Adopted Sections 
 An agency may take final action on a section 30 days after a proposal has been 
published in the Texas Register. The section becomes effective 20 days after the 
agency files the correct document with the Texas Register, unless a later date 
is specified or unless a federal statute or regulation requires implementation 
of the action on shorter notice. 
 If an agency adopts the section without any changes to the proposed text, only 
the preamble of the notice and statement of legal authority will be published. 
If an agency adopts the section with changes to the proposed text, the proposal 
will be republished with the changes. 
 
   
  TITLE 13. CULTURAL RESOURCES 
 Part III. Texas Commission on the Arts 
  Chapter 35. Texas Arts Plan 
  
  13 TAC sec.35.1 
 
  The Texas Commission on the Arts adopts an amendment to  sec.35.1, with 
changes to the proposed text as published in the June 18, 1993, issue of the 
Texas Register  (18 TexReg 3914). 
 The amendment to the Texas Arts Plan, which outlines the activities of the 
Commission, will revise the Commission's mission, goals, and assistance 
guidelines by reorganizing administrative and program structure to enable the 
agency to more effectively meet the needs of the citizens of Texas. The 
amendment is adopted with changes to reflect changes in the material adopted by 
reference. 
 The Commission will be able to utilize federal and state financial assistance 
funds in a more effective manner, thereby allowing more Texas organizations, 
communities, and citizens to participate in agency programs. 
 No comments were received regarding adoption of the proposal. 
 The amendment is adopted under the Government Code, Chapter 444.009, which 
provides the Texas Commission on the Arts with the authority to make rules and 
regulations for its government and that of its officers and committees. 
 
 
  sec.35.1. Adoption of Texas Arts Plan. The commission adopts by reference the 
Texas Arts Plan as amended September, 1993. This document is published by an 
available from the Texas Commission on the Arts, P.O. Box 13406, Austin, Texas 
78711. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 20, 1993. 
 TRD-9327589 
  Connie Ree Green 
 Director of Finance and Administration 
 Texas Commission on the Arts 
    Effective date: September 10, 1993 
 Proposal publication date: June 18, 1993 
 For further information, please call: (512) 463-5535 
         
               
  TITLE 16. ECONOMIC REGULATION 
 Part II. Public Utility Commission of Texas 
  Chapter 23. Substantive Rules 
  
