiary hearing shall be limited as provided by the examiner within the scope of the original prefiled testimony to introductory material, corrections to the prefiled testimony, and a brief summary. The live presentation shall generally last no more than 30 minutes for each prefiled witness. (d) The examiner shall set the deadline for the filing of prefiled testimony at a reasonable time before the evidentiary hearing. The factors the examiner shall consider include the complexity of the material, the expected length of the material, the number of witnesses or issues that are to be presented by prefiled testimony, and the acceptable method of presenting objections. sec.265.31. Subpoena of Witnesses and for the Production of Documentary Evidence. (a) On his own motion or on the written request of any party to a hearing under this subchapter pending before him, on a showing of good cause, and on deposit of sums as required by the Administrative Procedure Act, the examiner shall issue a subpoena addressed to the sheriff or constable of the State of Texas, or any other person authorized to serve subpoenas as provided in the Texas Rules of Civil Procedure, Rule 178, to require the attendance of witnesses and the production of books, records, papers, or other objects as may be necessary and proper for the purposes of the proceedings. The Office of Hearings Examiners may develop a standard subpoena request form which the examiner may require the requesting party to complete and return as a prerequisite to issuance of a subpoena. (b) If a subpoena also commands the person to whom it is directed to produce books, papers, documents or tangible things designated therein, the examiner, on motion made seasonably and in any event at or before the time specified in the subpoena for compliance therewith, may: (1) quash or modify the subpoena if it is unreasonable and oppressive; or (2) condition denial of the motion to quash or modify upon the advancement by the person on whose behalf the subpoena is issued, of the reasonable costs of producing the books, papers, documents, or tangible things. sec.265.33. Witness Shall Attend Hearing. Every witness summoned in any hearing shall attend the hearing from day to day, and from place to place, until discharged by the examiner or party summoning such witness. If any witness after being duly subpoenaed fails to attend, such witness may be subject to any remedies available through district court to the party summoning the witness. sec.265.34. Evidence. (a) In contested cases, irrelevant, immaterial, or unduly repetitious evidence will be excluded. (b) Whenever necessary to ascertain facts not reasonably susceptible of proof under the Texas Rules of Civil Evidence, evidence not admissible thereunder may be admitted, except where precluded by statute, if it is of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443588 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 239-0600 Subchapter D. Discovery in Hearings Held Under Subchapter C 30 TAC sec.sec.265.36-265.49 The new sections are adopted under the Texas Water Code, sec.5.103 and sec.5.105, which provides the Texas Natural Resource and Conservation Commission with the authority to adopt any rules necessary to carry out its powers and duties under the Water Code and other laws of Texas and to establish and approve all general policy of the commission. sec.265.36. Discovery in Hearings Held under Subchapter C. (a) Except when otherwise ordered by the examiner, discovery in hearings held under Subchapter C of this chapter will be separated by time and manner into three distinct periods. Within the timeframe set for each period in this subsection, the examiner shall have the discretion to set the duration of each discovery period. (1) First Discovery Period. The first discovery period shall extend 30 to 80 days from the date that jurisdiction is taken by the agency. This period is reserved for the protestants' discovery from the applicant. The applicant may conduct limited discovery related to the nature of each protestant (including for example the type and date of organization, purpose, and number of members) and whether the source of funding is by a competitor of the applicant. (2) Second Discovery Period. The second discovery period shall extend 30 to 80 days from the end of the first discovery period. Discovery during this period shall consist of the following: (A) the protestant may discover from the staff; (B) the applicant may discover from the protestant and the staff; the number of interrogatories available to the applicant during the second discovery period shall be reduced by the number of interrogatories submitted during the first discovery period; and (C) the staff may discover from the protestant and the applicant. (3) Third Discovery Period. The third discovery period shall extend 20 to 45 days from the end of the second discovery period. During this period, any discovery by the protestant or the applicant from the staff shall be limited to the staff's position regarding the applicant's response, and the staff's position regarding the protestants' issues. Discovery from the applicant and the protestant shall be limited to the scope of the listed issues as provided in sec.265.24(b) of this title (relating to Discovery Schedule) and the applicant's response as provided in sec.265.24(d). The examiner shall have discretion to limit or expand discovery in this period further in the interest of fairness. The examiner shall identify which of the time periods listed above applies to discovery for those parties not fitting into the categories discussed above as appropriate. (b) Discovery from the Executive Director. Whenever discovery is sought of the staff of the executive director in any of the discovery periods, it shall be in accord with the following provisions: (1) Beginning at the time jurisdiction is taken, all parties shall have access to all unprivileged documents in the agency's files without the necessity of submitting an Open Records request or a Request for Production. It shall be the agency's responsibility to ensure that documents protected from discovery as provided for under law are removed from agency public files and that all assertions of privilege by the executive director relating to those agency files are made at the time jurisdiction is taken or other timely manner. (2) The executive director shall answer Interrogatories and Requests for Production during the second and third discovery periods. (3) The executive director shall be subject to depositions during the second and third discovery periods, under the following conditions: (A) Each deposition shall be limited to a total of 4 hours. (B) Any party seeking to depose a staff witness shall attempt to set the time and date of the deposition through agreement with the staff. (C) The staff shall not be required to submit to a date for the deposition less than 10 days from the date of the request. (D) The staff shall not be required to submit to a deposition any later than a date 20 days prior to the prehearing conference. (E) All depositions of staff witnesses shall be taken in Austin in one of the TNRCC office buildings. (F) All of these requirements may be waived by agreement of the staff or by the examiner on a showing of good cause. (c) Voluntary discovery may be sought at any time by any party. sec.265.37. Forms and Scope of Discovery; Protective Orders; Supplementation of Responses. (a) Forms of discovery. For purposes of hearings held under Subchapter C of this chapter, all forms of discovery are deemed compellable. Permissible forms of discovery for hearings under this subchapter include: (1) oral or written depositions of any party or nonparty; (2) written interrogatories; (3) requests of a party for admissions of facts and the genuineness or identity of documents or things; (4) requests and motions for production, examination, and copying of documents or other tangible materials; and (5) requests and motions for entry upon and examination of real property. (b) Scope of discovery. Except as provided in subsection (c) of this section, unless otherwise limited by order of the examiner in accordance with these rules, the scope of discovery is as follows: (1) In general. Parties may obtain discovery regarding any matter which is relevant to the subject matter in the pending proceeding. It is not grounds for objection that the information sought will be inadmissible at hearing if the information sought appears to be reasonably calculated to lead to the discovery of admissible evidence. It is also not grounds for objection that an interrogatory propounded pursuant to sec.265.40 of this title (relating to Interrogatories to Parties) involves an opinion or contention that relates to fact or the application of law to fact, but the examiner may order that such an interrogatory not be answered until after designated discovery has been completed or until a prehearing conference or other later time. It is also not grounds for objection that a request for admission propounded pursuant to sec.265.41 of this title (relating to Requests for Admissions) relates to statements or opinions of fact or of the application of law to fact or mixed questions of law and fact or that the documents referred to in a request may not be admissible at trial. (2) Documents and tangible things. A party may obtain discovery of the existence, description, nature, custody, condition, location and contents of any and all documents (including papers, books, accounts, drawings, graphs, charts, photographs, electronic or videotape recordings, and any other data compilations from which information can be obtained and translated, if necessary, by the person from whom production is sought, into reasonably usable form) and any other tangible things which constitute or contain matters relevant to the subject matter in the proceeding. A person is not required to produce a document or tangible thing unless it is within the person's possession, custody or control. Possession, custody or control includes constructive possession such that the person need not have actual physical possession. As long as the person has a superior right to compel the production from a third party (including an agency, authority or representative), the person has possession, custody or control. The executive director and the public interest counsel of the commission are not required to amass, assemble, collect, compile, gather, and/or sort the materials described in this paragraph if those materials are readily available in the commission's records. (3) Land. (A) During the appropriate discovery period, a party may obtain a right of entry upon designated land or other property in the possession or control of a person upon whom a request or motion to produce is served when the designated land or other property is relevant to the application which is the subject of the hearing for the purpose of inspection and measuring, surveying, photographing, testing or sampling the property or any designated object or operation thereon. This provision is not intended to affect any statutory rights authorizing access. If a person has a superior right to compel a third person to permit entry, the person with the right has possession or control. Upon request of the controller or possessor of the land, the examiner may order that entry upon the land be subject to any existing safety regulations or protections of trade secrets or processes, and may impose other reasonable restrictions on this right as necessary. Unless otherwise ordered by the examiner, the parties shall enter into a standard Agreement for Entry Upon Land which contains the following: (i) a release and indemnification