The Texas Natural Resource Conservation Commission (commission) proposes new §80.108, Executive Director Party Status in Permit Hearings and §80.118, Administrative Record. The commission also proposes amendments to §80.17, Burden of Proof; §80.21, Witness Fees; §80.109, Designation of Parties; §80.117, Order of Presentation; §80.127, Evidence; §80.131, Interlocutory Appeals and Certified Questions; §80.153, Issuance of Subpoena or Commission to Take Deposition; §80.251, Judge's Proposal for Decision; §80.252, Judge's Proposal for Decision; §80.257, Pleadings Following Proposal for Decision; and §80.261, Scheduling Commission Meetings.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED RULES

In accordance with Texas Water Code (TWC) §5.228, the executive director of the commission is required to be a party to all contested case hearings. As a result of public testimony received during its comprehensive review of the commission, the Sunset Advisory Commission recommended that the statute be changed to allow, rather than require, the executive director to participate in contested case permit hearings. The Sunset Advisory Commission also recommended that: 1) the role of the executive director be more clearly defined; 2) that the executive director be expressly prohibited from rehabilitating non-agency witnesses in permit hearings; and (3) that the commission adopt rules specifying the factors the executive director must take into account when considering whether to be a party in a permit hearing.

This recommendation was codified in House Bill (HB) 2912, the Sunset Bill for the commission. Under HB 2912, TWC, §5.228, was amended to provide that the executive director is required to be a party in a contested case hearing only in a matter where the executive director bears the burden of proof (e.g., an enforcement proceeding). For permit hearings, the executive director may be a party only for the purpose of providing information to complete the administrative record. The commission is required to specify, by rule, the factors the executive director must consider in determining, on a case-by-case basis, whether to participate in a hearing as a party. Factors the commission must consider in developing these rules include: 1) the technical, legal, and financial capacity of the parties; 2) whether the parties have previously participated in a hearing; 3) the complexity of the issues; and 4) the available resources of commission staff. The executive director is expressly prohibited from rehabilitating the testimony of non-agency witnesses or from assisting an applicant in meeting its burden of proof unless that applicant fits a category of permit applicants that under commission rule are eligible for such assistance. The amendments to TWC, §5.228, take effect September 1, 2001, and apply only to hearings in which the executive director is named as a party on or after that date.

This rulemaking is necessary to implement the provisions of HB 2912 as close as practicable to their effective date.

SECTION BY SECTION DISCUSSION

Section 80.17, Burden of Proof, is proposed to be amended to reflect that the executive director must comply with proposed new §80.108, relating to the executive director's party status in permit hearings. This proposed change implements amended TWC, §5.228(e).

Section 80.21, Witness Fees, is proposed to be amended to clarify that a commission employee who is compelled to testify as a witness or deponent is only entitled to receive those expenses allowed by commission policy and applicable law.

New §80.108, Executive Director Party Status in Permit Hearings, is proposed to implement TWC, §5.228(b), (c), and (e). This proposed new section directs when, and under what circumstances, the executive director may participate in contested case permit hearings. This proposed new section provides for mandatory abstention of the executive director in some permitting matters, mandatory participation in other permitting matters, and discretionary participation, based on an evaluation of certain criteria, in permitting matters not covered by the mandatory provisions. The commission, in particular, solicits comments regarding the mandatory abstention provisions of proposed new §80.108(a) and whether the types of applications identified should be expanded or restricted.

New §80.108(a) would prohibit the executive director from participating in the following permit hearings: 1) an application concerning municipal solid waste where land use is the sole issue at hearing, including hearings held for determination of land use compatibility under Texas Health and Safety Code (THSC), §361.069; 2) an application for an air quality standard permit to authorize a concrete batch plant under THSC, §382.05195; 3) an application for an air quality permit to authorize emissions from facilities which solely emit the types of emissions that do not require health and welfare effects review as specified on the Toxicology and Risk Assessment (TARA) Emissions Screening List; 4) an application for a permit for a municipal solid waste transfer facility under 30 TAC §330.4; 5) an application for a permit for the processing of grit and grease trap waste under 30 TAC §330.4; 6) an application for a permit for composting facilities under 30 TAC §332.3; and 7) an application to authorize solely the irrigation of domestic or municipal wastewater effluent meeting the requirements for secondary treatment in 30 TAC Chapter 309. The hearings identified involve matters for which executive director participation is not necessary for one or more of the following reasons: 1) commission technical staff have limited expertise on the issue in controversy (e.g., land use compatibility); 2) the permit conditions for the authorization sought have been developed after extensive technical evaluation and no other unique conditions are involved (e.g., concrete batch plant standard permits); or 3) the issues to be considered are of limited complexity or are ones for which the technical evaluation of staff as reflected in the administrative record, is not likely to require further elaboration.

New §80.108(b) proposes that the executive director be required to participate in the following matters: 1) applications concerning water rights; 2) applications for which the executive director has recommended denial of the permit; 3) involuntary amendments; 4) applications for which the draft permit includes provisions opposed by the applicant; and 5) applications for which the applicant has requested a hearing under 30 TAC §55.27(b) and §55.211(c). Executive director participation in the matters identified in 1) - 5) is proposed for one or more of the following reasons: 1) the executive director is essentially serving in the role of trustee of a natural resource (e.g., water rights); or 2) the executive director's position in the proceeding is contrary to that of the applicant and his participation is necessary to ensure that the commission has the benefit of all relevant information necessary to make a decision (e.g., application for which the executive director has recommended denial).

If the mandatory provisions of this new section for participation or abstention do not apply, then §80.108(c) outlines the factors to be considered by the executive director in determining, in his discretion, whether to participate in a contested case permit hearing as a party. The executive director, as a preliminary matter, is to consider whether there is any issue that merits his participation, based on the existence of one or more of the following conditions: 1) one or more of the issues to be presented in the hearing are new, unique, or complex, including consideration of whether an issue relates to more than one medium, and whether it is likely that construction of prior agency policy or practice will be involved; 2) it is likely that the decision on any of the issues to be presented in the hearing will have significant implications for other agency actions or policies; 3) it is likely that changes to proposed permit conditions could adversely affect human health or the environment; or 4) any issue to be considered is likely to affect federal program approval or authorization.

Based on an evaluation of these conditions, the executive director may elect to participate as a party or he may proceed with an analysis of additional factors. These factors include whether there is a significant disparity in the legal and technical capacity, and if requested, financial capacity of the parties, whether there are limitations on the availability of commission staff and whether there is a need for the executive director to present an applicant's compliance history.

New §80.108 requires the executive director to notify all parties of his intention to participate in a contested case permit hearing as a party as soon as practicable and no later than one week after the end of the preliminary hearing. The executive director's decision on participation is not subject to review by either the commission or the State Office of Administrative Hearings (SOAH). New §80.108(d) states that when the executive director participates as a party under subsections (b) or (c), he shall do so solely for the purpose of providing information to complete the administrative record. New §80.108(e) clarifies that the executive director may only assist the applicant in meeting its burden of proof if the applicant is eligible for such help because it meets certain criteria. Those criteria are: 1) the applicant is a qualifying local governmental entity as defined in commission rule; or 2) the applicant is a non-profit entity; and 3) there is a significant public need for the permit to avoid imminent adverse impact to human health or the environment. New §80.108(f) provides that the executive director may assist an applicant in meeting its burden of proof notwithstanding subsections (a) - (d), which set forth the matters in which the executive director shall and shall not participate as well as the factors to be considered. The commission notes that as it develops further experience with implementation of the amendments to TWC, §5.228 under HB 2912, it may further refine in future rulemakings the provision relating to Executive Director Party Status in Permit Hearings.

Section 80.109(a), Designation of Parties, is amended to reflect that under certain circumstances, the executive director may be added as a party to a permit hearing after the date of the preliminary hearing, without the otherwise required finding of good cause and extenuating circumstances. Section 80.109(b) is amended to provide that the executive director is a required party in commission proceedings concerning matters in which the executive director bears the burden of proof. The executive director would also be named as a party to commission proceedings in matters concerning TWC, §§11.036, 11.041, and 12.013; TWC, Chapters 13, 35, 36, and 49 - 66; Texas Local Government Code, Chapters 375 and 395; matters arising under Texas Government Code, Chapter 2260 and 30 TAC Chapter 11, Subchapter D; and matters under TWC, Chapter 26, Subchapter I, and 30 TAC Chapter 334, Subchapters H and L. The executive director may also be a party in contested case hearings concerning permitting matters if he participates as a party in accordance with the provisions of §80.108. Proposed §80.109(b)(5) (formerly §80.109(b)(3)) is proposed to be amended to correct cross-references to rules relating to affected persons. The amended section is also proposed to be renumbered to accommodate the changes made in the rule.

Section 80.117, Order of Presentation, is proposed to be amended to remove the requirement that the executive director open with a simple statement of his position in a permit hearing. It is proposed that the applicant open the proceeding instead. The section is also proposed to be amended to that in those cases where the executive director is participating as a party, the executive director follows the applicant, protesting parties, and public interest counsel in presenting evidence.

New §80.118, Administrative Record, lists those documents which at a minimum constitute the administrative record. These include: 1) the final draft permit, including any special provisions or conditions; 2) the summary of the technical review of the permit application; 3) the compliance summary of the applicant; 4) copies of the published and/or mailed public notices relating to the permit application, as well as affidavits of public notices; and 5) any agency document determined by the executive director to be necessary to reflect the administrative and technical review of the application. New §80.118(b) states that for the purpose of referrals to SOAH under §80.5 and §80.6, the chief clerk's case files must include the administrative record described in subsection (a).

Section 80.127, Evidence, is proposed to be amended to prohibit the executive director from rehabilitating the testimony of a non-agency witness in permitting matters. The executive director may only rehabilitate agency witnesses who are testifying solely for the purpose of completing the administrative record. The proposed change implements TWC, §5.228(d). A new subsection (h) is also proposed to be added to clarify that commission staff testimony or evidence relating to the administrative record as defined by proposed new §80.118 or any other executive director function required by law shall not constitute assistance to permit applicants in meeting their burden of proof.

Section 80.131, Interlocutory Appeals and Certified Questions, is proposed to be amended to reflect that the judge must send copies of certified questions to the executive director, whether or not he is a party to the hearing. Copies of all briefs and replies must be served on the executive director in accordance with 30 TAC §1.11. The executive director may file briefs and responses to all certified questions. Finally, the chief clerk is required to give the executive director notice of any commission meeting where the certified questions will be considered. These amendments would allow executive director participation on significant policy issues certified to the commission regardless of party status.