  Telephone 
 
  16 TAC sec.23.91 
 
  The Public Utility Commission of Texas adopts new sec.23.91 with changes to 
the proposed text as published in the April 6, 1993, issue of the Texas Register  
(18 TexReg 2274). All local exchange carriers with annual revenues from 
regulated telecommunications operations in Texas of $100,000,000 or more for 
five consecutive years will be required to comply with this proposed rule. The 
rule requires local exchange carriers (LECs) to determine and provide to the 
Public Utility Commission the long-run incremental costs (LRIC) incurred by such 
carriers in the provision of telecommunications services. 
 The public benefit anticipated as a result of enforcing the new section will be 
promotion of consistent ratemaking treatment, decreased litigation of issues in 
rate cases, and greater certainty regarding the economic costs of providing 
telecommunications services. 
 The following parties submitted comments: the Office of Public Utility Counsel 
(OPUC); CENTEX Telemanagement, Inc. (CENTEX); Texas Telephone Association (TTA); 
Sprint Communications Company L.P. (Sprint); MFS Communications Company, Inc. 
(MFS); GTE Southwest, Incorporated and Contel of Texas (the GTE Companies); 
Texas Statewide Telephone Cooperative, Inc. (TSTCI); AT&T Communications of the 
Southwest, Inc. (AT&T); Southwestern Bell Telephone Company (SWB); General 
Services Commission (GSC); MCI Telecommunications Corporation (MCI); Southwest 
Telecommunications Association, Inc. (STA); and Texas Association of Long 
Distance Telephone Companies (TEXALTEL). Capital Network System, Inc. (CNSI) 
requested by means of a transmittal letter to be notified of the time and date 
of commission sponsored workshops in connection with sec.23.91 but did not file 
any written comments. 
 Following the publication of the proposed rule, the commission conducted three 
workshops at which the commenting parties further discussed the issues raised in 
their comments. 
 Generally in support of the proposed rule and the incremental costing 
methodology therein are the following parties: CENTEX; TTA; Sprint; MFS; the GTE 
Companies; AT&T; SWB; GSC; MCI; STA; and TEXALTEL. OPUC generally opposes the 
proposed rule. TSTCI neither opposes nor supports the proposed rule; it filed 
comments that are cautionary and neutral. 
 The remainder of this preamble is organized as follows. General issues that do 
not pertain to any particular subsections of the proposed rule are discussed 
first. Specifically, the preamble begins with a summary of the comments on the 
section's use of incremental costing and basic network functions (BNFs) to 
determine service costs. The next topic is the added distinction between volume 
sensitive costs and volume insensitive costs associated with BNFs. The last part 
of the preamble pertains to comments on the specific subsections of the proposed 
rule and follows the order in which the subsections are found in the proposed 
rule. The parenthetic references to the various comments refer to page numbers 
on file at the Public Utility Commission of Texas. 
 The two prominent features of the costing methodology embodied in the proposed 
rule are: first, the requirement that LECs perform cost studies consistent with 
the principles of incremental costing; and second, the requirement that LECs 
identify and cost basic network functions (BNFs) that are used in various 
combinations to provide tariffed services. 
 All parties that support the proposed rule in their comments endorsed the 
section's requirements that cost studies use incremental costing principles. 
CENTEX states that they support "the Proposed Rule's emphasis on what is 
sometimes called Total Service Long Run Incremental Cost ("TSLRIC") 
methodology." (CENTEX comments at 1.) TTA likewise "agrees with the incremental 
cost methodology." (TTA comments at 1.) Sprint "supports the use of LRIC [to] 
identify the economic cost of providing a service or group of services." (Sprint 
comments at 1.) MFS states that it "strongly supports adoption of the proposed 
rule, relating to Long Run Incremental Cost Methodology for LEC services." (MFS 
comments at 1.) The GTE Companies also support the use of incremental costs and 
comment that they "are pleased that the proposed Rule advocates the use of 
incremental costs." (The GTE Companies at 5.) AT&T cites that "among the 
desirable aspects of the Rule as proposed [is] recognition that the appropriate 
costing standard to detect subsidization of competitive services by monopoly 
services is the total service long run incremental cost (TSLRIC) standard." 
(AT&T comments at 2.) SWB "commends the Commission's Staff for proposing a rule 
that utilizes incremental costs" and dedicates a section to incremental costing 
under the heading "Incremental cost and not fully distributed cost is the 
correct methodology for a cost rule." (SWB comments at 2.) GSC states that it 
"supports a true LRIC analysis." (GSC comments at 1.) MCI notes that Total 
Service LRIC "is the appropriate measure of cost." (MCI comments at 8.) STA 
states that Staff's Long Run Incremental Cost Rule "makes significant progress 
toward achieving [the] policy objective [that] LECs set prices for competitive 
services so that these services are neither directly nor indirectly subsidized." 
(STA comments at 1.) TEXALTEL "supports the concept embodied within proposed 
rule sec.23.91" and, in fact, suggests improvements, discussed below, to assure 
that correct LRIC results are obtained. (TEXALTEL comments at 1.) 
 Notwithstanding its disagreements with the commission's proposed rule, OPUC 
does not appear to be fundamentally opposed to the incremental costing 
methodology per se, though it does assert that "the utilization of LRIC 
information alone will not achieve the Commission's stated objectives of 
promoting consistent ratemaking treatment, decreasing litigation of issues in 
rate cases, and furnishing greater certainty regarding services' economic 
costs." (OPUC comments at 1.) 
 However, while they are not opposed to incremental costing, GSC and OPUC 
comment extensively on what they perceive to be an inconsistency between the 
proposed rule's professed long run incremental cost methodology and its 
requirements that LECs use current demand data, least cost technologies that are 
currently available on the market, and existing network topologies. 
 Although GSC generally supports the proposed rule, GSC notes that "despite the 
acceptable sec.23.91(c)(6) definition [of LRIC], the proposed Rule on actually 
measuring LRIC does not match that definition. The cost measured under the 
proposed method is for an increment of output that 'shall be the level of output 
necessary to satisfy total current demand...' This suggests that the increment 
of demand is the total demand for the particular BNF at the present time, and 
does not reflect a prospective change in demand that would cause a corresponding 
change in costs." (GSC comments at 3.) GSC further comments that "it is not 
clear how the notion of 'long run' actually will fit into the empirical analysis 
... since both LRIC and demand levels are based on the current time frame." (GSC 
comments at 4.) GSC asserts that "LRIC studies should be forward looking, and 
for that reason, involve demand and cost projections..." (GSC comments at 4.) 
 OPUC's comments express much the same concerns. OPUC comments that "the rule 
assumes that the relevant increment of output associated with determining LRIC 
is 'the level of output necessary to satisfy total current demand levels for all 
services using the BNF in question.' Proposed sec.23.91(f)(1). Such conditions 
clearly are not planning related." (OPUC comments at 11.) In regard to the 
requirement that least cost technology choices must be restricted to those that 
are currently available on the market, OPUC comments that it is "unclear of what 
relevance the stipulations might be to determination of long run values." (OPUC 
comments at 11.) 
 The commission disagrees with GSC and OPUC for the following reasons. The 
concerns of GSC and OPUC seem to stem, in part, from their interpretation that 
the long run pertains to events in the future and, therefore, that LRIC studies 
must be based on projected data rather than on current data. That is, GSC and 
OPUC seem to maintain that the distinction between "short run" and "long run" is 
one primarily in chronological time, with the short run referring to the present 
and the long run to the future. While the commission recognizes that GSC's and 
OPUC's use of the term has been applied in some LRIC studies performed for 
telecommunications services, the commission believes that the economic 
literature does not restrict the term "long run" to this particular use. 
 In the economic literature, long run cost functions, traditionally, do not 
refer to costs that a firm is projected to incur at some point in the future; in 
fact, the discussions of such functions in standard economic texts do not even 
include time as a variable that is relevant. The reason is that the term long 
run, rather than referring to some time period in the future, refers to a set of 
assumptions that underlie the construction of cost functions. In the 
construction of long run cost functions all inputs are assumed to be variable. 
In contrast, in the construction of short run cost functions some inputs are 
assumed to be fixed. 
 As Alfred Kahn notes "[t]he source of the confusion is the economist's use of 
the unfortunate terms 'short run' and 'long run.' They seem to correspond to 
time in some chronological sense-short run to costs that are incurred today and 
long run to those incurred next year, or some such. But in fact they do not." 
Kahn goes on to say that the short run/long run distinction is "between costs 
that are fixed and those that are variable with output during some arbitrary 
period of time." A. Kahn, The Economics of Regulation: Principles and 
Institutions, MIT Press, Cambridge, MA, 1988, p.72. 
 The proposed rule, then, does not use the term long run in a chronological 
sense to refer to costs that the companies might incur during some time period 
in the future. (Such a use of the term indeed would have necessitated the need 
to engage in demand and cost projections.) Instead, the term long run is used 
predominantly for the following reasons. First, it is used to allow cost 
analysts to assume that all inputs are variable, to ignore embedded cost 
structures, and to produce cost studies reflective of least cost technology 
choices. Second, it is used to ensure that all capital costs, assumed fixed in 
the short run, are included in the long run incremental costs studies. 
 What follows are additional reasons why the commission rejects suggestions 
that, for the purposes of the proposed rule, cost studies for existing services 
ought to be based on "demand and cost projections" and technology choices other 
than those currently available on the market. (That is not to say that such 
studies would not be useful for other purposes.) 
 First, the results obtained from cost studies based on anything other than 
current demand levels can not be readily applied, except under some strong 
assumptions, to determine whether services or groups of services are currently 
cross-subsidized, one of the main objectives of the commission's costing rule. 
This is particularly true for cost studies that are based on "an incremental 
change in demand resulting from projected growth over some planning horizon," as 
GSC suggests a "properly constructed LRIC study" should be. (GSC comments at 4.) 
Such studies would only indicate the minimum revenue necessary to recover the 
costs of an increment of demand growth, not the revenue needed to prevent cross-
subsidization of a service as a whole, or a group of services as a whole. 
 Second, the specification of the relevant increment of output will differ 
depending on, among other considerations, whether the setting involves a single-
product or a multi-product firm. Clearly, for a single-product firm it would be 
peculiar to specify total output for the service as the relevant increment in an 
incremental cost study: one would simply get total cost. For a single-product 
firm, therefore, one would not choose total output but some other level, such as 
an increment in output needed to serve a projected increase in demand. This is 
not necessarily true for a multi-product firm, such as a local exchange 
telephone company. As noted by AT&T, MCI, and others, it is entirely meaningful 
in a multi-product setting to determine incremental costs, where the increment 
of output concerns the addition, or discontinuation, of a service or group of 
services. In fact, the information obtained from such an exercise is critical in 
determining whether a service or group of services is cross-subsidized. (For a 
discussion of the incremental cost test and subsidy-free prices, see Daniel F. 
Spulber, Regulation and Markets, MIT Press, Cambridge, MA, 1989, p. 120-124.) 
Since one of the main objectives of the proposed rule is to help prevent cross-
subsidization, it is reasonable and necessary to use total current demand levels 
as the relevant increment of output. 
 Third, demand and cost projections are not easily obtained and, in any event, 
are likely to be controversial. Also, demand forecasts are contingent on service 
rates that, in turn, are contingent on costs that, coming full circle, are 
contingent on demand. This interdependence between costing and pricing that 
exists when demand and cost projections are used is, among other complications, 
what the commission has sought to avoid by separating costing and pricing 
issues. 
 Fourth, the commission sees no merit in allowing the companies and other 
parties to conjecture about futuristic technologies that may or may not be 
introduced in the market and for which, as of yet, no verifiable vendor prices 
can be obtained. 
 Last, the proposed rule requires the LECs to update all studies every six 
months when significant changes occur. This requirement, therefore, obviates the 
need for controversial demand and cost projections and assures that the 
commission has access, at all times, to current cost information. 
 For the above reasons and others discussed below, the commission believes that 
the provisions in the proposed rule are both theoretically consistent and 
appropriate. 
 OPUC comments that "even if the proposed rule were revised so that true LRIC 
studies are mandated, additional information would be required to achieve 
costing objectives. Most notably ... the ceiling of the pricing range must be 
discernable if some customers are not to be burdened with uneconomically high 
rates. This ceiling level is determined from the stand alone costs of service. " 
(OPUC comments at 5.) 
 The commission disagrees with OPUC for the following reasons. First, as long as 
all services and groups of services (that share common costs) recover their 
LRIC, as determined under the proposed rule, then no service or group of 
services is being subsidized. But, if no service or group of services is being 
subsidized (i.e., there are no subsidy flows), then no service or group of 
services is doing any subsidizing, either. Therefore, as long as regulators 
prevent the company from over-earning, the company is reasonably efficient, and 
all services and groups of services recover at least their LRICs, then no 
service is charged more than its stand-alone costs. 
 Second, the nesting of services into groups when common costs exist will allow 
the commission to observe the upper limit on how much the company should be 
allowed to charge customers. Indeed, if all common costs are properly accounted 
for, then the proposed rule, in effect, produces the stand-alone benchmarks that 
OPUC maintains are needed to protect customers. 
 Further, to the extent that the company has inefficient or stranded facilities 
not accounted for in LRIC studies (OPUC comments at 7), the recovery of these 
facilities is a pricing problem that the commission will address during the 
rulemaking proceeding on pricing referenced in subsection (p). 
 The second prominent feature of the proposed rule, the requirement that the 
LECs identify and cost the basic network functions used to provide their 
finished services, received general support as well, except from OPUC, which is 
generally opposed to the proposed rule. CENTEX states that "the Proposed Rule 
correctly recognizes that the myriad of services currently offered by the LECs 
in Texas are in reality constructed by combining a limited number of Basic 
Network Functions (BNFs) in various ways." (CENTEX comments at 1.) Sprint offers 
that "the use of BNFs as cost components in developing a service or group LRIC 
facilitates the proper reflection of incremental costs." (Sprint comments at 1.) 
MFS comments that "the Commission's proposal would introduce a fundamental and 
important innovation in costing methodology, namely the use of "bottom-up" 
methods that start with the costs of disaggregated network components and work 
up to develop service costs." (MFS comments at 1.) AT&T states that it supports 
an approach to costing that includes the "identification of the separate basic 
network functions that comprise the highly technical, complex network as 
marketed by the LECs." (AT&T comments at 2.) MCI comments that "the proposed 
rules properly recognize that the networks of the LECs perform a finite number 
of basic network functions (BNFs), which can be combined in various ways into a 
vast variety of finished telecommunications services, and properly focus on the 
development of cost information at the level of these basic network functions, 
rather than at the level of finished services." (MCI comments at 1.) STA asserts 
that since "the proposed rule builds from the costs of basic network functions 
of the network (BNFs)" the proposal "represents the proper approach to cost 
determination." (STA comments at 2.) 
 While SWB and the GTE Companies do not explicitly endorse the use of BNFs to 
determine service costs, they do not oppose it either. In fact, SWB states that 
"the central nature of cost causation in the proposed rule is consistent with 
the philosophy of Southwestern Bell's current cost models and methods to the 
degree that it utilizes 'cost drivers' or basic cost causative components that 
could be conceptually similar to properly defined BNFs." (SWB comments at 3.) 
The GTE Companies, rather than opposing the use of BNFs to determine service 
costs, recommend that by focusing on only "the core or key BNFs" the approach 
"will identify the costs of the most important BNFs or cost drivers and will 
relate more directly to the result of proceedings and workshops addressing the 
scope and timing of interconnection, unbundling, and pricing." (The GTE 
Companies comments at 2.) 
 However, while neither SWB or the GTE Companies appear to have conceptual 
problems with the proposed rule's focus on costing basic BNFs, both parties 
express concerns about the number of BNFs and the degree of specificity with 
which BNFs have been prescribed. SWB states because "BNFs will vary across 
companies and over time ... BNFs should be a fluid concept. It will be difficult 
to fully specify BNFs at the outset. Thus SWB recommends that specific BNFs not 
be codified in the rule." (SWB comments at 6.) The GTE Companies share SWB's 
concerns. The GTE Companies comment that "the rapid, perhaps even revolutionary, 
pace of change in telecommunications technology is well known to all parties, 
and it is well recognized that the BNFs of today will change dramatically with 
time." Therefore, the GTE Companies "strongly recommend that the specific and 
detailed BNFs contained in the proposed rule be removed." (The GTE Companies 
comments at 8.) 
 Sprint, on the other hand, expressing the opposite concern of SWB and the GTE 
Companies, comments that it "questions whether the BNFs have been identified at 
a low enough level. BNFs should be identified at a level that will allow service 
LRIC studies to properly reflect the incremental cost of the service. If BNFs 
are identified at too high a level, many more costs become common between 
services and are forced to the group of services level." (Sprint comments at 2.) 
 The above comments demonstrate the tension between the need to define BNFs with 
an appropriate degree of specificity and the danger that codified BNFs may 
quickly become obsolete because of technological change and/or because of the 
differences in cost causative relationships across companies. The commission has 
sought to resolve this tension by specifying BNFs at a reasonable level of 
detail while allowing the companies not only to add BNFs but also to modify BNFs 
or eliminate prespecified BNFs altogether where it is demonstrated that doing so 
is appropriate. 
 As noted, OPUC is the only party that filed comments to oppose the use of BNFs 
to determine service costs. OPUC states that "the proposed rule offers no 
engineering justification for the building block approach nor any assurance that 
the LEC would design its network in the same way or use the same combination of 
BNFs if it were aware, a priori, that these would be subject to disassembly." 
(OPUC comments at 8.) 
 The commission agrees with OPUC that the costing methodology embodied in the 
proposed rule could alter the incentive structure for the LEC and affect network 
design and investments in the future, depending on, among other things, how cost 
study results impact service rates. But, since this observation would be true 
for all costing methodologies in general, it is no reason to oppose any 
methodology in particular. Furthermore, to the extent that the LEC's network 
design will be affected by the costing methodology in the rule, the likely 
result is a more modular and open network architecture. 
 The commission, however, disagrees with OPUC that there exists "no engineering 
justification for the building block approach." In fact, the network functions 
identified in the proposed rule as BNFs are so identified in large part 
precisely because their engineering characteristics allow them to be set apart 
from other functions and to be costed out individually. 
 OPUC also comments that "with the appearance of the 'intelligent network' 
services/features/functions may be largely defined (invented) based on transient 
user needs or carrier strategy. Thus, the process of making BNF revisions could 
essentially be continuous. ... A LRIC based on BNFs may have an 'expected life' 
of as little as a few hours!" (OPUC comments at 9.) The commission disagrees 
with OPUC. Network functions which require substantial investment outlays will 
not any time soon have an expected life of just a few hours. Finished services, 
on the other hand, may be created or modified, in an intelligent network 
environment, in the amount of time that it takes to load-up a new software 
program. Therefore, OPUC's argument is in fact a compelling demonstration of the 
need to perform cost studies not just for finished services but also for network 
functions, as the commission proposes in its costing rule. 
 The proposed rule envisioned that costs associated with the provision of BNFs 
would have volume sensitive and volume insensitive components, consistent with 
the standard representation of cost functions in the economic literature; it did 
not, however, include specific definitions for those terms. Instead, the 
proposed rule used general language to suggest the use of volume sensitive and 
volume insensitive costs, such as "the long run incremental costs for the 
tariffed service shall include the costs associated with this usage [of the 
BNF.]" While some parties, such as MCI, found the proposed rule's treatment 
adequate, other parties suggested that the proposed rule be modified to include 
definitions and a more explicit treatment of the volume sensitive and volume 
insensitive costs. 
 For example, the GTE Companies note that "the costs which vary with output 
could be referred to as the volume sensitive costs. The costs which do not vary 
with output but are incremental with the offering of the service could be 
referred to as volume insensitive costs." (The GTE Companies comments at 7.) SWB 
likewise asserts the need to make the distinction explicit because "the 
distinction between volume sensitive and volume insensitive costs is important 
for sound business and policy reasons (e.g., avoiding cross-subsidies.)" (SWB 
comments at 15.) The commission incorporates the recommendations and adds 
subsections (c)(23)-(24) to define volume sensitive and volume insensitive costs 
and modifies subsections (d)(5), (d)(6), (f)(8), (f)(9), and (g)(3), 
accordingly. 
 GSC comments that "there are several places in the proposed rule where the word 
'significant' is used to describe a trigger point that determines whether a 
certain action should occur. The language in these instances is vague and it is 
not clear when the point of 'significance' is reached." (GSC comments at 5.) In 
its discussion of some specific instances in which the proposed rule uses the 
term significant GSC suggests that "a range of [approximately] 10 percent would 
be a reasonable range." (GSC comments at 6.) The commission recognizes that the 
proposed rule should set some standard to define when something is "significant" 
and when it is not. Therefore, the commission adds subsection (c) (19) to define 
the term "significant." 
 The preamble to the April 6, 1993 Texas Register Publication of the proposed 
rule stated that there would be no anticipated economic cost to persons who are 
required to comply with the proposed section. A number of parties took issue 
with this statement. TTA comments that it "disagrees with the statement that 
there is no anticipated costs." TTA maintains that "to identify and conduct LRIC 
studies for all relevant basic network functions ('BNFs') and to determine the 
LRIC cost of every tariffed service by grouping BNFs and services which share 
common costs is a massive undertaking." (TTA comments at 2.) The GTE Companies 
comment that "although the GTE Companies support adoption of an incremental cost 
study rule ..., the magnitude of the effort required by the proposed rule to 
accomplish these studies is significant." They note that the requirements 
potentially apply to "approximately 1400 services: a truly burdensome number." 
Therefore, the GTE Companies recommend "that the scope be reduced to a 
manageable level such that incremental cost studies produced on only those BNFs 
which competitive suppliers must obtain in order to compete." (The GTE Companies 
comments at 18.) Similarly, SWB comments that "the Commission must not operate 
under the mistaken impression that compliance with this proposed rule will not 
have an adverse economic impact on the LECs." SWB maintains that "the cost of 
compliance for Southwestern Bell will be quite high in terms of additional 
needed resources and costs. Specifically, Southwestern Bell estimates that it 
will need additional employees to insure compliance in Texas at an annual cost 
of at least $4 million over the next three years. This is a significant real 
cost to Southwestern Bell which would then become a part of the cost of 
service." (SWB comments at 8.) 
 The commission believes that TTA, the GTE companies and SWB overstate the 
burden that the proposed rule would impose on complying companies. First, both 
the GTE companies and SWB already employ cost analysts that conduct cost studies 
for a variety of purposes, such as cost studies for applications under 
sec.sec.23.24, 23.26 or 23.27. The effect of the proposed rule, therefore, would 
be to streamline and systematize the manner in which such cost studies are 
conducted. Second, the commenting parties fail to take into account the 
potential benefits and cost savings from reduced litigation of issues related to 
cost, cross-subsidization, and predation in docketed proceedings. Nevertheless, 
to accommodate some of the concerns of the parties, the commission adds 
subsection (j)(6)(C) to allow companies to file for a waiver (under the 
workplan) from the requirement to perform LRIC studies for certain services. 
This provision, for example, would allow the companies to demonstrate that, in 
the absence of competitive concerns, revenues for a service were so small that 
the requirement to perform a cost study for the service would be unduly 
burdensome and of little public benefit. 
 MFS recommends, in view of changing telecommunications technologies, that the 
second sentence of subsection (c)(1) be amended to allow the company the 
flexibility to specify additional subcategories of BNFs. (MFS comments at 3.) 
The Commission agrees with MFS that sec.23.91 should allow the companies 
flexibility to reflect changes in telecommunications technologies. However, the 
commission believes that sec.23.91 provides sufficient flexibility by allowing 
the companies to specify new BNFs or to redefine prescribed BNFs. No changes 
were made. 
 GSC comments that the activities described under the category of BNFs of 
Ancillary Services are more properly described as being adjuncts to BNFs and 
services. (GSC comments at 6.) The commission agrees and modifies subsection 
(c)(1) accordingly. 
 STA notes that the language defining the subcategory for billing and collection 
allows for the undesirable possibility that the companies include functions that 
properly belong under operator services. STA recommends that the commission adds 
the following phrase to subsection (c)(1)(A): "to the extent that this activity 
does not otherwise include activities described in subparagraph (C) of this 
paragraph, relating to Operator Services." (STA comments at 3.) The commission 
appreciates STA's concerns but believes that the definitions are sufficiently 
clear and that no changes are needed. 
 STA proposes that the subcategory defined in subsection (c)(1)(C) explicitly 
include the use of Line Identification Data Base (LIDB) and Originating Line 
Screening (OLS). Further, STA maintains that subsection (c)(1) (C) should also 
include the provision of "0-" calls. (STA comments at 3.) The commission 
disagrees with STA and maintains that subsection (c)(1)(C) has been defined with 
a sufficient degree of specificity. 
 AT&T notes that in subsections (c)(1)(C) and (e)(11) the services described at 
the end of the first sentence should be "(busy line verification)" and "(busy 
line interruption)." (AT&T comments at 9.) The commission agrees and modifies 
the language accordingly. 
 A number of parties comment on the proposed definition of BNFs in subsection 
(c)(2). CENTEX expresses concern that the definition leaves the companies too 
much discretion. (CENTEX comments at 3.) The GTE Companies comment that "the 
definition does not make a distinction between costing and pricing" and that 
"the definition should recognize and include the necessary description of cost 
causation." (The GTE Companies comments at 13.) SWB maintains that the 
definition "incorrectly ties costing and pricing and how services may be 
offered." (SWB comments at 5.) GSC suggests that the definition should be 
expanded by adding the phrase "or as a service component. " (GSC comments 7.) 
During the workshops the parties agreed to change the definition to read as 
follows: "A discrete network function which is useful, either as a stand-alone 
function or in combination with other functions, for which costs can be 
identified." The commission changes the definition accordingly. 
 In regard to subsection (c)(5), MCI comments that the rules fail "to consider 
costs which may be related to groups of BNFs," and that "MCI regards this as a 
significant omission." MCI maintains that "a relatively large proportion of the 
costs of the LEC's networks consists of volume-insensitive costs which relate to 
network functions rather than to finished services." Therefore, MCI recommends 
that "the proposed rule be modified to require identification of group-related 
costs at the level of BNFs." Agreeing with MCI, the commission modifies 
subsection (c)(5) to define the term "costs common to BNFs" and subsection (h) 
to require the LECs to identify and calculate the costs that are common to BNFs, 
as well as subsections (j)(2) and (k)(2) pertaining to the LEC proposed workplan 
and other filing requirements. SWB suggests that the definition of common costs 
in subsection (c)(5) be changed to reflect that costs can be common to 
customers. (SWB comments at 1 of Attachment A.) While agreeing with SWB that for 
some purposes it can be meaningful to define costs common to customers, the 
commission believes that for the purposes of sec.23.91-to determine costs for 
tariffed services, among other purposes-the definition for common costs should 
not be defined as costs common to customers. 
 SWB also suggests that the commission add language to subsection (c)(5) to 
indicate that some costs can be assigned only to the firm in its entirety. (SWB 
comments at 2 of Attachment A.) The commission agrees with SWB and modifies the 
definition of common costs in (c)(5)(A) accordingly. 
 TEXALTEL expresses concern about the term "avoided" in subsections (c)(6) and 
(c)(16). TEXALTEL comments that "[i]n the Commission's cost study history, 
'avoided' cost and 'incremental' cost have often implied two very different 
costing concepts." According to TEXALTEL, because "provision of telephone 
services frequently involves investment in 'sunk costs,' which are investments 
in cable or other equipment which are not salvageable ... the incremental cost 
to initially provide service[s] is substantially greater than the cost that 
would be avoided if the services, once provided, were discontinued." (TEXALTEL 
comments at 1.) The commission agrees with TEXALTEL and modifies subsection (c) 
(6) and (c)(16). 
 SWB proposes to substitute the word "service" for BNF in the definition of the 
term "cost driver" in subsection (c)(7). (SWB comments at 2 of Attachment A.) 
The commission disagrees with SWB because the substitution would subvert the 
intention of  sec.23.91, to direct the focus away from traditional service 
costing to the costing of basic network functions used to deliver finished 
services. 
 SWB suggests that the subsection (c)(8)-(9) be modified to allow the company to 
use forward looking data for cost of debt and cost of money. (SWB comments at 2. 
The commission disagrees with SWB. However, as discussed below, the commission 
modifies some language pertaining to the company's cost of money. 
 A number of parties comment on the definitions in subsection (c)(10). MFS 
suggests that the terms "originating and terminating" in subsection (c)(10)(A) -
(B) be substituted for by the phrase "two or more." (MFS comments at 5.) The 
commission believes that the current language is sufficient and appropriate. 
 GSC notes that the phrase "temporary time-sensitive" in subsection (c)(10) (B) 
is not clear, and that "the word shared should be substituted for time-
sensitive" to clarify the definition. (GSC comments at 7.) The commission agrees 
with GSC's comments and changes the definition based on those comments. 
 CENTEX comments that since depreciation expenses are defined in subsection 
(c)(11), the definition of expenses in subsection (c)(12) should exclude 
depreciation expenses. (CENTEX comments at 3.) The commission disagrees with 
CENTEX. Depreciation expenses defined in (c)(11) are simply a subset of expenses 
defined in subsection (c)(12), and, therefore, there is no reason to change 
these definitions. 
 GSC maintains that the definition of expenses in subsection (c)(12) is too 
vague and suggests modifying it to read "being those only associated with the 
change in demand that caused the incremental investment under study." (GSC 
comments at 7.) The commission believes that the principles developed under 
subsection (d) of the proposed rule and the requirements specified in other 
subsections are sufficient to assure that only expenses associated with the 
relevant increment of output are included in the cost studies required under the 
proposed rule. Therefore, the commission does not believe that the definition 
needs to be changed and leaves the language as originally proposed. 
 AT&T expresses concerns that certain common costs may be arbitrarily allocated 
to services not causally responsible for such common costs. (AT&T comments at 
6.) To further strengthen the language of the proposed rule to avoid that such 
arbitrary allocations occur, the commission modifies the language in subsection 
(c)(13) and substitutes the phrase "are not directly attributable" for "cannot 
be assigned." 
 A number of parties comment on the definition of least cost technology, 
subsection (c)(14). CENTEX recommends that the proposed rule restrict the least 
cost technology choice to currently available technologies. TSTCI is concerned 
that the definition could be interpreted to refer to the cheapest technology 
available on the market, as opposed to the appropriate interpretation that the 
least cost technology is the most economically efficient choice. (TSTCI comments 
at 5.) SWB comments that least cost technology choices should be made consistent 
with the company's overall network requirements and not on a piece-meal basis. 
(SWB comments at 14.) The commission agrees with the commenters and modifies the 
definition in subsection (c)(14) accordingly as well as subsections (f)(3), 
(g)(6), and (i) (3). 
 AT&T comments that in subsection (c)(14) the last four words of the first 
sentence should read, "most economically efficient choice," rather than 
"economically most efficient choice." (AT&T comments at 9.) The commission 
agrees with AT&T's suggestion, and modifies subsection (c)(14) accordingly. 
 GSC comments that there exists a conflict between the definition in subsection 
(c)(14) of least cost technology, the proposed rule's emphasis on LRIC, and the 
requirement that cost studies be based on current data. GSC comments that "the 
costs to be used in the analysis are based on the least cost technology, which 
is the technology that would be selected in the long run as the economically 
most efficient choice. However, this is another instance of mixing the long run 
with the current situation. Even though a long run technology may be selected 
... for the cost studies, current costs and current demand are used in the 
proposed rule to develop LRIC results." (Emphasis added) (GSC comments at 8.) 
The commission believes that the requirements of sec.23.91 are theoretically 
consistent and appropriate. 
 First, there exists no theoretical problem with the requirement that the least 
cost technology choices are restricted to currently available technologies for 
which vendor prices can be obtained. In fact, the commission feels strongly that 
it would be most inappropriate to allow companies to use investment data based 
on futuristic technologies that may or may not be introduced on the market and 
for which no established vendor prices exist. Second, there is no inherent 
theoretical contradiction in using least cost technology data to determine the 
costs of satisfying the companies' current demand levels. For example, in the 
economic literature on sustainable prices, the concept of sustainability against 
full entry is defined explicitly in terms of current demand levels produced at 
minimum costs, i.e., with the use of long run least cost technologies. (See 
Baumol, Panzar and Willig, Contestable Markets and the Theory of Industry 
Structure, HBJ, NY, 1982, p. 205.) For a more extensive explanation of the 
proposed rule's use of the term "long run" see the previously mentioned general 
discussion. 
 GSC comments that "the proposed rule assumes only one technology (i.e., least 
cost) which is incorrect. The LRIC should be appropriately weighted to reflect 
technology mixes." Furthermore, GSC comments that there are cost differences 
between, say, an AT&T switch and a Northern Telcom switch. According to GSC 
"[t]hese factors should be reflected in an appropriate cost weighting in the 
LRIC study." (GSC comments at 11 and 12.) The commission agrees with GSC and 
modifies subsection (c)(14) accordingly. 
 SWB comments that the commission's definition in subsection (c)(15) of the long 
run is too theoretical to be implemented. SWB suggests the following language: 
"A period of time long enough to capture all of the costs that are caused by or 
brought into existence because of an activity or service decision and are 
avoided when the activity ceases." (SWB comments at 14.) The commission believes 
that the definition in the proposed rule accomplishes the same objective as the 
language proposed by SWB and, therefore, sees no need to make any changes. 
 CENTEX comments that the definition of long run incremental costs (LRIC) in 
subsection (c)(16) should be made consistent with subsection (f)(1) by 
specifying the relevant increment of output. (CENTEX comments at 4.) The 
commission agrees with CENTEX that it is critically important that cost studies 
are based on the relevant increment of output. However, since the definition of 
LRIC needs to be applicable to a number of diverse instances, the commission 
believes that the relevant increment is more appropriately specified in the 
subsections that contain guidelines for specific LRIC studies. 
 In regard to subsection (c)(16), the GTE Companies assert that "one should not, 
without question, start with the notion that either long run or short run costs 
are relevant. Rather, one should identify the costs which the company will incur 
if the decision under evaluation is implemented. ... Let the "run" of the cost 
analysis process fall were it will." (The GTE Companies comments at 7.) While 
the commission agrees with the GTE Companies that the nature of the decision 
under evaluation should determine whether short run or long run costs are 
relevant, the commission believes that for the purposes of sec.23.91 the 
relevant costs are the long run costs. 
 GSC comments that there exists a contradiction between the commission's 
definition of LRIC in subsection (c)(16) and requirements elsewhere in sec.23. 
91. Specifically, GSC sees a conflict between the use of the term long run and 
the requirement that the relevant increment of output "shall be the level of 
output necessary to satisfy total current demand levels" under subsection (f) 
(1). GSC maintains that it would be more appropriate to determine LRIC for "a 
prospective change in demand." (GSC comments at 3.) As noted earlier, in the 
economic literature on sustainable prices, the concept of sustainability against 
full entry is defined explicitly in terms of current demand levels produced at 
minimum costs, i.e., with the use of long run least cost technologies. Since 
sustainability of tariffed service rates is one of the issues the commission is 
interested in exploring, the commission's approach to service costing is 
theoretically consistent and appropriate. For a more extensive explanation of 
the proposed rule's use of the term "long run" see the general discussion 
provided above. 
 GSC comments that network access as defined in subsection (c)(18) "may someday 
also connect to the equivalent of BNFs of other providers such as MFS, Teleport, 
AT&T, etc.," and that some provisions should be made for this possibility. (GSC 
comments at 8) The commission does not believe that its definition of network 
access precludes the possibility described by GSC; therefore, no changes are 
made. 
 AT&T notes a typographical error in subsection (c)(20): the title should be 
"Switching and Switch Functions." (AT&T comments at 9.) The commission agrees 
and modifies the language accordingly. 
 TEXALTEL raises a concern regarding the definition and application of 
interoffice switching in subsection (c)(21)(A). TEXALTEL notes that because 
there "are many situations where the same central office serves both tandem and 
local switching functions (a class 4/5 office, in older terminology)," the 
possibility exists that "costs will be double dipped if both a local switching 
cost and a tandem switching cost is incurred when a call transits only one 
central office from a customer access line to an IC point of presence." The 
commission agrees with TEXALTEL that the possibility of "double-dipping" exists 
and that it would be inappropriate. The commission, therefore, urges parties to 
remain alert to this undesirable possibility, both when checking cost studies 
performed under the requirements of this section as well as in subsequent 
proceedings. The commission, however, does not find it necessary to change the 
language of subsection (c)(21)(A). 
 Subsections (d)(5) and (6), pertaining to the presence and treatment of common 
costs, drew comments from virtually all parties. 
 Sprint comments that it agrees with the construction of common costs in 
subsection (d) but recommends that the language be general and that no reference 
be made to specific BNFs whose costs "shall be excluded from LRIC studies." 
(Sprint comments at 2.) The commission appreciates Sprints observations, 
however, the comments filed by certain parties indicate that a certain degree of 
specificity is needed to assure that cost studies are performed consistent with 
the costing principles of the proposed rule. 
 AT&T comments on subsection (d)(5) that "the designation of a BNF as a common 
cost ... prejudices the decision as to whether the costs associated with that 
