Part 1. TEXAS COMMISSION ON ENVIRONMENTAL QUALITY

Chapter 37. FINANCIAL ASSURANCE

Subchapter I. FINANCIAL ASSURANCE FOR PETROLEUM UNDERGROUND STORAGE TANK SYSTEMS

30 TAC §§37.825, 37.830, 37.835, 37.840, 37.845, 37.855, 37.867, 37.870, 37.885

The Texas Commission on Environmental Quality (agency, commission, or TCEQ) adopts amendments to §§37.825, 37.830, 37.835, 37.840, 37.845, 37.855, 37.870, and 37.885. The commission also adopts new §37.867.

Sections 37.825, 37.830, 37.835, 37.840, 37.845, 37.855, 37.870 and 37.885, and new 37.867 are adopted without changes to the proposed text as published in the December 21, 2007, issue of the Texas Register (32 TexReg 9527) and will not be republished.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE ADOPTED RULES

The primary purpose of the adopted amendments is to incorporate into agency rules, changes to statute which were effective September 1, 2007, based on language in House Bill (HB) 1956, 80th Legislature, 2007.

SECTION BY SECTION DISCUSSION

Subchapter I. Financial Assurance for Petroleum Underground Storage Tank Systems

Existing §§37.825, 37.830, 37.835, 37.840, 37.845, and 37.855 are being amended to clarify and simplify the figures containing the required wordings for each of these financial assurance mechanisms. Each amended figure will now clearly indicate that each mechanism is covering both corrective action and compensating third parties for bodily injury and property damage caused by accidental releases as is already required by rule. Prior to December 22, 1998, corrective action coverage in many situations could be provided by using the State's Reimbursement Fund, meaning the owner or operator may have only been required to provide financial assurance for third party liability claims. Accordingly, existing mechanism wordings require mechanism providers to indicate which of the coverages was provided. Since that date, owners or operators are required to provide financial assurance for both types of coverage. The adopted wordings should limit confusion by mechanism providers as to which language should be included.

In addition, the adopted mechanism wording requirements will require that the TCEQ facility identification number be reflected on each mechanism for Texas located facilities. This change will more clearly associate the coverage provided with an individual facility and greatly assist the agency's ability to monitor financial assurance.

Finally, wording of the Chief Financial Officer's Letter in the adopted amendment to §37.825 have been changed to require disclosure of the fiscal year-end date for the most recent audited financial statements upon which the financial test is based. This will help ensure that the test is prepared using current financial information.

New §37.867 is adopted to comply with passage of HB 1956, which added a new subsection (e-2) to Texas Water Code (TWC), §26.352. TWC, §26.352(e-2) states the following: "The owner or operator of a tank for which insurance coverage or other financial assurance has terminated shall dispose of any regulated substance in the tank at a properly licensed facility not later than the 90th day after the coverage terminates, unless the owner or operator provides the commission proof that the owner or operator maintains evidence of financial responsibility as required under Subsection (a)."

Adopted new §37.867 implements TWC, §26.352(e-2), while adding clarifications of how it will interact with existing agency rules. Adopted new §37.867(a) uses the term "empty" while placing the term "dispose" in subsection (b). This is intended to clarify the statutory requirement in TWC, §26.352(e-2) that regulated substances be "disposed of," so that it is clear that valuable petroleum product need not necessarily be sent to a waste disposal facility, when there may be a more productive course of action available, such as selling it back to a distributor, or to some other licensed transporter. The rule clarifies that the primary intent is simply that the tank be properly emptied. However, if the regulated substance is disposed of, then disposal must be done in accordance with all applicable requirements.

Adopted §37.867(c) addresses how the new section interacts with existing financial assurance requirements. Most importantly, the new rule does not create a "90-day window" where a tank owner/operator is exempt from the basic requirement of maintaining financial assurance. Rather, §37.867 addresses the specific issue of tanks being empty, by stating that tanks must be emptied by the 90th day after coverage terminates. The exception to this requirement would be that the owner or operator has re-obtained acceptable financial assurance within the 90-day period. A tank owner or operator could still have a general financial assurance violation during the 90-day period, but he or she would not receive a citation under §37.867 until after the 90-day period.

Adopted §37.867(d) addresses how the new rule interacts with existing §37.885. Tank owners or operators may avail themselves of this provision as they would have in the past, with the exception that they are still required to follow adopted §37.867 by ensuring that the tanks are empty within 90 days of financial assurance termination. For tank owners or operators where financial assurance has not terminated, existing §334.54 still applies: tanks may remain properly temporarily removed from service, with fuel in the tanks, indefinitely.