Section 80.153(a), Issuance of Subpoena or Commission To Take Deposition, is proposed to be amended to add a cross-reference to §80.21, which specifies the witness fees that must be paid. A new subsection (f) is also proposed to be added to explicitly provide that the executive director's legal staff may participate in defending the deposition of any agency employee upon whom a subpoena or commission is served.

Section 80.251, Judge's Proposal for Decision, applies to any application that is administratively complete before September 1, 1999. Section 80.252, Judge's Proposal for Decision, applies to any application that is administratively complete on or after September 1, 1999. These sections are proposed to be revised to require that the SOAH judge send to the executive director a copy of the proposal for decision regardless of his party status.

Section 80.257, Pleadings Following Proposal for Decision, is proposed to be amended to clarify that any party may file exceptions or briefs. It is also proposed that for permit hearings in which the executive director has not participated as a party, the commission or the general counsel may request that the executive director file briefs.

Section 80.261, Scheduling Commission Meetings, is proposed to be amended to require that the SOAH judge, in all cases, notify the executive director of the date of the commission meeting at which a proposal for decision will be heard. Additionally, this section is proposed to be revised to require that the chief clerk notify the executive director of any rescheduled commission meetings, whether or not he is a party to the hearing.

The proposed changes to §§80.153, 80.251, 80.257, and 80.261 are intended to ensure that the executive director is kept informed of the status of commission proceedings regardless of party status.

FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT

John Davis, Technical Specialist with Strategic Planning and Appropriations, determined for the first five-year period the proposed rules are in effect, there may be fiscal implications, which are not anticipated to be significant, to units of state or local government as a result of implementation of the proposed rules. The executive director is currently required to be a party to all contested case hearings for permits. The proposed rules are intended to require the executive director to be a party to a contested case permit hearing only when the executive director bears the burden of proof or when certain conditions are met.

The proposed rules are intended to implement certain provisions of HB 2912 (an act relating to the continuation and functions of the Texas Natural Resource Conservation Commission; providing penalties), 77th Legislature, 2001. Specifically, HB 2912 authorizes the executive director to participate as a party in contested case permit hearings before the commission or SOAH for the purpose of providing information to complete the administrative record. The proposed rules include an identification of matters in which the executive director shall and shall not participate as a party as well as specify the factors the executive director must consider in determining whether to participate as a party in a contested case hearing not covered by the mandatory provisions. Additionally, the proposed rules are intended to specify the categories of permit applicants eligible to receive assistance in meeting their burden of proof.

The proposed rules require that when choosing whether to participate as a party in a contested case hearing, the executive director has to consider as a preliminary matter whether any issue to be presented merits participation. If the executive director finds that any issue merits participation, he may elect to participate as a party or he may also consider the following factors: whether there is a significant disparity in the legal and technical, and if requested, financial capacity of the parties; whether there are limitations on the availability of agency staff; and whether there is a need for the executive director to present an applicant's compliance history.

In order for the executive director to assist an applicant in meeting its burden of proof in a contested case hearing concerning a permitting matter before the commission or the SOAH, the proposed rules set forth the following criteria: the applicant is a qualifying local governmental entity; or the applicant is a non-profit entity; and there is a significant public need for the permit to avoid imminent adverse impact to human health or the environment.

The commission does not anticipate that units of state and local government will incur significant costs due to implementation of the proposed rules. However, implementation of the proposed rules may result in the executive director participating in fewer contested case permit hearings as a party, which may provide a cost savings to the commission, in an amount that is not anticipated to be significant.

PUBLIC BENEFIT AND COSTS

Mr. Davis also determined for each year of the first five years the proposed rules are in effect, the public benefit anticipated from enforcement of and compliance with the proposed rules would be to ensure the executive director does not unnecessarily participate as a party in contested case permit hearings.

The proposed rules are intended to implement certain provisions of HB 2912. Specifically, HB 2912 authorizes the executive director to participate as a party in contested case permit hearings before the commission or the SOAH for the sole purpose of providing information to complete the administrative record. The proposed rules include an identification of matters in which the executive director shall and shall not participate as a party as well as specify the factors the executive director must consider in determining whether to participate as a party in a contested case hearing not covered by the mandatory provisions. Additionally, the proposed rules set forth the categories of permit applicants eligible to receive assistance in meeting their burden of proof.

The commission does not anticipate that individuals and businesses will incur significant costs due to implementation of the proposed rules.

SMALL BUSINESS AND MICRO-BUSINESS ASSESSMENT

There will be no significant adverse fiscal implications for small or micro-businesses as a result of implementation of the proposed rules. The proposed rules are intended to implement certain provisions of HB 2912. Specifically, HB 2912 authorizes the executive director to participate as a party in contested case permit hearings before the commission or the SOAH for the sole purpose of providing information to complete the administrative record.

The proposed rules are intended to specify the conditions under which the executive director shall or shall not participate as a party in a contested case hearing. Additionally, the proposed rules are intended to specify the categories of permit applicants eligible to receive assistance in meeting their burden of proof.

The commission anticipates that small or micro-businesses will not incur significant costs due to implementation of the proposed rules.

DRAFT REGULATORY IMPACT ANALYSIS DETERMINATION

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

Major environmental rule means a rule the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. Because the specific intent of the proposed rulemaking is procedural in nature and establishes procedures for the executive director's participation as a party in contested case hearings on permitting matters, the rulemaking does not meet the definition of a major environmental rule.

In addition, even if the proposed rules are a major environmental rule, a draft regulatory impact assessment is not required because the rules do not exceed a standard set by federal law, exceed an express requirement of state law, exceed a requirement of a delegation agreement, or propose to adopt a rule solely under the general powers of the agency. This proposal does not exceed a standard set by federal law. This proposal does not exceed an express requirement of state law because it is authorized by the following state statutes: Texas Government Code, §2001.004, which requires state agencies to adopt rules of practice; and TWC, Chapter 5, Subchapter F, as well as the other statutory authorities cited in the STATUTORY AUTHORITY section of this preamble. This proposal does not exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program because the rule is consistent with, and does not exceed, federal requirements, and is in accordance with TWC, §5.228, which expressly requires the commission to adopt rules necessary to specify the factors the executive director must consider in determining whether to participate as a party in a contested case permit hearing. Further, TWC, §5.228, requires the commission to adopt rules that establish categories of permit applicants eligible to receive assistance from the executive director in meeting their burden of proof. This proposal does not adopt a rule solely under the general powers of the agency, but rather under a specific state law (i.e., TWC, Chapter 5, Subchapter F and Texas Government Code, §2001.004). Finally, this rulemaking is not being proposed or adopted on an emergency basis to protect the environment or to reduce risks to human health from environmental exposure.

TAKINGS IMPACT ASSESSMENT

The commission evaluated the proposed rules and performed a preliminary analysis of whether Texas Government Code, Chapter 2007 is applicable. The commission's preliminary analysis indicates that Texas Government Code, Chapter 2007 does not apply to the proposed rules. Nevertheless, the commission further evaluated the proposed rules and performed a preliminary analysis of whether the proposed rules constitute a takings under Texas Government Code, Chapter 2007. The specific primary purpose of the proposed rules is to revise the commission rules to establish procedures for executive director participation in contested case permit hearings as required by HB 2912, §1.20. The proposal relates to the factors the executive director must consider when deciding whether to participate as a party in a contested case permit hearing as well as to categories of permit applicants eligible to receive assistance in meeting their burden of proof from the executive director. The proposed rules will substantially advance these stated purposes by providing specific provisions on the aforementioned matters. Promulgation and enforcement of these rules will not affect private real property which is the subject of the rules because the proposed language relates to procedural matters relating to executive director party status rather than any substantive requirements.

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM

The commission reviewed the proposed rulemaking and found that the rules are neither identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11, nor will it affect any action/authorization identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11. Therefore, the proposed rules are not subject to the Texas Coastal Management Program.

ANNOUNCEMENT OF HEARING

A public hearing on this proposal will be held September 18, 2001 at 10:00 a.m. in Room 2210 of TNRCC Building F, located at 12100 Park 35 Circle, Austin. The hearing will be structured for the receipt of oral or written comments by interested persons. Individuals may present oral statements when called upon in order of registration. There will be no open discussion during the hearing; however, an agency staff member will be available to discuss the proposal 30 minutes before the hearing and will answer questions before and after the hearing.

SUBMITTAL OF COMMENTS

Comments may be submitted to Angela Slupe, MC 205, Office of Environmental Policy, Analysis, and Assessment, Texas Natural Resource Conservation Commission, P.O. Box 13087, Austin, Texas 78711-3087, or faxed to (512) 239-4808. All comments should reference Rule Log Number 2001-027-080-AD. Comments must be received by 5:00 p.m., September 24, 2001. For further information, please contact Kathy Ramirez, Regulation Development Section, at (512) 239- 6757.

Subchapter A. GENERAL RULES

The Texas Natural Resource Conservation Commission (commission) proposes amendments to §114.2, Inspection and Maintenance (I/M) Definitions; §114.50, Vehicle Emissions Inspection Requirements; §114.51, Equipment Evaluation Procedures for Vehicle Exhaust Gas Analyzers; and §114.53, Inspection and Maintenance Fees; the repeal of §114.52, Waivers and Extensions for Inspection Requirements; and new §114.52, Early Participation Incentive Program. The commission proposes these revisions to Chapter 114, Control of Air Pollution from Motor Vehicles, and to the state implementation plan (SIP) in order to control ground-level ozone in the Dallas/Fort Worth (DFW), Houston/Galveston (HGA), and El Paso (ELP) ozone nonattainment areas.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED RULES

In a prior rulemaking, the commission established an air pollution control strategy involving emissions testing of vehicles to reduce oxides of nitrogen (NO _x ) and other emissions necessary for the counties included in the DFW, HGA, and ELP nonattainment areas to be able to demonstrate attainment with the ozone national ambient air quality standard (NAAQS). The rulemaking adopted by the commission on December 6, 2000 and published in the January 12, 2001, issue of the Texas Register (26 TexReg 362) modified the vehicle emissions testing program by implementing acceleration simulation mode (ASM-2) testing and on-board diagnostics (OBD) testing for vehicles that are registered and primarily operated in the DFW and HGA nonattainment areas beginning May 1, 2002, in certain counties. Unlike the current two-speed idle (TSI) test, ASM-2 technology has the ability to detect NO _x emissions. Because NO _x is a precursor to ground-level ozone formation, reduced NO _x , and volatile organic compound (VOC) emissions will result in ground-level ozone reductions. El Paso will continue to implement TSI for vehicle model years vehicles 1995 and older and implement OBD for 1996 and newer vehicles. The inclusion of OBD in the I/M program satisfied a federal mandate requirement that all 1996 and newer model year vehicles would require an OBD check.