BNF are recovered through rates for a group of services or through rates for 
unbundled BNFs." (Emphasis added.) (AT&T comments at 4.) The commission 
disagrees with AT&T that the recovery of the costs associated with a BNF have 
been prejudiced by the construction of the proposed rule and the treatment of 
common costs therein. In fact, addressing AT&T's concerns, subsection (l)(4) 
explicitly provides for instances of service unbundling. Furthermore, in the 
event of service unbundling, subsection (l)(4) requires that "the LEC shall 
carefully reexamine the identification of groups of services that share 
significant common costs" and that "the LEC should update all studies ... that 
are affected by [the] changes." Nevertheless, to further demonstrate that the 
proposed rule is not intended to prejudice issues of cost recovery, the 
commission adds subsection (d)(8) to make explicit that "nothing in [sec.23.91] 
is intended to either endorse or reject the LEC's current rate and tariff 
structures." 
 AT&T, the GTE Companies, and SWB object, though for different reasons, to the 
language in subsection (d)(6) that requires the LECs to exclude the costs 
associated with the Network Access Channel Basic Level (NACBL) and Network 
Access Channel Connection Basic Level (NACCBL) from the LRIC studies for 
residential and business basic local exchange service. 
 Consistent with its comments on subsection (d)(5), AT&T maintains that the 
NACBL and NACCBL are "not common costs of other services. They are BNFs which 
can be services in and of themselves." Furthermore, AT&T comments that the "the 
manner in which costs are ultimately to be recovered will be unfairly colored by 
the inconsistent exclusion of the cost of the BNF from the LRIC of some, but not 
all, tariffed services." (AT&T comments at 6.) The commission disagrees with 
AT&T. First, as noted previously, subsection (l)(4) explicitly provides for the 
possibility of service unbundling and requires, when it does happen, that "the 
LEC shall carefully reexamine the identification of groups of services that 
share significant common costs." Clearly, if the NACBL and NACCBL are offered on 
an unbundled basis as separately tariffed services, the costs associated of 
providing them would not be a cost common to other services. AT&T's concerns, 
therefore, are unwarranted. Second, it would be impractical and undesirable for 
sec.23.91(d)(6) to enumerate exhaustively all services for which the LRIC study 
shall exclude the costs associated with the provision of NACBL and NACCBL. 
Obviously, however, there will be a good number of services to which the costs 
associated with the NACBL and NACCBL are common and for which LRIC studies 
should, consistent with the costing principles of sec.23.91, exclude such common 
costs as well. Therefore, when the costing principles of sec.23.91 are 
consistently and correctly applied there should be no "unfair coloring and 
inconsistent exclusion of costs" from LRIC studies. 
 The GTE Companies comment that "the loop or NAC is not a cost common to other 
services or BNFs" because "a cost element should not be treated as common simply 
because costs do not vary with minutes and calls." (The GTE Companies comments 
at 15.) The commission disagrees with the GTE Companies' characterization that 
the proposed rule designates the costs associated with providing NACBL and 
NACCBL as common "simply because [their] costs do not vary with minutes and 
calls." The reason why the proposed rule designates the costs associated with 
the provision of NACBL and NACCBL as common is because these functions provide 
access to the public switched network without which a large number of services 
simply could not be provided. To the extent, therefore, that the costs of the 
NACBL and NACCBL are volume insensitive, and as long as these functions are not 
available on an unbundled basis, the costs of the NACBL and NACCBL are classic 
examples of costs common to a group of services and, as such, should properly be 
excluded from LRIC studies for individual services. Instead, the cost recovery 
responsibility of the volume insensitive costs of the NACBL and NACCBL should be 
attributed to all services requiring the use of these BNFs collectively. 
 SWB comments that "the loop of Local Exchange Service is ... dedicated to a 
specific customer's use. Thus, loop costs are properly attributed to this 
customer. Therefore, "using cost-causative principles, one must conclude that 
ordering basic local exchange service causes the NAC costs for that customer." 
(Emphasis added) (SWB comments at 8.) The commission notes that the proposed 
rule makes no statement on whether or not the costs of the NACBL and NACCBL are 
common to customers. Section 23.91(d)(6) only asserts that to the extent that 
the costs of the NACBL and NACCBL are volume insensitive, and as long as these 
functions are not available on a unbundled basis, the costs of the NACBL and 
NACCBL are classic examples of costs common to services that should be excluded 
from LRIC studies for individual services. 
 GSC comments on sec.23.91(d)(6) that "PBX trunks, multiline business lines, 
Centrex station lines, and coin service should also contain this exclusion since 
these services likewise share common facilities, e.g., local loops." (GSC 
comments at 9.) The commission disagrees with GSC that specific references to 
these services need to be included in the rule. As noted previously, it would be 
impractical and undesirable for sec.23.91(d)(6) to enumerate exhaustively all 
services for which the LRIC study shall exclude the costs associated with the 
provision of NACBL and NACCBL. Nonetheless, the commission clarifies that the 
intent of the language in subsections (d)(6) and (g)(3) would require that the 
individual LRIC studies for business local exchange service provided over PBX 
trunks shall exclude any volume insensitive costs associated with the use of the 
NACBL or NACCBL. 
 In view of the above comments, however, the commission adds language to further 
reduce the possibility that subsection (d)(6) is misunderstood. First, the 
commission substitutes the term "attribute" for "assign" to underscore the 
proposed rule's emphasis on cost-causation principles and its prohibition on 
arbitrary allocations of costs. For the same reasons, the commission adds the 
phrase "cost recovery responsibility of these costs." Further, the commission 
inserts the phrase "as these services are tariffed on the effective date of this 
section" to make clear that the provisions of the latter part of subsection 
(d)(6) pertain to currently tariffed services. (The same modification is made in 
subsection (g)(3).) Last, the commission inserts the phrase "volume insensitive" 
to reflect the added distinction between volume sensitive and volume insensitive 
costs defined in subsection (c)(23)-(24). 
 In regard to subsection (e), TSTCI comments that the commission "needs to 
include how customer-specific costs for customer-specific contracts should be 
addressed." (TSTCI comments at 7.) The commission believes that because the 
costing principles developed in the proposed rule are general and consistent 
with economic theory there is no need to add specific language for customer-
specific contracts. 
 STA comments that "since the station lines associated with Centrex- or Plexar-
type service provide more than access to the LEC network, the interface 
associated with these lines should constitute a new required BNF." (STA comments 
at 3.) The commission does not believe that subsection (e)(2)(A) needs to be 
changed at this time. The language of the proposed rule is sufficiently flexible 
to assure that if the costs to provide the interface for Centrex- or Plexar-type 
service is systematically different, then a separate BNF can be identified. 
 AT&T suggests that the titles of subsections (e)(1) and (2) should read, 
respectively, "Required BNFs for subcategory Network Access (NA) Channel:" and 
"Required BNFs for subcategory [Network Access] NA Channel Connection:" (AT&T 
comments at 9.) The commission agrees and modifies the language as suggested by 
AT&T. 
 AT&T comments that "language that merely encourages disaggregation is 
inconsistent with the definition of BNFs and will provide an opportunity for 
subversion of the rule." Therefore, AT&T recommends that the last sentence of 
subsection (e)(3)(B) be modified to read: "The company shall disaggregate this 
BNF into smaller BNFs that capture the variety of features and functions 
available to customers." (AT&T comments at 7.) AT&T's comments are a further 
illustration of the tension between the need to specify BNFs at an appropriate 
level of detail and the need to give the LECs a sufficient degree of freedom and 
flexibility to identify BNFs that reflect the cost causative relationships for 
their individual companies. The commission believes, however, that the proposed 
language is appropriate and makes no changes. 
 In regard to subsection (e)(6)(D), GSC comments that "similar functions, but 
with different cost characteristics, should not be combined to create one 
averaged BNF." (GSC comments at 9.) The commission agrees with GSC but does not 
believe that any changes are needed to remedy this concern because subsections 
(e)-(f) already allow for the identification of new BNFs or additional cost 
drivers to accommodate instances in which costs differ systematically. 
 During the workshops on the proposed rule, comments were made that the phrase 
"local transport" in subsection (e)(6)(D) should be replaced by the phrase 
"network access," which is more consistent with the language used elsewhere in 
the proposed rule. The commission agrees with that comment and changes 
subsection (e)(6)(D) accordingly. 
 In regard to subsection (e)(7)(B), MFS comments that "the definition of the 
"Dedicated Transport Facility" BNF should not dictate that the LECs perform cost 
studies for this BNF using the economies of shared wideband digital fiber optic 
carrier systems." MFS asserts that "cost studies should be based upon the least 
cost technology for the BNF, as dictated by the general principle in subsection 
(d)(2), whether that technology is fiber optics or something else." (MFS 
comments at 6.) MFS makes the same comments in regard to subsection (e)(8) (B). 
The commission agrees with MFS that the proposed rule should not dictate 
specific technologies as least cost technologies and modifies subsection (e)(7) 
(B) and (e)(8)(B) accordingly. 
 STA comments that subsection (e)(9) needs to be modified so that the BNF for 
Billing and Collection is not assigned costs associated with the provision of 
Operator Services. (STA comments at 3.) The commission appreciates STA's concern 
but believes that the language in the proposed rule is sufficiently clear to 
prevent such a mis-assignment of costs; therefore, no change is made. 
 During the workshops on the proposed rule, comments were made that the term 
"guidelines" that appears in a number of subsections leaves the companies too 
much discretion. The commission agrees and substitutes the phrase "instructions" 
in subsections (f), (g), and (i). 
 AT&T, MCI, GSC, OPUC, and TSTCI comment on the relevant increment of output 
prescribed in subsection (f)(1). 
 Agreeing with the proposed rule, AT&T comments that "the appropriate costing 
standard to detect subsidization of competitive services by monopoly services is 
the total service long run incremental cost standard." (AT&T comments at 2.) 
MCI, also agreeing with the proposed rule, makes the same observation and 
comments that Total Service LRIC "is the appropriate measure of cost, and 
ensures that all of the costs associated with the provision of a function will 
be captured by the study." Further, MCI asserts that "[n]o proper incremental 
cost study would use a demand increment other than total current demand levels, 
and the requirement should therefore be made general in application." (MCI 
comments at 8-9.) 
 GSC's comments pertain to the use of a long run framework in conjunction with 
the requirement that cost studies use current demand levels. (GSC comments at 
3.) Likewise, OPUC notes that the requirement in subsection (f)(1) that the 
relevant increment of output is "the level of output necessary to satisfy total 
current demand levels for all services using the BNF in question, " "clearly 
[is] not planning related." (OPUC comments at 11.) The commission disagrees with 
OPUC and GSC and refers to the general discussion of how the term "long run" is 
used in the proposed rule and the response to GSC's comments on subsection 
(c)(14). The commission makes no changes in response to these comments. 
 TSTCI notes that it may not be appropriate to use current demand levels for 
cost studies under subsection (f)(1) when it concerns demand generated by new 
services that may experience considerable growth. (TSTCI comments at 8.) The 
commission agrees with TSTCI and has modified subsections (f)(1), (g)(4), and 
(i)(1) to allow LECs to use demand forecasts when "demand can demonstrably be 
anticipated to increase significantly over the course of six months." 
 AT&T comments that the proposed rule "requires the LRIC studies of LECs to 
avoid the use of embedded costs data 'to the extent possible.'" AT&T argues, 
correctly, that "embedded costs are alien to the concept of LRIC costing." 
Therefore, according to AT&T "the use of this phrase opens what is possibly a 
very broad and ambiguous loophole in the incremental costing requirement." (AT&T 
comments at 9.) The commission agrees with AT&T and revises subsections (f)(2), 
(g)(5), and (i)(2), accordingly. 
 In regard to subsection (f)(2)(A), OPUC comments that "these proposed rules 
were constructed under the caveat that in the long run there will exist 'common' 
costs which will not be attributable to any offering or group of offerings. 
Proposed sec.23.91(f)(2)(A)." (Emphasis added.) (OPUC comments at 10. ) 
Elsewhere, OPUC comments that "common costs ... are arbitrarily handled by 
simply 'excluding' them from the cost studies." (OPUC comments at 5) The 
commission disagrees with OPUC's characterization of the proposed rule. In fact, 
the proposed rule is expressly constructed to assure that all costs that cannot 
be properly attributed to individual BNFs or services are attributed to the 
appropriate groups of BNFs or services. Specifically, subsections (h) and (i) 
require LECs to attribute common costs to the specific groups of services that 
brought those costs into existence. 
 GSC comments that subsection (f)(4), which requires the LEC to use in its cost 
studies the existing network topology, should be expanded to allow for planned 
network expansions. (GSC comments at 10) SWB makes the same suggestion in 
reference to subsection (g). (SWB comments at 6 of Attachment A.) The commission 
agrees with GSC and SWB and modifies subsections (f)(4), (g)(7), and (i)(4) 
accordingly. 
 A number of parties comment on the cost of money and rate of depreciation to be 
used in cost studies. The proposed rule requires that the company use "the most 
recent commission approved" rate of return and rates of depreciation for the 
company. GSC, MCI, and SWB comment that it would be more in keeping with the 
intent of the proposed rule to allow companies to deviate from commission 
approved rates where it is demonstrably appropriate. In regard to subsection 
(f)(5), GSC comments that "a forward looking incremental cost of money should be 
used in LRIC studies." (GSC comments at 10.) MCI comments that "subsections 
(f)(6), (g)(9), and (i)(6) of the proposed rule specify that the most recent 
Commission-approved rates ... be used. The Commission should consider whether 
the LEC should be permitted to propose alternative depreciation rates, ... 
subject to Commission approval." (MCI comments at 9.) A similar comment is made 
by SWB. SWB maintains that "over the long run, these approved [rate of return 
and depreciation rates] may not reflect the true economic costs of deploying 
additional capital or the loss in value of that capital over time 
(depreciation). The rule should permit depreciation rates and cost of money 
rates that are justified by the facts at the time the cost will occur rather 
than cost surrogates that are not forward looking." (SWB comments at 18.) In 
view of the above comments, the commission modifies subsections (f)(5) and (6), 
(g)(8) and (9), (i)(5), and (6), to permit the LEC to use rates for depreciation 
and cost of money other than commission approved rates when it can demonstrate 
that other rates are appropriate. However, there will remain a presumption of 
reasonableness when the LEC uses commission approved rates for its company. 
 OPUC suggests that there exists an inconsistency between the provisions of 
subsections (f)(1) and (7). Subsection (f)(1) requires the LEC to use total 
current demand levels. Subsection (f)(7), on the other hand, requires that "when 
identifying the 'appropriate' measure of unit cost, the company is instructed to 
ignore the current rate structure for tariffed services using the BNF." OPUC 
comments that "it is unclear how current demand can be divined without current 
rate structures being in place." (OPUC comments at 11.) The commission does not 
believe that there exists a conflict between the provisions of the two 
subsections. First, subsection (f)(7) does not negate the obvious relationship 
between service demand and the level and structure of service rates. However, to 
the extent that current tariff structures suggest causal relationships between 
output and costs, the provisions that the LEC "shall ignore the current rate 
structure" allow the cost analyst to take an unprejudiced view at cost 
causation. Further, total current demand should be a quantity that is readily 
ascertainable by the LEC. 
 In subsection (f)(7), AT&T notes a typographical error. The second sentence 
should read, "The measure of unit cost chosen for a BNF shall correspond to the 
basis upon which the costs of the BNF are incurred." (AT&T comments at 9.) The 
commission agrees and modifies the language accordingly. 
 OPUC, TSTCI and GSC comment on the provisions of subsection (f)(8). Subsection 
(f)(8) provides that "the LEC shall calculate unit cost for the BNF based on the 
assumption of full capacity utilization." OPUC maintains that the assumption of 
full capacity utilization "do not jibe with those relating to current demand for 
the relevant increment of output and LCT [least cost technology], the LCT's 
current availability, and existing topology." (OPUC comments at 12.) TSTCI 
expresses concerns that are similar to OPUC's. TSTCI fears that there will be 
"under assignment of cost ... because the current demand level (including 
engineered spare capacity) is almost always going to be less than full capacity 
(which also includes engineered spare)." (TSTCI comments at 8.) Expressing much 
the same concern, GSC comments that "a more realistic fill factor that 
represents an average for the planing period, or some other averaging of actual 
or projected fill factors should be used" lest unit cost understate true costs." 
(GSC comments at 11.) The commission believes that the concerns of OPUC, TSTCI 
and GSC are unfounded. Subsection (f) (3) requires, for the purposes of the LRIC 
studies, that the capacity of the least cost facilities are assumed to be 
optimally sized to satisfy current demand levels. This implies, by assumption, 
that there is full capacity utilization, allowing, of course, for excess 
capacity due to lumpy investments or technical requirements, such as spare 
capacity needed for testing and maintenance. Therefore, when unit costs are 
calculated based on full capacity utilization, unit costs, by construction, must 
reflect all costs brought into existence as a result of the unit's production in 
the long run. To the extent, however, that the embedded cost structure of the 
company reflects excess capacity greater than what is needed to account for 
lumpy investments or technical requirements, the resulting cost differential is 
an uneconomic cost that is properly excluded from cost studies. (The commission 
will address the recovery of uneconomic costs during the pricing proceeding 
referenced in subsection (p)). 
 From comments taken during the workshops on the proposed rule, the commission 
learned that the term "engineered spare capacity" in subsection (f) (8) is not 
unambiguous. Therefore, the commission changes the phrase in subsection (f)(8) 
to "spare capacity due to lumpy investments or technical requirements, such as 
spare capacity needed for testing." Subsection (f)(8) is further modified to 
reflect the added distinction between volume sensitive and volume insensitive 
costs introduced under subsections (c)(23)-(24). 
 Both Sprint and TEXALTEL comment on the cost drivers specified in proposed 
subsection subsection (f)(10). Sprint comments that "certain network components 
are provisioned to meet busy hour capacity. Sprint opposes, however, cost 
studies developed to establish BNF costs based on the time of day as proposed in 
subsections (f)(9)." (Sprint comments at 2.) TEXALTEL comments that the proposed 
rule "for the first time suggest Time of Day (TOD) costing. TEXALTEL is not 
necessarily highly opposed to this idea (as it likely does make economic sense) 
but is gravely concerned that this is a highly complex addition to this costing 
concept." (TEXALTEL comments at 2.) While the commission appreciates the 
concerns of Sprint and TEXALTEL, it believes that the LECs should be able to 
account for cost variations caused by the time of day where such variations are 
significant. The commission makes no changes in response to these comments. 
 TEXALTEL expresses concern that the rule "appears to envision one LRIC study 
for all services," in contrast to the workshop discussions which appeared to 
envision a series of LRIC studies to be performed. (TEXALTEL comments at 3.) The 
commission clearly does not intend for only one LRIC study to be performed for 
all services, and has modified the language in subsections (g) and (i) to ensure 
that it is unambiguous that a separate LRIC study is to be performed for each 
tariffed service, and for each group of services that share significant common 
costs. 
 Subsection (j) of the proposed rule requires the LEC workplans to be filed 
within 45 days of the effective date of the rule. Several parties comment that 
the proposed time period is too short to adequately comply with the requirements 
of the workplan. TSTCI contends that the proposed time period is too 
restrictive, regardless of the size of the LEC. Furthermore, "[i]f at some 
future date the small companies are required to comply with this provision they 
could not meet this 45 day deadline, primarily because of the lack of 
resources." (TSTCI comments at 8.) The GTE Companies recommend that the 
requirement be modified to 45 work days. (The GTE Companies comments at 19.) SWB 
comments that the 45 day requirement is "burdensome," and suggests that it be 
changed to 120 days. (SWB comments at 9 and Attachment A, at 8.) In light of 
these concerns, and considering the importance of having a thorough, complete, 
and well-developed workplan, the commission agrees to extend the time period for 
filing the workplan. The workplan must now be filed within 70 days of the 
effective date of the rule. Accordingly, the commission also extends the time 
schedule for the parties to review the LEC workplan in subsection (m)(2), and to 
request a suspension of the workplan review process in subsection (m)(4). 
 Subsections (j)(4)(A) and (B) of the proposed rule allow a maximum of 30 months 
from the effective date of the section for the LEC to complete all required cost 
studies, while requiring the LEC to justify a cost study completion date which 
is longer than 18 months following the effective date of the section. CENTEX 
contends that this schedule is "needlessly long," and notes that in other states 
LECs have been able to complete LRIC studies for all services in approximately 
one year. CENTEX suggests that the LEC be given a maximum of 18 months to 
complete all required studies, and be required to justify each study completion 
date longer than 12 months from the effective date of the section. (CENTEX 
comments at 8-9.) SWB argues that the proposed schedule is "unrealistic" and 
"cannot be met." SWB contends that "[w]hile it is possible to do some cost 
studies within a short time frame, other studies require up to twelve months to 
complete. Moreover, the latter time period is under the environment when the 
methodology is already defined and understood by the cost analysts involved. The 
new rule may propose new models, methods and additional requirements which can 
only have the effect to extend the time needed to complete studies." (SWB 
comments at 9-10.) The commission disagrees with both CENTEX and SWB, and 
maintains that the proposed time schedule for the completion and filing of cost 
studies is appropriate. In response to CENTEX's comment that LECs in other 
states have completed studies for all services within a year, the proposed rule 
requires the LEC to perform studies for BNFs, in addition to services, and the 
commission recognizes that this may take additional time, for which the schedule 
should allow. In response to SWB's concerns, the commission believes that the 
proposed schedule allows ample time for the LEC to incorporate the concepts and 
requirements set forth in this rule, and to perform the necessary cost studies, 
including those that may take 12 months to complete. Therefore, no change is 
made. 
 The GTE Companies and SWB criticize the proposed rule for not addressing the 
protection of confidential and proprietary information. Both parties comment on 
the need to protect cost information as well as cost models. (The GTE Companies 
comments at 16-17, SWB comments at 16-17.) The GTE Companies express concern for 
the disclosure of "intellectual property and technical information which is 
viewed as confidential, highly sensitive and proprietary by the various 
equipment vendors or licensors." Furthermore, the GTE Companies comment, this 
information is only released to the GTE Companies under strict non-disclosure 
agreements and other protective measures, under which it "cannot be released to 
third parties without the consent of the source company. " (The GTE Companies 
comments at 16.) SWB expresses a similar concern, stating that some of its cost 
models "require a fee for use under a license agreement from a software vendor." 
(SWB comments at 16.) The GTE Companies point out that "[in] the case of GTE-
developed models, the software and documentation in question represent original 
work and have been specifically developed by GTE personnel, at the expense of a 
substantial amount of time, money, and resources, for its exclusive internal 
use." (The GTE Companies comments at 17.) Likewise, SWB states that it has 
developed some of its cost models "at great expense." (SWB comments at 16.) SWB 
maintains that its cost models are "intellectual property that is not part of 
the public domain." Furthermore, SWB comments "[t]he proposed rule's mandate of 
open algorithms and models raises property rights implications." (SWB comments 
at 16.) SWB also comments on the competitive harm that could result from the 
disclosure of its cost information and models to competitors: "[t]he Commission 
should not place SWB at a competitive disadvantage by permitting public 
disclosure of cost information and cost studies." (SWB comments at 17.) SWB 
suggests language to be added to the proposed rule that would require the 
examiner or staff to implement procedures to protect LEC proprietary or 
confidential data. 
 CENTEX also addresses the issue of confidentiality. CENTEX asserts that in 
order to review the workplans and LRIC studies "in a thorough and meaningful 
way" the commission and all interested parties will need access to "all relevant 
LEC information, including information which the LECs assert is proprietary and 
confidential." (CENTEX comments at 9-10.) CENTEX suggests language to be added 
to subsections (m) and (n) of the proposed rule, which would require the LECs to 
make information "available to all requesting parties unless such data are 
proprietary to third parties (e.g., the prices charged to the LECs by switch 
vendors)." CENTEX's proposed language would also prohibit LECs from either 
requiring parties to enter into confidentiality agreements in order to obtain 
cost study data or limiting review to the LEC's premises "unless the Commission 
specifically finds that disclosure of some part of the cost study data or 
results would create a significant risk of competitive harm to the LECs." 
Furthermore, CENTEX's language would ensure that the LECs bear the burden of 
proving that the disclosure of cost study information would be detrimental to 
them, and it cautions the LECs to limit their requests for proprietary treatment 
of cost study information as much as possible. (CENTEX comments at 10.) 
 The Texas Open Records Act, Texas Civil Statutes, Article 6252-17a, sec.3(a) 
(hereinafter the "Open Records Act"), provides that "[a]ll information 
collected, assembled, or maintained by or for governmental bodies, except in 
those situations where the governmental body does not have either a right of 
access to or ownership of the information, pursuant to law or ordinance or in 
connection with the transaction of official business is public information and 
available to the public..." To attain its statutory objectives, the Public 
Utility Regulatory Act (PURA), Article V, Texas Civil Statutes, Article 1446c, 
grants the commission the right of access to information; consequently, the 
commission considers all information "collected, assembled, or maintained" by it 
to be presumptively public information. While the Open Records Act excludes from 
this designation many categories of information, GTE and SWB have neither 
alleged nor demonstrated that the information for which they seek proprietary 
safeguards falls within any exception to the Open Records Act. The commission 
cannot prescribe access to information that is more restrictive than the Open 
Records Act. It therefore declines to modify the proposed rule in response to 
the comments of CENTEX, GTE and SWB. The commission notes, however, that this 
rule does not preclude an LEC from making a showing to entitle the LEC to 
protection of information that it considers confidential. 
 The contrasting viewpoints of the commenting parties suggest the need for a 
means to expeditiously resolve issues related to confidentiality. However, 
rather than adopting specific rule provisions, the commission believes that the 
resolution of issues relating to the identification and protection of 
confidential information are best addressed in the context of the workplan 
review. Therefore, the commission adds subsection (j)(7) to the rule, which 
requires that the LECs identify information to be filed pursuant to this section 
that the LEC considers to be confidential and/or proprietary; provide an 
explanation to substantiate the designation of "confidential" and/or 
"proprietary"; and propose a procedure for the treatment of such information. 
Like the other components of the workplan, the LECs' filings for the 
identification and proposed treatment of such information will be subject to the 
review of the parties and the Examiner. Adoption of this procedure by the 
commission does not constitute any presumption as to the confidentiality of LEC 
information. 
 Subsections (m) and (n) set forth a review process for the LEC workplan and 
LRIC studies, respectively. MFS comments that while an expedited review process 
for LEC workplans is desirable so that LRIC studies are filed in a timely 
manner, the examiner should have the authority to reject a deficient workplan. 
MFS contends that this is necessary since it is possible that a LEC could file 
such a deficient or incomplete workplan that it "would not be practicable for 
the staff to recommend and the presiding examiner to review the modifications 
necessary to bring it into compliance." MFS adds that the authority to reject a 
workplan should be exercised "only in the most extreme circumstances." (MFS 
comments at 8.) MFS comments that the examiner should also be able to reject a 
deficient LRIC study, adding "there is likely to be more need for rejection of 
cost studies than in the case of workplans." (MFS comments at 8.) The commission 
believes that MFS's concerns are adequately addressed by subsections (m)(1) and 
(n)(1), which require the LEC workplans and LRIC studies to be reviewed for 
sufficiency. If the presiding examiner or staff concludes that material 
deficiencies exist, the LEC shall be notified of the deficiency and required to 
file a corrected workplan or study. This process ensures that only a non-
deficient workplan or study will be approved by the examiner. Thus, there is no 
need to allow an examiner to reject a workplan or study on the grounds that the 
workplan or study is deficient. 
 MFS's comments, however, do indicate that some clarification is necessary in 
subsections (m)(2)(E) and (n)(2)(E). As proposed, these subsections allow the 
examiner to either approve the study or workplan or "approve the workplan (LRIC 
study) with modification." Although the rule implicitly requires that the LEC 
refile a workplan (LRIC study) prior to approval, "with modification," the 
commission is concerned that the proposed language is not sufficiently clear on 
this point. Therefore, the commission modifies the language in subsections 
(m)(2)(E) and (n)(2)(E) to read as follows: "The examiner shall approve the 
workplan (LRIC study) or order the LEC to refile the workplan (LRIC study) 
incorporating all modifications recommended by the examiner." (Emphasis added.) 
 Furthermore, MFS comments that the expedited review process for LRIC studies 
"does not allow interested parties a sufficient opportunity to contest a LEC 
cost study that is based on questionable data or assumptions," and recommends 
that the commission adopt one of two alternate revisions to remedy this. First, 
the commission could allow the examiner to reject the cost study if it cannot be 
modified and to require that the study be docketed and set for hearing if the 
examiner finds there to be any material issue of fact as to the validity of the 
study. Alternatively, MFS recommends that the commission adopt a rule stating 
that "approval of a cost study by the examiner permits that study to be used as 
prima facie evidence of the LEC's costs in other proceedings, but does not bar 
other parties from introducing additional evidence of costs in opposition to 
that study or from presenting evidence that the study is not in compliance with 
the rule." (MFS comments at 9.) MFS further notes that if the commission intends 
to rely upon the cost studies in setting rates, "then sec.42 and  sec.43 of PURA 
require that there be some opportunity to contest these studies in an 
evidentiary hearing." (MFS comments at 9.) Similarly, TEXALTEL expresses the 
concern that the rule "anticipates no Commission action on either the work plan 
or the LRIC studies." TEXALTEL asserts that the commission should be called upon 
to approve the studies, in order to ensure that all parties "have an opportunity 
to be heard if they object to some part of the studies and assures that the 
Commission, by taking action on the studies, has expressed support of their 
subsequent use for pricing purposes." Furthermore, TEXALTEL comments, "[a]bsent 
such action, based on our understanding of 'res judicata,' the issue of the 
appropriateness of the LRIC studies is open for litigation in any subsequent 
proceeding." TEXALTEL recommends that parties be given a right to a hearing at 
some point before rates are finally set that may rely on the LRIC studies. Upon 
conclusion of staff review, TEXALTEL recommends scheduling the studies for 
commission consideration and giving parties an opportunity to participate, 
"perhaps in a framework similar to rulemakings." (TEXALTEL comments at 4-5.) The 
commission appreciates the concerns expressed by MFS and TEXALTEL. Because these 
concerns, however, pertain to the setting of rates based on the LRIC studies, 
they are more appropriately addressed and resolved in the context of the pricing 
rule, referenced under subsection (p). 
 TEXALTEL expresses concern that the administrative approval process for LRIC 
studies will exclude the participation of all parties except Staff and the LECs, 
and cites several reasons for its concern. First, TEXALTEL contends that "there 
are no requirements that the LECs provide their studies to other interested 
parties or that they even make them timely available." (TEXALTEL comments at 3.) 
TEXALTEL recommends that participating parties be placed on a service list and 
service required on all documents. TEXALTEL contends that the time frames for 
review are "totally unworkable if parties must hunt around at the Commission to 
find out what has been filed." LECs should be required to provide participating 
parties with copies of their workplans and LRIC studies. (TEXALTEL comments at 
4.) The commission disagrees with TEXALTEL's suggestions. Requiring the LECs to 
maintain service lists and to furnish each party with copies of all documents is 
burdensome. The documents will be filed at the commission, and will therefore be 
available to all interested parties. Furthermore, the commission believes that 
the new subsection (o), pertaining to notification requirements, discussed 
below, adequately addresses TEXALTEL's concerns about not knowing when documents 
have been filed pursuant to this section. 
 Second, TEXALTEL contends that, because the studies are voluminous, the 
timeline provided in the proposed rule for review of the LRIC studies is "very 
inadequate." TEXALTEL recommends that the 45-day review period in subsection 
(n)(2)(A) be extended to 120 days from the date the studies are given to 
interested parties. (TEXALTEL comments at 3-4.) The commission is not convinced 
that an extension of the time to review LRIC studies is warranted. The 
commission does find, however, that the time schedules for the parties to review 
both the workplan and the LRIC studies in subsections (m)(2) and (n)(2), 
respectively, should be keyed off the date a sufficient workplan or study is 
filed, and modifies the language accordingly. This ensures that time for the 
parties to review the workplan or LRIC study will not be cut short if a 
deficient workplan is filed. Furthermore, the commission contends that 
provisions set forth in subsections (m)(4) and (n)(4) which allow a party to 
suspend the review process for 30 days, for good cause, provide sufficient 
flexibility in the timeline for review. 
 Third, TEXALTEL comments that although subsections (m) and (n) refer to "any 
party that demonstrates a justiciable interest," there is neither a definition 
of who such a party is nor a procedure for resolving controversy over what 
constitutes a "justiciable interest." TEXALTEL suggests that this be 
accomplished by assigning an examiner "to manage the process and to rule on 
intervention requests, discovery disputes, or other matters." (TEXALTEL comments 
at 4). The commission agrees with TEXALTEL that a means for resolving such 
disputes is necessary, but points out that subsections (m) and (n) of the rule 
already provide for the assignment of an examiner to preside over the 
administrative review process. 
 Proposed subsections (m)(3) and (n)(3) require the LECs to respond to requests 
for information about the workplan and LRIC studies within 10 days after receipt 
of the request. SWB comments that it needs more than 10 days to respond to 
requests for information about the workplan and LRIC studies, and suggests a 
minimum turnaround time of 25 days. (SWB comments at 9 and Attachment A, at 11.) 
The commission agrees to extend the request for information response time for 
the workplan only to 15 days and modifies the language in (m)(3) accordingly. 
Since, as discussed previously, the commission has agreed to extend both the 
LECs' deadline for filing the workplan, and the time schedule for the parties to 
review the workplan, extension of the time for a LEC to respond to requests for 
information about the workplan to 15 days will not require a further extension 
of the time schedule. If, however, the request for information turnaround time 
for the LRIC studies were to be extended, the timeline for review of the studies 
would have to be extended accordingly to provide ample time for discovery. The 
commission does not believe that such an extension is necessary or desirable, 
and therefore, declines to extend the RFI response time for LRIC studies. 
 AT&T notes a typographical error in subsection (m)(4): in the first sentence, 
the word "than" should be changed to "that." (AT&T comments at 9.) The 
commission modifies the language accordingly, and makes a similar change to 
subsection (n)(4) where the same error also appears. 
 AT&T comments that although the proposed rule gives interested parties an 
opportunity to comment on workplans and LRIC studies, it does not provide for 
notice of these filings. (AT&T comments at 8.) AT&T suggests language that would 
require the commission to publish notice of these filings in the Texas Register. 
The commission agrees that such notice would be beneficial and adds subsection 
(o), Notice Requirements, to provide for notice of a LEC's intent to file a 
workplan or LRIC study pursuant to this section. 
 New subsection (p) provides for the initiation of a rulemaking proceeding to 
develop a pricing methodology for LEC services six months after the effective 
date of the LEC workplan. MCI expresses support and "strongly encourages the 
Commission to initiate a rulemaking on pricing principles without delay." (MCI 
comments at 11-12.) In its comments, SWB supports the approach the commission 
has taken in separating costing and pricing issues: "The proposed rule 
appropriately leaves the issue of pricing methodology until a later time as the 
concepts of cost and pricing are separate and distinct. It is imperative that 
the cost rule not be established with preconceived views regarding pricing and 
the provision of services." (SWB comments at 4.) AT&T expresses two concerns 
with the proposal to key the time period for initiating the pricing rulemaking 
to the effective date of the workplan. First, there could be confusion over 
which LEC's workplan will start the clock running. The workplans could have 
different effective dates, due to differences in the approval process, such as a 
30 day suspension. Second, AT&T notes, since review of the workplan can be 
suspended for 30 days, the effective date could be extended, thereby prolonging 
the initiation of the pricing rulemaking. AT&T recommends that the commission 
adopt a date certain for the initiation of the rulemaking, and suggests 270 days 
after the effective date of this section. (AT&T comments at 8.) TEXALTEL 
comments that proposed section (o) provides "unnecessary delays" in the 
initiation of a pricing rule, and sees no reason that it could not begin 
immediately. (TEXALTEL comments at 4-5.) Similarly, MFS agrees with the 
commission's proposal to proceed with a separate rulemaking to address pricing 
issues, but comments that the commission "should not wait six to twelve months 
before even beginning this process." MFS encourages the commission to begin this 
process now. (MFS comments at 9.) The commission's intent in timing the 
initiation of pricing rulemaking from the effective date of the workplan was to 
ensure that pricing issues were kept separate from the review of the workplan, 
however, the commission recognizes AT&T's concerns. The commission modifies the 
language so that pricing rulemaking will be initiated within 180 days after the 
effective date of this section, not the effective date of the workplan. This 
modification does not affect the commission's effort to keep pricing issues 
separate from costing issues, especially since, under this timeline, the 
workplan will likely be approved by the time the pricing rulemaking is 
initiated. The commission does believe, however, that shortening the time period 
for the initiation of the pricing rulemaking, as suggested by TEXALTEL and MFS, 
would interfere with the commission's effort to keep costing and pricing issues 
separate and may adversely affect the workplan review process. Therefore, the 
timeline is not shortened. 
 STA suggests modification of proposed subsections (o) and (d)(4) to require 
that service-related costs are recovered by the service's rates in the pricing 
rulemaking proceeding. (STA comments at 3.) The commission believes that STA's 
concerns relate to pricing issues, and therefore will more appropriately be 
addressed in the pricing proceeding. 
 All comments, including those not specifically referenced herein, were fully 
considered by the commission. 
 The section is adopted under Texas Civil Statutes, Article 1446c, sec.16, which 
provide the Public Utility Commission of Texas with the authority to make and 
enforce rules reasonably required in the exercise of its powers and 
jurisdiction, and sec.18, which provides that the public interest requires that 
new rules, policies, and principles be formulated and applied to protect the 
public interest and to provide equal opportunity to all telecommunications 
utilities in a competitive marketplace. 
 