provision; (ii) allowance for all parties to split samples; (iii) a provision that the controller of the land shall allow entry within a reasonable period of time after the request; and (iv) a provision that the controller of the land shall have the right to accompany the party entering the property. (B) The parties may request and the examiner will rule on whether a party intending to take samples shall be required to reveal the types of samples and methodology and parameters of tests performed on those samples prior to or subsequent to entry upon land. (4) Potential parties and witnesses. A party may obtain discovery of the identity and location (name, address and telephone number) of any potential party and of persons having knowledge of relevant facts. A person has knowledge of relevant facts when he or she has or may have knowledge of any discoverable matter. The information need not be admissible in order to satisfy the requirements of this subsection and personal knowledge is not required. (5) Experts and reports of experts. Discovery of the facts known, mental impressions and opinions of experts, otherwise discoverable because the information is relevant to the subject matter in the pending proceeding, but which were acquired or developed in anticipation of trial and the discovery of the identity of experts from whom the information may be learned may be obtained only as follows: (A) General. A party may obtain discovery of the identity and location (name, address and telephone number) of an expert who may be called as an expert witness, the subject matter of which the witness is expected to testify, the mental impressions and opinions held by the expert and the facts known to the expert (regardless of when the factual information was acquired) which relate to or form the basis of the mental impressions and opinions held by the expert. The disclosure of the same information concerning an expert used for consultation and who is not expected to be called as an expert witness at trial is required if the consulting expert's opinion or impressions have been reviewed by a testifying expert. (B) Reports. A party may also obtain discovery of documents and tangible things including all tangible reports, physical models, compilations of data and other materials prepared by an expert or for an expert in anticipation of the expert's hearing and deposition testimony. The disclosure of material prepared by an expert used for consultation is required even if it was prepared in anticipation of trial if the consulting expert's opinions or impressions have been reviewed by a testifying expert. (C) Determination of status. The examiner has discretion to compel a party to make the determination and disclosure of whether an expert may be called to testify within a reasonable and specific time. (D) Reduction of report to tangible form. If the discoverable factual observations, tests, supporting data, calculations, photographs, or opinions of an expert who will be called as an expert witness have not been recorded and reduced to tangible form, the examiner may order these matters reduced to tangible form and produced within a reasonable time. (6) Statements. Any person, whether or not a party, shall be entitled to obtain, upon written request, his own statement previously made concerning the matter which is the subject of the hearing, or its subject matter, which is in the possession, custody or control of any party. If the request is refused, the person may move for an examiner's order under sec.265.50 of this title (relating to Abuse of Discovery; Sanctions). For the purpose of this paragraph, a statement previously made is: (A) a written statement signed or otherwise adopted or approved by the person making it; and (B) a stenographic, mechanical, electrical or other type of recording, or any transcription thereof which is a substantially verbatim recital of a statement made by the person and contemporaneously recorded. (c) Exemptions. The following matters are protected from disclosure by privilege: (1) Work product. The work product of an attorney, subject to the exceptions of Texas Rules of Civil Evidence, sec.503(d), which shall govern as to work product as well as to attorney-client privilege. (2) Experts. The identity, mental impressions and opinions of an expert who has been informally consulted or of an expert who has been retained or specially employed by another party in anticipation of, or preparation for hearing, or any documents or tangible things containing such information if the expert will not be called as an expert witness, except that the identity, mental impressions and opinions of an expert who will not be called to testify as an expert and any documents or tangible things containing such impressions and opinions are discoverable if the consulting expert's opinion or impressions have been reviewed by a testifying expert. (3) Written statements. The written statements of potential witnesses and parties, when made in connection with, or in anticipation of, the prosecution, investigation, defense or protest of the particular application or petition that is the subject of the proceeding, except that persons, whether parties or not, shall be entitled to obtain, upon request, copies of statements they have previously made concerning the application or petition or its subject matter and which are in the possession, custody, or control of any party. The term "written statements" includes: (A) a written statement signed or otherwise adopted or approved by the person making it; and (B) a stenographic, mechanical, electrical or other type of recording, or any transcription thereof which is a substantially verbatim recital of a statement made by the person and contemporaneously recorded. For purposes of this paragraph, a photograph is not a statement. (4) Party communications. Communications between agents or representatives or the employees of a party to the hearing or communications between a party and that party's agents, representatives or employees, when made in connection with the prosecution, investigation, defense or protest of the particular application or petition that is the subject of the particular proceeding, or in anticipation of the prosecution, protest, or defense of any claims made in a part of the pending hearing. This exemption does not include communications prepared by or for experts that are otherwise discoverable. For the purposes of this paragraph, a photograph is not a communication. (5) Other privileged information; Any Matter Protected from Disclosure by Any Other Privilege. Upon a showing that the party seeking discovery has substantial need of the materials and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means, a party may obtain discovery of the materials otherwise exempt from discovery by paragraphs (3) and (4) of this subsection. Nothing in this subsection shall be construed to render non-discoverable the identity and location of any potential party, any person having knowledge or relevant facts, any expert who is expected to be called as a witness during trial, or of any consulting expert whose opinions or impressions have been reviewed by a testifying expert. (d) Presentation of objections. Either an objection, a motion to compel or a motion for protective order made by a party to discovery shall preserve that objection without further support or action by the party unless the objection or motion is set for special hearing and determined by the examiner. At any reasonable time, any party may request a special hearing on any objection, motion to compel or motion for protective order. The failure of a party to obtain a ruling prior to trial on any objection to discovery, motion to compel or motion for protective order does not waive such objection or motion. In objecting to an appropriate request within the scope of subsection (b) of this section, a party seeking to exclude any matter from discovery on the basis of an exemption or immunity from discovery must specifically plead the particular exemption or immunity from discovery relied upon and at or prior to any special hearing, shall produce any evidence necessary to support such claim either in the form of affidavits served at least seven days before the special hearing or by testimony. If the examiner determines that an in camera inspection and review by the examiner of some or all of the requested discovery is necessary, the objecting party must segregate and produce the discovery to the examiner in a sealed wrapper or by answers made in camera to deposition questions, to be transcribed and sealed in event the objection is sustained. When a party seeks to exclude documents from discovery and the basis for objection is undue burden, unnecessary expense, harassment or annoyance, or invasion of personal, constitutional, or property rights rather than a specific immunity or exemption, it is not necessary for the examiner to conduct an inspection and review of the particular discovery before ruling on the objection. After the date on which answers are to be served, objections are waived unless an extension of time has been obtained by agreement or order of the examiner or good cause is shown for the failure to object within such period. (e) Protective orders. On motion specifying the grounds and made by any person against or from whom discovery is sought under these rules, the examiner may make any order in the interests of justice necessary to protect the movant from undue burden, unnecessary expense, harassment or annoyance, or invasion of personal, constitutional, or property rights. Insofar as the applicant is claiming confidentiality of any part of the permit application, the applicant shall request a protective order at the time that jurisdiction is taken. All other claims of confidentiality shall be handled as they arise, according to the timelines established under subsection (d) of this section. Unless amended by the examiner, a standard order developed by the Office of Hearings Examiners shall be used. Motions or responses made under this section may have exhibits attached including affidavits, discovery pleadings, or any other documents. Specifically, the examiner's authority as to such orders extends to, but is not limited by, any of the following: (1) ordering that requested discovery not be sought in whole or in part, or that the extent or subject matter of discovery be limited, or that it not be undertaken at the time or place specified; (2) ordering that the discovery be undertaken only by such method or upon such terms and conditions or at the time and place directed by the examiner. (f) Duty to supplement. A party who has responded to a request for discovery that was correct and complete when made is under no duty to supplement his response to include information thereafter acquired, except the following shall be supplemented not less than 30 days prior to trial unless the examiner finds that a good cause exists for permitting or requiring later supplementation. (1) A party is under a duty reasonably to supplement his response if he obtains information upon the basis of which: (A) he knows that the response was incomplete and incorrect when made; (B) he knows that the response, though correct and complete when made, is no longer true and complete and the circumstances are such that failure to amend the answer is in substance misleading; or (2) If the party expects to call an expert witness when the identity or the subject matter of such expert witness' testimony has not been previously disclosed in response to an appropriate inquiry directly addressed to these matters, such response must be supplemented to include the name, address and telephone