The primary reason for this proposed rulemaking is to implement portions of House Bill 2134 (HB 2134), 77th Legislature, 2001, related to waivers and test-on-resale, and the United States Environmental Protection Agency's (EPA's) Amendments to Vehicle Inspection Maintenance Program Requirements Incorporating the On-Board Diagnostic Check, Final Rule. These proposed amendments are also necessary to provide the commission and the Texas Department of Public Safety (DPS) with expanded authority and flexibility related to implementation of the revised I/M program adopted by the commission on December 6, 2000.

The proposed rulemaking requires all vehicle emissions test stations in the DFW, extended DFW (EDFW), and HGA program areas, with the exception of low volume emissions inspection stations, to offer both ASM-2 testing and OBD testing to the public; defines the term "low volume emissions inspection station"; requires all vehicle emissions inspection stations in the El Paso program area to offer both TSI testing and OBD testing to the public; adjusts the administrative portion of the test fees remitted to the state; increases fees for the El Paso area should the county opt into the low-income vehicle repair assistance, retrofit, and accelerated vehicle retirement program; requires a test-on-resale component; incorporates the TSI and ASM-2 specifications into one equipment specification document with an amended date; provides for new equipment requirements and specifications regarding OBD equipment; creates a new section to establish an early participation incentive program; and repeals §114.52.

SECTION BY SECTION DISCUSSION

The proposed amendments to §114.2, Inspection and Maintenance (I/M) Definitions, add a new definition for "low volume emissions inspection station" in paragraph (3). A "low volume emissions inspection station" is proposed to be defined as an inspection station that opts to perform OBD testing only and does not exceed 1,200 OBD tests per calendar year. This term required definition because of the proposed amendments to §114.50, which include an exception for facilities meeting this definition. The subsequent paragraphs are renumbered accordingly. Also, the definition for "on-board diagnostic system" was clarified by stating that all references to OBD should be interpreted to mean the second generation of this equipment, sometimes referred to as OBD II.

The proposed amendments to §114.50, Vehicle Emissions Inspections Requirements, revise program requirements for the state I/M program for vehicle testing and inspection. Proposed amendments to §114.50(a) add a requirement that all vehicle emissions test stations in the DFW, EDFW, and HGA program areas must offer both the ASM-2 test and the OBD test to the public. One exception to this requirement would be provided to low volume emissions inspection stations, as defined in proposed §114.2(3). If the owner of an emissions inspection station wishes to have his or her station classified as a low volume emissions inspection station, the owner must petition the DPS. The commission anticipates that DPS will develop the rules for petitioning for this classification in its upcoming rulemaking. The proposed revisions also include a requirement that all vehicle emissions inspection stations in the El Paso program area must offer both a TSI test and OBD test to the public. There would be no low volume emissions inspection stations in El Paso exempted from the requirement to offer both TSI and OBD tests.

The commission requests comments in regards to allowing new car dealers an exception from the requirement to offer both ASM-2 and OBD testing so that they may offer only OBD vehicle emissions testing for 1996 and newer model year vehicles in affected areas for the purpose of continuing their customer service and warranty agreements. This exception would not be limited by the number of tests per year performed by the dealers. The commission may include such an exception in the adopted version of these revisions.

Due to the addition of a proposed new subparagraph (C) in §114.50(a)(4), subparagraphs (D) - (G) are proposed to become (E) - (H). In proposed §114.50(a)(4)(H), the reference to subparagraphs (E) - (F) is corrected to reference subparagraphs (F) - (G) as a result of the renumbering. Also throughout §114.50, the statement "If OBD data cannot be collected from the vehicle, an EPA approved tail-pipe emissions test will be used" is proposed to be deleted because it is rare that OBD data cannot be collected from the vehicle. In those instances, the station will still check the OBD malfunction indicator light (MIL), one of the primary pass/fail criteria for OBD inspections. The commission believes that removing this provision will not have a significant impact on the effectiveness of the program, and it will avoid situations where cars might have to be sent to a different station to complete their emission test.

The proposed amendments to §114.50(b) revise paragraph (5) to delete the reference to the minimum expenditure waiver because this waiver was eliminated by HB 2134. The proposed revision to paragraph (6) adds the phrase, "or in any county adjacent to a program area" to extend the current remote sensing program to include cars commuting into the area from neighboring counties. This proposed revision is authorized by HB 2134. The proposed new paragraph (7) adds a test-on-resale component to the I/M program as required by HB 2134. Vehicles resold (any change of ownership except first sale) from a county without an I/M program into any I/M program county would not be eligible for title receipt or registration unless proof was presented that the vehicle had passed an approved vehicle emissions test within the past 90 days. Model year 1996 and newer vehicles with less than 50,000 miles would be exempt from the test-on-resale requirement. Current paragraph (7) is proposed to be renumbered as paragraph (8).

The proposed amendments to §114.50(c) delete the reference to §114.52, which is proposed to be repealed, and replaces it with a reference to 37 TAC §23.93, which contains the DPS requirements relating to waivers and extensions. The DPS is responsible for issuance and enforcement of waivers and extensions. All criteria and procedures for waivers and extensions are specified in DPS rules.

The proposed amendments to §114.51, Equipment Evaluation Procedures for Vehicle Exhaust Gas Analyzers, update the requirements for vehicle emissions testing equipment. This section currently specifies application, certification, maintenance, and service requirements for manufacturers or distributors of vehicle emissions testing equipment seeking approval of an exhaust gas analyzer or analyzer system for use in the Texas I/M program. Section 114.51(a) currently specifies a date of November 1, 2000 for the exhaust analyzer technical specifications known as "Specifications for Preconditioned Two Speed Idle (TSI) Vehicle Exhaust Gas Analyzer Systems for use in the Texas Vehicle Emissions Testing Program," and "Specifications for Acceleration Simulation Mode (ASM-2) Vehicle Exhaust Gas Analyzer System for use in the Texas Vehicle Emissions Testing Program." The revised rule incorporates the current TSI specifications into the current ASM-2 specifications and to make some minor revisions to the requirements. The new specification would be titled "Specifications for Vehicle Exhaust Gas Analyzer Systems for use in the Texas Vehicle Emissions Testing Program," dated June 15, 2001.

Additionally, the revised section would include a new specification titled "Specifications for On- Board Diagnostics II for use in the Texas Vehicle Emissions Testing Program," dated June 15, 2001, to provide the specifications for all OBD test equipment used in the program. Also, the proposed revision to §114.51(b)(5) renames the Texas Data Link to the Texas Information Management System to reflect the current name of the contract to manage the exchange of vehicle test data.

The commission has worked with stakeholders to ensure that the proposed specifications are as close as possible to their final form. Based upon the short time frame for the certification of equipment to these standards, the commission felt that it was imperative that the manufacturers be able to begin work on the testing equipment immediately. Due to the input of the stakeholders, the commission does not anticipate receiving comments that will result in major changes to the equipment analyzer specifications. If the commission decides that minor changes are warranted to clarify conflicts or errors in the existing specifications, then notification to potential analyzer equipment providers will be made as expeditiously as possible.

The current §114.52, Waivers and Extensions for Inspection Requirements, is proposed to be repealed because these requirements are duplicative of those contained in DPS rules, 37 TAC §23.93, relating to Vehicle Emissions Inspection Requirements. Currently, the DPS is responsible for the issuance and enforcement of waivers and extensions; therefore, these requirements do not need to be included in the commission's rules. House Bill 2134 created a new low mileage waiver requirement. Program requirements will be waived for a failed vehicle on which at least $100 has been spent to bring the vehicle into compliance and which has been driven less than 5,000 miles since the last safety inspection and will be driven less than 5,000 miles before the next safety inspection, as determined by DPS. House Bill 2134 also eliminated the minimum expenditure waiver which allowed for a waiver from I/M requirements if an individual spent at least $450 to repair the vehicle and it still did not meet emissions standards. The commission anticipates that DPS will adopt and implement the waiver requirements revised by HB 2134 in its upcoming rulemaking.

The proposed new §114.52, Early Participation Incentive Program, is meant to encourage owners and operators of emissions inspection stations to participate early in the purchase of ASM-2 equipment to ensure an adequate number of emissions inspection stations are available by the program start date. The proposed new section explains the program eligibility requirements, program acceptance criteria, enrollment and documentation requirements, and the incentive payment plan. The incentive program would be available to the owners or operators of the first 1,000 eligible emissions inspection stations in Dallas, Tarrant, Denton, Collin, and Harris Counties or adjacent counties. The proposed incentive would provide emissions inspection station owners or operators with a financial assurance if ASM-2 testing were to be terminated within three years of the program start date on May 1, 2002. The number of years will be calculated as the number of 12-month periods since the program start date, not calendar years. If ASM-2 testing were to be terminated during the first two years of the program, the proposed rule provides that emissions inspection station owners or operators accepted into the early participation incentive program would receive a payment of $675 per month for the remainder of the three-year period. The payment amount is approximately 75% of the average initial capital investment of ASM-2/OBD equipment ($40,000) less $8,000 for the OBD portion of the equipment which can continue to be used for emission testing of 1996 and newer vehicles, spread over 36 months. If ASM-2 testing were to be terminated during the third year of the program, the proposed rules provide that all inspection station owners or operators accepted into the early participation incentive program whose stations have conducted less than 5,000 emissions tests at program termination would receive a payment of $675 per month for the remainder of the third year. The proposed rules also give the executive director authority to accept additional stations into the program at his discretion if necessary to ensure adequate distribution of stations throughout the program areas.

The commission requests comments on the adequacy of the incentive amount and payment terms. Specifically, the commission requests comments on the concept of extending the protection over a longer period of time, e.g five years at lesser monthly payments than proposed.

For affected program areas that begin ASM-2 testing in May 2003 (Brazoria, Fort Bend, Galveston, Montgomery, Ellis, Johnson, Kaufman, Parker, and Rockwall Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive will be available to the owners or operators of the first 200 eligible inspection stations.