 
  sec.23.91. Long Run Incremental Cost Methodology for LEC Services. 
 
  (a) Application. This section shall apply to local exchange carriers (LECs), 
as that term is defined in sec.23.61 of this title (relating to Telephone 
Utilities), with annual revenues from regulated telecommunications operations in 
Texas of $100,000,000 or more for five consecutive years. 
   
  (b) Purpose. This section shall be used to determine the long run incremental 
costs incurred by LECs in the provision of telecommunications services. The 
costs determined in this section shall not be used to determine a company's 
revenue requirement during a proceeding pursuant the Public Utility Regulatory 
Act, sec.42 or sec.43. 
   
  (c) Definitions. The following words and terms when used in this section shall 
have the following meaning unless the context clearly indicates otherwise. 
 
  (1) Ancillary Services. The category of basic network functions (BNFs) (as 
defined in paragraph (2) of this subsection) that provide for certain activities 
that either support or otherwise are adjuncts to other BNFs or finished 
services. This category of BNFs consists of three subcategories of BNFs: Billing 
and Collection; Measurement; and Operator Services. 
 
  (A) Billing and Collection. The subcategory of BNFs that provide for the 
function of compiling the information needed for customer billing, preparing the 
customer bill statement, disbursing the bill and collecting the customer 
payments. 
   
  (B)  Measurement. The subcategory of BNFs that provide the functions of 
assembling, collating and transmitting end office switch recorded call data 
(occurrence and duration). 
   
  (C) Operator Services. The subcategory of BNFs that provide for the provision 
of a number of live or mechanized assistance functions to aid customers in the 
following ways: obtaining customer telephone number, street address and ZIP code 
information (directory assistance); providing new telephone numbers or 
explanatory information to callers who dial numbers which have been changed or 
disconnected (intercepts); providing assistance to customers in completing 
operator handled toll or local calls (collect, credit card, third party, 
station-to-station or person-to-person); checking busy lines to make sure the 
line is not out of service (busy line verification); and interrupting busy lines 
(busy line interruption). These Operator Services are provided to end user 
customers as well as local exchange and interexchange carriers. 
     
  (2) Basic network function (BNF). A discrete network function, which is useful 
either as a stand-alone function or in combination with other functions, for 
which costs can be identified. 
   
  (3) Capital costs. The recurring costs that result from expenditures for plant 
facilities that are capitalized. The annual capital costs consist of 
depreciation, cost of money, and income taxes. 
   
  (4) Categories of BNFs. All BNFs shall fall into one of four categories of 
BNFs. The categories are: Network Access (as defined in paragraph (18) of this 
subsection); Switching and Switch Functions (as defined in paragraph (20) of 
this subsection); Dedicated and Switched Transport (as defined in paragraph (10) 
of this subsection); and Ancillary Services (as defined in paragraph (1) of this 
subsection). 
   
  (5) Common costs. Costs that are not directly attributable to individual cost 
objects. For the purposes of this section there are three types of common costs: 
general overhead costs; costs common to BNFs; and costs common to services. 
 
  (A)  General overhead costs. Costs incurred in operating and managing the 
company that are not directly attributable to BNFs or services. 
   
  (B)  Costs common to BNFs. Costs incurred in the provision of BNFs that can 
not be directly attributed to any one BNF individually but only to a category or 
subcategory of BNFs collectively. 
   
  (C) Costs common to services. Costs incurred in the provision of two or more 
services that do not vary with changes in the relative proportions of the 
outputs of those services. Common costs are not directly attributable to any one 
service individually but only to a group of services collectively. In the event 
a BNF is used in the provision of two or more services then the volume 
insensitive cost of the BNF is a cost common to the services that use the BNF. 
However, if the technological requirements for the provision of one service 
alter the least cost technology choice for common BNFs or common facilities, 
then the increase in costs caused by the requirements for more advanced 
technologies is not a common cost but a cost directly attributable to the 
service that alters the least cost technology choice. 
     
  (6) Cost causation principle. The principle that only those costs that are 
caused by an activity (such as a network function, service, or group of 
services) in the long run are directly attributable to that activity. Costs are 
caused by an activity, in the long run, if the costs are brought into existence 
as a direct result of the activity. 
   
  (7) Cost driver. A specific condition, under which a BNF is provided, whose 
change causes significant and systematic changes in the cost of providing a BNF. 
For example, if the cost of providing a Network Access Channel varies with the 
density and size of a wire center, then density and size are cost drivers for 
that BNF. 
   
  (8) Cost of debt. The rate of interest paid on borrowed money. 
   
  (9) Cost of money. The weighted annual cost to the LEC of the debt and equity 
capital invested in the company. 
   
  (10) Dedicated and Switched Transport. The category of BNFs that provide for 
dedicated or shared transmission transport between two or more LEC switching 
offices or wire centers. This BNF category consists of two subcategories of 
BNFs: Dedicated Transport and Switched Transport. 
 
  (A)  Dedicated Transport. The subcategory of BNFs that provide for full 
period, bandwidth specific (e.g., DS-0, DS-1, DS-3) interoffice transmission 
paths between the originating and terminating points of channel connection. 
   
  (B)  Switched Transport. The subcategory of BNFs that provide for shared 
interoffice transmission paths between originating and terminating points of 
switching. 
     
  (11) Depreciation expenses. The charges based on the depreciation accrual 
rates designed to spread the cost recovery of the property over its economic 
life. 
   
  (12) Expenses. Costs incurred in the provision of services that are expensed, 
rather than capitalized, in accordance with the Uniform System of Accounts 
applicable to the carrier. 
   
  (13) Group of services. A number of separately tariffed services that share 
significant common costs (as defined in paragraph (5) of this subsection) that 
are necessary and unique to the provision of those services and are not directly 
attributable to any one service individually. This term also refers to a 
situation in which two or more groups of services are part of a larger group of 
services because of significant common costs that are necessary and unique to 
the provision of all the services in the group but are not directly attributable 
to any one group or service individually. 
   
  (14) Least cost technology. The technology, or mix of technologies, that would 
be chosen in the long run as the most economically efficient choice. The choice 
of least cost technologies, however, shall 
 
  (A) be restricted to technologies that are currently available on the market 
and for which vendor prices can be obtained; 
   
  (B) be consistent with the level of output necessary to satisfy current demand 
levels for all services using the BNF in question; and 
   
  (C) be consistent with overall network design and topology requirements. 
     
  (15) Long run. A time period long enough to be consistent with the assumption 
that the company is in the planning stage and all of its inputs are variable and 
avoidable. 
   
  (16) Long run incremental cost (LRIC). The change in total costs of the 
company of producing an increment of output in the long run when the company 
uses least cost technology. The LRIC should exclude any costs that, in the long 
run, are not brought into existence as a direct result of the increment of 
output. 
   
  (17) Measure of unit cost. The measure of usage used to calculate unit cost 
for a particular BNF (for example, a minute of use of a switching function, or a 
quarter mile of a DS-1 Network Access Channel). The measure of unit costs may be 
multidimensional; for example, it may have both time and distance components. 
The measure of unit cost chosen for a BNF shall correspond to the basis upon 
which the costs of that BNF are incurred. 
   
  (18) Network Access. The category of BNFs that accommodate access to other 
network functions provided by LECs. Access is accomplished by transmission paths 
between customers and LEC wire centers. This category consists of three 
subcategories of BNFs: Network Access Channel; Network Access Channel 
Connection; and Channel Performance and Other Features and Functions. 
 
  (A) Network Access (NA) Channel. The subcategory of BNFs that provide the 
transmission path between the point of interface at the customer location and 
the main distribution frame, or equivalent (e.g., DSX-1, DSX-3), of an LEC wire 
center. 
   
  (B) Network Access (NA) Channel Connection. The subcategory of BNFs that 
provide the interface between the Network Access Channel and the LEC wire center 
switching equipment, subsequent dedicated transport equipment (dedicated 
interoffice circuits), or subsequent channel equipment (dedicated intraoffice 
circuits). 
   
  (C) Channel Performance and Other Features and Functions. The subcategory of 
BNFs that provide the channel functions associated with transmission or service 
type (e. g., analog, digital, coin, ISDN), bandwidth conversion, signaling, 
multiplexing, amplification, and channel performance. 
     
  (19) Significant. For the purposes of this section, the qualifying term 
significant is used to refer to instances in which costs or changes affect total 
study results by at least 5.0%. This general guideline for when costs or changes 
are significant may be relaxed by considering the cumulative effect of either 
including or excluding costs or changes from a study. 
   
  (20) Subcategories of BNFs. Groupings of closely related BNFs in a category of 
BNFs. 
   
  (21) Switching and Switch Functions. The category of BNFs that provide for 
switched access between two or more Network Access Channels or between Network 
Access Channels and other BNFs, such as interoffice transport. This function is 
accomplished through the establishment of a temporary transmission path between 
Network Access Channels in the same switching office; between a Network Access 
Channel and the interoffice facilities that interconnect switching offices; or 
between a Network Access Channel and other BNFs. This BNF category shall cover 
the first point of switching for a customer. This BNF category consists of three 
subcategories of BNFs: Interoffice Switching; Intraoffice Switching; and 
Switching Features. 
 
  (A) Interoffice Switching. The subcategory of BNFs that provide for: switching 
between Network Access Channels and Switched Transport facilities which are 
connected to different wire centers; and switching between Network Access 
Channels and Switched Transport facilities when a tandem switch is used as the 
first point of interface to the LEC switched network (e.g., connection of 
facilities from an interexchange carrier's point of network interface). 
   
  (B)  Intraoffice Switching. The subcategory of BNFs that provide for switching 
between two or more Network Access Channels within the same wire center. 
   
  (C) Switching Features. The subcategory of BNFs that provide added convenience 
or capabilities to other BNFs or finished services. 
     
  (22) Unit cost. A cost per unit of output calculated by dividing the total 
long run incremental cost of production by the total number of units. 
   
  (23) Volume sensitive costs. The costs of providing a BNF that vary with the 
volume of output of the services that use the BNF. 
   
  (24) Volume insensitive costs. The costs of providing a BNF that do not vary 
with the volume of output of the services that use the BNF. 
     
  (d)  General principles. 
 
  (1) Underlying the construction and application of this section is the 
recognition that the LEC network consists of a finite number of BNFs that, when 
bundled in various combinations, can be used to deliver and market a vast 
variety of telecommunications services. Therefore, the determination of the cost 
of a service and the costs of a group of services under this section shall 
involve the identification and costing of BNFs. 
   
  (2) The LRIC studies that the LEC is required to file under this section shall 
assume that the company is operating in the long run and employs least cost 
technologies, as those terms are defined in subsection (c) of this section. 
   
  (3) In order to obtain accurate LRIC study results, the LEC shall avoid the 
use of embedded cost data; expense items and capital costs shall reflect long 
run incremental costs and the LEC shall justify any instance in which embedded 
cost data are used. Further, the fact that the costs determined under this 
section may differ from the company's embedded costs as determined during 
proceedings under the Public Utility Regulatory Act,  sec.42 or sec.43, should 
in no way cause the company to attribute any of this cost discrepancy to LRIC 
studies for BNFs, services, or groups of services. 
   
  (4) The appropriate methods for service pricing and recovery of the revenue 
requirement will be developed in the rulemaking proceeding mandated under 
subsection (p) of this section. 
   
  (5) When a BNF is used in the provision of two or more services then the 
volume insensitive cost of the BNF is a cost common to the services (as defined 
in subsection (c)(5)(C) of this section) that use the BNF. 
   
  (6) When services share significant common costs (as defined in subsection 
(c)(5)(C) of this section), none of the common costs shall be included in the 
LRIC studies for the services individually; instead, the company shall identify 
which services share the common costs and attribute the cost recovery 
responsibility of these costs to the group of services collectively. 
Specifically, the individual LRIC studies for residential and business basic 
local exchange service, as these services are tariffed on the effective date of 
this section, shall exclude any volume insensitive costs associated with the use 
of the Network Access Channel Basic Level (as defined in subsection (e)(1)(A) of 
this section) and Network Access Channel Connection Basic Level (as defined in 
subsection (e)(2)(A) of this section). 
   
  (7) When two or more groups of services share common costs, none of the common 
costs shall be included in the LRIC studies for groups individually; instead, 
the company shall identify which groups share the common costs and assign the 
common cost recovery responsibility of these costs to these groups collectively. 
   
  (8) Nothing in this section is intended to either endorse or reject the LEC's 
current rate and tariff structures. 
     
  (e) Identification of Basic Network Functions. The LEC shall identify for each 
subcategory of BNFs the relevant and separately identifiable BNFs. The 
determination of the appropriate degree of aggregation of network components, 
functions, or activities into separately identifiable BNFs shall be consistent 
with the principles described in subsection (d) of this section. Furthermore, in 
choosing BNFs, the LEC shall seek to minimize the number of network components, 
functions, or activities that are not included in BNFs. In addition to BNFs the 
company identifies under this subsection, the company shall identify for each 
subcategory of BNFs the following prescribed BNFs: 
 
  (1) Required BNFs for subcategory Network Access (NA) Channel: 
 
  (A) NA Channel Basic Level: A transmission path which provides less than 1.544 
Mbps digital capability. This includes 300 to 3,000 Hz analog voice service. 
   
  (B) NA Channel DS-1 Level: A transmission path which has 1. 544 MBPS digital 
capability. 
   
  (C) NA Channel DS-3 Level: A transmission path which has 45 MBPS digital 
capability. 
     
  (2) Required BNFs for subcategory NA Channel Connection: 
 
  (A) NA Channel Connection Basic Level: An interface for channels which provide 
less then 1.544 Mbps digital capability. This includes the interface for 300-
3,000 Hz analog voice service which is the basic interface for most voice-grade 
services such as: basic local residential and local business service, PBX 
trunks, Centrex-type access lines and voice-grade dedicated transport service. 
In addition, this category includes the interface for four frequency bandwidths 
provided for audio channels such as: 200 to 3,500 Hz, 100 to 5,000 Hz, 50 to 
8,000 Hz and 50 to 15,000 Hz. Also included in this BNF are the interfaces for 
low-speed data transmission at speeds of 2.4, 4.8, 9.6, 56 Kbps and all other 
speeds below the T-1 rate of 1.544 Mbps. This interface is for narrowband 
service. 
   
  (B) NA Channel Connection DS-1 Level: An interface for 1.544 MBPS digital 
transmission channels. This interface connects high capacity wideband 
transmission channels which operate in a full duplex, time division (digital) 
multiplexing mode. 
   
  (C) NA Channel Connection DS-3 Level: An interface for 45 MBPS digital 
transmission channels. This interface connects broadband transmission channels 
which operate in full duplex, time division (digital) multiplexing mode. 
     
  (3) Required BNFs for subcategory Channel Performance and Other Features and 
Functions: 
 
  (A) Standard signalling and transmission level capabilities. Signalling and 
transmission level capabilities suitable for a wide variety of network services 
and applications associated with the BNF NA Channel Basic Level, as defined in 
paragraph (1)(A) of this subsection. 
   
  (B) Nonstandard signalling and transmission level capabilities and other 
features. Signalling and transmission level capabilities and other features and 
functions, other than those defined in subparagraph (A) of this paragraph, such 
as high voltage protection, multiplexing, and bridging. The company is 
encouraged to disaggregate this BNF into smaller BNFs that capture the variety 
of features and functions available to customers. 
     
  (4) Required BNFs for subcategory Interoffice Switching: Interoffice 
Switching. The type of switching that provides for: switching between Network 
Access Channels and Switched Transport facilities which are connected to 
different wire centers; and switching between Network Access Channels and 
Switched Transport facilities when a tandem switch is used as the first point of 
interface to the switched network (e.g., connection of facilities from an 
interexchange carrier's point of network interface). 
   
  (5) Required BNFs for subcategory Intraoffice Switching: Intraoffice 
Switching. Switching between two or more Network Access Channels served from the 
same wire center. 
   
  (6) Required BNFs for subcategory Switching Features: 
 
  (A) Hunting Arrangements. An optional function available to customers with 
multiple local exchange access lines in service. 
   
  (B)  Custom Calling Features. Various optional features which provide added 
calling convenience. 
   
  (C) Central Office Automatic Call Distribution. The provision of call 
distribution as an integrated function of certain electronic central offices 
equipped to provide this capability. This function permits an equal distribution 
of a large volume of incoming calls to predesignated groups of answering 
positions, referred to as agent positions. 
   
  (D) Central Office Based PBX-Type Functions. A business communications system 
furnished from stored program control central offices that provides the 
equivalent of customer premises PBX services through the use of central office 
hardware and software as well as through network access facilities from the 
central office to the customer premises. Included in this BNF shall be only 
hardware specific to this type of service, processor or memory usage involved in 
special features for this type of service, and any software or software right to 
use fees associated with this type of service. This BNF should exclude any 
network functions that are already identified as other BNFs. 
     
  (7) Required BNFs for subcategory Dedicated Transport: 
 
  (A)  Dedicated Transport Termination. An interface which provides for the 
transmission conversions (e.g., multiplexing) required between channel 
connection and dedicated transport facilities. 
   
  (B) Dedicated Transport Facility. The full-period, bandwidth-specific (e.g., 
DS-0, DS-1, and DS-3), interoffice transmission paths established between two 
points of dedicated transport termination. 
     
  (8) Required BNFs for subcategory Switched Transport: 
 
  (A) Switched Transport Termination. An interface which provides for the 
transmission conversion (e.g., multiplexing) required between the switching 
function and switched transport facilities. 
   
  (B)  Switched Transport Facility. The temporary interoffice transmission paths 
established between two points of switched transport termination. 
   
  (C)  Switched Transport Tandem Switching. The intermediate points of switching 
used as an economic surrogate to direct routing of interoffice facilities in the 
provision of switched transport. 
     
  (9) Required BNFs for subcategory Billing and Collection: Billing and 
Collection. The function of compiling the information needed for customer 
billing, preparing the customer bill statement, disbursing the bill and 
collecting the customer payments (this includes any collection activities 
required for late payment or non-payment of billing amount due). 
   
  (10) Required BNFs for subcategory Measurement: Measurement. The function of 
assembling, collating, and transmitting end-office switch recorded call data 
(occurrence and duration). 
   
  (11)  Required BNFs for subcategory Operator Services: Operator Services. The 
role of providing a number of live or mechanized assistance functions to aid 
customers in the following ways: obtaining customer telephone number, street 
address and ZIP code information (directory assistance); providing new telephone 
numbers or explanatory information to callers who dial numbers which have been 
changed or disconnected (intercepts); providing assistance to customers in 
completing operator handled toll or local calls (collect, credit card, third 
party, station-to-station or person-to-person); checking busy lines to make sure 
the line is not out of service (busy line verification); and interrupting busy 
lines (busy line interruption). These Operator Services are provided to end user 
customers as well as local exchange and interexchange carriers. 
     
  (f) LRIC studies for individual BNFs. The LEC shall perform a LRIC study for 
each of the BNFs identified under subsection (e) of this section. The company 
shall perform the LRIC studies consistent with the principles described in 
subsection (d) of this section. Additionally, the company shall use the 
following instructions in determining the LRIC for individual BNFs. 
 
  (1) Relevant increment of output. For the purposes of this subsection, the 
relevant increment of output, as that term is used in subsection (c)(16) of this 
section, shall be the level of output necessary to satisfy total current demand 
levels for all services using the BNF in question. Adjustments to total service 
output may be made to reflect the presence of new services for which demand 
levels can demonstrably be anticipated to increase significantly over the course 
of six months. 
   
  (2) Relating expenses to BNFs. The company shall avoid the use of embedded 
cost data and shall determine expenses consistent with the principles of long 
run incremental costing. 
 
  (A) Common expenses. Common expenses that are not directly attributable, using 
the cost causation principle, to the BNF shall be excluded. 
   
  (B) Nonrecurring expenses. The expenses of nonrecurring activities shall be 
separately identified. 
   
  (C) Taxes. Any tax expenses not directly attributable, using the cost 
causation principle, shall be excluded from the LRIC study for individual BNFs. 
Specifically, taxes associated with the provision of services that use more than 
one BNF shall not be included in the BNF LRICs. 
     