number of the expert witness and the substance of the testimony concerning which the expert witness is expected to testify, as soon as is practical, but in no event less than 30 days prior to trial, except on leave of the examiner. (3) In addition, a duty to supplement answers may be imposed by order of the examiner or agreement of the parties, or at any time prior to trial, through new requests for supplementation or prior answers. (g) Discovery Disputes. (1) Discovery motions. All discovery motions shall contain a certificate by the party filing same that efforts to resolve the discovery dispute without the necessity of examiner intervention have been attempted and failed. (2) Motions to Compel and for Protective Orders. Whenever a discovery dispute arises, the disputing party shall file a motion to compel or for protective order. Any response shall be filed within five working days of receipt. The response may be a showing of good cause for extra time to respond. The examiner shall rule within five working days of the response. (3) Finality of Examiner's Ruling. No discovery issues shall be certified to the commission. sec.265.45. Non-Stenographic Recording; Deposition by Telephone. (a) Non-Stenographic Recording. Any party may cause the testimony and other available evidence at a deposition upon oral examination to be recorded by other than stenographic means, including videotape recordings, upon leave of the examiner, and the non-stenographic recording may be presented at trial in lieu of reading from a stenographic transcription of the deposition, subject to the following: (1) Any party intending to make a non-stenographic recording shall give five days' of notice to all other parties by mail, return receipt requested, and shall specify in said notice the type of non-stenographic recording which will be used. (2) After notice is given, any party may make a motion for relief under sec.265.37 of this title (relating to Forms and Scope of Discovery; Protective Orders; Supplementation of Responses). If a special hearing session is not held prior to the taking of the deposition, the non-stenographic recording shall be made subject to the examiner's ruling at a later time. (3) Any party shall have reasonable access to the original recording and may obtain a duplicate copy at his own expense. (4) The expense of a non-stenographic recording shall not be taxed as costs, unless before the deposition is taken, the parties so agree, or the examiner so orders, for good cause shown, on motion and notice. (5) The non-stenographic recording shall not dispense with the requirement of a stenographic transcription unless the examiner shall so order on motion and notice before the deposition is taken and such order shall make such provision concerning the manner of taking, preserving and filing the non-stenographic recording as may be necessary to assure that the recorded testimony will be intelligible, accurate and trustworthy. Such order shall not prevent any party from having stenographic transcription made at his own expense. In the event of an appeal, the non-stenographic recording shall be reduced to writing at the expense of the party making the recording. (b) Deposition by telephone. The parties may stipulate in writing, or the examiner may, upon motion, order that a deposition be taken by telephone. For the purposes of this section and sec.265. 43 of this title (relating to Issuance of Commission to Take Deposition) and sec.265.50 of this title (relating to Abuse of Discovery; Sanctions), a deposition taken by telephone is taken in the district and at the place where the deponent is to answer questions propounded to him. sec.265.49. Use of Deposition Transcripts in Commission Proceedings. (a) Use of deposition transcript in same proceeding. (1) Use of depositions. At trial or upon a hearing on a motion, any part or all of a deposition taken in the same proceeding, insofar as admissible under the Texas Rules of Civil Evidence, may be used by any person for any purpose against any party who was present or represented at the taking of the deposition or who had reasonable notice thereof. Further, the Texas Rules of Civil Evidence shall be applied to each question and answer as though the witness were then present and testifying. Depositions shall include the original transcripts or any certified copies thereof. Unavailability of the deponent is not a requirement for admissibility. (2) Included within meaning of "same proceeding." Substitution of parties pursuant to these rules does not affect the right to use depositions previously taken. (3) Parties joined after deposition taken. If one becomes a party after a deposition is taken and has an interest similar to that of any party described in paragraphs (1) or (2) of this subsection, the deposition is admissible against him if he has had a reasonable opportunity, after becoming a party, to redepose the deponent, and has failed to exercise that opportunity. Any existing deposition may be used by parties joined after the deposition is taken for any purpose against any party in accordance with paragraphs (1) and (2) of this subsection. (b) Use of deposition transcript taken in different proceeding. At trial or upon the hearing of a motion or an interlocutory proceeding before an examiner, any part or all of a deposition taken in a different proceeding may be used subject to the provisions and requirements of the Texas Rules of Civil Evidence. Further, the Texas Rules of Civil Evidence shall be applied to each question and answer as though the witness was then present and testifying. (c) Motion to suppress. When a deposition transcript has been delivered by the deposition officer and notice of delivery given at least one entire day before the day on which the case is called for trial, errors and irregularities in the notice of delivery, and errors in the manner in which the testimony is transcribed or the deposition transcript is prepared, signed, certified, sealed, endorsed, delivered, or otherwise dealt with by the deposition officer under sec.265.48 of this title (relating to Submission to Witness; Changes; Signing) are waived, unless a motion to suppress the deposition transcript or some part thereof is made and notice of the written objections made in the motion is given to every other party before trial commences. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443587 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 239-0600 Subchapter E. Special Sanctions Rules Relating to Freezing the Process 30 TAC sec.sec.265.50, 265.51, 265.53-265.55 The new sections are adopted under the Texas Water Code, sec.5.103 and sec.5.105, which provides the Texas Water Commission with the authority to adopt any rules necessary to carry out its powers and duties under the Water Code and other laws of Texas and to establish and approve all general policy of the commission. sec.265.50. Abuse of Discovery; Sanctions. (a) Motion for sanctions or order compelling discovery. A party, upon reasonable notice to all other parties and to all other persons affected thereby, may apply for sanctions or an order compelling discovery as follows: (1) Motion. According to subparagraphs (A), (B), (C), and (D) of this paragraph, the discovering party may move for an order compelling a designation, an appearance, an answer or answers, or inspection or production in accordance with the request, or apply to the examiner for imposition of any sanction authorized by subsection (b)(2) of this section without the necessity of first having obtained an examiner's order compelling such discovery: (A) if a party or other deponent which is a corporation or other entity fails to designate the persons or persons to testify on the deponent's behalf, and, if the deponent so desires, the matters on which each person designated will testify; or (B) if a party, or other deponent, or a person designated to testify on behalf of a party or other deponent fails: (i) to appear before the officer who is to take his deposition, after being served with a proper notice; or (ii) to answer a question propounded or submitted upon oral examination or upon written questions; or (C) if a party fails: (i) to serve answers or objections to interrogatories submitted under sec.265.40 of this title (relating to Interrogatories to Parties), after proper service of the interrogatories; or (ii) to answer an interrogatory submitted under sec.265.40; or (iii) to serve a written response to a request for inspection under sec.265.39 of this title (relating to Discovery and Production of Documents and Things for Inspection, Copying or Photographing), after proper service of the request; or (iv) to respond that discovery will be permitted as requested or fails to permit discovery as requested in response to a request for inspection submitted under sec.265.39; or (D) if a party fails to comply with any person's written request for the person's own statement as provided in sec.265. 37(b)(6) of this title (relating to Forms and Scope of Discovery; Protective Orders; Supplementation of Responses). (2) Depositions Upon Oral Examination. When taking a deposition on oral examination, the proponent of the question may complete or adjourn the examination before he applies for an order. (3) Protective Orders. If the examiner denies the motion in whole or in part, the examiner may make such protective order as he would have been empowered to make on a motion pursuant to sec.265.37. (4) Material Misrepresentations. Material misrepresentations, including misleading statements or omissions of material information in any application material, or in response to a discovery request or in testimony, constitutes a violation and may be punished by the Examiner with the full range of sanctions, including a recommendation of denial, of the relief requested in the hearing by the responsible party. (5) Evasive or Incomplete Answer. For purposes of this section, an evasive or incomplete answer is to be treated as a failure to answer. (b) Failure to comply with order or with discovery requests. (1) Sanctions by court. If a deponent fails to appear or to be sworn or to answer a question after being directed to do so by an examiner, the failure may be appealed to district court by the movant as provided by law. (2) Sanctions by examiner and commission. If a party or an officer, director, or managing agent of a party or a person designated under subsection (a)(1) of this section to testify on behalf of a party fails to comply with proper discovery requests or to obey an order to provide or permit discovery, including an order made under subsection (a) of this section, the examiner may impose any of the sanctions authorized by sec.265.50 of this title (relating to Abuse of Discovery; Sanctions) or he may, after notice and hearing, make such orders, or recommendations to the commission, in regard to the failure as are just, and among others, the following: (A) an examiner's order disallowing any further discovery of any kind or of a particular kind by the disobedient party; (B) an examiner's order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order; (C) an examiner's order refusing to allow the disobedient party to support or oppose designated claims, or prohibiting him from introducing designated matters in evidence; (D) an examiner's order striking out pleadings, or parts thereof, or staying further proceedings until the order is obeyed. The commission may issue an order dismissing, with or without prejudice, the application, petition, or proceedings or any part thereof. (c) Abuse of discovery process in seeking, making, or resisting discovery. If the examiner finds a party is abusing the discovery process in