For affected program areas that begin ASM-2 testing in May 2004 (Chambers, Liberty, and Waller Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive will be available to the owners or operators of the first 30 eligible inspection stations.

The proposed amendments to §114.53, Inspection and Maintenance Fees, establish the state administrative fees to be remitted to DPS out of each inspection fee. Proposed §114.53(a)(2) specifies a $2.50 state administrative fee from the test fee of $14 for TSI and OBD testing in El Paso County. The section is also revised to provide that if a resolution is passed by the El Paso County Commissioners to participate in the Low Income Repair Assistance Program (LIRAP) to be established in a separate rulemaking, the test fee in El Paso County would be $17 and the administrative fee would be $5.50 ($2.50 state administrative fee plus $3.00 to fund the LIRAP) from each TSI and OBD test fee. Proposed §114.53(a)(3) and (4) specify a $2.50 state administrative fee for an ASM-2 test and an $8.50 fee ($2.50 state administration fee and $6.00 to fund LIRAP) for an OBD test to be remitted from the test fee of $22.50 in the DFW, EDFW, and HGA nonattainment areas. These administrative fees will be remitted to DPS by the inspection station owners at the time inspection station owners purchase inspection stickers.

The commission requests comments on the adequacy of the test fee. The commission is aware of concerns that the test fee does not take into account the cost of an increased number of retests due to the higher failure rate expected. Based upon comments received regarding the overall adequacy of the fee, the commission may consider changes to the test fee for ASM and OBD testing upon adoption of these rules.

FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT

John Davis, Technical Specialist with Strategic Planning and Appropriations, determined that for the first five-year period the proposed rules are in effect, it is anticipated that the commission will receive additional revenues of approximately $3.9 million in Fiscal Year (FY) 2002, $15.3 million in FY 2003, and up to approximately $22 million by FY 2005 as a result of administration and enforcement of the proposed amendments. The increased revenues will be used to provide assistance to counties participating in the LIRAP created by HB 2134 and to develop, administer, evaluate, and maintain the states's I/M vehicle emissions testing program. There may be fiscal implications, which are not anticipated to be significant, for units of state and local government located within the DFW, HGA, and ELP nonattainment areas which may have to upgrade or purchase new emission testing equipment, which could cost as much as $40,000, to comply with the proposed amendments.

There are provisions within this rulemaking that would also provide financial assurances to emissions inspection stations if the ASM-2 testing program were terminated within the first three years of the program. The fiscal liability to the state could be approximately $26.5 million over a three-year period if the ASM-2 testing program were terminated on June 1, 2002, and could be approximately $20.3 million over a three-year period if the ASM-2 testing program were terminated on June 1, 2003.

Additionally, there will be fiscal implications, which are not anticipated to be significant for any single unit of state and local government that conducts its own vehicle emissions tests within the DFW, HGA, and ELP areas. The total cost for emissions inspection stickers bought by all units of government within affected counties would increase by approximately $125,000 annually. The commission anticipates no fiscal implications for units of state and local government located outside of the DFW, HGA, and ELP nonattainment areas.

The proposed amendments are intended to revise the state's I/M vehicle emissions testing program and implement certain provisions of HB 2134. The Texas I/M program applies to all gasoline-powered motor vehicles 2 - 24 years old that are subject to an annual emissions inspection. The current I/M program requires that affected model year 1996 and newer motor vehicles operating in the DFW, HGA, and El Paso nonattainment areas will be required to pass an OBD test and all affected vehicles in the DFW and HGA areas older than model year 1996 will be required to pass an ASM-2 test beginning May 1, 2002. In El Paso, affected motor vehicles older than model year 1996 are required to pass a TSI emissions test. House Bill 2134 also requires the commission to develop the LIRAP, which is intended to provide funding to participating counties to assist motorists in repairing, retrofitting, or scrapping vehicles that have failed an emissions test. This rulemaking only implements updates to the I/M program and funding mechanisms to help fund the LIRAP. Implementation of the LIRAP guidance and regulations will occur in a future rulemaking.

The proposed amendments will not result in an increased vehicle emissions test fee unless El Paso County decides to participate in the LIRAP. If this occurs, the emissions test fee in El Paso will be increased from $14 to $17 to help fund the LIRAP. In previous rulemakings, the commission raised the vehicle emission test fee in the DFW and HGA areas from $14 to $22.50 and raised the fee in El Paso from $13 to $14 effective May 1, 2002. For the purposes of this fiscal note, it is assumed that El Paso will participate in the LIRAP.

The proposed amendments are intended to increase the administrative portion of the emissions test fee that will be remitted to the state, effective May 1, 2002. The commission will receive an additional $0.06 for every ASM-2 test and an additional $6.06 (of which $6.00 is pass-through money that will fund the LIRAP) for every OBD test performed in the DFW and HGA nonattainment areas. The commission will also receive an additional $3.06 (of which $3.00 is pass-through money that will fund the LIRAP) for every TSI and OBD test performed in the ELP nonattainment area. Since privately-owned inspection stations would not be required to transfer increased administrative portions of the emissions test fee to the commission until May 1, 2002, there would be no loss in revenues to these inspection stations because under current requirements inspection stations also begin collecting an increased emissions test fee beginning on May 1, 2002.

The commission estimates that approximately 1,300,000 vehicles in the DFW and HGA areas and 138,000 vehicles in El Paso will receive a vehicle emissions tests in FY 2002. During FY 2003, approximately 4,300,000 vehicles in the DFW and HGA areas and 425,000 vehicles in El Paso will receive vehicle emissions tests. Based on the number of vehicles that are projected to receive emissions tests, and the increased administrative portion of each testing fee to be remitted to the commission, an additional $3.9 million in FY 2002 and $15.3 million in FY 2003 is expected to be received by the commission.

Units of state and local government that test their own vehicles would be required to pay more for emission stickers due to the proposed amendments. Units of state and local government that purchase emissions inspection stickers from the DPS are required to pay the administrative portion of the emissions test fee, which is currently $1.75 per sticker. The proposed amendments will raise the administrative fee to $2.50 per sticker for all ASM-2 and TSI test stickers purchased in the DFW, HGA, and ELP program areas. The administrative fee for OBD stickers will be increased to $8.50 per sticker for those purchased in the DFW and HGA areas, and $5.50 per sticker for those purchased in the ELP area. The commission estimates that approximately 21,335 government owned vehicles will receive an annual ASM-2 or OBD test in the DFW and HGA nonattainment areas. The total costs due to increased administrative fees for units of state and local governments in these areas is estimated to be approximately $119,000 annually. The commission estimates that approximately 2,100 government owned vehicles will receive an annual TSI or OBD test in El Paso. The total costs due to increased sticker prices for units of state and local governments in El Paso is estimated to be approximately $5,700 annually.

The proposed amendments would also require all vehicle emissions inspection stations in affected program areas, with the exception of low volume emissions inspection stations, to offer both ASM-2 and OBD testing; implement an incentive program for early participation in the vehicle emissions testing program; require a test-on-resale component (HB 2134 requirement); and delete the previous minimum expenditure waiver (HB 2134 requirement). Additionally, the proposed amendments will incorporate the TSI and ASM-2 specifications into one equipment specification document with an amended date, and require new equipment requirements and specifications for OBD equipment and effective dates. The commission estimates these final two provisions will not have fiscal impact on units of state and local government because these are requirements that have to be met by emission analyzer manufacturers.

The requirement that all vehicle emissions inspection stations provide both ASM-2 and OBD tests in the DFW and HGA nonattainment areas would begin May 1, 2002. All existing or new vehicle emissions inspection stations in El Paso County would also be required to provide both TSI and OBD tests beginning May 1, 2002. The remaining counties affected and applicable timelines are listed in the following table.

Figure 1: 30 TAC Chapter 114 - Preamble

The only exception to these requirements would be for low volume emissions inspection stations in the DFW and HGA nonattainment areas, which can opt to perform OBD tests only, if the station performs 1,200 or fewer OBD tests per year.

Units of state and local government that currently conduct their own emission testing will either have to purchase new or upgrade existing equipment, contract with a vendor to perform the testing, have their vehicles tested at local stations, or apply for authorization to conduct OBD tests only. The number of state and local government testing stations is unknown. The cost to upgrade existing analyzers in El Paso County to a system that can perform both TSI and OBD tests will be approximately $4,000, while the cost to purchase a new system to conduct these tests will cost approximately $20,000. The cost to upgrade existing analyzers in the DFW and HGA areas to perform ASM-2 and OBD tests will be approximately $25,000, while the cost to purchase new analyzers in these areas will cost approximately $40,000. If a unit of state and local government in the DFW and HGA nonattainment areas qualifies as a low volume emissions inspection station, it could receive authority from the DPS to conduct OBD only tests. The cost of OBD testing equipment is approximately $8,000.

The proposed amendments would implement an early participation incentive program designed to encourage early purchases of ASM-2 equipment. The incentive to emissions inspection station owners or operators would be a financial assurance offered by the state if the program were terminated early. However, it is not anticipated that any units of state or local government would be eligible for the proposed incentive plan because their testing facilities would not be open to the general public which is one of the program eligibility requirements. The incentive would be available to the first 1,000 eligible DPS certified stations operating in affected counties that enter into a three-year contract for the purchase and installation of ASM-2 equipment by December 31, 2001. The proposal provides that if ASM-2 testing were terminated during the first two years, all qualified stations would receive a payment of $675 per month for the remainder of the three years. If ASM-2 testing were terminated during the third year of the contract, those qualified stations that have conducted less than 5,000 emissions inspections since the program start date would receive a payment of $675 per month for the remainder of the third year. The $675 a month payment would be paid from anticipated additional revenues resulting from implementation of the proposed amendments.

For affected program areas that begin ASM-2 testing in May 2003 (Brazoria, Fort Bend, Galveston, Montgomery, Ellis, Johnson, Kaufman, Parker, and Rockwall Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive would be available to the first 200 eligible inspection station owners or operators.

For affected program areas that begin ASM-2 testing in May 2004 (Chambers, Liberty, and Waller Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive will be available to the owners or operators of the first 30 eligible inspection stations.

If ASM-2 testing in the DFW and HGA nonattainment areas were terminated on June 1, 2002 (one month after the program started), the commission would be required to pay 1,000 stations (assuming this many were qualified for the incentives) $675 per month for 35 months. The total cost to the commission would be approximately $26.5 million between June 1, 2002 and May 31, 2005. This analysis assumes the entire ASM-2 testing program were cancelled, so stations due to begin ASM-2 testing on May 1, 2003 and May 1, 2004 would not be affected by the cancellation.