Adopted §37.867(e) ensures that the section as a whole does not affect the commission's authority to require a shutdown of a facility under TWC, §26.3475(e), nor any other sections, rules, or statutes, with regard to financial assurance.

In accordance with passage of HB 1956, this rulemaking adoption amends §37.870(b) to require that owners or operators of Underground Storage Tanks (USTs) must attach to the agency's self-certification form the appropriate document which constitutes evidence of current financial assurance, i.e., for example, an insurance certificate. Currently, tank owners or operators merely sign the self-certification form which contains a declaration that they have current financial assurance.

This rulemaking adoption also amends §37.885 to clarify the circumstances under which an owner or operator is released from financial assurance requirements. The insertion of the phrase "properly temporarily removed from service, in accordance with the requirements of §334.54 of this title (relating to Temporary Removal from Service)" does not create a new substantive requirement. Rather, it is a clarification of existing language which used the phrase "removed from service" without specifying whether reference was being made to temporary or permanent removal from service, or both. The existing interpretation has been that reference was being made to both: either form of removal from service, if done properly, would release an owner or operator from financial assurance requirements.

Finally, §37.885 is amended to add subsection (b), which states that in order to be released from financial assurance requirements under this section, the owner or operator must notify the commission of the change in status in accordance with §334.7. This notification is not a new requirement; rather, it is a clarification of something that is already required under §§334.54(e)(2), 334.55(f)(1), and 334.7(d)(1)(B). A tank owner or operator who is nearing the end of his or her financial assurance term, but intends to close operations and no longer use his or her tanks, would need to comply with the removal from service provisions and notify the commission, before the tank owner or operator would be released from financial assurance requirements.

FINAL REGULATORY IMPACT ANALYSIS DETERMINATION

The commission reviewed the rulemaking in light of the regulatory impact analysis requirements of Texas Government Code, §2001.0225, and determined that the rulemaking is not subject to Texas Government Code, §2001.0225 because it does not meet the definition of a "major environmental rule" as defined in that statute. 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, 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. Although the specific intent of this rule is to "protect the environment" by tightening regulations which ensure that there are private funds available for clean up and liability for releases from underground storage tanks, the second prong of the definition of a "major environmental rule" is not met: The adopted rules would 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.

Further, it does not meet any of the four requirements listed in Texas Government Code, §2001.0225(a). Texas Government Code, §2001.0225(a) states: "This section applies only to a major environmental rule adopted by a state agency, the result of which is to: 1) exceed a standard set by federal law, unless the rule is specifically required by state law; 2) exceed an express requirement of state law, unless the rule is specifically required by federal law; 3) 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 4) adopt a rule solely under the general powers of the agency instead of under a specific state law." These adopted rules do not meet any of the four applicability requirements and thus are not subject to the regulatory analysis provisions of Texas Government Code, §2001.0225 even if they did meet the definition of a major environmental rule. Specifically, the adopted rules are required by state law, are not adopted solely under the general powers of the agency, and do not exceed a requirement of state law, federal law, or a delegation agreement or contract between the state and an agency or representative of the federal government.

The commission invited public comments of the draft regulatory impact analysis determination during the public comment period. No comments were received on the draft regulatory impact analysis.

TAKINGS IMPACT ASSESSMENT

The commission evaluated the adopted rules and performed an assessment of whether Texas Government Code, Chapter 2007 is applicable. The commission's assessment indicates that Texas Government Code, Chapter 2007 does not apply to these adopted rules because this is an action that is taken in response to a real and substantial threat to public health and safety; that is designed to significantly advance the health and safety purpose; that does not impose a greater burden than is necessary to achieve the health and safety purpose. Thus, this action is exempt under Texas Government Code, §2007.003(b)(13).

The adopted rules are an "action taken in response to a real and substantial threat to public health and safety" in that contamination from releases from underground storage tanks pose a threat to both soils and groundwater with which the public may come into contact. The adopted rules are "designed to significantly advance the health and safety purpose" by tightening regulations that ensure that private funds are available for addressing contamination from releases from underground storage tanks. The adopted rules "do not impose a greater burden than is necessary to achieve the health and safety purpose" because they are narrowly tailored to the class of tank owners or operators and narrowly tailored to specific conditions or events, such as termination of financial assurance coverage.