  (3) Least-cost technology. LRIC studies shall assume the use of least-cost 
technology. The choice of least-cost technologies, however, shall: 
 
  (A) be restricted to technologies that are currently available on the market 
and for which vendor prices can be obtained; 
   
  (B) be consistent with the level of output necessary to satisfy current demand 
levels for all services using the BNF in question; and 
   
  (C) be consistent with overall network design and topology requirements. 
     
  (4) Network topology. LRIC studies shall use the existing or planned network 
topology. 
   
  (5) Cost of money. When the company uses the most recent commission approved 
rate of return for the company, as that term is used in sec.23.21(c)(1) of this 
title (relating to Cost of Service) there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
   
  (6) Rate of depreciation. When the company uses the most recent commission 
approved rate of depreciation for the company there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
   
  (7) Measure of unit cost. LRIC studies shall identify the appropriate measure 
of unit cost for a BNF (e. g., minutes of use, access line). The measure of unit 
cost chosen for a BNF shall correspond to the basis upon which the costs of the 
BNF are incurred. The measure of unit cost may be multidimensional; for example, 
it may have both time and distance components. In identifying the appropriate 
measure of unit cost, the company shall ignore the current rate structure for 
tariffed services using the BNF. 
   
  (8) Determination of unit cost. Using the measure of unit cost identified 
under paragraph (7) of this subsection, the company shall calculate unit cost 
for the BNF based on the assumption of full capacity utilization of the BNF, 
which should allow for any spare capacity due to lumpy investments or technical 
requirements, such as spare capacity needed for testing. The unit cost shall be 
calculated based on the volume sensitive costs of the BNF and exclude all costs 
that are volume insensitive (as those terms are defined in subsections (c)(23)-
(24) of this section). 
   
  (9)  Determination of volume insensitive costs. The company shall calculate 
the volume insensitive costs (as defined in subsection (c)(24) of this section) 
for the BNF. 
   
  (10) Cost drivers. LRIC studies shall identify and account for all relevant 
cost drivers. LRIC studies for certain BNFs shall at a minimum account for the 
cost drivers specified below. 
 
  (A) Cost drivers for NA Channel Basic Level, NA Channel DS-1 Level, and NA 
Channel DS-3 Level. The LRICs for these BNFs shall systematically account for 
variations in costs caused by variations in 
 
  (i) the density of a wire center; 
   
  (ii) the size of a wire center; and 
   
  (iii) the distance. 
     
  (B) Cost drivers for NA Connection Basic Level, NA Connection DS-1 Level, and 
NA Connection DS-3 Level. The LRICs for these BNFs shall systematically account 
for variations in costs caused by variations in: 
 
  (i) the density of a wire center; and 
   
  (ii) the size of a wire center. 
     
  (C)  Cost drivers for Intraoffice Switching and Interoffice Switching. The 
LRICs for these BNFs shall systematically account for variations in costs caused 
by variations in: 
 
  (i) the density of a wire center; 
   
  (ii) the size of a wire center; and 
   
  (iii) the time of day. 
     
  (D) Cost drivers for Dedicated Transport Facilities and Termination. The LRICs 
for these BNFs shall systematically account for variations in costs caused by 
variations in: 
 
  (i) the size of a wire center; and 
   
  (ii) the distance. 
     
  (E) Cost drivers for Switched Transport Facilities, Termination and Tandem 
Switching. The LRICs for these BNFs shall systematically account for variations 
in costs caused by variations in: 
 
  (i) the size of a wire center; 
   
  (ii)  the distance; and 
   
  (iii) time of day. 
     
  (F) Cost drivers for Measurement. The LRIC for this BNF shall systematically 
account for variations in costs caused by variations in: 
 
  (i) the density of a wire center; 
   
  (ii) the size of a wire center; 
   
  (iii)  the time of day; and 
   
  (iv) the duration of a call. 
     
  (G) Cost drivers for Operator Services. The LRIC for this BNF shall 
systematically account for variations in costs caused by variations in the type 
of operator services calls. 
       
  (g) LRIC studies for tariffed services. The LEC shall perform a LRIC study for 
each tariffed service, except those services for which a waiver has been granted 
under the workplan approved under subsection (m) of this section. Each LRIC 
study for a tariffed service shall be calculated as the sum of the costs caused 
by that a service's use of BNFs and any other service specific costs associated 
with functions not identified as separate BNFs, such as expenses of billing, 
service specific advertising and marketing, and service specific taxes. Each 
LRIC study for a tariffed service shall be consistent with the principles 
described in subsection (d) of this section. Additionally, the company shall use 
the following instructions in determining the LRIC for individual tariffed 
services: 
 
  (1) Mapping of BNFs and costs to tariffed services. The LRIC study shall 
identify the BNFs that are used in the provision of the tariffed service; the 
long run incremental costs for the tariffed service shall include the costs 
associated with this usage. The costs associated with the service's use of a BNF 
shall be calculated as the product of the unit cost for the BNF (as determined 
under subsection (f)(8) of this section) and the demand of the service for that 
BNF. 
   
  (2) Identification of other costs. The LRIC study for an individual tariffed 
service shall include all service specific costs (e.g., expenses of billing, 
marketing, customer service or service specific taxes) related to the provision 
of the service that are not included in the costs for the BNFs. 
   
  (3) Exclusion of common costs. The LRIC study for an individual tariffed 
service shall exclude any costs that are common costs (as defined in subsection 
(c)(5) of this section). Specifically, the individual LRIC studies for 
residential and business basic local exchange service, as these services are 
tariffed on the effective date of this section, shall exclude any volume 
insensitive costs associated with the use of the Network Access Channel Basic 
Level (as defined in subsection (e) (1)(A) of this section) and Network Access 
Channel Connection Basic Level (as defined in subsection (e)(2)(A) of this 
section). 
   
  (4) Relevant increment of output. For the purposes of this subsection, the 
relevant increment of output, as that term is used in subsection (c)(16) of this 
section, shall be the level of output necessary to satisfy current demand levels 
for the service. Adjustments to total service output may be made to reflect the 
presence of new services for which demand levels can demonstrably be anticipated 
to increase significantly over the course of six months. 
   
  (5) Relating expenses to services. The company shall avoid the use of embedded 
cost data and shall determine expenses consistent with the principles of long 
run incremental costing. 
 
  (A) Common expenses. Common expenses that are not directly attributable, using 
the cost causation principle, to the service shall be excluded. 
   
  (B) Nonrecurring expenses. The expenses of nonrecurring activities shall be 
separately identified. 
   
  (C) Taxes. Any tax expenses not directly attributable, using the cost 
causation principle, shall be excluded from the LRIC study for individual 
services. 
     
  (6)  Least-cost technology. LRIC studies shall assume the use of least-cost 
technology. The choice of least-cost technologies, however, shall 
 
  (A)  be restricted to technologies that are currently available on the market 
and for which vendor prices can be obtained; 
   
  (B) be consistent with the level of output necessary to satisfy current demand 
levels for all services using the BNF in question; and 
   
  (C) be consistent with overall network design and topology requirements. 
     
  (7) Network topology. LRIC studies shall use the existing or planned network 
topology. 
   
  (8) Cost of money. When the company uses the most recent commission approved 
rate of return for the company, as that term is used in sec.23.21(c)(1) of this 
title (relating to Cost of Service) there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
   
  (9)  Rate of depreciation. When the company uses the most recent commission 
approved rate of depreciation for the company there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
     
  (h)  Identification of BNFs and groups of services that share significant 
common costs and calculation of such common costs. The company shall identify 
all instances in which BNFs and groups of services share significant common 
costs and calculate such common costs. 
 
  (1) Costs common to BNFs. The company shall identify and calculate for each 
subcategory of BNFs and category of BNFs significant costs that are common to 
BNFs (as defined in subsection (c) (5)(B) of this section). Costs common to BNFs 
shall only be identified and calculated at the level of subcategories of BNFs 
and/or categories of BNFs. 
   
  (2) Costs common to groups of services. The company shall identify and 
calculate all significant common costs and the groups of services that share 
those common costs (as defined in subsection (c)(5)(C) of this section). The 
calculation of common costs required under paragraphs (1)-(2) of this subsection 
shall be consistent with the principles described in subsection (d) of this 
section and the instructions listed below. 
   
  (3)  Relevant increment of output. When common costs are computed for BNFs or 
services, the relevant increment of output, as that term is used in subsection 
(c)(16) of this section, shall be the level of output necessary to satisfy 
current demand levels for the BNFs or the services. Adjustments to total service 
output may be made to reflect the presence of new services for which demand 
levels can demonstrably be anticipated to increase significantly over the course 
of six months. 
   
  (4) Expenses. The company shall avoid the use of embedded cost data and shall 
determine expenses consistent with the principles of long run incremental 
costing. 
 
  (A) Nonrecurring expenses. The expenses of nonrecurring activities shall be 
separately identified. 
   
  (B) Taxes. Any tax expenses not directly attributable, using the cost 
causation principle, shall be excluded from the cost studies for common costs. 
     
  (5) Least-cost technology. The studies shall assume the use of least-cost 
technology. The choice of least-cost technologies, however, shall: 
 
  (A) be restricted to technologies that are currently available on the market 
and for which vendor prices can be obtained; 
   
  (B) be consistent with the level of output necessary to satisfy current demand 
levels for the BNFs or services in question; and 
   
  (C) be consistent with overall network design and topology requirements. 
     
  (6) Network topology. Cost studies shall use the existing or planned network 
topology. 
   
  (7) Cost of money. When the company uses the most recent commission approved 
rate of return for the company, as that term is used in sec.23.21(c)(1) of this 
title (relating to Cost of Service) there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
   
  (8) Rate of depreciation. When the company uses the most recent commission 
approved rate of depreciation for the company there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
     
  (i) LRIC studies for groups of tariffed services that share significant common 
costs. The LEC shall perform a LRIC study for each group of services identified 
under subsection (h)(2) of this section. Each group LRIC shall be calculated as 
the sum of the LRICs (as determined under subsection (g) of this section) for 
the services in the group and the common costs for those services (as identified 
under subsection (h)(2) of this section). Each LRIC study shall be consistent 
with the principles described in subsection (d) of this section. Additionally, 
the company shall use the following instructions in determining the LRIC for 
groups of services. 
 
  (1) Relevant increment of output. When the LRIC is computed for a group of 
services, the relevant increment of output, as that term is used in subsection 
(c)(16) of this section, shall be the level of output necessary to satisfy 
current demand levels for the services in the group. Adjustments to total 
service output may be made to reflect the presence of new services for which 
demand levels can demonstrably be anticipated to increase significantly over the 
course of six months. 
   
  (2) Relating expenses to groups of services. The company shall avoid the use 
of embedded cost data and shall determine expenses consistent with the 
principles of long run incremental costing. 
 
  (A) Common expenses. Common expenses that are not directly attributable, using 
the cost causation principle, to the group of services shall be excluded. 
   
  (B) Nonrecurring expenses. The expenses of nonrecurring activities shall be 
separately identified. 
   
  (C)  Taxes. Any tax expenses not directly attributable, using the cost 
causation principle, shall be excluded from the LRIC study for the group of 
services. 
     
  (3) Least-cost technology. LRIC studies shall assume the use of least cost 
technology. The choice of least-cost technologies, however, shall: 
 
  (A) be restricted to technologies that are currently available on the market 
and for which vendor prices can be obtained; 
   
  (B) be consistent with the level of output necessary to satisfy current demand 
levels for all services using the BNF in question; and 
   
  (C) be consistent with overall network design and topology requirements. 
     
  (4) Network topology. LRIC studies shall use the existing or planned network 
topology. 
   
  (5) Cost of money. When the company uses the most recent commission approved 
rate of return for the company, as that term is used in sec.23.21(c)(1) of this 
title (relating to Cost of Service) there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
   
  (6)  Rate of depreciation. When the company uses the most recent commission 
approved rate of depreciation for the company there will be a presumption of 
reasonableness. The company shall justify the use of any other rate. 
     
  (j)  Filing requirements for LEC provided workplan. Within 70 days of the 
effective date of this section, the LEC shall file with the commission and the 
Office of Public Utility Counsel (OPUC) a plan for compliance with the 
provisions of this section. The workplan shall be consistent with the 
principles, instructions and requirements set forth in this section and shall be 
reviewed in accordance with the procedures established in subsection (m) of this 
section. The workplan submitted by the LEC shall include the following 
components. 
 
  (1) Identification of BNFs and cost methodology. The workplan submitted by the 
LEC shall discuss the BNFs identified under this section and include a detailed 
discussion of the cost methodology the LEC proposes to use for the studies 
required under this section. Additionally, the workplan shall meet the following 
requirements: 
 
  (A) List of BNFs. The workplan shall include a list of all BNFs that the LEC 
has identified pursuant to subsection (e) of this section. 
   
  (B) Additional BNFs. If the LEC proposes to identify BNFs in addition to the 
BNFs identified in subsection (e) (1)-(11) of this section, the workplan shall 
include a description of each of the BNFs that the LEC proposes to identify, and 
a discussion of why these BNFs should be identified in addition to the BNFs 
identified in subsection (e)(1) -(11) of this section. 
   
  (C) Definitions of BNFs. For each BNF identified under subsection (e) of this 
section, the workplan shall include, a precise definition of the BNF, including 
the points of demarcation in the LEC's network between each BNF and other BNFs. 
   
  (D) Diagrams. For each BNF identified under subsection (e) of this section, 
the workplan shall include a diagram that illustrates the BNF's role in the 
provision of LEC services. 
   
  (E) Least cost technology choices for BNFs. For each BNF identified under 
subsection (e) of this section, the workplan shall identify which technology or 
technologies (e.g., fiber optic cable, digital switching systems) will be 
considered the least cost technology (as defined in subsection (c)(14) of this 
section) for the BNF. 
   
  (F) Identification of investments. The workplan shall include a discussion of 
the methodology that the LEC proposes to use in identifying investments 
associated with each of the BNFs identified under subsection (e) of this 
section. 
   
  (G) Data sources. For each BNF identified under subsection (e) of this 
section, the workplan shall include a discussion of the data sources to be used 
in developing the costs of the BNF. 
   
  (H) Service demand. For each BNF identified under subsection (e) of this 
section, the workplan shall include a discussion of the data sources to be used 
for service demand in developing the costs of the BNF. 
   
  (I) Automated cost models. The workplan shall include a description of any 
automated cost models which the LEC proposes to use in developing the cost of 
the BNF. For each such automated cost model, the workplan shall provide a 
detailed description of the algorithm of the cost model and demonstrate that the 
methodology of the cost model is consistent with the long run incremental cost 
methodology described in this section. 
   
  (J) Flowcharts. For each type of cost study required under this section, the 
workplan shall include a detailed flowchart that identifies all models used in 
the study and the interrelationships between the inputs and outputs of the 
models. 
   
  (K) List of cost drivers. For each BNF identified under subsection (e) of this 
section, the workplan shall identify the cost drivers that the LEC has 
identified pursuant to subsection (f)(10) of this section. 
   
  (L) Additional cost drivers. If the LEC proposes to identify and account for 
cost drivers in addition to the cost drivers identified in subsection 
(f)(10)(A)-(G) of this section, the workplan shall include a description of each 
of the cost drivers that the LEC proposes to use, and a discussion of why these 
cost drivers should be used in addition to the cost drivers identified in 
subsection (f)(10)(A)-(G) of this section. 
   
  (M)  Loading factors. The workplan shall include a discussion of the 
methodology that the LEC proposes to use in identifying operating expenses, 
depreciation, and taxes relating to each of the BNFs identified under subsection 
(e) of this section. 
   
  (N) Categorization of BNFs. For each BNF identified under subsection (e) of 
this section, the workplan shall identify the category and subcategory of BNFs 
(as defined in subsection (c) of this section) under which the BNF is 
categorized. 
   
  (O) Mapping from BNFs to tariffed services. For each BNF identified under 
subsection (e) of this section, the workplan shall include a list of all 
tariffed services that use the BNF. 
   
  (P) Mathematical representation. The workplan shall include a formal 
mathematical statement describing the cost relationships between BNFs, tariffed 
services, and groups of tariffed services. This statement shall translate the 
principles, instructions and requirements of this section into the traditional 
mathematical terms used in the economic literature. Specifically, the company 
shall include a mathematical statement that describes the functional 
relationship between the long run incremental costs for a tariffed service and a 
service's use of BNFs. 
     
  (2)  Identification of costs common to BNFs. The workplan submitted by the LEC 
shall identify which BNFs share common costs and the sources of the common costs 
(as identified under subsection (h)(1) of this section). 
   
  (3)  Identification of groups of services. The workplan submitted by the LEC 
shall include a list of all groups of services that the LEC has identified 
pursuant to subsection (h)(2) of this section. The list shall meet the following 
requirements: 
 
  (A) Identification of services in groups. The list shall identify for each 
group the services that are included in the group. When the group contains 
smaller groups of services, the smaller groups that are included in the group 
shall be identified. 
   
  (B) Identification of BNFs that represent common costs. The list shall 
identify the BNFs that represent the common costs for each group of services. 
   
  (C)  Identification of other common costs. The list shall identify other 
sources of common costs for each group of services (as identified under 
subsection (h)(2) of this section). 
     
  (4) Proposed schedule for completion and filing of cost studies. The workplan 
submitted by the LEC shall include a proposed completion and filing date for: 
the LRIC study for each BNF identified under subsection (e) of this section, 
including the required BNFs specified in subsection (e)(1)-(11) of this section; 
the LRIC study for each tariffed service offered by the LEC; and the LRIC study 
for each group of services identified under subsection (h) of this section. The 
proposed schedule submitted by the LEC shall meet the following requirements: 
 
  (A)  If the schedule proposed by the LEC would result in completion of any 
cost study later than 18 months following the effective date of this section, 
the LEC should discuss in detail the reasons why the cost study may not be 
completed within 18 months. 
   
  (B) In no event should the schedule proposed by the LEC result in the 
completion of any cost study later than thirty months following the effective 
date of this section. 
   
  (C) The schedule proposed by the LEC should space the completion and filing of 
cost studies relatively evenly over the course of the period of time allowed for 
completing the studies and avoid, to the greatest degree possible, the filing of 
large quantities of studies at any one date. 
   
  (D) The schedule proposed by the LEC shall not result in completion of any 
LRIC study for a tariffed service before the completion of the LRIC studies for 
all the BNFs that are used in the provision of the tariffed service. 
     
  (5) Prototype LRIC studies for BNFs, tariffed services, and groups of tariffed 
services. The workplan shall provide prototype LRIC studies for BNFs, tariffed 
services, and groups of tariffed services, to serve as models for the studies 
filed pursuant to this section. In devising the prototype studies the LEC shall 
consider the following instructions. 
 
  (A) Completeness. The prototype LRIC studies shall be structured to provide 
for all information (e.g., inputs, outputs, assumptions) necessary to understand 
the studies and to reasonably verify their accuracy. 
   
  (B) Consistency and efficiency. The company shall seek to organize the 
prototype studies in a manner that clearly demonstrates the relationships and 
consistencies between studies. To the extent that a number of studies use 
automated models, standardized loading factors or other standardized methods, 
the company shall propose a way of documenting these methods that reduces 
unnecessary duplication. 
   
  (C) PC-based spreadsheets and open algorithms. The company shall create the 
prototype studies both on paper and on personal computer based electronic 
spreadsheets. In designing the personal computer based electronic spreadsheet 
versions the company shall seek to create an open algorithm that can be used and 
modified by the commission staff and other users. 
     
  (6) Waiver requests. 
 
  (A) Waiver for required BNF. The workplan shall include a request for waiver 
if the company finds that a required BNF specified in subsection (e)(1) -(11) of 
this section is inappropriate for its network. The waiver request shall be 
accompanied by a statement demonstrating why the required BNF is inappropriate. 
   
  (B) Waiver for required cost driver. The workplan shall include a request for 
waiver if the company finds that a required cost driver specified in subsection 
(f)(10)(A)-(G) of this section is inappropriate for its network. The waiver 
request shall be accompanied by a statement demonstrating why the required cost 
driver is inappropriate. 
   
  (C)  Waiver for required LRIC studies for individual tariffed services. The 
workplan shall include requests for waivers for those services for which the 
company proposes to not perform a LRIC study. 
     
  (7) Proposal for the treatment of information designated as confidential or 
proprietary. The workplan submitted by the LEC shall include the LEC's proposal 
for the treatment of information to be filed pursuant to this section that the 
LEC designates or intends to designate as confidential and/or proprietary. The 
LEC shall include the following information: 
 
  (A) Identification. Identification of the information to be filed pursuant to 
this section (e.g. cost models, algorithms, data) that the LEC will designate as 
confidential and/or proprietary. 
   
  (B) Explanation. For each item identified in subparagraph (A) of this 
paragraph, an explanation supporting the LEC's designation of information as 
confidential and/or proprietary. 
   
  (C)  Proposal. The LEC's proposal for the treatment of information designated 
by the LEC as confidential and/or proprietary that the LEC will file pursuant to 
this section (e.g., a proposed protective agreement). 
       
  (k)  Requirements for initial filings of LRIC studies. The LEC shall file with 
the commission and OPUC the LRIC studies required under this section. The LRIC 
studies shall be consistent with the principles, instructions, and requirements 
set forth in this section and shall be reviewed in accordance with the 
procedures established in subsection (n) of this section. In accordance with the 
workplan, and the waivers therein, approved under subsection (m) of this 
section, the LEC shall file a LRIC studies for: 
 
  (1) each BNF identified under subsection (e) of this section and calculated 
under subsection (f) of this section, including those that are specified as 
required BNFs under subsection (e)(1)-(11) of this section; 
   
  (2) costs common to BNFs as identified and calculated under subsection (h) of 
this section; 
   
  (3) each tariffed services as calculated under subsection (g) of this section; 
and 
   
  (4) each groups of services identified under subsection (h) of this section 
and calculated under subsection (i) of this section. 
     
  (l) Requirements for subsequent filings of LRIC studies. The LRIC studies 
required by this subsection shall be consistent with the principles, 
instructions and requirements set forth in this section and the workplan 
approved in subsection (m) of this section and shall be reviewed in accordance 
with the procedures established in subsection (n) of this section. 
 
  (1) Updated studies. Thirty-six months after the effective date of the 
section, and every six months thereafter, the LEC shall file with the commission 
and OPUC updated versions of all filings, other than the workplan, required 
under this section. The LEC is not required to update its filings for those 
studies where no significant changes have occurred. 
   
  (2)  Provisions for new BNFs. When significant technological or other changes 
occur that necessitate a change in the definition of current BNFs or the 
identification of new BNFs, the LEC shall file with the commission and OPUC 
updated versions for all affected LRIC studies or new studies as appropriate. 
   
  (3) Provisions for new services. For each application for a service filed 
pursuant to this title, the LEC shall file with the commission and OPUC a LRIC 
study for the service consistent with the principles described in subsection (d) 
of this section and the specific requirements set forth in subsection (g) of 
this section. 
   
  (4) Unbundling of existing tariffed services. When an application filed 
pursuant to this title proposes a service that previously had been bundled with 
other BNFs into a tariffed service, the LEC shall carefully reexamine the 
identification of groups of services that share significant common costs (as 
required under subsection (h) of this section). If the new service significantly 
changes the identification of groups of services and the identification of 
common costs, the LEC should update all studies required under this section that 
are affected by these changes. 
     
  (m) Review process for LEC workplan. An LEC workplan considered under this 
section shall be reviewed administratively to determine whether the LEC's 
workplan is consistent with the principles, instructions and requirements set 
forth in this section. 
 
  (1) Sufficiency. The workplan shall be examined for sufficiency. To be 
sufficient, the LEC workplan shall include the components required by subsection 
(j) of this section. If the presiding examiner or the commission staff concludes 
that material deficiencies exist in the workplan, the LEC shall be notified 
within 15 days of the filing date of the specific deficiency in its workplan. 
The LEC shall have 15 days from the date it is notified of the deficiency to 
file a corrected workplan. 
   
  (2) Time Schedule. 
 
  (A) No later than 60 days after the filing date of the sufficient workplan, 
any party that demonstrates a justiciable interest may file with the presiding 
examiner written comments or recommendations concerning the workplan. 
   
  (B) No later than 70 days after the filing date of the sufficient workplan, 
OPUC may file with the presiding examiner written comments or recommendations 
concerning the workplan. 
   
  (C) No later than 80 days after the filing date of the sufficient workplan, 
the commission staff shall file with the presiding examiner written comments or 
recommendations concerning the workplan. 
   