If ASM-2 testing in the DFW and HGA nonattainment areas were terminated on June 1, 2003, the commission would be required to pay 1,000 stations $675 per month for 23 months and 200 stations (assuming this many were qualified for incentives beginning May 1, 2003) $675 per month for 35 months. The total cost to the commission would be approximately $20.3 million between June 1, 2003 and May 31, 2006. This analysis assumes the entire ASM-2 testing program were cancelled, so stations due to begin ASM-2 testing on May 1, 2004 would not be affected by the cancellation.

If ASM-2 testing in the DFW and HGA nonattainment areas were terminated on June 1, 2004 (within the third program year for those counties that begin ASM-2 testing on May 1, 2002, and just one month after the program start date for those counties that begin ASM-2 testing on May 1, 2004), the commission would be required to pay up to 1,000 stations (or however many eligible stations had conducted fewer than 5,000 emissions tests since the program start date) $675 per month for 11 months, 200 stations $675 per month for 23 months, and 30 stations $675 per month for 35 months. The total cost to the commission would be approximately $11.3 million between June 1, 2004 and May 31, 2007. This analysis assumes the maximum number of inspection stations were eligible for incentives.

The proposed amendments are also intended to implement certain provisions of HB 2134, which require the commission to incorporate a test-on-resale component into the existing I/M program, and remove the current minimum expenditure waiver in favor of a low mileage waiver. Test-on-resale will require county tax assessor collectors to bar the registration of vehicles to be resold from outside program areas into affected counties without having passed an emissions test. In order to pass an emissions test, an owner or operator of an affected vehicle would have to pay $14 (potentially $17 if El Paso County participates in LIRAP) in El Paso and $22.50 in all other program areas for an emissions test. Model year 1996 and newer vehicles that have fewer than 50,000 miles would be excluded from the test-on-resale provision. The commission anticipates that the test-on-resale component of the I/M program will not have significant fiscal implications to units of state and local government within affected counties because most vehicles purchased by units of government are purchased as new vehicles within I/M program areas.

The I/M program currently allows owners and operators of vehicles that fail an emissions test to apply for a minimum expenditure waiver in order to be excluded from testing for a year. The minimum expenditure was $450; however, HB 2134 eliminated this waiver in favor of a low mileage waiver that would allow owners and operators of failing vehicles to be waived from emission standards requirements if at least $100 was spent to repair the vehicle and if the vehicle was driven less than 5,000 miles since the last inspection and will be driven less than 5,000 miles during the current inspection year. If a vehicle does not qualify for the new waiver, the owner or operator would have to fix the vehicle or participate in LIRAP. The commission does not anticipate significant impacts to units of state and local government due to the deletion of the minimum expenditure waiver, because only approximately 250 waivers were requested annually.

PUBLIC BENEFITS AND COSTS

Mr. Davis also determined that for each year of the first five years the proposed rules are in effect, the public benefit anticipated from enforcement of and compliance with the proposed amendments will be improved air quality by the potential reduction of on-road mobile source emissions and potential reduction in NO _x emissions. These rules should also contribute toward demonstration of attainment with the ozone NAAQS in the areas affected by this proposed rulemaking.

The proposed amendments are intended to revise the state's I/M vehicle emissions testing program and implement certain provisions of HB 2134. The proposed amendments require all vehicle emissions inspection stations in affected program areas, with the exception of low volume emissions inspection stations, to offer both ASM-2 and OBD testing; adjust the administrative portion of vehicle emissions test fees remitted to the state; increase the test fee for TSI and OBD tests in El Paso if El Paso opts into the LIRAP; require a test-on-resale component (HB 2134 requirement); and delete the previous minimum expenditure waiver (HB 2134 requirement). Additionally, the proposed amendments would incorporate the TSI and ASM-2 specifications into one equipment specification document with an amended date, and require new equipment requirements and specifications for OBD equipment and effective dates. The commission estimates these final two provisions will not have fiscal impact on individuals and businesses in Texas because these are requirements that have to be met by emission analyzer manufacturers, none of which are located in Texas.

The requirement that all vehicle emissions inspection stations provide both ASM-2 and OBD tests in the DFW and HGA nonattainment areas would begin May 1, 2002. All existing or new vehicle emission testing stations in El Paso County would also be required to provide both TSI and OBD tests beginning May 1, 2002. The remaining counties affected and applicable timelines are listed in the following table.

Figure 2: 30 TAC Chapter 114 - Preamble

The only exception to these requirements would be for low volume emissions inspection stations in the DFW and HGA nonattainment areas, which can opt to perform OBD tests only if the station performs 1,200 or fewer OBD tests per year.

Individuals and businesses that currently conduct emissions testing would either have to purchase new or upgrade existing equipment, or apply for authorization to conduct OBD tests only. It is anticipated that the economic decision to upgrade or purchase the required equipment will include the economics of labor costs, potential alternative use of labor's time, the equipment capital costs, and volume of anticipated inspections, current equipment, and other anticipated costs associated with emissions testing. It is anticipated that some inspection stations that must upgrade their equipment or purchase new equipment in order to comply with the proposed emissions testing requirements in the proposed amendments will find it uneconomical to do so for various reasons and will be unable to continue to perform emissions inspections. It is anticipated that this business decision will be made by each inspection station owner or operator.

There are approximately 2,100 privately-owned inspection stations in the DFW and HGA areas and 200 in El Paso. By May 1, 2002, 75% or 1,575 of the current inspection stations in the DFW and HGA nonattainment areas will have to purchase new ASM-2 equipment in order to conduct ASM-2 and OBD vehicle emissions tests. Each new analyzer will cost approximately $40,000. The remaining 525 inspection stations will be able to upgrade current analyzers at a cost of approximately $25,000. In Collin and Denton Counties, current inspection stations will have to purchase new ASM-2 equipment to conduct ASM-2 and OBD tests. Follow-on counties that begin testing on May 1, 2003 and May 1, 2004 will also have to purchase new ASM-2 equipment to conduct ASM-2 and OBD tests. There are currently approximately 1,210 stations in the DFW and HGA areas that could qualify as low volume emissions inspection stations. If these stations are granted authority to conduct OBD only tests, they would only have to purchase OBD testing equipment, which costs approximately $8,000.

In El Paso County, 80% or 160 of the current inspection stations will have to purchase new TSI analyzers to incorporate OBD. Each new analyzer will cost approximately $20,000. The remaining 40 inspection stations will be able to upgrade current analyzers at a cost of approximately $4,000.

The proposed amendments are also intended to increase the administrative portion of the emissions test fee that would be remitted to the commission, effective May 1, 2002. However, since privately-owned inspection stations would not be required to transfer increased administrative portions of the emissions test fee to the commission until May 1, 2002, there would be no loss in revenues to these inspection stations because under current requirements inspection stations also begin collecting an increased emissions test fee beginning on May 1, 2002.

The proposed amendments will not result in a vehicle emission test fee increase unless El Paso County decides to participate in the LIRAP. For the purposes of this fiscal note, it has been assumed that El Paso will participate in the LIRAP; therefore, the vehicle emission test fee applied to all affected vehicles in El Paso for this analysis is $17. The commission estimates there will be approximately 138,000 vehicles in FY 2002 and approximately 425,000 vehicles in FY 2003 subject to the I/M vehicle emission testing program in El Paso County. The $3.00 fee increase will require individuals and businesses to pay an additional $414,000 in FY 2002 and approximately $1.28 million in FY 2003.

The proposed amendments would implement an early participation incentive program designed to encourage early purchases of ASM-2 equipment. The incentive to emissions inspection station owners or operators would be a financial assurance offered by the state if the program were terminated early. The incentive would be available to the first 1,000 eligible DPS certified stations operating in affected counties that enter into a three-year contract for the purchase and installation of ASM-2 equipment by December 31, 2001. The proposal provides that if ASM-2 testing were terminated during the first two years, all qualified stations would receive a payment of $675 per month for the remainder of the three years. If ASM-2 testing were terminated during the third year of the contract, those qualified stations that have conducted less than 5,000 emissions inspections since the program start date would receive a payment of $675 per month for the remainder of the third year.

For affected program areas that begin ASM-2 testing in May 2003 (Brazoria, Fort Bend, Galveston, Montgomery, Ellis, Johnson, Kaufman, Parker, and Rockwall Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive would be available to the first 200 eligible inspection station owners or operators.

For affected program areas that begin ASM-2 testing in May 2004 (Chambers, Liberty, and Waller Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive will be available to the owners or operators of the first 30 eligible inspection stations.

The proposed amendments are also intended to implement certain provisions of HB 2134, which require the commission to incorporate a test-on-resale component into the existing I/M program and remove the current minimum expenditure waiver in favor of a low mileage waiver. Test-on-resale will require county tax assessor collectors to bar the registration of vehicles to be resold from outside program areas into affected counties without having passed an emissions test. In order to pass an emissions test, an owner or operator of an affected vehicle would have to pay $14 (potentially $17) in El Paso and $22.50 in all other program areas for an emissions test. Model year 1996 and newer vehicles that have fewer than 50,000 miles would be excluded from the test-on-resale provision.

The I/M program currently allows owners and operators of vehicles that fail an emissions test to apply for a minimum expenditure waiver in order to be excluded from testing for a year. The minimum expenditure was $450; however, HB 2134 eliminated this waiver in favor of a low mileage waiver that would allow owners and operators of failing vehicles to be waived from emission standards requirements if at least $100 was spent to repair the vehicle and if the vehicle was driven less than 5,000 miles since the last inspection and will be driven less than 5,000 miles during the current inspection year. If a vehicle does not qualify for the new waiver, the owner or operator would have to fix the vehicle or participate in LIRAP. The commission does not anticipate significant impacts on individuals and businesses due to the deletion of the minimum expenditure waiver, because only approximately 250 waivers were requested annually.

SMALL BUSINESS AND MICRO-BUSINESS ASSESSMENT

There will be adverse fiscal implications, which may be significant to small and micro-businesses as a result of implementing the proposed amendments, which revise the state's I/M vehicle emissions testing program and implement certain provisions of HB 2134. The primary fiscal implications would be the requirement to upgrade or purchase new vehicle emission testing equipment in order to continue participating in the state's I/M program, which could cost as much as $40,000 per vehicle emission analyzer.