seeking, making, or resisting discovery or if the examiner finds that any interrogatory or request for inspection or production is unreasonably frivolous, oppressive, or harassing, or that a response or answer is unreasonably frivolous or made for the purposes of delay, then the examiner, or the commission may, after notice and hearing, impose any appropriate sanction authorized by sec.265.50 or authorized by subsection (b)(2)(A)-(C) of this section, or recommend that the commission dismiss the proceedings as authorized by subsection (b)(2)(D) of this section. Such order of sanction shall be subject to review on appeal when the commission's order becomes final. (d) Failure to comply with sec.265.41 of this title (relating to Requests for Admissions). (1) Deemed admission. Each matter of which an admission is requested shall be deemed admitted unless, within the time provided for in sec.265.41, the party to whom the request is directed serves upon the party requesting the admissions a sufficient written answer or objection in compliance with the requirements of sec.265.41, addressed to each matter of which an admission is requested. For purposes of this section, an evasive or incomplete answer may be treated as a failure to answer. (2) Motion. The party who has requested the admission may move to determine the sufficiency of the answers or objections. Unless the examiner determines that an objection is justified, the examiner may order that an answer be served. If the examiner determines that an answer does not comply with the requirements of sec.265.41, the examiner may order either that the matter be admitted or that an amended answer be served. (e) Failure to respond to or supplement discovery. A party who fails to respond to or supplement his response to a request for discovery shall not be entitled to present evidence which the party was under a duty to provide in a response or supplemental response or to offer the testimony of an expert witness or of any other person having knowledge of discoverable matter, unless the examiner finds that good cause, sufficient to require admission, exists. The burden of establishing good cause is upon the party offering the evidence and good cause must be shown in the record. sec.265.51. Sanctions for Failure to Serve or Deliver Copy of Pleadings and Motions. If any party fails to serve on or deliver to the other parties a copy of any pleading, plea, motion, prefiled testimony or prefiled objections, or other application for an examiner's order, the examiner may, in his discretion, on notice and hearing: (1) order all or any part of such document stricken; or (2) direct that such party shall not be permitted to present grounds for relief, protest or defense contained therein. sec.265.53. Failure to Identify Witnesses. A party shall be barred from calling a witness who has not been identified pursuant to sec.265. 26 of this Chapter (relating to Identification of Witnesses). sec.265.54. Failure to Identify Testimony. Absent good cause, a witness shall be barred from testifying about matters which were not identified by the sponsoring party in its witness list and amendments thereto, and/or in that witness' prefiled testimony, when election to prefile testimony has been noticed by the sponsoring party or when prefiled testimony has been directed by the examiner. sec.265.55. Barring Exhibits. Absent good cause under sec.265. 24(i)(2) of this title (relating to Discovery Schedule and Freezing the Process for Hearings Conducted Pursuant to this Subchapter), an exhibit shall not be accepted into the record which was not offered at the prehearing conference. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443586 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 239-0600 Chapter 267. Procedures During Public Hearing 30 TAC sec.267.11, sec.267.13 The Texas Natural Resource Conservation Commission (Commission) adopts amendments to sec.267.11 and sec.267.13, concerning the presentation of evidence in hearings; specifically, providing for a certain order of presentation and that witnesses be called either by a party or the hearings officer. The rules are adopted with changes to the proposed text as published in the February 8, 1994, issue of the Texas Register (19 TexReg 885). The proposed changes are necessitated by the merger of the Texas Air Control Board and the Texas Water Commission in order to combine and refine the rules to meet the needs of a broad range of hearing types at the new agency. The proposed changes are consistent with current practices at the agency. A public hearing was held on February 28, 1994 in Austin. The comment period closed March 14, 1994. Comments to the proposed sections were received by the following entities: Henry, Lowerre, Hass and Frederick; USA Waste Services; the Lone Star Chapter of the Solid Waste Association of North America; the Cities of Arlington and Irving; and Kelly, Hart and Hallman. With regard to sec.267.11, one commenter urged that if the Executive Director (ED) has taken a position in favor of permit issuance, the ED should be aligned with the applicant and the presentation order should be: applicant; executive director, public interest counsel (PIC); and protestants. The commenter argued that ED alignment with the applicant is proper where the ED is going to make the case for the applicant. The Commission disagrees that such alignment is proper. The ED is a statutory party and, while the ED may have preliminary position regarding the application, that position may change based upon new information or new evidence. In any event, while the ED may take position regarding the application, the burden of proof remains with the applicant. Further, it should be noted that sec.267.11 has been changed to clarify which provisions apply only to permit hearings and which apply to all proceedings. For clarity, the Commission has also amended the rule to reflect that the ED opens with a statement regarding its "preliminary" position rather than "current" position. Section 267.13(c) would allow any person whose position is not adequately represented to be called as a witness for the ex- aminer, subject to cross- examination by all parties. All commenters stated that the problem with the rule is that it would allow the person called as the examiner's witness to enter late in the process during hearing, circumventing discovery and thus denying due process, with the surprise witness supplying testimony that may become the basis for decision on an issue or on the final decision. The Commission disagrees with the commenters' suggestion. The intent of the rule is to allow the hearings examiner to develop a full record. Occasionally during the hearing process, an issue may come to light about which the parties have little information, but which is very relevant to the case at hand. Without the authority to subpoena witnesses who have relevant knowledge, the examiner may be precluded from making an adequate recommendation. However, the Commission agrees that the change in the proposed wording is in order to prevent circumvention of discovery. A clarifying sentence is added to provide the parties an opportunity to take discovery of such person. The amendments are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its power and duties under the code and other laws of this state and to establish and approve all general policy of the Commission. sec.267.11. Order of Presentation. (a) In all proceedings the moving party shall have the right to open and close. Where several matters have been consolidated, the presiding officer will designate who will open and close. The presiding officer will determine at what stage intervenors will be permitted to offer evidence and argument. After all parties have completed the presentation of their evi- dence, the presiding officer may call upon any party for further material or relevant evidence upon any issue. (b) Before the moving party opens in a permit hearing, the Executive Director's Staff shall open with a simple statement of its preliminary position on the application and, in a permit hearing, will present the Staff's draft permit including special provisions, if any. In a permit hearing, the applicant presents evidence to meet its burden of proof on the application, any opponents present evidence, the Public Interest Counsel presents evidence, and the Staff presents its evidence. In all cases, the applicant shall be allowed to close with its rebuttal. Any party may present a rebuttal case when another party presents evidence which could not have been reasonably anticipated. sec.267.13. General Admissibility of Evidence. (a)-(b) (No change.) (c) Testimony will be received only from witnesses called by a party or his or her representative or the presiding officer. The presiding officer may allow or request testimony from any person whose position is not adequately represented by any party, subject to cross-examination by all parties or their representatives. Such testimony may be allowed at the presiding officer's discretion. All parties shall have an opportunity to take discovery of such person. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443569 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Chapter 269. Procedures After Public Hearings Before a Hearings Examiners 30 TAC sec.269.6 The Texas Natural Resource Conservation Commission (Commission) adopts an amendment to sec.269.6, concerning pleadings following the Proposal for Decision; specifically, establishing the deadlines for filing of exceptions and replies to exceptions with the time periods allowed to be changed by agreement of all parties. The rule is adopted without changes to the proposed text as published in the February 8, 1994, issue of the Texas Register (19 TexReg 885). The proposed changes are necessitated by the merger of the Texas Air Control Board and the Texas Water Commission in order to combine and refine the rules to meet the needs of a broad range of hearing types at the new agency. The proposed changes are consistent with current practices at the agency. A public hearing was held on February 28, 1994, in Austin. The comment period closed March 14, 1994. No comments were received regarding adoption of the rule. The amendment is adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its power and duties under the code and other laws of this state and to establish and approve all general policy of the Commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443568 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 Chapter 274. Expediting the Complex Hearings The Texas Natural Resource Conservation Commission (Commission) adopts the repeal of sec.sec.274.1-274.9, 274.21-274.24, 274.41-274.63, and 274.71-274.76, concerning expediting the complex hearings are adopted without changes to the proposed text as published in the February 4, 1994, issue of the Texas Register (19 TexReg 776). Repeal of these rules is based in part on Commission work with the Permit Hearing Task Force, a group of attorneys, individuals associated with industry- related interests, individuals associated with environmental interests and other special interest groups. A public hearing was held on April 7, 1994, in Austin, Texas. The comment period closed on April 7, 1994. There was no oral testimony given during the public hearing. However, the Commission has received written testimony on the repeal proposal from one commenter, the law firm of Henry, Lowerre, Hess and Frederick. This commenter observed that the three to four attempts to use these rules was not a sufficient test of their usefulness and practicality. The commenter noted that the rules had many benefits and believes their repeal is mistaken. The