Nevertheless, the commission further evaluated these adopted rules and performed an assessment of whether these adopted rules constitute a taking under Texas Government Code, Chapter 2007. The adopted rules implement HB 1956, which amended TWC, §26.352, concerning Financial Responsibility.

Promulgation and enforcement of the adopted rules would be neither a statutory nor a constitutional taking of private real property by the commission. Specifically, the adopted rules do not affect a landowner's rights in private real property because this rulemaking does not burden (constitutionally) nor restrict or limit the owner's rights to property and reduce its value by 25% or more beyond that which would otherwise exist in the absence of the adopted rules. There are no burdens imposed on private real property from these adopted rules and the benefits to society are the adopted rules' specific procedures and requirements for ensuring that underground storage tanks have financial assurance coverage. As a whole, this rulemaking will not constitute a taking under Texas Government Code, Chapter 2007.

CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM

The commission reviewed the adopted rulemaking and found the adoption is a rulemaking identified in the Coastal Coordination Act Implementation Rules (31 TAC §505.11(b)(2)) subject to the Texas Coastal Management Program (CMP) and will, therefore, require that goals and policies of the CMP be considered during the rulemaking process.

CMP Goals: 31 TAC §501.12 states in part that "the goals of the Texas Coastal Management Program (CMP) are: (1) to protect, preserve, restore, and enhance the diversity, quality, quantity, functions, and values of coastal natural resource areas (CNRAs); (2) to ensure sound management of all coastal resources by allowing for compatible economic development and multiple human uses of the coastal zone; (3) to minimize loss of human life and property due to the impairment and loss of protective features of CNRAs;" and "(5) to balance the benefits from economic development and multiple human uses of the coastal zone, the benefits from protecting, preserving, restoring, and enhancing CNRAs, the benefits from minimizing loss of human life and property, and the benefits from public access to and enjoyment of the coastal zone."

The previously stated goals will not be adversely affected by the rule changes described in this preamble for the reason that the rulemaking provides for increased enforcement of financial assurance requirements for underground storage tank owners or operators.

CMP Policies: 31 TAC §501.13, "Administrative Policies," states in relevant part: "Agency and subdivision rules and ordinances subject to §501.10 of this title (relating to Compliance with Goals and Policies) shall: (1) require applicants to provide information necessary for an agency or subdivision to make an informed decision on a proposed action listed in §505.11 of this title (relating to Actions and Rules Subject to the Coastal Management Program) or §505.60 of this title (relating to Local Government Actions Subject to the Coastal Management Program); (2) identify the monitoring established to ensure that activities authorized by actions listed in §505.11 of this title (relating to Actions and Rules Subject to the Coastal Management Program) or §505.60 of this title (relating to Local Government Actions Subject to the Coastal Management Program) comply with all applicable requirements; (3) identify circumstances in which agencies and subdivisions have the authority to issue variances from standards or requirements for the protection of CNRAs, including the grounds for granting variances."

The previously stated policies will not be adversely affected by the rule changes described in this preamble for the reason that there are no substantive changes relating to provision of information, monitoring of compliance, or variances.

PUBLIC COMMENT

The commission held a public hearing on the proposed rulemaking in Austin on January 17, 2008. The comment period closed on January 22, 2008. No comments were received.

STATUTORY AUTHORITY

The amendments and new section are adopted under TWC, §5.012, which provides that the commission is the agency responsible for implementing the constitution and laws of the state relating to the conservation of natural resources and protection of the environment; TWC, §5.103, which authorizes the commission to adopt any rules necessary to carry out its powers and duties under this code and other laws of this state; TWC, §5.105, which directs the commission to establish and approve all general policy of the commission by rule; TWC, §26.011, which requires the commission to control the quality of water by rule; TWC, §26.345, which authorizes the commission to develop a regulatory program and to adopt rules regarding underground storage tanks (USTs); and TWC, §26.352, which directs the commission to adopt rules establishing the requirements for maintaining evidence of financial responsibility for taking corrective action in response to a release from a UST.

The adopted amendments and new section implement changes in laws of this state made during the 80th Legislature, 2007, with the passage of HB 1956.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 18, 2008.

TRD-200802057

Mary R. Risner

Director, Litigation Division

Texas Commission on Environmental Quality

Effective date: May 8, 2008

Proposal publication date: December 21, 2007

For further information, please call: (512) 239-0177