  (D) No later than 90 days after the filing date of the sufficient workplan, 
any party that demonstrates a justiciable interest, OPUC, or the LEC may file 
with the presiding examiner a written response to the commission staff's 
recommendation. 
   
  (E) No later than 100 days after the filing date of the sufficient workplan, 
the presiding examiner shall complete an administrative review to determine 
whether the LEC's workplan is consistent with the principles, instructions and 
requirements set forth in this section. The examiner shall approve the workplan 
or order the LEC to refile the workplan incorporating all modifications 
recommended by the examiner. 
     
  (3)  Requests for Information. While the workplan is being administratively 
reviewed, the commission staff, OPUC, and any party that demonstrates a 
justiciable interest may submit requests for information to the LEC. Three 
copies of all answers to such requests for information shall be provided within 
15 days after receipt of the request by the LEC to the commission staff, OPUC 
and any party that demonstrates a justiciable interest. 
   
  (4)  Suspension. At any point within the first 60 days of the review process, 
the presiding examiner, the commission staff, OPUC, the LEC, or any party that 
demonstrates a justiciable interest may request that the review process be 
suspended for 30 days. The examiner may grant a request for suspension only if 
he or she has determined that the party has demonstrated that good cause exists 
for such suspension. 
   
  (5) Effective date of the LEC workplan. The effective date of the LEC workplan 
shall be the date it is approved by the presiding examiner. 
     
  (n) Review process for LRIC studies. A LRIC study considered under this 
section shall be reviewed administratively to determine whether the LEC's LRIC 
study is consistent with the principles, instructions and requirements set forth 
in this section. 
 
  (1) Sufficiency. The LRIC study shall be examined for sufficiency. To be 
sufficient, the LRIC study shall conform to the prototype studies developed 
under the workplan approved under subsection (m) of this section. If the 
presiding examiner or the commission staff concludes that material deficiencies 
exist in the LRIC study, the LEC shall be notified within 15 days of the filing 
date of the specific deficiency in its LRIC study. The LEC shall have 15 days 
from the date it is notified of the deficiency to file a corrected LRIC study. 
   
  (2) Time Schedule. 
 
  (A) No later than 45 days after the filing date of the sufficient LRIC study, 
any party that demonstrates a justiciable interest may file with the presiding 
examiner written comments or recommendations concerning the LRIC study. 
   
  (B) No later than 55 days after the filing date of the sufficient LRIC study, 
OPUC may file with the presiding examiner written comments or recommendations 
concerning the LRIC study. 
   
  (C) No later than 65 days after the filing date of the sufficient LRIC study, 
the commission staff shall file with the presiding examiner written comments or 
recommendations concerning the LRIC study. 
   
  (D) No later than 75 days after the filing date of the sufficient LRIC study, 
any party that demonstrates a justiciable interest, OPUC, or the LEC may file 
with the presiding examiner a written response to the commission staff's 
recommendation. 
   
  (E) No later than 85 days after the filing date of the sufficient LRIC study, 
the presiding examiner shall complete an administrative review to determine 
whether the LEC's LRIC study is consistent with the principles, instructions and 
requirements set forth in this section. The examiner shall approve the LRIC 
study or order the LEC to refile the LRIC study incorporating all modifications 
recommended by the examiner. 
     
  (3) Requests for Information. While the LRIC study is being administratively 
reviewed, the commission staff, OPUC, and any party that demonstrates a 
justiciable interest may submit requests for information to the LEC. Three 
copies of all answers to such requests for information shall be provided within 
10 days after receipt of the request by the LEC to the commission staff, OPUC 
and any party that demonstrates a justiciable interest. 
   
  (4) Suspension. At any point within the first 45 days of the review process, 
the presiding examiner, the commission staff, OPUC, the LEC, or any party that 
demonstrates a justiciable interest may request that the review process be 
suspended for 30 days. The examiner may grant a request for suspension only if 
he or she has determined that the party has demonstrated that good cause exists 
for such suspension. 
   
  (5) Effective date of the LRIC study. The effective date of the LRIC study 
shall be the date it is approved by the presiding examiner. 
     
  (o)  Notice requirements. At least ten days before an LEC files any workplan 
or LRIC study pursuant to this section, the LEC shall file with the commission 
and OPUC a notice of its intent to file such workplan or LRIC study and the 
expected filing date. The LEC's notice shall indicate that the filing is being 
made pursuant to this section. The commission shall then publish notice of the 
LEC's intent to file the workplan or LRIC study in the Texas Register. 
   
  (p) Pricing rule. Within 180 days of the effective date of this section, the 
commission shall initiate a rulemaking proceeding to develop a pricing 
methodology for LEC services that is consistent with the cost information 
obtained under this section. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327671 
  John Renfrow 
 Secretary of the Commission 
 Public Utility Commission of Texas 
    Effective date: September 10, 1993 
 Proposal publication date: April 6, 1993 
 For further information, please call: (512) 458-0100 
         
                   
  TITLE 19. EDUCATION 
 Part II. Texas Education Agency 
  Chapter 61. School Districts 
  
  Subchapter AA. Commissioner's Rules 
 
  County Education Districts 
 
  19 TAC sec.61.1001 
 
  The Texas Education Agency (TEA) adopts new sec.61.1001, concerning county 
education districts (CED), with changes to the proposed text as published in the 
June 29, 1993, issue of the Texas Register (18 TexReg 4230). The rule is 
necessary to establish a distribution scheme to fulfill the legislative mandate 
to distribute CED funds in an orderly fashion that achieves three priorities in 
descending order to pay the component districts 100% of the 1992-1993 
entitlement, thus fulfilling the original purpose of the CEDs; to provide to the 
extent possible a stop loss provision for districts that lost funds in the 
transition from Senate Bill 351 to Senate Bill 7; and to distribute any funds 
remaining after execution of the first two priorities on a per weighted student 
basis within the CED. All ratios will be computed by TEA, Division of State 
Funding. All ratios will be computed based on 1992-1993 school district data, 
since that was the last year in which CEDs operated. 
 The following comments were received regarding adoption of the new rule. 
 Comment: Daingerfield Consolidated ISD, North East ISD, and Northside ISD 
requested that the current 1992-1993 distribution ratios be continued. 
 Comment: Seminole ISD and the Texas Association of Community Schools requested 
that the current 1992-1993 CED ratios be continued until August 31, 1993, and 
that the revenues be distributed to the districts where the property was 
located. 
 Comment: Plano ISD and Lake Travis ISD requested that CED revenues be 
distributed to the districts where the property was located. 
 Comment: Sonora ISD disagreed with the fact that budget-balanced districts 
would receive little, if any, distribution. 
 Comment: La Porte ISD requested that consideration be given to reserves for 
pending litigation. 
 Comment: College Station ISD requested that excess CED funds be used to cover 
1991-1992 proration. 
 Comment: Andrews ISD requested that lost CED funds be included in the 
distribution in addition to loss of state funds. 
 Comment: Houston ISD sought clarification of the distribution formula in 
subsection (b)(3). 
 Agency response: The preceding clarifications were made. Although technical 
changes were made in the language as originally proposed, no substantive change 
in the proposed priorities was made. In general, commentators sought CED 
distribution more favorable to themselves. The purpose of the rule as written 
was to minimize within available revenues the losses due to transition from 
Senate Bill 351 to Senate Bill 7. 
 Comment: The law firm of McCreary, Veselka, Bragg and Allen, P.C., on behalf of 
Henderson ISD requested that the language regarding the disposition of penalties 
be clarified. The firm also requested that the rule specify that tax collection 
responsibility be required of every school district in which property with 
delinquent CED taxes is located. 
 Agency response: The first requested change was made. The second request was 
denied to allow local discretion regarding tax collection responsibility. 
 Comment: An individual requested that the distribution penalties be clarified 
and streamlined. He also asked whether the term "compiled" in subsection (h) was 
used in its technical sense. 
 Agency response: The change was made. The term "compiled" in subsection (h) was 
used in its accounting sense. 
 Comment: Killeen ISD supports the proposed rule as originally written. 
 The new rule is adopted under Senate Bill 7, sec.4.15, which authorizes the 
commissioner of education to adopt rules as necessary to implement statutory 
requirements concerning abolition of CEDs. 
 
 
  sec.61.1001. Management of Assets, Liabilities, and Records of Former County 
Education Districts. 
 
  (a) Not later than August 31, 1993, the governing board of each county 
education district (CED) shall designate a governmental entity or an officer of 
a governmental entity located within the boundaries of the CED as the successor-
in-interest to the assets, liabilities, and records of the CED and shall notify 
the commissioner of education of the designation. 
   
  (b) On August 31, 1993, the governing board of each CED shall distribute all 
funds paid to a county education district in 1993 except any penalties under the 
Texas Tax Code, sec.33.07. In the following order of priority, the governing 
board of each CED shall distribute the funds: 
 
  (1)  to pay any outstanding debts of the former CED, including refunds, and 
establish a reasonable reserve for refunds to be held by the successor-in-
interest; 
   
  (2) to the school districts in the CED as required by the Texas Education 
Code, sec.16.501, in the full amount of the 1992-1993 district entitlement as 
determined by the 1992-1993 Summary of Finances issued by the Texas Education 
Agency (TEA), Division of State Funding; 
   
  (3) to the school districts of the former CED according to the ratio of each 
district's reduction in revenues, resulting solely from formula changes between 
the 1992-1993 school year and the 1993-1994 school year, to the sum of all 
reductions in revenues for school districts in the former CED. This ratio shall 
be computed and sent to the districts by TEA, Division of State Funding. This 
distribution ratio shall apply until 100% of the loss in revenues as defined in 
this subsection has been paid; and 
   
  (4) to the school districts of the former CED according to the ratio of each 
district's number of weighted average daily attendance for the 1992-1993 school 
year to the number of weighted average daily attendance in the CED for the same 
school year. This ratio shall be computed and sent to the districts by TEA, 
Division of State Funding. 
     
  (c) The successor-in-interest shall continue to collect all delinquent taxes 
of the CED, including any accrued but unpaid penalties and interest, and to 
distribute any amounts collected under subsections (f) and (g) of this section 
according to the priorities specified in subsection (b) of this section. Funds 
may be distributed on a monthly basis or less often according to administrative 
costs for processing small monetary amounts. 
   
  (d) Penalties under the Texas Tax Code, sec.33.07, paid to a CED in the 1992-
1993 school year shall be allocated to the school district that is the situs of 
the property that incurred the penalties. Thereafter, all penalties under the 
Texas Tax Code, sec.33.07, shall be allocated to the entity collecting the 
delinquent CED tax. All other CED revenues, including interest, shall be paid 
according to the priorities specified in subsection (b) of this section. 
   
  (e) On September 1, 1993, the governing board shall also transfer other assets 
of the CED, and all contracts, liabilities, and the records of the CED to the 
successor-in-interest. The governing board shall notify the commissioner of 
education of the amounts of the assets and liabilities transferred and the 
amounts of any uncollected taxes levied by the former CED in the annual 
financial report for the fiscal year ended August 31, 1993. 
   
  (f) The successor-in-interest of a CED shall collect or contract for the 
collection of any taxes levied by the former CED that are delinquent. 
   
  (g) The successor-in-interest of a CED may sell any assets, other than funds, 
of the former CED that the successor does not need to perform the duties of 
successor-in-interest. 
   
  (h) Not later than December 31 of each year, beginning with 1994, each 
successor-in-interest shall file with the commissioner of education an annual 
report compiled by an independent certified public accountant of the amount of 
delinquent taxes collected, the amount of proceeds received from the sale of 
assets, the amount of debts paid, the amount of distributions made to school 
districts, and the related administrative costs of the successor-in-interest 
during the preceding fiscal year. The financial report shall include a 
supplemental schedule of assets and liabilities transferred to the successor-in-
interest or any component school district. 
   
  (i) The successor-in-interest of a former CED shall file an annual financial 
report for the fiscal year ended August 31, 1993, for the former CED according 
to the instructions in Change 27, Bulletin 679, Financial Accounting Manual. 
   
  (j) A majority of the boards of trustees of the component districts of a 
former CED may by a majority vote redesignate the successor-in-interest of the 
former CED. The commissioner of education may require the board of trustees of 
component districts of a former CED to redesignate the successor-in-interest of 
the former CED. 
   
  (k)  The successor-in-interest of a former CED may pay necessary 
administrative costs from penalties and other delinquent tax proceeds. 
Administrative costs include, but are not limited to, audit expenses, payroll, 
contracted services, supplies and materials, and other operating costs 
associated with continuing delinquent tax collection and distribution 
activities. 
   
  (l) The successor-in-interest of a former CED shall report delinquent taxes 
collected and funds distributed, administrative costs, and delinquent tax 
receivable balances to each component school district of the former CED within 
30 days after the end of any month during which the successor-in-interest 
collects or distributes any delinquent taxes. Reports may be made on a monthly 
basis or less often according to administrative costs for communicating small 
transaction reports amounts. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327692 
  Criss Cloudt 
 Director, Policy and Evaluation 
 Texas Education Agency 
    Effective date: September 13, 1993 
 Proposal publication date: June 29, 1993 
 For further information, please call: (512) 463-9701 
         
           
  19 TAC sec.61.1002 
 
  The Texas Education Agency (TEA) adopts new sec.61.1002, concerning county 
education districts (CED), without changes to the proposed text as published in 
the June 29, 1993, issue of the Texas Register (18 TexReg 4231). Senate Bill 7, 
passed by the 73rd Legislature, statutorily abolished the system of CEDs created 
by Senate Bill 351, 72nd Legislature, and held unconstitutional by the Texas 
Supreme Court in the Andrews v. Meno (Edgewood III) litigation. Section 4.15 of 
the Bill authorizes the commissioner of education to adopt rules related to the 
abolition of CEDs. New sec.61.1002 prescribes the form of a notice a school 
district may publish explaining the conversion from CED taxes. 
 No comments were received regarding adoption of the new rule. 
 The new rule is adopted under Senate Bill 7, sec.4.15, which authorizes the 
commissioner of education to adopt rules as necessary to implement statutory 
requirements concerning abolition of CEDs. 
 
 
  sec.61.1002. Tax Rate Notice. For the 1993-1994 school year, a school district 
may publish the following notice next to any notice required to be published by 
the Texas Tax Code, sec.26.06. Explanation of Conversion from County Education 
District Taxes. County education districts have been abolished. In order to 
compare school tax rates from last year to this year, it is necessary to compare 
the combined school tax rate to the school district's proposed tax rate for this 
year. Last year the _____________________________ school district's tax rate was 
_____________. Last year the _____________________________ county education 
district's tax rate was _______________. The combined school district and county 
education district tax rate was _____________. The proposed tax rate for 
_______________________ school district for this year is ______________. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327694 
  Criss Cloudt 
 Director, Policy and Evaluation 
 Texas Education Agency 
    Effective date: September 13, 1993 
 Proposal publication date: June 29, 1993 
 For further information, please call: (512) 463-9701 
         
         
  19 TAC sec.61.1041 
 
  The Texas Education Agency (TEA) adopts the repeal of sec.61.1041, concerning 
the role of military reservation districts within county education districts 
(CED), without changes to the proposed text as published in the June 29, 1993, 
issue of the Texas Register (18 TexReg 4231). 
 Senate Bill 7 passed by the 73rd Legislature statutorily abolished the system 
of CEDs created by Senate Bill 351, 72nd Legislature, and held unconstitutional 
by the Texas Supreme Court in the Andrews v. Meno (Edgewood III) litigation. 
This action has rendered sec.61.1041 obsolete. 
 No comments were received regarding adoption of the repeal. 
 The repeal is adopted under Senate Bill 7, sec.4.15, which authorizes the 
commissioner of education to adopt rules as necessary to implement statutory 
requirements concerning abolition of CEDs. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993 
 TRD-9327696 
  Criss Cloudt 
 Director, Policy Planning and Evaluation 
 Texas Education Agency 
    Effective date: September 13, 1993 
 Proposal publication date: June 29, 1993 
 For further information, please call: (512) 463-9701 
         
             Chapter 62. Commissioner's Rules Concerning the Equalized Wealth 
Level 
  
  19 TAC sec.sec.62.1001, 62.1011, 62.1031, 62.1041, 62.1051, 62. 1061 
 
  The commissioner of education adopts new sec.sec.62.1001, 62.1011, 62.1031, 
62.1041, 62.1051, and 62.1061, concerning the equalized wealth level established 
by the Texas Education Code, Chapter 36, as enacted in Senate Bill 7, Acts of 
the 73rd Legislature, Regular Session (1993), without changes to the proposed 
text as published in the June 29, 1993, issue of the Texas Register (18 TexReg 
4232). 
 Section 62.1021, concerning Preclearance Submission, which was proposed in the 
same submission, is being withdrawn. 
 The rules are necessary to clarify issues relating to the implementation of the 
Texas Education Code, Chapter 36. 
 The commissioner is authorized to adopt rules necessary to implement the 
chapter under the Texas Education Code, sec.36.006, as enacted in Senate Bill 7. 
The Administrative Procedure and Texas Register Act does not apply to rules 
issued by the commissioner under the Texas Education Code, Chapter 36. 
 
 
  sec.62.1001. Authority of Trustees; Duration of Agreements. 
 
  (a)  Trustees of independent school districts may not delegate their authority 
to enter into agreements necessary to achieve the purposes of the Texas 
Education Code, Chapter 36. Nor may the trustees authorize any exclusive 
franchises on the right to negotiate on behalf of the district. 
   
  (b)  Consolidations under the Texas Education Code, Chapter 36, Subchapter B; 
detachments and annexations under Subchapter C; and tax base consolidations 
under Subchapter F are permanent in duration and districts may not enter into 
agreements that purport to limit the duration of the agreement. Nor may the 
parties create by agreement any right to cancel the agreement. 
 
     
  sec.62.1011. Election Duties of Board of Trustees.  For the purposes of an 
election ordered under the Texas Education Code, Chapter 36, the board of 
trustees that orders the election shall perform any applicable duty assigned to 
the county judge or to the county commissioners court under the Texas Education 
Code, Chapter 19. 
 
   
  sec.62.1031. Date of Agreement for Purposes of Determining Election Date.  For 
the purposes of the Texas Education Code, sec.36.010, the date of an agreement 
entered by the board of trustees of a school district under the Texas Education 
Code, Chapter 36, Subchapter E or F, is the date that the agreement is certified 
by the commissioner of education. 
 
   
  sec.62.1041. Weighted Students in Average Daily Attendance for Purposes of Tax 
Rate Rollback. In determining the number of weighted students in average daily 
attendance for the purposes of tax rate rollback calculations under the Texas 
Tax Code, sec.26.08, the number calculated under the Texas Education Code, 
sec.16.302, is adjusted: 
 
  (1) as provided by the Texas Education Code, sec.36.123, by adding the number 
of weighted students in average daily attendance attributed to the district 
through a contract to educate nonresident students under the Texas Education 
Code, Chapter 36, Subchapter E; and 
   
  (2) by adding the number of weighted students in average daily attendance 
attributed to the district through the purchase of attendance credits under the 
Texas Education Code, Chapter 36, Subchapter D. 
 
     
  sec.62.1051. Definition of Parcel Detached and Annexed by Commissioner.  For 
the purposes of implementing the Texas Education Code, Chapter 36, Subchapter G, 
a parcel shall be defined as one or more separately described items of real 
property, together with the improvements and personal property located on the 
property, that have the same taxable situs or that are: 
 
  (1) contiguous to each other; 
   
  (2) used as a unit or subject to the same predominant use; and 
   
  (3) located within the boundaries of a single school district. 
 
     
  sec.62.1061. Election of Trustees of District Consolidated by Commissioner. 
The election date under the Texas Education Code, sec.36. 253(b), is modified to 
be the first May uniform election date after the effective date of a 
consolidation order under the Texas Education Code, Chapter 36. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327698 
  Criss Cloudt 
 Director, Policy and Evaluation 
 Texas Education Agency 
    Effective date: September 13, 1993 
 Proposal publication date: June 29, 1993 
 For further information, please call: (512) 463-9701 
         
               
  TITLE 22. EXAMINING BOARDS 
 Part XIV. Texas Optometry Board 
  Chapter 271. Examinations 
  
  22 TAC sec.sec.271.1-271.3, 271.6 
 
  The Texas Optometry Board adopts amendments to sec.sec.271.1-271.3, and 271.6, 
concerning Examinations. Section 271.1 is adopted with changes to the proposed 
text as published in the July 6, 1993, issue of the Texas Register  (18 TexReg 
4377). Sections 271.2, 271.3, and 271.6 are adopted without changes and will not 
be republished. 
 The rules are procedural and are intended to inform the candidates for 
licensure regarding the process for applying for and taking the Board 
Examination, including fee changes. 
 The section will function by ensuring that all candidates for licensure will be 
fully informed when applying for licensure in the State of Texas. 
 Only one comment was received regarding adoption of the amendments. 
LensCrafters asked for clarification of sec.271.3, regarding use of calculators 
in the exam administration. 
 The agency did not disagree with comments and offered clarification regarding 
the language omitted as a housekeeping measure. Calculators were formerly used 
in the State written examination which is no longer administered. The 
calculators are not required in the clinical examination. The agency did not 
change the proposed rule as published. 
 The amendments are adopted under Texas Civil Statutes, Article 4552, sec.2. 14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules. 
 
 
  sec.271.1. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise. 
   
     Act-The Texas Optometry Act, Texas Civil Statutes, Article 4552. 
   
     APTRA-The Administrative Procedure and Texas Register Act, Government Code, 
Chapter 2001. 
   
     Board-The Texas Optometry Board. 
   
     Executive director -Executive director of the Texas Optometry Board. 
   
     Contested case -A proceeding, including but not restricted to licensing, in 
which the legal rights, duties, or privileges of a party are to be determined by 
the board after an opportunity for adjudicative hearing. 
   
     Respondent-A person against whom a formal charge has been made alleging 
conduct that violates the Act or rules, regulations, or orders of the board and 
whose legal rights are to be determined by the board after the opportunity for 
an adjudicative hearing in a contested case as defined by the APTRA. 
   
     SOAH-State Office of Administrative Hearings. 
   