Commission disagrees. The Commission believes that the complex hearings process does not produce the time and cost savings anticipated, especially during discovery prior to the application being declared technically complete. Concurrently with repealing these sections the Commission is adopting amendments and new rules in Chapter 265, Procedures Before Public Hearing, which include special procedures for freezing the application prior to hearing and discovery and sanction procedures. The Commission believes the repeal of complex hearings process rules and adoption of amendments of Chapter 265 will streamline and make the hearings process more fair. Chapter 265 as adopted is published concurrently in this edition of the Texas Register. Subchapter A. General Rules 30 TAC sec.sec.274.1-274.9 The repeals are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and establish and approve all general policy of the Commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443581 Mary Ruth Holder Director, Legal Services Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 463-8069 Subchapter B. Prehearing Procedures for Complex Hearings 30 TAC sec.sec.274.21-274.24 The repeals are adopted under Water Code, sec.5.103 and sec.5.105, which authorize the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443583 Mary Ruth Holder Director, Legal Services Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 463-8069 Subchapter C. Discovery and Evidence 30 TAC sec.sec.274.41-274.63 The repeal are adopted under Water Code, sec.5.103 and sec.5.105, which authorize the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443582 Mary Ruth Holder Director, Legal Services Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 463-8069 Subchapter D. Sanctions 30 TAC sec.sec.274.71-274.76 The repeals are adopted under Water Code, sec.5.103 and sec.5.105, which authorize the Commission to adopt any rules necessary to carry out its powers and duties under the Code and other laws of this state and to establish and approve all general policy of the Commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 6, 1994. TRD-9443584 Mary Ruth Holder Director, Legal Services Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 4, 1994 For further information, please call: (512) 463-8069 Chapter 275. Special Provisions Variance Hearings 30 TAC sec.sec.275.130-275.132 The Texas Natural Resource Conservation Commission (Commission) adopts amendments to sec.sec.275.130-275.132, concerning variance hearings pursuant to the Texas Clean Air Act. Section 275.130 is adopted with changes to the proposed text as published in the February 8, 1994, issue of the Texas Register (19 TexReg 885). Sections 275.131 and 275.132 are adopted without changes and will not be republished. The proposed changes are necessitated by the merger of the Texas Air Control Board and the Texas Water Commission in order to combine and refine the rules to meet the needs of a broad range of hearing types at the new agency. The proposed changes are consistent with current practices at the agency. A public hearing was held on February 28, 1994, in Austin. The comment period closed March 14, 1994. No comments were received regarding adoption of the rules. Section 275.130 was modified by the agency for clarification purposes. The amendments are adopted under the Texas Water Code, Title 2, Subtitle A, Chapter 5, sec.5.103 and sec.5.105, which authorizes the Commission to adopt any rules necessary to carry out its power and duties under the code and other laws of this state and to establish and approve all general policy of the Commission. sec.275.130. Variance Hearings Pursuant to the Texas Clean Air Act. Upon the filing of a proper petition, a date for a hearing on the petition shall be set not be more than 90 days after the date the petition is filed. Notice of the hearing shall be given as required by the Texas Health and Safety Code, Texas Clean Air Act (TCAA), sec.382.031 and the Administrative Procedure Act, the Government Code, Chapters 2001 and 2002. A petition for the variance shall be considered to be in proper form if it identifies the person seeking the variance; identifies the particular rule or provisions of the TCAA from which a variance is sought; identifies the source of air contaminants which are the subject of the petition, including information on the nature and the amount of emissions from the source, if available, and the location of the source; and includes a short and plain statement of the grounds upon which the relief is sought. Forms to assist in the filing of a petition are available upon request, but are not mandatory. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on May 25, 1994. TRD-9443567 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Effective date: July 27, 1994 Proposal publication date: February 8, 1994 For further information, please call: (512) 239-0615 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part VII. Texas Commission on Law Enforcement Officer Standards and Education Chapter 211. Administration Division 37 TAC sec.211.66, sec.211.67 The Texas Commission on Law Enforcement Officer Standards and Education (commission) adopts the repeals of sec.211.66, concerning Agreement Training and sec.211.67 concerning Academy Advisory Boards, without changes to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3634). Section 211.66 is being amended and replaced with a new number sec.215.66. Section 211.67 is being amended to include all types of training providers, and is being proposed for adoption with a new number sec.215.67. The repeals of this section were adopted at the June 14, 1994, regular quarterly meeting of the commission. Section 211.66 and sec.211.67 were adopted as Final Order 94-7. No comments were received regarding adoption of the repeals. The repeals are adopted under the Texas Government Code, Chapter 415, sec.415.010(1), which provides the commission with authority to pass rules for the administration of this chapter, and under the Texas Government Code, Chapters 2001 and 2002, which taken together establish the procedures for the rule making requirements for the commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443601 Truman Lewis Assistant Director Texas Commission on Law Enforcement Officer Standards and Education Effective date: September 1, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 450-0188 37 TAC sec.211.75 The Texas Commission on Law Enforcement Officer Standards and Education (commission) adopts the repeal of sec.211.75, concerning Advisory Boards, without changes to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3635). Section 211.75 is being replaced by a new section which provides the same guidelines for all training providers. The repeal of this section was adopted at the June 14, 1994, regular quarterly meeting of the commission. Section 211.75 was adopted as Final Order 94-8. No comments were received regarding adoption of the repeal. The repeal is adopted under the Texas Government Code, Chapter 415, sec.415. 010(1), which provides the commission with authority to pass rules for the administration of Chapter 415; and under the Texas Government Code, Chapters 2001 and 2002, which taken together establish the procedures for the rule making requirements for the commission. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443602 Truman Lewis Assistant Director Texas Commission on Law Enforcement Officer Standards and Education Effective date: September 1, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 450-0188 37 TAC sec.211.100 The Texas Commission on Law Enforcement Officer Standards and Education (commission) adopts the repeal of sec.211.100, concerning the in-service training requirements for agencies, that appoint peace officers or reserves in order to place the rule in compliance with applicable State law, without changes to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3637). This rule will be amended and reproposed as sec.221.100 to establish continuity and consistency in the rule numbering scheme. The repeal of this section was adopted at the June 14, 1994, regular quarterly meeting of the commission. Section 211.100 was adopted as Final Order 94-2. No comments were received regarding adoption of the repeal. The repeal is adopted under the Texas Government Code, Chapter 415, sec.415. 010(1), which provides the commission with authority to pass rules for the administration of this Chapter, and sec.415.034(a) and (b), which require the commission to recognize, prepare, or administer continuing education programs, and to require law enforcement agencies to provide such training. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443598 Truman Lewis Assistant Director Texas Commission on Law Enforcement Officer Standards and Education Effective date: September 1, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 450-0188 Chapter 215. Training and Educational Providers and Related Matters Division 37 TAC sec.215.66 The Texas Commission on Law Enforcement Officer Standards and Education (commission) adopts new sec.215.66 to provide guidelines for the delivery of law enforcement training by contract providers, with changes to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3636). It is necessary to provide guidelines consistent with those applicable to licensed academies in order to maintain quality in the commission's training effort. This section amends and replaces repealed sec.211. 66 of the commission rules. This new section was adopted with changes at the June 14, 1994, regular quarterly meeting of the commission. The terms 'staff member' or 'commission' were changed to 'executive director' in subsections (b)(2), (d), (e)(1), (6), and (h). In subsection (b)(2) the change to executive director was made because only the executive director can enter into a contract for the Commission. The other changes were made for continuity throughout the rule. Subsection (d) was also changed to read ". . . Any party may terminate upon written notice to all other parties, received by either the executive director, the coordinator, or any other named person or office." Section 215.66 was adopted as Final Order 94- 5. No comments were received regarding adoption of this new section. The new section is adopted under Texas Government Code, Chapter 415, sec.415. 