The proposed amendments do not increase emission test fees, unless El Paso County decides to participate in the LIRAP. If this were to occur, the annual emissions inspection fee in El Paso would be increased from $14 to $17. If the fee is increased, the cost to small and micro-businesses will vary with the number of vehicles owned and affected by the testing requirements.

The proposed amendments are intended to increase the administrative portion of the emissions test fee that would be remitted to the commission, effective May 1, 2002. However, since privately- owned inspection stations would not be required to transfer increased administrative portions of the emissions test fee to the commission until May 1, 2002, there would be no loss in revenues to these inspection stations because under current requirements inspection stations also begin collecting an increased emissions test fee beginning on May 1, 2002.

The commission anticipates that many of the 2,300 inspection stations in the DFW, HGA, and ELP areas are small or micro-businesses that will be required to upgrade their current testing equipment or purchase new analyzers to continue participating in the state's I/M program. It is anticipated that the economic decision to upgrade or purchase the required equipment will include the economics of labor costs, potential alternative use of labor's time, the equipment capital costs, and volume of anticipated inspections, current equipment, and other anticipated costs associated with emission testing. It is anticipated that some small or micro-business inspection stations that must upgrade their equipment or purchase new equipment in order to comply with the proposed emission testing requirements in the proposed amendments will find it uneconomical to do so for various reasons and will be unable to continue performing emissions inspections. It is anticipated that this business decision will be made by each inspection station.

New analyzer equipment required to conduct ASM-2 (with integrated OBD) vehicle emission testing in the DFW and HGA areas will cost approximately $40,000. The cost to upgrade currently owned analyzers to conduct these tests costs approximately $25,000. New analyzer equipment required to conduct TSI (with integrated OBD) vehicle emission testing in El Paso County will cost approximately $20,000. The cost to upgrade currently owned analyzers to conduct these tests will cost approximately $4,000.

The proposed amendments would add an exception for testing stations in the DFW and HGA nonattainment areas that qualify as low volume emissions inspection stations. These stations could be authorized by the DPS to conduct only OBD tests if the stations conduct 1,200 or less OBD tests annually. The OBD test equipment costs approximately $8,000.

The proposed amendments would implement an early participation incentive program designed to encourage early purchases of ASM-2 equipment. The incentive to emissions inspection station owners or operators would be a financial assurance offered by the state if the program were terminated early. The incentive would be available to the first 1,000 eligible DPS certified stations operating in affected counties that enter into a three-year contract for the purchase and installation of ASM-2 equipment by December 31, 2001. The proposal provides that if ASM-2 testing were terminated during the first two years, all qualified stations would receive a payment of $675 per month for the remainder of the three years. If ASM-2 testing were terminated during the third year of the contract, those qualified stations that have conducted less than 5,000 emissions inspections since the program start date would receive a payment of $675 per month for the remainder of the third year.

For affected program areas that begin ASM-2 testing in May 2003 (Brazoria, Fort Bend, Galveston, Montgomery, Ellis, Johnson, Kaufman, Parker, and Rockwall Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive would be available to the first 200 eligible inspection station owners or operators.

For affected program areas that begin ASM-2 testing in May 2004 (Chambers, Liberty, and Waller Counties), the same incentive would be offered beginning with the program start date for those counties. The incentive will be available to the owners or operators of the first 30 eligible inspection stations.

The following is an analysis of the potential costs per employee for small or micro-businesses affected by the proposed amendments. Small and micro-businesses are defined as businesses having fewer than 100 or 20 employees, respectively. A small business that decides to purchase a new ASM-2 analyzer would incur costs up to approximately $40,000 per analyzer or $400 per employee. A micro- business that decides to purchase a new ASM-2 analyzer would incur costs up to approximately $40,000 per analyzer or $2,000 per employee. The overall costs to small or micro-businesses to implement the provisions of this bill will vary depending on how many analyzers are purchased or upgraded, and how many vehicles owned and operated by a small or micro-business are affected by the potential $3.00 emission testing fee increase in El Paso.

DRAFT REGULATORY IMPACT ANALYSIS DETERMINATION

The commission reviewed the proposed rulemaking in light of the regulatory analysis requirements of Texas Government Code, §2001.0225, and determined that the rulemaking action is not subject to §2001.0225 because it does not meet the definition of a "major environmental rule" as defined in that statute. "Major environmental rule" means a rule, the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The proposed amendments to Chapter 114 are intended to protect the environment or reduce risks to human health from environmental exposure to ozone. However, the emissions inspection stations in and around nonattainment areas would not normally be considered a sector of the economy. In addition, the commission set the portion of the fees to be retained by the inspection station to ensure that additional costs of equipment can be recovered. Additionally, the commission has proposed an early participation incentive program to provide additional assurance that the cost of ASM-2 equipment can be recovered through the fees. Therefore, the proposed rules do not affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The proposed amendments are intended to revise the vehicle emissions testing program as part of the control strategy to reduce NO _x emissions necessary for the ozone nonattainment areas of the state to be able to demonstrate attainment with the ozone NAAQS.

As defined in Texas Government Code, §2001.0225 only applies to a major environmental rule, the result of which is to: exceed a standard set by federal law, unless the rule is specifically required by state law; exceed an express requirement of state law, unless the rule is specifically required by federal law; exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; or adopt a rule solely under the general powers of the agency instead of under a specific state law. This rulemaking does not meet any of these four applicability requirements of a "major environmental rule." Specifically, the emissions testing program revised by this proposal was developed in order to meet the ozone NAAQS set by the EPA under 42 United States Code (USC), §7409, and therefore meets a federal requirement. The revisions are meant to ensure a successful program. This rulemaking does not exceed an express requirement of state law. This rulemaking is intended to implement provisions of HB 2134, 77th Legislature, 2001. The rulemaking does not exceed a requirement of a delegation agreement. The rulemaking was not developed solely under the general powers of the agency, but was specifically developed to meet the NAAQS established under federal law and authorized under Texas Clean Air Act (TCAA), §§382.011, 382.012, 382.017, 382.019, 382.039, and 382.201 - 382.216.

The commission invites public comment on the draft regulatory impact assessment.

TAKINGS IMPACT ASSESSMENT

The commission prepared a takings impact assessment for these rules in accordance with Texas Government Code, §2007.043. The following is a summary of that assessment. The specific purpose of the rulemaking is to implement a revised I/M program in the ozone nonattainment areas of the state as part of the strategy to reduce emissions of ozone precursors necessary for the area to be able to demonstrate attainment with the ozone NAAQS.

Promulgation and enforcement of the rules will not burden private, real property because this rulemaking action does not require the installation of permanent equipment. Although the rule revisions do not directly prevent a nuisance or prevent an immediate threat to life or property, they do prevent a real and substantial threat to public health and safety and partially fulfill a federal mandate under 42 USC §7410. Specifically, the emissions limitations and control requirements within this proposal were developed in order to meet the ozone NAAQS set by the EPA under 42 USC §7409. States are primarily responsible for ensuring attainment and maintenance of the NAAQS once the EPA has established them. Under 42 USC §7410 and related provisions, states must submit, for approval by the EPA, SIPs that provide for the attainment and maintenance of NAAQS through control programs directed to sources of the pollutants involved. Therefore, the purpose of the rulemaking action is to implement a revised I/M program which is necessary for the ozone nonattainment areas to meet the air quality standards established under federal law as NAAQS. Consequently, the exemption which applies to these rules is that of an action reasonably taken to fulfill an obligation mandated by federal law. Therefore, this rulemaking action will not constitute a takings under Texas Government Code, Chapter 2007.

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM

The commission determined that the proposed rulemaking relates to an action or actions subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources Code, §§33.201 et seq.), and the commission rules in 30 TAC Chapter 281, Subchapter B, Consistency with the CMP. As required by 31 TAC §505.11(b)(2) and 30 TAC §281.45(a)(3) relating to actions and rules subject to the CMP, commission rules governing air pollutant emissions must be consistent with the applicable goals and policies of the CMP. The commission reviewed the proposed rulemaking for consistency with the CMP goals and policies in accordance with the rules of the Coastal Coordination Council, and determined that the rulemaking is consistent with the applicable CMP goals and policies. The CMP goal applicable to this rulemaking is the goal to protect, preserve, and enhance the diversity, quality, quantity, functions, and values of coastal natural resource areas (31 TAC §501.12(l)). The CMP policy applicable to this rulemaking is the policy (31 TAC §501.14(q)) that commission rules comply with federal regulations in 40 Code of Federal Regulations to protect and enhance air quality in the coastal area (31 TAC §501.14(q)). This rulemaking does not authorize any new air contaminants and is intended to revise the vehicle emissions testing program as part of the control strategy to reduce NO _x emissions necessary for the ozone nonattainment areas of the state to be able to demonstrate attainment with the ozone NAAQS. Therefore, this rulemaking is consistent with the applicable policy and goal.

The commission seeks public comment on the consistency of the proposed rulemaking with applicable CMP goals and policies.

ANNOUNCEMENT OF HEARING

Public hearings on the proposal will be held at the following times and locations: September 13, 2001, at 2:00 p.m. and at 7:00 p.m., Houston City Council Chambers, 2nd Floor, 901 Bagby, Houston; September 14, 2001, at 2:00 p.m. and at 7:00 p.m., North Central Texas Council of Governments, Transportation Board Room, 3rd Floor, 616 Six Flags Drive, Arlington; and September 14, 2001, at 7:00 p.m., City of El Paso Council Chambers, 2nd Floor, 2 Civic Center Plaza, El Paso.

The hearings are structured for the receipt of oral or written comments by interested persons. Individuals may present oral statements when called upon in order of registration. Open discussion will not occur during the hearings; however, an agency staff member will be available to discuss the proposal 30 minutes prior to the hearings, and answer questions before and after the hearings.

Persons with disabilities who have special communication or other accommodation needs who are planning to attend the hearing should contact the Office of Environmental Policy, Analysis, and Assessment at (512) 239-4900. Requests should be made as far in advance as possible.

SUBMITTAL OF COMMENTS

Comments may be submitted to Joyce Spencer, Office of Environmental Policy, Analysis, and Assessment, MC 205, P.O. Box 13087, Austin, Texas 78711-3087; or by fax at (512) 239-4808. All comments must be received by 5:00 p.m. on September 14, 2001, although written comments submitted at the September 14, 2001 hearings will be accepted. All comments should reference Rule Log No. 2001-035-114-AI. For further information, please contact Jill Burditt, Policy and Regulations Division, at (512) 239-0560.