     PFD-Proposal for Decision. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327630 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: August 10, 1993 
 Proposal publication date: July 6, 1993 
 For further information, please call: (512) 835-1938 
         
           Chapter 273. General Rules 
  
  22 TAC sec.273.1 
 
  The Optometry Board adopts an amendment to sec.sec.273.1 concerning surrender 
of license, without changes to the proposed text as published in the July 6, 
1993, issue of the Texas Register (18 TexReg 4378). 
 The rule was amended to make it nongender specific. The rule requires the 
surrender of a licensure when a license has expired or in the alternative the 
filing of an affidavit regarding the practice without a license. 
 All licensees who have allowed their license to expire will be informed of the 
need and requirement to surrender their license. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under Texas Civil Statutes, Article 4552, sec.2.14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327631 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: September 10, 1993 
 Proposal publication date: July 6, 1993 
 For further information, please call: (512) 835-1938 
         
       
  22 TAC sec.273.4 
 
  The Optometry Board adopts an amendment to sec.273.4 concerning fees, without 
changes to the proposed text as published in the July 16, 1993, issue of the 
Texas Register  (18 TexReg 4615). 
 The rule as amended sets various fees assessed to licensees and candidates for 
licensure. 
 The amendment enables licensees and candidates to be fully informed of the fees 
required by the board. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under Texas Civil Statutes, Article 4552, sec.2.14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules, and to set fees. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327632 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: September 10, 1993 
 Proposal publication date: July 16, 1993 
 For further information, please call: (512) 835-1938 
         
       
  22 TAC sec.sec.273.5, 273.6, 273.7 
 
  The Optometry Board adopts new sec.sec.273.5, 273.6, and 273.7 concerning 
general rules, without changes to the proposed text as published in the July 6, 
1993, issue of the Texas Register (18 TexReg 4379). 
 As a result of passage of House Bill 1479, amending the Texas Optometry Act, 
these rules were required in order to address the issuance of a faculty limited 
license, provisional licensure, and inactive licenses. 
 The rules will fully inform candidates for licensure as well as current 
licensees the procedures to be followed in regard to the obtaining and 
maintaining of a license to practice optometry in the State of Texas, including 
fees. 
 One comment was received. LensCrafters (retail optical company) questioned 
sec.273.6 regarding provisional licensure. It questioned whether the Board could 
restrict provisional licensure to therapeutic optometrists and not optometrists. 
The comments also questioned the type of examinations being required, more for 
clarification in regard to the classification of optometrists seeking 
provisional licensure. 
 Comments against the new section was the LensCrafters (retail optical company). 
 The rule as adopted provides for provisional licensure to a therapeutic 
optometrist and was not adopted with change. The Board interprets the 
substantial equivalency of law between the candidates' licensure state and 
current optometry law, as well as the statutory requirement that only 
therapeutic optometry licenses can be issued as the intent of the legislature 
that only therapeutic optometrists can receive provisional licensure. Detailed 
comments in response is available from the Board Office. 
 The new sections are adopted under Texas Civil Statutes, Article 4552, sec.2. 
14, which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327633 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: September 10, 1993 
 Proposal publication date: July 6, 1993 
 For further information, please call: (512) 835-1938 
         
       
  22 TAC sec.273.8 
 
  The Optometry Board adopts new sec.273.8 concerning renewal of license, 
without changes to the proposed text as published in the July 6, 1993, issue of 
the Texas Register  (18 TexReg 4616). 
 This rule sets forth the procedures for renewal of licenses including fees 
required. Each licensee must renew their license on an annual basis by statute, 
and the rule will serve to advise of the procedures to be followed. 
 The new section will enable all licensees to be informed of procedures to 
follow and applicable fees, including late penalty fees, involved. 
 No comments were received regarding adoption of the new section. 
 The new section is adopted under Texas Civil Statutes, Article 4552, sec.2. 14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules, and to set fees. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327634 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: September 10, 1993 
 Proposal publication date: July 16, 1993 
 For further information, please call: (512) 835-1938 
         
         Chapter 275. Continuing Education 
  
  22 TAC sec.275.1, sec.275.2 
 
  The Texas Optometry Board adopts amendments to sec.275.1 and sec.275.2, 
concerning Continuing Education, without changes to the proposed text as 
published in the July 6, 1993, issue of the Texas Register (18 TexReg 4381). 
 The rules were amended to include statutory language imposed by House Bill 1479 
of the 73rd Legislature, which increased the requirement of 12 mandatory 
continuing education to 16 hours. 
 The amendments enable licenses to be informed that the optometry law requires 
that each obtain 16 hours of continuing education for renewal of their license. 
 No comments were received regarding adoption of the amendments. 
 The amendments are adopted under Texas Civil Statutes, Article 4552, sec.2. 14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules, and to set fees. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993 
 TRD-9327635 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: January 1, 1994 
 Proposal publication date: July 6, 1993 
 For further information, please call: (512) 835-1938 
         
         Chapter 279. Interpretations 
  
  22 TAC sec.sec.279.2, 279.5, 279.6, 279.7, 279.11, 279.12, 279.13 
 
  The Optometry Board adopts amendments to sec.sec.279.2, 279.5, 279.6, 279.7, 
279.11, 279.12, and 279.13 concerning interpretations, without changes to the 
proposed text as published in the July 6, 1993, issue of the Texas Register  (18 
TexReg 4382). 
 The rules were amended to correct housekeeping language in accordance with 
House Bill 1479, passed by the 73rd Legislature, amending the Texas Optometry 
Act, There were no substantive changes made to the rules. 
 Licensees will be more fully informed regarding the interpretations of the 
Board which will contain current, concise language in accordance with statutory 
language. 
 No comments were received regarding adoption of the amendments. 
 The amendments are adopted under Texas Civil Statutes, Article 4552, sec.2. 14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantive and procedural rules, and to set fees. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327637 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: September 10, 1993 
 Proposal publication date: July 6, 1993 
 For further information, please call: (512) 835-1938 
         
       
  Chapter 280. Therapeutic Optometry 
 22 TAC sec.280.1 
 
  The Texas Optometry Board adopts an amendment to sec.280.1, concerning 
application for certification, without changes to the proposed text as published 
in the July 6, 1993, issue of the Texas Register (18 TexReg 4384). 
 The rule was amended to include the amount of the application fee, affected by 
the adoption of sec.273.4. The rule informs licensees of the fee involved for a 
duplicate therapeutic optometry certificate. 
 Therapeutic optometrists will be informed of the process and fee involved for 
the issuance of a duplicate therapeutic optometry certificate. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under Texas Civil Statutes, Article 4552, sec.2.14, 
which provide the Texas Optometry Board with the authority to promulgate 
procedural and substantive rules, and to set fees. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 19, 1993. 
 TRD-9327636 
  Lois Ewald 
 Executive Director 
 Texas Optometry Board 
    Effective date: September 10, 1993 
 Proposal publication date: July 6, 1993 
 For further information, please call: (512) 835-1938 
         
             
  TITLE 31. NATURAL RESOURCES AND CONSERVATION 
 Part III. Texas Air Control Board 
  Chapter 101. General Rules 
  
  31 TAC sec.101.1 
 
  The Texas Air Control Board (TACB) adopts an amendment to sec.101.1, 
concerning definitions, without changes to the proposed text as published in the 
March 5, 1993, issue of the Texas Register (18 TexReg 1396). 
 The amendment was proposed to reword the definition for nonattainment area to 
avoid using the defined word "nonattainment" within the definition and to delete 
the nonattainment new source review definitions. These definitions will now be 
located in 31 TAC sec.116.12. 
 No comments were received regarding adoption of the amendment. 
 The amendment is adopted under the Texas Health and Safety Code (Vernon 1990), 
Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327709 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: March 5, 1993 
 For further information, please call: (512) 908-1451 
         
         Chapter 116. Control of Air Pollution by Permits For New Construction 
or Modification 
  
  31 TAC sec.sec.116.1-116.6, 116.8-116.14 
 
  The Texas Air Control Board (TACB) adopts the repeal of  sec.sec.116.1-116.6 
and 116.8-116.14, concerning Control of Air Pollution by Permits For New 
Construction or Modification, without changes to the proposed text as published 
in the February 23, 1993, issue of the Texas Register. 
 The repeals are adopted so that a new Chapter 116 can be adopted. The new 
chapter will add a variety of subchapters and undesignated heads as opposed to 
the repealed format, which consists of one undesignated head, Permits, 
encompassing the entire chapter. 
 These changes have been initiated by the TACB in preparation of the Federal 
Clean Air Act (FCAA) Title V permitting requirements which must be adopted by 
November 15, 1993, and to improve organization of the chapter. 
 No comments were received regarding adoption of the repeals. 
 In compliance with the Americans With Disabilities Act, this document may be 
requested in alternate formats by contacting Air Quality Planning Program staff 
at (512) 475-2245, (512) 908-1500 FAX or 1-800-RELAY-TX (TDD), or by writing or 
visiting at 12124 Park 35 Circle, Austin, Texas 78753. 
 The repeals are adopted under the Texas Health and Safety Code (Vernon 1990) , 
Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327710 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
     