010(1), which provides the commission with the authority to pass rules for the administration of this chapter; sec.415.010(7) which provides for contracts; sec.415.010(9) which provides the commission with authority to establish minimum standards; and sec.415.031(a) which requires the commission to establish and maintain training programs; and under the Texas Government Code, Chapters 2001 and 2002, which taken together establish the procedures for the rule making requirements for the commission. sec.215.66. Agreement Training. (a) The commission may, in the discretion of the executive director, enter into an agreement with a law enforcement agency, a law enforcement association, or alternative delivery trainer to conduct training for license holders. (b) Any such agreement is limited to those terms expressly included in the agreement or incorporated by reference and must be dated and: (1) in writing on a commission form; (2) signed by the executive director; (3) signed by the chief administrator or head of the sponsoring organization; and (4) signed by the training coordinator responsible for the administration of that training. (c) An agreement may approve a specific course(s) and the number of times it will be offered. These contracts are perpetual but may be terminated for cause within ten days by written notice on the part of either party to the contract. An agreement may incorporate by reference a law, rule, or any other document. However, any waiver, exception, or deletion must be express. (d) The executive director may terminate an agreement if no training is conducted within each calendar year unless the chief administrator has petitioned the executive director for a waiver, and the waiver has been granted. The executive director may suspend an agreement, until compliance, for any violation of its terms or of any commission rule or law. Any party may terminate upon written notice to all other parties, received by either the executive director, the coordinator, or any other named person or office. (e) The agreeing agency, association, or alternative delivery trainer must: (1) provide a comprehensive needs assessment to the executive director justifying the need for an agreement. The needs assessment must include as a minimum: (A) the names of the licensed academies located in the council of governments or regional planning commission area of the requesting party; (B) a description of the existing law enforcement training programs in the area; (C) what specific training need(s) are to be addressed by the proposed agreement contract. (D) the number and types of courses that will be offered during the first quarter of the executed contract; (2) appoint and maintain an advisory board as required by law and rule; (3) follow the current requirements set by its advisory board; (4) select a training facility that meets all academy inspection requirements, if applicable; (5) select any instructional material, equipment, or resources necessary for the course; (6) forward for approval, upon the executive director's request, at least one copy of the learning objectives of each course covered by the agreement; (7) appoint and maintain the appointment of a qualified training coordinator; (8) insure the training coordinator discharges any responsibilities required by law, rule, or agreement; (9) select and monitor the performance of qualified instructors; (10) admit any license holder subject to any reasonable limitations or preferences required by the advisory board; (11) insure effective training and distribute learning objectives to each student before the course is taught; (12) teach or insure that each course is taught in accordance with the instructor guide and/or learning objectives provided or approved by the commission; (13) keep records of all agreement training for at least five years; and (14) proctor any required examination and insure fair, honest results. (f) Unless expressly waived by the agreement: (1) an advisory board for agreement training must discharge the responsibilities of such boards as required by law or rule; and (2) a training coordinator for an agreement must discharge the same responsibilities as an academy training coordinator and must hold a valid instructor license. (g) By entering into any such agreement, the commission preapproves specific training which will be fully credited by the commission to each student as basic or in-service training or to the agency as in-service training provided by that agency, unless: (1) the training was not conducted in compliance with the agreement; or (2) the advisory board, training coordinator, or instructor substantially failed to discharge any responsibility required by rule. (h) Once the agreement has been executed, the agreement trainer may be evaluated periodically by the commission as determined by the executive director. The evaluation may be accomplished by commission staff or by training professionals selected and trained by commission staff. (i) The effective date of this section is September 1, 1994. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443603 Truman Lewis Assistant Director Texas Commission on Law Enforcement Officer Standards and Education Effective date: September 1, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 450-0188 The Texas Commission on Law Enforcement Officer Standards and Education (commission) adopts new sec.215.67 to establish consistent guidelines for both licensed academies and agreement training providers, with one change to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3637). The change is at subsection (k) where it is changed to its to correct a typographical error. This section amends and replaces repealed sec.211.67, concerning Academy Advisory Boards, and sec.211.75, concerning Advisory Boards. This section is renumbered to provide better administrative control and consistency in the numbering scheme. Section 215.67 was adopted as Final Order 94-6. No comments were received regarding adoption of this new section. 37 TAC sec.215.67 The new section is adopted under Texas Government Code, Chapter 415, sec.sec.415.010(1), 415.031(a), and 415.031(c), which provides the commission with the authority to pass rules for the administration of Chapter 415; and under the Texas Government Code, Chapters 2001 and 2002, which taken together establish the procedures for the rule making requirements for the commission. sec.215.67. Training Provider Advisory Boards. (a) Each licensed academy and each agreement training provider approved by the commission must establish and maintain an advisory board as required by law. To be established, this board must have at least three members who are appointed by the sponsoring organization. To be maintained, the active, appointed membership of the board must not fall below a quorum for more than 30 days. (b) The board may have members who are law enforcement personnel. However one- third of the members must be public members having the same qualifications, found in the Government Code, sec.415-005, as any commissioner who is required by law to be a member of the general public. The chief administrator or head of the sponsoring organization and the designated training coordinator may only be ex-officio, non-voting members. (c) The board must elect a chairman and may elect other officers and set its own rules of procedure. A quorum must be present in order to conduct business. (d) A board must meet at least once each calendar year. More frequent meetings may be called by its chairman, the training coordinator, or the person who appoints the board (e) A board will keep written minutes of all meetings. These minutes must be retained for at least five years and a copy forwarded to the commission upon board approval. (f) Board members will be appointed by the following authority: (1) for an agency academy, by the chief administrator as defined in sec.211.1 of this title (relating to definitions); (2) for a college academy, by the dean or other person who appoints the training coordinator; or (3) for a regional academy, by the head of the council of governments or other sponsoring entity holding the academy license from names submitted by chief administrators from that area; or (4) for an agreement training provider, by the chief administrator. (g) A member may be removed by the appointing authority. (h) A board is generally responsible for advising on the development of curricula and any other related duty that may be required by the commission. (i) The board must, as specific duties: (1) effectively discharge its responsibilities and otherwise comply with commission rules; (2) advise on the need to study, evaluate, and identify specific training needs; (3) advise on the determination of the types, frequency, and location of course to be offered; and (4) advise on the establishment of the standards for admission, prerequisites, minimum and maximum class size, attendance, and retention. (j) A board must advise on the establishment of admission standards, and determine the order of preference between employees or prospective appointees of the sponsoring organization and other persons, if any. No person may be admitted to a training course without meeting the admission standards. (k) A board may, when discharging its responsibilities, request that a report be made or some other information be provided to them by a training or course coordinator. (l) The effective date of this section is September 1, 1994. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443604 Truman Lewis Assistant Director Texas Commission on Law Enforcement Officer Standards and Education Effective date: September 1, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 450-0188 Chapter 221. Proficiency Certificates and other Post-Basic Licenses Division 37 TAC sec.221.100 The Texas Commission on Law Enforcement Officer Standards and Education (commission) adopts new sec.221.100 with changes to the proposed text as published in the May 13, 1994, issue of the Texas Register (19 TexReg 3638). The commission is required by statute to establish and maintain minimum training standards for peace officers, reserve law enforcement officers, county jailers, and public security officers. A part of the statutorily required training is mandated continuing education in specific topic areas. Senate Bill 473, Acts of the 73rd Texas Legislature, amended existing provisions of Government Code, Chapter 415, by adding new topics. It is an objective of the Commission to implement fully the spirit and intent of the new provisions. The citizens of Texas derive a benefit when law enforcement practitioners are adequately trained in contemporary issues that affect all the various segments of society. Some of these issues are addressed in the amended continuing education statute. sec.221.100 will amend and replace sec.211. 100, which did not address all provisions of the amended statute. The new section was adopted with changes at the June 14, 1994, regular quarterly meeting of the commission. The changes made were to subsection (b) adding ". . ., beginning September 1, 1993," and to subsection (d) deleting ". . . or September 1, 1993, whichever is later". Section 221.100 was adopted as Final Order 94-1. An oral comment was received during the June 13, 1994, commission work session meeting. An individual from the Fort Bend County Sheriff's Office, Richmond, asked for clarification whether the commencement date of September 1, 1993, referred to in subsection (d), applies to constables only, or to all peace officers covered by sec.221.100. The assistant director clarified that subsection (d) applies to constables and/or their deputies. He pointed out that the law the commission is implementing in this section went into effect September 1, 1993, but the provisions for in-service training for constables and their deputies went into effect September 1, 1991. The reference to September 1, 1993, was deleted from subsection (d), and subsection (b) was changed to include the effective date of September 1, 1993. The new section is adopted under Texas Government Code, Chapter 415, sec.415. 