Subchapter A. DEFINITIONS

Subchapter A. APPLICATION PROCESSING

Subchapter C. APPLICATION FOR PERMIT

Subchapter G. CONSIDERATION PRIOR TO PERMIT ISSUANCE

The Texas Natural Resource Conservation Commission (commission) proposes amendments to §335.112, Standards, and §335.152, Standards.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED RULES

The primary purpose of the proposed amendments is to revise the commission's rules to conform to certain federal regulations, either by incorporating the federal regulations by reference or by introducing language into the commission's rules which corresponds to the federal regulations. Establishing equivalency with federal regulations will enable the State of Texas to increase its level of authorization to operate aspects of the federal hazardous waste program in lieu of the United States Environmental Protection Agency (EPA). The federal regulations being addressed in this proposal were promulgated by the EPA in issues of the Federal Register from December 1994 through September 1999. These proposed amendments would also incorporate administrative corrections.

SECTION BY SECTION DISCUSSION

Section 335.112(a)(1) is proposed to be amended to update the adoption of the EPA regulations under 40 Code of Federal Regulations (CFR) Part 265, Subpart B, relating to general facility standards, as promulgated by the EPA in the December 8, 1997 issue of the Federal Register (62 FR 64636). Adoption of the general inspection requirements at 40 CFR §265.15(b)(4) would be changed to correct the reference to the inspection requirements for floating roof tanks and to correct previous omissions.

Section 335.112(a)(4) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 265, Subpart E, relating to manifest system, recordkeeping and reporting, as promulgated by the EPA in the December 8, 1997 issue of the Federal Register (62 FR 64636). Adoption of the operating record requirements at 40 CFR §265.73(b)(6) is proposed to correct the reference to the inspection requirements for floating roof tanks and to correct previous omissions.

Section 335.112(a)(8) - (10) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 265, Subpart I, relating to use and management of containers; 40 CFR Part 265, Subpart J, relating to tank systems; and 40 CFR Part 265, Subpart K, relating to surface impoundments, respectively, as promulgated by the EPA in the November 25, 1996 issue of the Federal Register (61 FR 59932). Adoption of this amendment would require owners and operators of interim status hazardous waste containers, tanks, and surface impoundments to comply with the applicable requirements of 40 CFR Part 265, Subparts AA, BB, and CC, relating to air emission standards for process vents; air emission standards for equipment leaks; and air emission standards for tanks, surface impoundments, and containers, respectively.

Section 335.112(a)(14) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 265, Subpart O, relating to incinerators, as promulgated by the EPA in the September 30, 1999 issue of the Federal Register (64 FR 52828). This proposed amendment would include the adoption by reference of 40 CFR §265.340(b) which provides that the air emission standards for incinerators of 40 CFR Part 265, Subpart O no longer apply when compliance with maximum achievable control technology (MACT) standards is demonstrated as specified.

Section 335.112(a)(19) and (20) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 265, Subparts AA and BB, relating to air emission standards for process vents and air emission standards for equipment leaks, respectively, as promulgated by the EPA in the December 8, 1997 issue of the Federal Register (62 FR 64636). This proposed amendment would include the adoption by reference of 40 CFR §265.1030(b)(3) and §265.1050(b)(3) which clarify that the 40 CFR Part 265, Subparts AA and BB requirements apply to 90-day accumulation time units that are not recycling units. Read together with 40 CFR §265.1030(b)(2) and §265.1050(b)(2), this proposed amendment clarifies that the aforementioned Subparts AA and BB requirements apply to recycling units if some other unit at the facility is subject to hazardous waste permitting requirements. This proposed amendment would also include the adoption by reference of 40 CFR §265.1030(d) which states that a process vent is not subject to the Subpart AA standards provided the owner or operator certifies that all Subpart AA-regulated process vents at the facility are equipped with operating air emission controls in accordance with the requirements of an applicable Texas Clean Air Act (TCAA) regulation codified in 40 CFR Part 60, 61, or 63. This exemption avoids unnecessary duplication with TCAA requirements. Finally, this proposed amendment to §335.112(a)(19) and §335.112(a)(20) would also include the adoption by reference of 40 CFR §265.1033(a)(2) and §265.1060(a) and (b) which clarify that units which become newly subject to these subparts as a result of a regulatory or statutory change, are provided a 30-month implementation schedule. The provision also clarifies that units which become newly subject to these subparts due to any reason other than a regulatory or statutory amendment are not allowed to comply using an implementation schedule; they must be in compliance on the date that the unit first becomes subject to Subparts AA and/or BB.

Section 335.112(a) is proposed to be amended by inserting paragraph (21) which would adopt by reference the EPA regulations under 40 CFR Part 265, Subpart CC, relating to air emission standards for tanks, surface impoundments, and containers, as promulgated by the EPA through the January 21, 1999 issue of the Federal Register (64 FR 3382). This proposed amendment would incorporate certain provisions and requirements relating to applicability, definitions, implementation schedules, general standards, inspection, monitoring, recordkeeping, and waste determination procedures, as well as technical standards necessary to control organic emissions from certain tanks, containers, surface impoundments, and closed-vent systems.

To account for the proposed insertion of new paragraph (21), paragraphs (21), (22), and (23) are proposed to be renumbered as paragraphs (22), (23), and (24).

Proposed §335.112(a)(24) would update the adoption of the 40 CFR Part 265 appendices by adding subparagraph (E) which would adopt by reference 40 CFR Part 265, Appendix VI, entitled "Compounds With Henry's Law Constant Less Than 0.1 Y/X," as promulgated by the EPA through the December 8, 1997 issue of the Federal Register (62 FR 64636).

Section 335.112(b)(4) is proposed to be amended by adding new citation substitutions and by rearranging the subparagraphs in ascending federal regulation citation numerical order for readability. The new substitutions are proposed under §335.112(b)(4)(F) - (I) as follows: 40 CFR §265.90 is changed to §335.116; 40 CFR §265.94 is changed to §335.117; 40 CFR §265.314 is changed to §335.125; and 40 CFR §270.1 is changed to §335.2, respectively. These proposed substitutions are necessary in order to reflect the appropriate commission rule which corresponds to certain of the federal regulations.

Section 335.152(a)(1) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart B, relating to general facility standards, as promulgated by the EPA in the December 8, 1997 issue of the Federal Register (62 FR 64636). Adoption of the general inspection requirements at 40 CFR §264.15(b)(4) would be changed to correct the reference to the inspection requirements for floating roof tanks and to correct previous omissions.

Section 335.152(a)(4) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart E, relating to manifest system, recordkeeping and reporting, as promulgated by the EPA in the December 8, 1997 issue of the Federal Register (62 FR 64636). Adoption of the operating record requirements at 40 CFR §264.73(b)(6) is proposed to correct the reference to the inspection requirements for floating roof tanks and to correct previous omissions.

Section 335.152(a)(7) - (9) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart I, relating to use and management of containers; 40 CFR Part 264, Subpart J, relating to tank systems; and 40 CFR Part 264, Subpart K, relating to surface impoundments, respectively, as promulgated by the EPA in the November 25, 1996 issue of the Federal Register (61 FR 59932). Adoption of this amendment would require owners and operators of permitted hazardous waste containers, tanks, and surface impoundments to comply with the applicable requirements of 40 CFR Part 264, Subparts AA, BB, and CC, relating to air emission standards for process vents; air emission standards for equipment leaks; and air emission standards for tanks, surface impoundments, and containers, respectively.

Section 335.152(a)(13) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart O, relating to incinerators, as promulgated by the EPA in the September 30, 1999 issue of the Federal Register (64 FR 52828). This proposed amendment would include the adoption by reference of 40 CFR §264.340(b) which provides that the air emission standards for incinerators of 40 CFR Part 264, Subpart O no longer apply when compliance with MACT standards is demonstrated as specified.

Section 335.152(a)(14) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart S, relating to corrective action for solid waste management units, as promulgated by the EPA in the November 30, 1998 issue of the Federal Register (63 FR 65874). This proposed amendment would incorporate new §264.554, relating to staging piles. The proposed requirement regarding staging piles would allow short-term storage to occur under circumstances that are protective of human health and the environment, without the extensive set of standards required for units in long-term use. The proposed allowance for the use of staging piles is intended to facilitate short-term storage of remediation wastes so that sufficient volumes can be accumulated for shipment to an off-site treatment facility, or for on-site treatment.

Section 335.152(a)(16) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart X, relating to miscellaneous units, as promulgated by the EPA through the September 30, 1999 issue of the Federal Register (64 FR 52828). This proposed amendment would incorporate the changes made by the EPA to the introductory text under 40 CFR §264.601 which refers to MACT standards within the permit terms and provisions applicable to miscellaneous units. Proposed §335.152(a)(16) would also adopt by reference changes promulgated by the EPA in the December 6, 1994 issue of the Federal Register (59 FR 62896), which amended 40 CFR §264.601 to indicate the applicability of 40 CFR Part 264, Subparts AA, BB, and CC to miscellaneous units.

Section 335.152(a)(17) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart AA, relating to air emission standards for process vents, as promulgated by the EPA through the January 21, 1999 issue of the Federal Register (64 FR 3382). This proposed amendment would also include amendments promulgated on December 8, 1997 (62 FR 64636), incorporating changes to 40 CFR §264.1030(b)(3) clarifying that the Subpart AA standards apply to hazardous waste generators' 90-day accumulation units that are not recycling units; 40 CFR §264.1030(c), clarifying that a facility permitted prior to the effective date of December 6, 1996 is subject to 40 CFR Part 265, Subpart AA until the requirements of 40 CFR Part 264, Subpart AA are incorporated into the permit; 40 CFR §264.1030(e), stating that a process vent is not subject to the Subpart AA standards provided the owner or operator certifies that all Subpart AA-regulated process vents at the facility are equipped with operating air emission controls in accordance with the requirements of an applicable TCAA regulation codified in Part 60, 61, or 63; 40 CFR §264.1031, revising the definition of "In light liquid service"; and 40 CFR §264.1033(a)(2), clarifying the conditions under which a 30-month implementation schedule applies. This proposed amendment would also incorporate from the aforementioned January 21, 1999 promulgation revised definitions of "Equipment" and "Open-ended valve or line" and a new definition for the term "Sampling connection system."