010(1), which provides the commission with authority to pass rules for the administration of Chapter 415; sec.415.034(a) and (b), which requires the commission to recognize, prepare, or administer continuing education programs, and to require law enforcement agencies to provide such training; and under Texas Government Code, Chapters 2001 and 2002, which taken together establish the procedures for the rule making requirements for the commission. sec.221.100. In-service Training Requirements for Agencies that Law Enforcement Officers, County Jailers, and Public Security Officers. (a) An agency that appoints or employs county jailers, or public security officers may provide, as defined in subsection (f) of this section, and during each 24-month period, training and instruction in civil rights, racial sensitivity, and cultural diversity. (b) An agency that appoints peace officers or reserve law enforcement officers shall provide, as defined in subsection (f) of this section, the in-service training program required by this section. The program shall consist of one or more in-service courses, that total at least 40 hours during each 24-month period, beginning September 1, 1993, and must: (1) be approved by the commission; and (2) include education and training in: (A) civil rights, racial sensitivity, and cultural diversity; and (B) the recognition of cases that involve the following: (i) child abuse; (ii) child neglect; (iii) family violence; and (iv) sexual assault. (c) An officer appointed to the officer's first supervisory position on or after September 1,1993 must receive in-service training on supervision as part of a course or courses provided under subsection (b) of this section during the 24-month period after the date of that appointment. (d) All constables and their deputies, as a part of their 40 hour in-service training requirement, shall complete 20 hours of instruction in civil process. A constable may, by written certification to the commission, exempt from the civil process training those deputies who do not serve process. The first 24-month period shall commence for each peace officer on that officer's date of appointment. (e) An agency may voluntarily require of or provide to, any peace officer or other person employed or appointed by that agency, any additional training that exceeds this required in-service program. (f) An agency provides a program or course, for purposes of this section if: (1) the agency orders or requires attendance and successful completion as a condition of continued employment or appointment; and the agency pays all the cost of attendance and provides direct or compensatory time off for attendance; or (2) the agency requires attendance and successful completion as a condition of continued commissioning; and the agency has issued the commission as provided by law to an officer who is appointed by another entity. (g) An in-service training program shall consist of one or more separate in- service courses, each of which shall have a final examination or skills test, as appropriate, which must be passed before course completion credit will be awarded. Any such course shall be reasonably related to the current or prospective duties of each person who attends; and at least one such course provided by each agency should include instruction in recent changes in criminal or civil law. (h) Unless otherwise provided by law, rule, or agreement, an agency or advisory board responsible for any in-service course shall, within its discretion: (1) govern the conduct of that course; (2) control the length, the number of times taught, and the specific content of any course; and (3) assign any or all officers to attend any particular course. (i) The effective date of this section is September 1, 1994. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443600 Truman Lewis Assistant Director Texas Commission on Law Enforcement Officer Standards and Education Effective date: September 1, 1994 Proposal publication date: May 13, 1994 For further information, please call: (512) 450-0188 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 27. Intermediate Care Facilities for the Mentally Retarded (ICFs-MR) Subchapter B. Contracting Requirements 40 TAC sec.27.203 The Texas Department of Human Services (DHS) adopts an amendment to sec.27. 203, concerning provider applications, in its Intermediate Care Facilities for the Mentally Retarded (ICFs-MR) rule chapter, with changes to the proposed text as published in the May 27, 1994, issue of the Texas Register (19 TexReg 4170). The justification for the amendment is to clarify the provider application rule regarding qualifications and requirements of a new applicant, refinanced facilities, half-mile rule, commensurate wages, and time frames. The amendment will function by improving quality of services provided by ICFs- MR resulting from changes to the application process. No comments were received regarding adoption of the amendment; however, DHS is adopting subsection (d)(3)(A) with a change to clarify that requests for a change in location following application approval must be in writing. The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs and under Texas Civil Statutes, Article 4413 (502), sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The amendment implements the Human Resources Code, sec. sec.32.001-32.042. sec.27.203. Provider Applications. (a) (No change.) (b) All applicants for participation in the Intermediate Care Facility for the Mentally Retarded (ICF/MR) Program must submit an application to the Texas Department of Mental Health and Mental Retardation (TXMHMR) for review and approval. The application must include documentation to verify the applicant's ability to ensure the delivery of quality care and services. (1) The documentation submitted must indicate that the following persons will have completed the ICF/MR preapplication training course prior to approval of the application: (A) the applicant and/or a designated representative, other than a consultant; and/or (B) the individual who will be responsible for the direct management of the facility; or (C) those who, at the time of application, are not owners of an ICF/MR facility in the Texas ICF/MR Program. (2) If the employment status of the persons specified in paragraph (1) of this subsection changes prior to approval of the application, approval of the application will be postponed until the appropriate persons complete the training. (c) All applications are limited to one level-of-care classification (I, V, VI, or VIII) and must meet the requirements specified in paragraphs (1)-(5) of this subsection. (1) Requested certification is limited to a maximum of six beds per facility, except for those facilities funded only through state general revenue and being refinanced by TXMHMR during fiscal year 1994-1995. This includes new facilities seeking initial certification and currently certified facilities seeking to increase the certified bed capacity. During the 1994-1995 biennium, facilities funded only through general revenue and refinancing under the ICF/MR Program that have more than six beds must become six-bed facilities within three years from the date of TXMHMR approval of the ICF/MR application packet. (2) The proposed facility is in compliance with applicable special use permit requirements, local zoning, and/or occupancy code requirements, and sec.27.201 of this title (relating to Participation Requirements). The proposed facility must also meet the specifications described in subparagraphs (A) and (B) of this paragraph: (A) The applicant must submit information about the proposed facility which addresses the services detailed in clauses (i)-(iv) of this subparagraph. (i) Availability of 24-hour emergency medical services, utility services, fire protection, police and sheriff protection, waste water, and garbage disposal. (ii) If the proposed facility intends to serve individuals who are eligible for educational services, the application must include documentation to verify that the local school district has been notified of the development of the proposed facility. (iii) If the proposed facility intends to serve individuals who are 22 years of age and older, the application must include a description of how the program intends to provide and/or support the delivery of vocational, day habilitation, or supported employment services. (iv) If the services are to be provided by an entity other than the applicant or facility, the service provider must submit documentation of his intent to provide services to the individuals who will be residing in the proposed facility. If commensurate wages will be earned by individuals in a vocational services setting provided by the applicant, documentation of Department of Labor Certification is required. (B) The applicant must submit documentation that the proposed facility is not within a one-half mile radius of another ICF/MR, except in those community care facilities that were refinanced by TXMHMR during fiscal year 1994-1995. (3) A needs assessment has been conducted to include the following: (A) (No change.) (B) The applicant must submit documentation to verify that the Mental Retardation Authority in whose catchment area the proposed facility is located has been notified of the development of the proposed facility and the proposed facility's admission criteria. The applicant must obtain and submit two letters which address the need for the facility from the following sources: the superintendent of the state school and/or the executive director of the MHMR center in whose catchment area the proposed facility is located, advocacy groups, developmental disability service providers and organizations, school districts, and/or other appropriate developmental disability referral sources. Letters from individuals who have a financial interest in the proposed facility are not acceptable. The letters must: (i) refer specifically to the proposed facility by name and/or address; (ii) be current within six months prior to the submission of the application; and (iii) be printed on the letterhead of the acknowledging entity. (C) If the facility serves individuals qualifying for Level-of-Care VIII services, the applicant must additionally submit documentation that verifies that the regional DHS office and at least two other appropriate developmental disability referral sources, such as Head Injury Foundation and Spina Bifida Foundation, have been notified about the development of the proposed facility. (D) (No change.) (4) (No change.) (5) Facilities that are in the application process prior to initial certification, certified facilities, and licensed facilities requesting to reclassify must withdraw from the program and submit a new application for the new level of care. (d) The applicant has 270 calendar days from the date an application for participation in the ICF/MR program has been approved by TXMHMR to obtain certification by the Texas Department of Human Services (DHS). If, at the end of the 270-calendar-day period, the provider is unable to obtain certification, the request for program participation will be withdrawn by TXMHMR and the application will be returned to the applicant. (1) TXMHMR may grant applicants a 90-calendar-day extension for new construction delayed by inclement weather, natural disaster, construction strike, litigation, requirements of other state agencies, or other causes beyond the provider's control. New construction does not include renovations or modifications to existing structures. The request for the extension must: (A) be submitted in writing to TXMHMR prior to the end of the 270-calendar-day period; and (B) include documentation to support the circumstance which caused the delay. (2) If there is an agency delay which is not the fault of the applicant and results in failure to obtain certification within the 270-calendar-day period, an extension is granted to enable completion of the process. A copy of the written notification will be forwarded to the provider and the other state agencies involved. The length of the extensions is as follows: (A) new construction-90 days; (B) survey scheduling-not to exceed the scheduled date of survey; or (C) litigation-until: (i) litigation is resolved, plus 270 days if construction was stopped because of an injunction; or (ii) the scheduled date of survey, if: (I) there was no new construction; or (II) construction was allowed to continue. (3) If an applicant must change locations following application approval by TXMHMR, the change in location must: (A) be requested in writing within the first 30 days from the date of the original application approval and