Section 335.152(a)(18) is proposed to be amended to update the adoption of the EPA regulations under 40 CFR Part 264, Subpart BB, relating to air emission standards for equipment leaks, as promulgated by the EPA through the December 8, 1997 issue of the Federal Register (62 FR 64636). This proposed amendment would incorporate changes to 40 CFR §264.1050(b)(3), clarifying that the Subpart BB standards apply to hazardous waste generators' 90-day accumulation units that are not recycling units; 40 CFR §264.1050(c), clarifying that a facility permitted prior to the effective date of December 6, 1996 is subject to 40 CFR Part 265, Subpart BB until the requirements of 40 CFR Part 264, Subpart BB are incorporated into the permit; and 40 CFR §264.1060(a) and (b), clarifying the conditions under which a 30-month implementation schedule applies.

Section 335.152(a) is proposed to be amended by inserting paragraph (19) which would adopt by reference the EPA regulations under 40 CFR Part 264, Subpart CC, relating to air emission standards for tanks, surface impoundments, and containers, as promulgated by the EPA through the January 21, 1999 issue of the Federal Register (64 FR 3382). This proposed amendment would incorporate certain provisions and requirements relating to applicability, definitions, general standards, inspection, monitoring, recordkeeping, reporting, and waste determination procedures, as well as technical standards necessary to control organic emissions from certain tanks, containers, surface impoundments, and closed-vent systems.

To account for the proposed insertion of new paragraph (19), paragraphs (19), (20), and (21) are proposed to be renumbered as paragraphs (20), (21), and (22).

Section 335.152(c)(4) is proposed to be amended by adding a new citation substitution and by rearranging the subparagraphs in ascending federal regulation citation numerical order for readability. The new substitution is proposed under §335.152(c)(4)(C) as follows: 40 CFR §264.80 is changed to §335.172 of this title (relating to Closure and Post-Closure Care (Land Treatment Units)). This proposed substitution is necessary in order to reflect the appropriate commission rule which corresponds to the federal regulation.

FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT

John Davis, Technical Specialist with Strategic Planning and Appropriations, determined that for the first five-year period the proposed amendments are in effect, there will be no fiscal impacts to units of state or local government as a result of implementation of the proposed amendments.

The proposed amendments are intended to adopt revised federal standards requiring implementation of air emission standards for tanks, surface impoundments, and containers; and revised federal standards requiring implementation of MACT for hazardous air pollutants emitted from hazardous waste incinerators, hazardous waste-burning cement kilns, and hazardous waste-burning lightweight aggregate kilns. Additionally, the proposal would require facilities to remove redundant permit requirements from Resource Conservation Recovery Act (RCRA) permits following compliance with the MACT standards. These federal standards were adopted by the EPA between 1994 and 1999. This proposal is intended to revise the commission's rules to conform to these federal regulations, either by incorporating the federal regulations by reference or by introducing language into the commission's rules which corresponds to the federal regulations. The commission is required to maintain equivalency with the federal regulations in order to maintain enforcement authority over facilities in the state affected by the regulations.

The proposed amendments do not introduce additional regulatory requirements that are not currently in place. Additionally, there are no known units of state and local government that own or operate facilities affected by the proposed amendments; therefore, the commission anticipates that adoption of these federal standards into state rules will not result in increased costs to units of state and local government.

PUBLIC BENEFITS AND COSTS

Mr. Davis also determined that for each year of the first five years the proposed amendments are in effect, the public benefit anticipated from enforcement of and compliance with the proposed amendments would be continued protection of human health and the environment through the state's adoption of stricter federal emission standards for hazardous waste incinerators, hazardous waste- burning cement kilns, and hazardous waste-burning lightweight aggregate kilns.

The proposed amendments are intended to adopt revised federal standards requiring implementation of air emission standards for tanks, surface impoundments, and containers; and revised federal standards requiring implementation of MACT for hazardous air pollutants emitted from hazardous waste incinerators, hazardous waste-burning cement kilns, and hazardous waste-burning lightweight aggregate kilns. Additionally, the proposal would require facilities to remove redundant permit requirements from RCRA permits following compliance with the MACT standards. These federal standards were adopted by the EPA between 1994 and 1999.

There are approximately 8,000 hazardous waste generators and 200 permitted facilities that would continue to be subject to the amended standards. Also, there are nine commercial incinerators, 26 on-site incinerators, and one waste-burning kiln that are currently affected by the federal MACT standards that would continue to be affected by the proposed amendments. Since the proposal does not introduce any additional regulatory requirements, there are no fiscal implications anticipated to affected owners and operators beyond what is already required by the federal standards.

SMALL BUSINESS AND MICRO-BUSINESS ASSESSMENT

There will be no adverse fiscal implications for small or micro-businesses as a result of implementation of the proposed amendments, which are intended to adopt federal RCRA regulations for hazardous waste tanks, surface impoundments, and containers. These federal standards were adopted by the EPA between 1994 and 1999.

There are approximately 8,000 hazardous waste generators and 200 permitted facilities that would continue to be subject to the amended standards, some of which are small or micro-businesses. The commission estimates that there are no hazardous waste incinerators, hazardous waste-burning cement kilns, or hazardous waste-burning lightweight aggregate kilns that are owned and operated by small or micro-businesses. These equipment types are primarily used by large industries to burn hazardous waste generated by company manufacturing operations or to burn waste from other companies generated offsite. Small or micro-businesses that utilize hazardous waste storage tanks, surface impoundments, or containers will have to continue to abide by federal standards that would be adopted by the commission.

Since the proposal does not introduce any additional regulatory requirements, there are no fiscal implications anticipated to affected small and micro-businesses beyond what is already required by the federal standards.

DRAFT REGULATORY IMPACT ANALYSIS DETERMINATION

The commission has reviewed the rulemaking in light of the regulatory analysis requirements of Texas Government Code, §2001.0225, and has determined that the rulemaking is not subject to §2001.0225 because it does not meet the definition of a "major environmental rule" as defined in that statute. Furthermore, it does not meet any of the four applicability requirements listed in §2001.0225(a). Although these rules are proposed to protect the environment and reduce the risk to human health from environmental exposure, this is not a major environmental rule because it does not adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. There is no adverse effect in a material way on the economy, a sector of the economy, productivity, competition, or jobs of the state or a sector of the state because 42 United States Code (USC), §6926(g), immediately imposes on the regulated community any new requirements and prohibitions under the Hazardous and Solid Waste Amendments of 1984 that are more stringent than state rules, on the effective date of the federal regulation. In other words, under federal law, the regulated community must comply with such new requirements and prohibitions that are more stringent, beginning on the effective date of the federal regulation. Since these more stringent rules are the ones which could have an adverse effect in a material way on the economy, a sector of the economy, productivity, competition, or jobs of the state or a sector of the state; since the portions of this proposal which are more stringent than previously existing rules are imposed by the Hazardous and Solid Waste Amendments of 1984; and since the regulated community is already required to comply with these more stringent rules, there is no such adverse effect caused by the proposal of these state rules. The reason there is no adverse effect in a material way on the environment, or the public health and safety of the state or a sector of the state is because these proposed rules are designed to protect the environment, the public health, and the public safety of the state and all sectors of the state. In addition, these rules would not exceed a standard set by federal law, exceed an express requirement of state law, exceed a requirement of a delegation agreement, or propose a rule solely under the general powers of the agency. The commission invites public comment on the draft regulatory impact analysis determination.

TAKINGS IMPACT ASSESSMENT

The commission has prepared a takings impact assessment for these proposed rules in accordance with Texas Government Code, §2007.043. The following is a summary of that assessment. The specific purpose of these proposed rules is to ensure that Texas' state hazardous waste rules are equivalent to the federal regulations after which they are patterned, thus enabling the state to retain authorization to operate its own hazardous waste program in lieu of the corresponding federal program. The proposed rules will substantially advance this stated purpose by proposing federal regulations by reference or by introducing language intended to ensure that state rules are equivalent to the corresponding federal regulations. Promulgation and enforcement of these rules will not affect private real property which is the subject of the rules because the rule language consists of technical corrections and updates to bring certain state hazardous waste regulations into equivalence with more recent federal regulations. There is no burden on private real property because 42 USC, §6926(g), immediately imposes on the regulated community any new requirements and prohibitions under the Hazardous and Solid Waste Amendments of 1984 that are more stringent than state rules, on the effective date of the federal regulation. In other words, under federal law, the regulated community must comply with such new requirements and prohibitions that are more stringent, beginning on the effective date of the federal regulation. Since these more stringent rules are the ones which could present a burden on private real property; since the portions of this proposal which are more stringent than previously existing rules are imposed by the Hazardous and Solid Waste Amendments of 1984; and since the regulated community is already required to comply with these more stringent rules, there is no such burden. The subject regulations do not affect a landowner's rights in private real property.

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM

The commission reviewed the proposed rulemaking and found that the proposal is a rulemaking identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11(b)(2), relating to Actions and Rules Subject to the Texas Coastal Management Program (CMP), or will affect an action and/or authorization identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11(a)(6), and will, therefore, require that applicable goals and policies of the CMP be considered during the rulemaking process. The commission prepared a consistency determination for the proposed rules in accordance with 31 TAC §505.22 and found the proposed rulemaking is consistent with the applicable CMP goals and policies. The following is a summary of that determination. The CMP goal applicable to the proposed rulemaking is the goal to protect, preserve, restore, and enhance the diversity, quality, quantity, functions, and values of coastal natural resource areas (CNRAs). Applicable policies are construction and operation of solid waste treatment, storage, and disposal facilities, such that new solid waste facilities and areal expansions of existing solid waste facilities shall be sited, designed, constructed, and operated to prevent releases of pollutants that may adversely affect CNRAs and, at a minimum, comply with standards established under the Solid Waste Disposal Act, 42 USC, §§6901 et seq. Promulgation and enforcement of these rules are consistent with the applicable CMP goals and policies because the proposed rule amendments will update and enhance the commission's rules concerning hazardous and industrial solid waste facilities. In addition, the proposed rules do not violate any applicable provisions of the CMP's stated goals and policies. The commission invites public comment on the consistency of the proposed rules.

SUBMITTAL OF COMMENTS

Comments may be submitted to Lola Brown, Office of Environmental Policy, Analysis, and Assessment, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to (512) 239-4808. All comments should reference Rule Log Number 2000-044A-335-WS. Comments must be received by 5:00 p.m., September 24, 2001. For further information or questions concerning this proposal, please contact Ray Henry Austin, Policy and Regulations Division, (512) 239-6814.

Subchapter E. INTERIM STANDARDS FOR OWNERS AND OPERATORS OF HAZARDOUS WASTE STORAGE, PROCESSING, OR DISPOSAL FACILITIES