include the relocation information required by TXMHMR; (B) meet all requirements set forth in this section and be approved by TXMHMR, ICF/MR Section; (C) remain within the same geographic region as the previously approved location, as defined in TXMHMR's Plan on Long-Term Care for People with Mental Retardation or Related Conditions; and (D) not alter the applicant's ability to obtain certification within the 270- calendar-day time period set forth in this subsection. (e) To receive approval for participation, applications must meet all requirements set forth in this section and be in compliance with TXMHMR's Plan on Long-Term Care for People with Mental Retardation or Related Conditions. Applications that have not received approval from TXMHMR within a 90-calendar- day period from the date submitted will be withdrawn from the review process and returned to the applicant. (1) TXMHMR reserves the right to deny the approval of any application if the applicant or an affiliate has been excluded from Medicaid program participation under Chapter 79, Subchapter V, of this title (relating to Fraud and Abuse Involving Medical Providers) or debarred from contracting with DHS under sec. sec.69.275-69.279 of this title (relating to Debarment and Suspension of Current and Potential Contractor's Rights, Causes for and Conditions of Debarment, Causes for and Conditions of Suspension, Proof Required for Debarment and Suspension, and Notice Requirements for Debarment and Suspension) . TXMHMR also reserves the right to postpone the approval of any application if the applicant or an affiliate is currently under investigation or review for potential fraud, abuse, or misuse of Medicaid funds or for any violation for which a sanction could be taken under Chapter 79, Subchapters V, W, and X of this title (relating to Fraud and Abuse Involving Medical Providers, Fraud or Abuse Involving Individual or Major Providers (Except Medical), and Recovery of Benefits Wrongfully Received). (2) As necessary, TXMHMR, ICF/MR Program staff will contact the applicant to facilitate completion of the application process. Upon approval, TXMHMR will notify DHS that the facility can begin the certification survey process. If a change in ownership or control occurs after the application is approved, but before the facility is certified, the application will be withdrawn and returned to the original owner and/or applicant. Applications are not transferable prior to certification of the facility. If a facility loses its license: (A) its certification will be revoked; and (B) the facility's provider contract will be canceled. (3) The contract for services is dependent on compliance with the provisions of this section. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443660 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: August 1, 1994 Proposal publication date: May 27, 1994 For further information, please call: (512) 450-3765 Subchapter D. Reimbursement Methodology 40 TAC sec.27.413 The Texas Department of Human Services (DHS) adopts an amendment to sec.27. 413, concerning rate setting methodology, in its Intermediate Care Facilities for the Mentally Retarded (ICFs-MR) rule chapter, with changes to the proposed text as published in the April 29, 1994, issue of the Texas Register (19 TexReg 3239). The justification for the amendment is to modify the reimbursement methodology for ICF-MR Level V children's facilities to ensure adequate payment to care for children in this class. The amendment will function by allowing the only Level V ICF-MR special children's facility to continue to operate. This facility is dedicated to serving disabled children with mental retardation or a related condition. During the public comment period, DHS received comments from representatives of Advocacy, Incorporated; the Arc of Texas; the Disability Policy Consortium; the Texas Planning Council for Developmental Disabilities; the American Disabled for Attendant Programs Today; the Health Care Financing Administration; United Cerebral Palsy of Texas; the Ada Wilson Children's Center for Rehabilitation; and several individuals. A summary of the comments and DHS's responses follows: Comment: Several commenters stated that the proposed reimbursement rule conflicts with DHS's Community Impact Statement. Response: While it is true that the proposed rule conflicts with the Community Impact Statement, it is just a temporary measure that will expire on October 1, 1994. Since the rulemaking function will be taken over by the Texas Department of Mental Health and Mental Retardation on September 1, 1994, the decision whether or not to continue with the temporary rules would be made by that agency. The rule is needed so that no disruption will occur for DHS's clients until a longer-term solution is developed. Comment: Several commenters stated that since DHS is proposing a new facility- specific reimbursement methodology, it should not be necessary to make the proposed change for the special children's facility class. Response: The earliest that the proposed facility-specific methodology would be implemented would be January 1, 1995. The proposed methodology for the special children's facility class would be a temporary measure until October 1, 1994. Comment: Commenters felt that setting a special rate for one special children's facility would encourage other providers to request special treatment for their facilities. They questioned how much extending the same treatment to other facilities would cost and whether failure to extend similar treatment to other facilities would raise "equal protection" issues. Response: Although the proposed rules would only affect the Ada Wilson facility, another provider outside the special children's class has requested similar treatment. If similar treatment were extended to all ICFs-MR, the estimated cost to the state would be at least $8 million annually. Regarding equality of treatment, the facility affected by the proposal is unique in that it is the only large Level V children's facility in the state and, along with four other large Level VI children's facilities, this facility is recognized as a special-payment class in published rules and in the Texas Medicaid State Plan, pursuant to the Royal Thomas v. Marlin Johnston lawsuit settlement agreement. Comment: Several commenters stated that they did not think enough information was presented to demonstrate the necessity for a special rate for Ada Wilson. Response: DHS and the Texas Department of Mental Health and Mental Retardation (TXMHMR) have been meeting with representatives of Ada Wilson for two years discussing the revenue shortfalls. TXMHMR staff have visited the facility to examine staffing and cost issues. The methodology that was proposed is designed to cover additional costs for enhanced services tailored to the needs of this particular population in this setting. Comment: One commenter recommended that the following actions be taken regarding the proposed methodology: (1) that DHS reaffirm its commitment to community services, (2) that any increase in funding for Ada Wilson be conditioned upon a redirection of effort toward developing community services, with specific time lines, and (3) that incentives be developed for Ada Wilson to increase community services to a point where the operation was not dependent upon residential services funding. Response: DHS is forwarding these recommendations to TXMHMR because that agency will be taking on responsibility for the ICF-MR program on September 1, 1994. Comment: One commenter requested clarification regarding the method and the base period which will be used to project historical costs. Response: DHS is adopting subsection (c)(3)(E)(iii) with changes to provide the requested clarification. In addition, DHS is adopting subsection (c)(3)(E) (v) with a change to clarify that the state will recoup nonexpended Medicaid payments, and is adopting (c)(3)(E)(vi) to add a reference to the State Plan amendment process which would be needed to replace or modify the methodology after September 30, 1994. The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs and under Texas Civil Statutes, Article 4413 (502), sec.16, which provides the Health and Human Services Commission with the authority to administer federal meeical assistance funds. The amendment implements the Human Resources Code, sec. sec.22.001, 22.002, and 32.001-32.042. sec.27.413. Rate Setting Methodology. (a)-(b) (No change.) (c) Rate determination. The Texas Board of Human Services determines general reimbursement rates for medical assistance programs for Medicaid recipients under the provisions of Chapter 24 of this title (relating to Reimbursement Methodology). The Texas Board of Human Services determines particular reimbursement rates for each class of ICF-MR provider by class of service based on consideration of Texas Department of Human Services (DHS) staff recommendations. To develop a separate set of reimbursement rate recommendations for each class of service within each provider class, DHS staff apply the following procedures. (1)-(2) (No change.) (3) Alternate children's facility reimbursement rates for selected children's facilities are determined as follows, effective January 1, 1992. (A)-(D) (No change.) (E) Temporary method for determination of ICF-MR Level V alternative children's facility rates for the period beginning May 1, 1994. An eligible children's facility is reimbursed in the following manner: (i) Rates are based on projected per diem costs, not to exceed the current ICF-MR/RC-VIII base rate, including the estimated per diem cost of augmentative communication devices, plus the single highest supplemental rate amount, as specified under sec.27.415(c) of this title (relating to ICF-MR/RC VIII Experimental Class). The cost-based rates will not include a mark-up or incentive factor. (ii) Reimbursement for fixed capital assets is in the form of a use fee. The use fee will be paid in lieu of building and building equipment depreciation, land and leasehold amortization, mortgage interest, and/or building and building equipment lease expense. The annual use fee is calculated as 14% of the appraised value of buildings, improvements and land, as determined by local taxing authorities. If an appraisal by local taxing authorities is unavailable, the appraised value of the property is determined as the square footage of the facility devoted to ICF-MR services multiplied by the statewide median value per square foot of facilities in the large facility Level V class of service. The per diem use fee is calculated by dividing the annual use fee by anticipated facility days of service. (iii) Projected costs may be calculated by using pro forma estimates based on historical costs adjusted to reflect anticipated expenses related to resident care, active treatment, health and safety, or other areas deemed necessary by DHS for the particular children's population served. (iv) The portion of the Medicaid rate to a provider that represents administrative costs, as collected on the administrative cost area of the Medicaid cost report, is limited to the 90th percentile in the array of administrative costs for all large Level V ICFs-MR. (v) Any Medicaid payments not expended on Medicaid allowable costs will be recouped by the state. (vi) This temporary method remains in effect until September 30, 1994, or until formally replaced or modified through a State Plan amendment, whichever comes first. (d)-(e) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 7, 1994. TRD-9443668 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: August 1, 1994 Proposal publication date: April 29, 1994 For further information, please call: (512) 450-3765