  The Texas Air Control Board (TACB) adopts new sec.sec.116.10-116.12, 116.110, 
116.111, 116.114-116.117, 116.120-116.126, 116.130-116.134, 116.136, 116.137, 
116.140, 116.141, 116.143, 116.150, 116.151, 116.160-116.163, 116.170, 116.174, 
116.175, 116.211-116.213, 116.310-116.314, and 116.410-116.418, concerning 
Control of Air Pollution by Permits for New Construction or Modification. 
Sections 116.10, 116.12, 116.110, 116.111, 116.116, 116.132, 116.133, 116.140, 
116.141, 116.150, 116.151, 116.160, 116.211-116.213, and 116.311 are adopted 
with changes to the proposed text as published in the February 23, 1993, issue 
of the Texas Register (18 TexReg 1130). The repeal of sec.sec.116.1-116.6 and 
116.8-116.14 and new sec.sec.116.11, 116.114, 116.115, 115.117, 116.120-116. 
126, 116.130, 116.131, 116.134, 116.136, 116.137, 116.143, 116.161-116.163, 
116.170, 116.174, 116.175, 116.310, 116.312-116.314, and 116.410-116.418 are 
adopted without changes and will not be republished. In addition, Standard 
Exemption 89 has been revised and new Standard Exemption 124 has been withdrawn. 
 In concurrent action, the TACB adopts the repeal of the existing Chapter 116. 
The new chapter is organized into five subchapters which are subdivided into 
undesignated heads as opposed to the present format which consists of a single 
undesignated head (Permits). The new format was developed to improve the 
organization of the contents into new groupings and headings that are more 
informative and logically consistent than the existing format. In addition to 
the reorganization, there are several substantive changes that were implemented 
in response to recommendations of the recently concluded Permits Process 
Workshop which was sponsored by the TACB. The following changes to existing 
language are adopted: the previous operating permits are replaced with 
requirements for operations certification; nonattainment review definitions and 
rules are revised for consistency with permits guidance; the applicability of 
standard exemptions is limited in nonattainment areas; Standard Exemption 89 for 
ethylene oxide sterilizers and the reference date of the Standard Exemption List 
in the new sec.116.211 are revised; a new Standard Exemption 124 is added to 
exempt changes to emission controls that are required by other TACB rules from 
the permitting process; voluntary certification of emissions is provided to 
create enforceable emission limitations for standard exemptions; a permit 
alteration procedure is created for changes that do not increase the rate or 
affect the character or method of control of emissions, but which may affect 
ambient impacts from the permitted facility or which require a change in the 
general or special provisions of the permit; the TACB policy to eliminate the 
requirement for a permit amendment for changes to a permitted facility that 
qualifies for a standard exemption is clarified; any hearing request must 
include a statement of the basis for that request. 
 In concurrent rulemaking, sec.101.1, concerning definitions, has been revised 
to delete the nonattainment new source review definitions now are located in 
sec.116.012. 
 Public hearings were held on March 16, 1993, in Austin and March 31, 1993, in 
Houston to consider the proposal. The comment period was extended to April 9, 
1993. Testimony was received from 57 commenters. All of the comments were 
directed towards the new Chapter. No comments were received on the repeal of the 
existing chapter or on the changes to the sec.101.1. Some of the comments were 
directed at language in the new Chapter which was unchanged from the existing 
chapter. However, most of the comments pertained to changes that resulted from 
the Permits Processing Workshop recommendations and several of the nonattainment 
definitions that were revised to be consistent with guidance from the 
Environmental Protection Agency (EPA). Throughout the preamble, "Regulation VI" 
refers to Chapter 116. 
 A special Permits Workshop was conducted on July 26, 1993, to resolve concerns 
about the proposed rules that were raised at the July 16, 1993, board meeting. 
Additional changes to the proposed rules were recommended at the workshop. The 
changes consist of revising the definition of net emissions increase to be 
consistent with the federal definition, clarification regarding the 
qualifications of the individual that signs an operations certification, a 
clarification of the responsibilities of the new owner during a change of 
ownership, a clarification that an increase rather than just a change in off-
property impacts is required to trigger prior approval for a permit alteration, 
a clarification that a local agency cannot override State authority by requiring 
a permit for a facility exempted by the TACB, clarification of compliance 
history requirements on permit renewals, and minor revision of Standard 
Exemption 89 subsection (c)(4) to state that it applies to multiple sterilizers 
on contiguous property "under common ownership." Also, it is stated for the 
public record that certified registration of emissions under a standard 
exemption does not absolve a facility from permit requirements. 
 The following commenters generally supported the proposed new chapter with 
suggested changes: Texas Utilities Services, Inc. (TU); The DuPont Company 
(DuPont); The Dow Chemical Company (Dow); Texas Mid-Continent Oil and Gas 
Association (TMOGA); Chevron U.S.A. Products Company (Chevron); Exxon Company 
U.S.A. (Exxon); Phillips Petroleum Company (Phillips); ASARCO, Inc.; Texas 
Campaign for the Environment (TCE); Amoco Oil Company (Amoco); Small, Craig & 
Werkenthin (Small-Craig); Shell Oil Company (Shell); Texas Chemical Council 
(TCC); Houston Lighting & Power Company (HL&P); Amoco Chemical Company (Amoco 
Chem); Ethyl Corporation; Merichem Company (Merichem); Texas Hospital 
Association (THA); and Eastman Chemical Company (Eastman). The following 
commenters suggested revisions to the proposed Regulation VI without stating 
their position on the overall proposal: EPA; Pennzoil Company (Pennzoil); 
Trinity Industries, Inc. (Trinity); Dixie Chemical Company, Inc. (Dixie); Vinson 
& Elkins (V&E); Greater Fort Bend Economic Development Council (Fort Bend); 
Dames & Moore (Dames); Missouri City (Missouri); Hampshire Chemical Corporation 
(Hampshire); Greater Houston Partnership (GHP); Velsicol Chemical Corporation 
(Velsicol); Haldor Topsoe, Inc. (Haldor); Harris County Pollution Control 
Department (Harris); Nova Molecular Technologies, Inc. (Nova); Kaneka Texas 
Corporation (Kaneka); City of Dallas Air Pollution Control Section (Dallas); 
Lonza, Inc. (Lonza); Eval Company of America (Evalca); Phillips 66 Company 
(Phillips 66); Philcare, Inc. (Philcare); Nisseki Chemical Texas Inc. (Nisseki); 
Protest K; Dianal America, Inc. (Dianal); Georgia Gulf Corporation (Georgia); 
Printing Industries Association (Printers); Galveston-Houston Association for 
Smog Prevention (GHASP); Association of Bayport Companies (Bayport); Pilko; 
Monsanto; Texas Association of Business (TAB); and one individual. Northeast 
Baptist Hospital, Methodist Medical Center, Hermann Hospital, and Memorial 
Hospital Southwest supported the testimony of the THA. Another individual 
commenter expressed total opposition to the proposed Regulation VI. 
 Pennzoil was concerned about the relationship between the new source review 
permit program under Regulation VI and the federal operating permit program 
proposed under separate rulemaking as new Chapter 122 (Regulation XII). Dow and 
TCC requested clarification that the new source review and federal operating 
permit programs are totally separate and independent programs. The staff 
believes that no specific language is needed in Regulation VI at this time to 
clarify that federal operating permits will be a separate program. Regulation 
XII will be a stand-alone chapter that encompasses the federal operating permit 
program. Regulation XII is still preliminary, and after it is adopted, it may be 
appropriate to include a statement in Regulation VI that refers the reader to 
Regulation XII for federal operating permit applicability. This is not possible 
until Regulation XII is adopted; however, it can be accomplished under future 
Regulation VI rulemaking. 
 TMOGA and Chevron requested that reasonably available control technology (RACT) 
requirements apply retroactively to emission reduction credits that occur within 
five years of the effective date of the Chapter 117 (Regulation VII) revisions. 
They requested that this issue be addressed in Regulation VI. The staff is in 
essential agreement with this proposal. This issue will be addressed in guidance 
and possibly in future rulemaking, as the proposal is beyond the scope of this 
rule package. Additional issues need to be resolved with EPA prior to future 
rulemaking. 
 Pennzoil requested the Regulation VI proposal be revised to allow the creation 
of separate nitrogen oxides (NO  [sub]x) and volatile organic compounds (VOC) 
reduction requirements and offset ratios in ozone nonattainment areas. Pennzoil 
also suggests that TACB request that EPA complete the NO [sub]x/VOC study 
mandated in the Federal Clean Air Act (FCAA), sec.185B. The staff does not 
disagree in principal with the concept of separate NO [sub]x and VOC reduction 
requirements. However, since EPA has not finished its mandated study, there 
would be no benefit to listing the now identical requirements separately. 
Additional rulemaking will still be required if the Texas Natural Resource 
Conservation Commission decides to list different reduction requirements in the 
future. 
 One individual commented that a public hearing should be held on all permit 
applications before the permit review process begins. 
 The hearings should be held at communities near the proposed site. Another 
individual commented that any verbal discussion between a permit applicant and 
the TACB should be held in public sessions. The staff disagrees that a public 
hearing should be held prior to permit review. The Texas Clean Air Act (TCAA) 
only requires an opportunity for public hearing, upon request, made during the 
specified public comment period. Agency resources do not justify a hearing on 
all applications-only those requested. In reviewing a permit application, it is 
not practical or time-effective to make a public announcement of all meetings 
between an applicant and the TACB. Subject to exceptions provided by law, the 
files are public records, and meeting summaries become part of the permit file. 
 Two individuals commented that a permit application should not be modified 
after initial submittal. The staff believes that interaction between an 
applicant and the permit engineer is a desirable and necessary part of the 
review process. Denial of permit applications with correctable deficiencies is 
not a reasonable approach. The applicant is entitled to be informed of 
deficiencies and allowed to correct them. The Texas Health and Safety Code has 
clearly provided for interaction in its requirement for an administrative 
completeness determination in sec.382.0517. Denial should only occur when the 
applicant does not meet standards and is unwilling to change the application to 
meet those standards. Denial prior to that time is a waste of resources in view 
of sec.382.0518(d). 
 An individual commented that there is a lack of precision in the terms and 
definitions used in the rules. Suggested changes were made in certain emission 
standards and limitations and requiring measured stack emissions. Many of the 
terms and definitions used in the regulations are taken directly from the 
applicable federal requirements or as stated in the TCAA. These terms cannot be 
changed to any great degree without changing the intent of the requirements. 
Emission limitations in a permit are determined on a case-by-case basis and are 
based on the application of best available control technology (BACT) which, by 
definition, requires the technology to be economically reasonable and 
technically feasible. It is impossible to measure the stack emissions until 
after the facility is constructed. The use of emission factors and estimates is 
often the only practical method of predetermining emission levels. Stack testing 
requirements are included, as appropriate, as a permit provision to demonstrate 
that the facility can meet the calculated emission levels after commencing 
operation. 
 An individual commented that all hazardous waste management facilities should 
be permitted and that operating hours should not be restricted on hazardous 
waste incinerators. The TCAA and the Solid Waste Disposal Act provide a 
comprehensive regulatory program, including permitting for hazardous waste 
management facilities. 
 An individual commented that an emissions inventory of all air and water 
pollution emission sources located within a two-mile radius of a proposed 
facility should be provided to the TACB. The staff does not perceive sufficient 
benefit from such comprehensive emissions inventory data to warrant requesting 
this information in all permit applications. The TACB permit engineers have 
authority to request such information for air emissions if it is deemed 
necessary to complete the permit review. Also, the Texas Water Commission, not 
the TACB, has regulatory authority for water pollution. Individual companies are 
already required to submit periodic emissions inventories of their sources which 
are maintained on file at the TACB and may also be required to submit areawide 
dispersion modeling based on such a comprehensive inventory. 
 Two individuals requested that annual emission limits for each air contaminant 
be included in the permit, including limits for fugitive and upset emissions. It 
is the current practice of the TACB Permits Program to specify emission 
limitations for each air contaminant on a case-by-case basis given the large 
variety in the types of contaminants and facilities. Where appropriate fugitive 
emission estimates are provided in a permit, however, the difficulties inherent 
in measuring fugitive emissions dictate that they are best regulated by work 
practice standards rather than emission limitations. In the case of particulate 
matter and VOC, it is often not practical to speciate, in the permit itself, 
each compound that may be present. For example, pump grade gasoline can contain 
as many as 200 specific VOCs. However, the total particulates and total VOC 
should be listed. Upset emissions are not routinely included because there is 
generally no way to quantify or predict the magnitude of an upset in advance. 
Also, an upset condition is considered to be an excessive emission which is 
beyond the immediate control of the facility and is not authorized in a permit. 
There are specific requirements in sec.101.6 that deal with upset conditions. 
 Dames suggested that Juarez, El Paso, and New Mexico be combined into a single 
air shed for the purpose of allowing emission credits for emission reductions 
made in both the Juarez area and the State of New Mexico. There are significant 
practical and legal restrictions on the ability of a state to enter into 
agreements with other states and foreign countries. The FCAA does provide for 
notification to other states on certain types of permitting activities. Further 
exploration of this issue should be addressed in a different rulemaking project. 
 GHP expressed concern over the availability of internal offset credits to small 
companies and suggested that the TACB promulgate regulations which allow for 
growth and flexibility. Internal offset requirements are under study by EPA and 
the TACB and are not included in this revision. Numerous other comments 
regarding different treatment of small and large sources have been received and 
are being taken into consideration in the nonattainment review portion of 
Regulation VI. The definition of the contemporaneous period and what must be 
offset has been revised in response to these comments. 
 TCE and Protest K commented that the entire Regulation VI should be reviewed 
and the language clarified. The staff agrees that the rule language should be 
clear and understandable. This is one of the main reasons for the proposed 
reorganization of Regulation VI. A subchapter containing just definitions has 
been placed at the beginning of the regulation and much of the language has been 
rewritten to improve clarity. In many cases, the regulatory language is designed 
to meet federal requirements, and the original language from the federal 
regulations has been retained to assure compliance with the original intent. The 
staff has tried to provide a balance between readability and the need to ensure 
that the legal meaning of the rules is not changed. 
 TCE commented that the fee schedules should be revised to be more equitable and 
require a company to pay a fee for all services. An evaluation of the fee system 
is beyond the scope of this rulemaking. The staff believes that the current fee 
structure is equitable and that no revisions to the system are needed at this 
time. The TACB receives adequate fees and EPA grant funds to cover its entire 
budget and no Texas General Revenue funds are used. 
 Protest K contends that there will be anticipated costs to the public for 
participating or attending public hearings or meetings and to inspect permit 
applications. The staff agrees that individuals choosing to protest a permit 
application may have some expenses involved for their participation in the 
permitting process. However, the opportunity to request public hearings and the 
public participation process existed under the old Regulation VI and the 
proposed reformat and revisions do not alter that mechanism. Therefore, there 
are no additional costs to the public as a direct result of the proposed rule 
changes. 
 An individual commented that BACT should be defined and economics should not 
enter into BACT determinations. The TCAA requires a permitted facility to use at 
least the "best available control technology." BACT as stated in the statute 
means with consideration of economic reasonableness and technical 
practicability. The statute clearly intended that as a part of this requirement. 
Given the wide variety of facilities and contaminants regulated under the TCAA, 
it is impractical to further define this term by rule; BACT is best determined 
based upon a case-by-case review. 
 An individual commented that smaller plants should not be allowed to pollute 
more than larger facilities and emission standards should be in grains per 
standard cubic foot (gr/scf) or parts per million (ppm) for stack emissions. 
Another individual commented that alternate site analysis should be used in 
permit review. Permit applications are reviewed on a case-by-case basis and 
smaller sources generally have lower emissions than larger sources. Emission 
standards, such as federal new source performance standards, are reported in 
gr/scf and ppm. However, permit allowable emissions are stated in pounds per 
hour because that is an absolute maximum emission rate. If allowables were 
stated as a concentration, such as ppm, then the actual pounds per hour rate 
could rise by increasing the flow rate through the stack. The staff prefers an 
absolute maximum allowable rate which is not to be exceeded. 
 Consistent with federal requirements, an alternative site analysis is required 
for permits which trigger federal nonattainment area new source review. The TCAA 
requires that for all permits, the location of the proposed facility must be 
such that it will not cause any air quality problems. Further extension of 
alternative site analysis is not warranted. 
 TAB commented that the proposed nonattainment rules may harm small businesses 
and there should be more incentive for large sources to sell emission credit 
reductions to be accessible to smaller sources. The TACB has decided to retain 
the five-year moving window as the contemporaneous period for smaller sources. 
This concept was strongly supported by small businesses that may have difficulty 
obtaining offset credits. In addition, the TACB is requiring that the project 
related increases be offset as opposed to the entire net contemporaneous 
emissions increases as earlier proposed. Also, an emissions banking rule, 
sec.101.29, establishes a method for sources to obtain offset credits. 
 With regard to Subchapter A (Definitions), Dow and TCC suggested modifying the 
definition of federally enforceable to include standard exemptions and certified 
emissions registration. TCE and GHASP recommended that all sources regulated by 
the TCAA be included in the definition. The definition of federally enforceable 
has been published by EPA in the Federal Register  and the staff believes that 
the original language should be retained to avoid confusion over the legal 
interpretation of the term. With regard to including standard exemptions, it is 
the opinion of the TACB and EPA that standard exemptions are already federally 
enforceable as a referenced part of Regulation VI. 
 TCE, GHASP, and Dallas recommended that the definition of emissions unit 
include all sources regulated by the TCAA. The definition of emissions unit has 
been published by EPA in  Federal Register and the staff believes that the 
original language should be retained to avoid confusion over the legal 
interpretation of the term. 
 Dallas suggested that the definition of new source should include an effective 
date. The staff agrees that this would clarify the term. The TCAA requirement 
for new source permits became effective on March 5, 1972. The date has been 
added to the definition. 
 Eastman suggested that definitions be added for the phrases "change in the 
character of emissions" and "change in the method of control of emissions." 
These terms have been in Regulation VI for many years, are generally understood, 
and are not susceptible to more precise definition without risking the 
inadvertent loss of some degree of substance. 
 Protest K objected to the use of the phrase "terms used by the Board have the 
meanings commonly ascribed to them in the field of air pollution control" in the 
first paragraph of  sec.116.10. This phrase appear in the introduction to the 
definitions in the General Rules, Regulation V, and sec.116.11 and sec.116. 12 
of the proposed Regulation VI. The staff believes that this phrase is 
appropriate and is merely intended to inform the reader that it would be 
impractical for TACB to attempt to define every term and phrase used throughout 
the regulations. The staff has retained the phrase. 
 An individual expressed concern that the definitions for federal enforceability 
and potential to emit allow applicants to lower emission calculations below 
levels that trigger new source review and create confusion concerning 
restriction of operating hours. These definitions basically track the federal 
definitions. Emission limitations stated in the permit or based upon 
representation by the applicant are binding and federally enforceable, thus an 
applicant is bound by those restrictions unless the applicant seeks to change 
the conditions or representations at which time it would be subject to all 
applicable permitting requirements. 
 Trinity suggested modifying subparagraph (C) of the definition for adjudicated 
decision to only include court orders or administrative orders that are final 
decisions which have exhausted all avenues of appeal; otherwise, it is 
considered an allegation rather than an adjudication and is not proper evidence 
of compliance history. Harris suggested modifying this definition to include 
nolo contendere, criminal diversions, and deferred adjudication. The TCAA does 
not define adjudicated decision, so the TACB has interpreted the term and 
defined it in the rules. The staff believes that the concept of final order is 
not related to whether all avenues of appeals have been exhausted. A judgement 
or order is final even though it may be subject to an appeal to a higher 
authority. Such orders may reflect significantly on a facility's compliance 
history and should be properly considered. The staff also disagrees that an 
order or judgement is merely an allegation if all avenues of appeal have not 
been exhausted. 
 Pleas of nolo contendre are merely pleas; but a conviction after a plea of nolo 
contendre  may be considered the same as any other proper conviction. Criminal 
diversions and deferred adjudication may lead to convictions; and any such 
conviction may be considered as an adjudicated decision. Further, the 
definitions and other provisions of the compliance history rules were 
established based upon recommendations made by a task force which included 
representatives from a broad range of interests. The task force worked for 
several months to arrive at the recommendations. Further public input occurred 
when the recommendations were formally proposed as rules. The rules became 
effective in December 1992. There is no demonstrated need to revisit the issues 
that were only recently resolved in the task force and rulemaking process. No 
changes have been made to the definition as a result of these comments. 
 Trinity suggested modifying the definition of compliance proceeding to exclude 
any notice of violation (NOV), notwithstanding a recommendation for enforcement 
because an NOV is an allegation, not a judgement. Harris suggests modifying this 
definition to include any NOV issued by state, federal, or local agencies. 
 An NOV is an allegation by the agency that a violation has occurred and 
generally initiates a compliance proceeding. The fact that it is not a final 
decision on whether a violation has occurred does mean it has no relevance to an 
applicant's compliance with applicable law. The TACB is capable of drawing this 
conclusion and acting appropriately. Since the statutory provision in  
sec.382.0518(c) references "compliance proceeding," consideration of an NOV is 
appropriate under that statutory provision. 
 The TACB is not intimately involved with NOVs issued by other agencies and may 
not have the necessary familiarity with the facts and circumstances associated 
with such an NOV to justify the use of such items. The definition has been 
retained as proposed. Further, as earlier referenced, there is no persuasive 
reason to revisit the compliance history provisions at this time. 
 GHASP commented that the definition of compliance history should specify that 
all information in the files may be used in the compliance evaluation. 
Compliance history rules provide that in contested case hearings, "compliance 
history" is not limited to those items identified in the rules. The staff 
believes that the rules generally provide sufficient information to evaluate the 
compliance history for applicants not involved in a contested case hearing. 
 EPA commented that the definition of lowest achievable emission rate would be 
less restrictive than the FCAA requires unless the phrase "whichever is more 
stringent" is included at the end of subparagraph (B). EPA cannot approve the 
definition without this addition. The staff deleted this phrase from the 
definition that preexisted in the General Rules in the belief that it was 
redundant since it is already stated at the beginning of the sentence in 
subparagraph (B). However, the staff has no objection to its inclusion and has 
reinserted the phrase. 
 EPA commented that the definition of offset ratio be modified by deleting the 
phrase "from the new source" from the end of the first sentence. EPA suggests 
that the phrase is inconsistent with sec.116.150(3) which refers to increases 
"from all new or modified facilities." The staff agrees with EPA's comments and 
has deleted the referenced phrase for consistency with  sec.116. 150(3). 
 EPA commented that the definition of potential to emit should correct the rule 
citation from 40 Code of Federal Regulations, sec.51.165(viii) to 40 Code of 
Federal Regulations, sec.51.165(a)(1)(viii) and TU stated that the word 
"enforceable" is redundant in this definition. GHASP commented that the 
definition should include all sources, not just those that are federally 
enforceable. The staff agrees with EPA's comment and has corrected the rule 
citation. The staff disagrees with modifying the definition as proposed by TU 
and GHASP since the current definition tracks the language in the Federal 
Register. 
 TU recommended that the definition of the term building, structure, facility, 
or installation reference the 1987 rather than the 1972 edition of the Standard 
Industrial Classification (SIC) Manual. Protest K recommended that this term 
include pipelines, compressors, toxic glycol processing units, and waste 
disposal facilities as well as measures taken to avoid flooding in established 
flood plains. The current definition in the Federal Register  still references 
the 1972 edition as amended by the 1977 supplement of the SIC manual. It is not 
appropriate to extend the definition beyond the scope provided by the federal 
definitions. As suggested by Protest K, the staff has retained the definition as 
proposed. 
 Pennzoil requested that NO [sub]x and VOC be treated separately regarding 
emission reduction and offset requirements. They recommended that Table 1 in the 
definition for major modification be changed to establish separate emission 
threshold requirements for NO [sub]x and VOC. GHASP commented that maintenance, 
repair, and replacement should be included in the definition. 
 The staff agrees with Pennzoil's concept in principal, but believes it is 
premature to list separate NO  [sub]x and VOC requirements until EPA determines 
that the offset ratios and net increase figures should be different. Future 
rulemaking will be required to implement these substantive changes, so there is 
no real benefit to establishing separate though identical NO [sub]x and VOC 
categories at this time. The staff disagrees with the suggestion to include 
maintenance, repair, and replacement in the definition since they are not 
included in the federal definition. 
 Pennzoil suggested that a definition for the term "modification" be written. 
The term "modification" is already defined in the Texas Health and Safety Code, 
sec.382.003, and would be redundant in Regulation VI. 
 Pennzoil suggested minor rewording of the definition for the term commence for 
clarification. The suggested revision would require a demonstration that 
cancellation of binding agreements would cause an "adverse impact" rather than 
"substantial loss" as currently proposed. Dow and TCC suggested changing the 
wording to correspond with the language in the Federal Register. The staff 
believes the suggested change by Pennzoil is a substantive change in the meaning 
of the term as defined in the Federal Register  and has not made this change. 
The staff has no objection to tracking the Federal Register  definition as 
proposed by Dow and TCC and has made the appropriate changes to the proposal. 
 Protest K objected to the redefinition of actual emissions to be average 
emissions as averaged over a two-year period. It also objected to stating that 
source-specific allowable emissions are equivalent to the actual emissions. TCE 
and GHASP stated that this definition should include fugitive emissions and 
upset emissions. Pennzoil suggested minor rewording of the definition. The 
portions of the definition that are included in the objection by Protest K 
already exist in the current definition listed in the Chapter 101; therefore, 
the staff disagrees with this "redefinition." Also, the language tracks the 
Federal Register  language except for the addition of the phrase "e.g., when the 
allowable limit is reflective of actual emissions" which is merely an example-
not a requirement. In response to TCE and GHASP, fugitive emissions are 
considered as provided by the federal requirements. The staff does not believe 
it is appropriate to go beyond the federal requirements as suggested by TCE and 
GHASP. The staff believes that Pennzoil's suggested wording will not add any 
clarification. The staff has retained the definition as originally proposed. 
 Dow requested that the definition of net emissions increase be revised to 
subdivide subparagraph (C)(ii) into (C)(ii) and (C)(iii). Exxon requested that 
the phrase "to be specified by the Executive Director" be deleted from 
subparagraph (A)(i). Phillips requested a revision to subparagraphs (A)(ii) and 
(C)(ii) to trigger the requirement only when an unacceptable offsite impact has 
occurred or to demonstrate attainment or reasonable further progress. The staff 
supports the suggestions by Dow and Exxon and has subdivided subparagraph 
(C)(ii) and deleted the reference to Executive Director specifically. Phillips 
request would substantively change the meaning of the term as defined in the 
Federal Register and would need approval by EPA. The staff can not grant the 
Phillips request at this time. 
 V&E commented that permit applications filed prior to November 15, 1992, should 
be excluded from the requirements of sec.116.150 and sec.116.151. The 
definitions of major facility/stationary source and major modification should 
include a statement that emission thresholds for NO [sub]x and the emission 
thresholds for serious and severe areas in Table 1 do not apply to permit 
applications filed prior to November 15, 1992. GHASP commented that fugitive 
emissions should be included in the definition of major facility. Harris 
commented that the definition of major modification be revised to remove the 
exemption for change in the hours of operation as stated in subparagraph (F). 
The referenced definitions have only changed in regard to NO [sub]x and VOC. 
Inhalable particulate matter, sulfur dioxide, carbon monoxide (CO), and lead are 
unaffected by this rule change. Therefore, nonattainment review of permit 
applications for pollutants other than NO point=4.02p  [sub]x and VOC would not 
be affected by the November 15, 1992 date. The TACB agrees with the statement 
that applications received prior to November 15, 1992, will be processed under 
the old rules. This is consistent with previous agreements with EPA. The staff 
has changed the regulatory language which is further discussed under the heading 
"Nonattainment Review." 
 Regarding the suggestion by GHASP, fugitive emissions are considered to the 
extent as provided by the federal requirements; the staff does not believe it is 
appropriate to go beyond the federal requirements. 
 The staff does not support the recommendation by Harris to delete the hours of 
operation exemption from the definition of major modification. This statement is 
part of the Federal Register definition, and deletion would be a substantive 
change that is beyond the scope of the proposed rule package. 
 GHASP suggested revisions to the definition of begin actual construction to 
include land clearing, necessary construction permits to reference state and 
local laws, and secondary emissions to include mobile source emissions. These 
definitions essentially track those in the Federal Register . The staff believes 
it is appropriate to follow the federal provisions. 
 Many comments were received regarding the new definitions of contemporaneous 
and contemporaneous period. The proposed definitions establish November 15, 
1992, as the start of a fixed contemporaneous period (for netting calculations) 
for all emission changes occurring after that date. Dixie, Fort Bend, Missouri, 
Velsicol, Haldor, TCC, Nova, Kaneka, Lonza, Evalca, Georgia, Printers, Bayport, 
and Pilko recommended that the contemporaneous period should provide a five-year 
moving window for sources with emissions less than 250 tons per year. V&E, 
Hampshire, Merichem, and Nisseki also favored the five-year window, but for 
sources less than 100 tons per year. Dianal supported the five-year window 
concept, but specified sources smaller than 150 tons per year. DuPont, TMOGA, 
Chevron, and Harris supported the moving window concept for small sources, but 
did not specify an annual emission rate to trigger the requirement. Pennzoil, 
TMOGA, and Chevron commented that sources that reduced NO [sub]x emissions prior 
to November 15, 1992, should be allowed to include those reductions in their 
netting calculations. Protest K commented that the contemporaneous period should 
not be limited to a five-year period. Lonza commented that the offset trigger 
level should be established at 25 tons per year rather than the proposed five 
tons per year. The staff agrees with the suggestions to establish a five-year 
moving window for sources with emissions less than 250 tons per year (tpy). This 
concept will provide some flexibility for growth to smaller sources that might 
otherwise be unable to secure any offset credits. Facilities with more than 250 
tpy of emissions have more options available for expansion by shutting down 
older, inefficient units or adding emission controls to these units. 
Accordingly, the staff recommends that the proposed rules be maintained for 
these larger sources and the moving window concept be added to the proposed 
rules for the smaller sources. The staff feels that the contemporaneous period 
for NO  [sub]x is a transition issue. The FCAA of 1990 established November 15, 
1992, as the effective date for NO [sub]x as a precursor to ozone. The offset 
trigger is set at 25 tpy. The five tpy trigger is the level at which the source 
will be required to perform calculations to see if the net emissions increase is 
above 25 tpy. The staff has changed the definitions of contemporaneous period 
and net emissions increase and deleted contemporaneous. 
 With regard to Subchapter B, DuPont commented that sec.116.110(b) regarding 
operations certification should be rewritten to require initial notification 
within 15 days after start-up rather than prior to start-up. The second 
certification should be required within 180 days after initial start-up rather 
than 60 days after initial start-up. Trinity objected to the second 
certification after start-up stating that the first certification should be 
sufficient. Eastman objected to the first certification and believes that the 
second certification after start-up should be sufficient. Phillips commented 
that a single certification should be required within 60 days of start-up with 
provisions for delaying submission with cause upon approval by the TACB. The 
purpose of the two-stage certification is to notify the TACB when construction 
is completed and again after facilities commence operation. The proposed 
revisions would alter that scenario. The staff has retained the language as 
proposed. 
 Dow and TCC suggested revision of sec.116.110(a) to clarify the meaning of 
start of construction by deleting the phrase "before any actual work is begun on 
the facility" and inserting "before any on-site construction is begun on the 
emitting facility." The wording in question is derived from the precodification 
statutory language and is appropriate in view of the fact that the codification 
process cannot change the substance of a statute. The current statutory language 
refers to "work on the construction." 
 GHASP commented that the standard exemption process should be deleted from 
sec.116.110. The TCAA authorizes exemption of insignificant sources from permit 
procedures. Elimination of standard exemptions is not appropriate in view of the 
statutory provisions. 
 Dow and TCC requested revision of sec.116.110(c) to delete the phrase "will 
comply with" and substitute "agrees to be bound by" under the change of 
ownership responsibility. This language is intended to allow companies that are 
out of compliance to complete transactions. Harris commented that the change of 
ownership notification should specify any name changes in the facility or 
corporate name change that may occur. TCE and GHASP commented that a change of 
ownership should allow greater public scrutiny. A new owner is bound by the 
terms of the permit and representations in the application as a consequence of 
accepting the permit. The suggested wording merely states the obvious and seems 
to suggest that the words "agrees to be bound by" would absolve the new owners 
from responsibility if they purchased a plant that was out of compliance. It 
would be inappropriate for the staff to agree to this condition. The suggested 
additional changes to the changes of ownership provisions would not provide 
sufficient benefits to offset the additional resources that would have to be 
devoted to administering those changes. 
 Amoco, TCC, and Amoco Chem recommended that a new paragraph be added to 
sec.116.110(a) to establish a general permit for construction of pollution 
control projects required by regulation. A company would be required to notify 
the TACB of the proposed project prior to construction, but could begin 
construction without receiving preapproval. The general permit will replace the 
proposed Standard Exemption 124, which is too restrictive according to the 
commenters. The staff has withdrawn the proposed Standard Exemption 124. See the 
comments regarding Standard Exemption 124 for more details. 
 Harris recommended that sec.116.110(b) specify that the person signing the 
operations certification be a responsible individual with process knowledge. 
Protest K and one individual expanded this requirement to specify that a top 
corporate official must sign and swear to the certification. GHASP suggested 
that "showing for good cause" and "best of the knowledge of the individual" be 
defined. The staff agrees that the operations certification signee should at 
least be a responsible individual with process knowledge and has added this 
language to the rule. The staff does not believe that a sworn certification is 
justified since this requirement is not even made for submission of a permit 
application. The staff believes that "to the best of the knowledge of the 
individual" is self explanatory and "showing of good cause" will be determined 
on a case-by-case basis by the TACB. 
 TCE and GHASP commented that projects under $2 million can result in 
significant air pollution, so the financial threshold in sec.116.110(d) should 
be lower. The referenced section only requires that a permit application with a 
capital cost over $2 million be submitted under the seal of a professional 
engineer. The staff agrees that significant air pollution can result from 
smaller projects. The intent of this rule was to assure that permit applications 
for large, complex projects are professionally prepared to simplify the review 
process for the TACB permit engineer. All permit applications undergo the same 
review process by the TACB. This rule was merely intended to allow smaller 
companies (with no professional environmental staff) or smaller (and typically 
less complex) projects to prepare their own permit applications and avoid the 
high cost of hiring a consultant unless a consultant is necessary. The staff has 
retained the current language. 
 Protest K and TCE recommended revision of sec.116.11(3) regarding BACT to 
severely restrict the economic reasonableness and technical practicability 
aspects. Regulation VI merely reiterates the definition found in the Texas 
Health and Safety Code. The staff has retained the paragraph as proposed. 
 Eastman commented that the modeling requirements in the last sentence of 
sec.116.111(9) should apply only to major new sources or major modifications. 
Existing major sources should be subject only to dispersion modeling if they 
undergo a major modification. DuPont recommended deletion of the last sentence 
of this paragraph. Upon review, the staff believes that all determinations 
regarding air dispersion modeling should be made on a case-by-case basis. 
Accordingly, the last two sentences of the proposed sec.116.111(9) have been 
deleted and the adopted paragraph will simply put applicants on notice that 
modeling may be necessary to determine the acceptability of the applications. 
 TCE and GHASP objected to the use of the term "side effect" in sec.116.111(1) 
regarding protection of public health and welfare. TCE commented that a specific 
requirement to protect the environment and public health should be included. The 
term, in question, is used in the Texas Health and Safety Code,  sec.382.052. 
The staff believes that the current language in  sec.116.111(1) is adequate to 
protect the health and physical property (environment) of the people. 
 Pennzoil suggested that sec.116.111(8) include the phrase "If the proposed 
facility is located in an attainment area, it...." to be consistent with 
sec.116.111(7). The staff agrees with this clarification and has added the 
suggested phrase. 
 DuPont suggested deleting sec.116.111(6), regarding performance demonstration, 
on the basis that requesting additional data may not verify compliance with the 
permit. GHASP suggested additional language to inform the applicant that 
modeling, monitoring, or testing may be required. In response to DuPont, the 
staff believes that in many instances the additional information will verify 
compliance with the permit conditions. It is understood that this will not be 
true in every case, but the requirement will be retained. The staff agrees with 
GHASP and has added language that monitoring, modeling, or testing may be 
required and is changing the proposed rule to accomplish that result. 
 DuPont suggested adding a requirement to sec.116.114(a) that a permit 
application must be assigned to a permit engineer within 30 days of receipt and 
that a conference call or meeting regarding deficiencies must be conducted 
within 60 days of the initial review of the application. TCE and GHASP commented 
that the total review time for permit approval should be extended beyond the 
current 180-day period. The staff does not agree that these time requirements 
should be added to the rules. There is already a requirement to notify 
applicants of deficiencies within 90 days of receipt. Permits are routinely 
assigned well within 30 days of receipt and conference calls or meetings may not 
be needed in every case. It has been the experience of the TACB Permits staff 
that significant resources must be used to demonstrate compliance with the 
various time limits. These resources are better spent on review of permit 
applications. The staff believes the current 180-day period is appropriate. 
 GHASP commented that permit fees should not be returned as stated in sec.116. 
114(a)(3) and that subsection (b) should define good faith effort. GHASP also 
commented that the fee exemption for reapplication that occurs within six months 
should be deleted. The provisions in the proposed rule are unchanged from those 
used for several years. The staff does not believe the suggested changes are 
appropriate. 
 TU suggested that a provision be added to sec.116.114(a)(3) requiring that 
final action be taken on a permit application within 30 days whenever the time 
limits for completion of the permit review are exceeded. This subsection was 
intended as a mechanism to provide for refund of the permit fee whenever it can 
be shown that the TACB did not act on a permit application without good cause. 
The time limits for completing the review are established in subsection (a)(2) 
of this section. Refund of the fee is the appropriate remedy for failure to meet 
the time limits and the additional requirement of final action within 30 days 
could force permit denial for problems that could have been corrected. 
 GHASP commented that in sec.116.115, significant impact should be defined and 
all standard exemptions should require written approval. Given the large number 
of contaminants and facilities reviewed by the TACB, the determination of 
significant impact should be left to case-by-case determination. Regarding the 
standard exemption comment, it is Subchapter C, not sec.116.115 which 
establishes requirements for standard exemptions. Section 116.115 states that a 
standard exemption cannot be used whenever prohibited by a permit provision, 
unless written approval is obtained. Standard exemptions cover a large number of 
sources, Requiring written approval on all such exemptions would be resource 
intensive and unwarranted in view of the limited benefits that would be derived. 
 TU commented that the reference to special exemptions in  sec.116.116(a) should 
be changed to standard exemptions. The subsection is written as intended. At one 
time, TACB issued a category of exemptions that were called special exemptions. 
They did not meet the requirements of a specific standard exemption, but the 
emissions were still insignificant. This type of exemption is no longer issued, 
but there are many previously issued special exemptions that are still valid. 
Special conditions or provisions were attached to special exemptions similar to 
permit provisions. This is what is referenced in sec.116.116(a). 
 DuPont suggested revision of sec.116.116(a), regarding amendments, to authorize 
changes in control method by standard exemption rather than permit amendment. 
Phillips made a similar suggestion, but specified that the change in control 
method should be covered under the permit alteration process. See the response 
to Standard Exemption 124. 
 Dow and TCC suggested revising sec.116.116(a) to allow variations from permit 
representations as long as emissions remain below levels authorized in the 
permit. These changes should be authorized under sec.116.116(b) which currently 
covers permit alterations. GHASP commented that no variations from permit 
representations should be allowed at all. The proposed change by Dow and TCC 
could result in a relaxation of emission controls if BACT review is not 
required. If a permit applicant is bound only by representations that would 
result in an emission increase, then, theoretically, a facility could be 
completely redesigned, as long as emission rates do not increase, without permit 
review. Also, an applicant could inflate proposed allowable emissions at the 
time of initial application, and then make sweeping changes in the plant design 
resulting in increases in actual emissions (but no increase in allowable) 
without needing any authorization. The staff is opposed to this change. The 
comment by GHASP would result in a substantive change from the current 
interpretation of the rules and is beyond the scope of this rulemaking. The 
staff did not intend any change to existing policies regarding variations from 
representations and does not believe any changes are warranted. 
 Dow and TCC suggested deleting the permit alteration procedure in sec.116. 
116(b) and replacing it with permit revisions. Under the proposed language, 
variations in permit representations which do not result in emission increases 
above permit allowables will be authorized in this subsection rather than the 
permit amendment as now required in sec.116.116(a). Changes from the language in 
the TACB proposed permit alteration procedure include specifying that the change 
in representation must affect the ambient impacts or involve an emission 
increase above permit allowables before the revision requirement is triggered. 
The revisions would be excluded from health effects review, BACT review, and 
modeling analysis. (The TACB proposal only exempts BACT review.) It also 
requires TACB action within 60 days or approval is considered automatic. Amoco 
also recommended exclusion of modeling requirements from permit alterations. 
Whether the proposed procedure is called a permit revision or a permit 
alteration is a matter of semantics. Permit alteration was chosen to avoid 
confusion with the required permit revision procedure to be included under the 
new federal operating permit program. The reasons for not allowing changes as 
long as emission allowables are not exceeded are discussed previously in the 
comments from Dow and TCC regarding sec.116.116(a). There may be cases, such as 
changes in stack parameters, which could affect ambient impacts and which would 
require additional modeling. An increase above permit allowables would require 
an amendment, not an alteration. The permit alteration language is retained as 
proposed. 
 Trinity requested that "a change in the character of emissions" as used in 
sec.116.116 be defined to allow such things as a change in the constituents of a 
surface coating without requiring a permit amendment. Trinity also requested 
that subsection (b) include an allowance for internal netting by transferring 
allowable emissions between sources at a facility. The Coatings Division of the 
Permits Program has developed and used provisions to allow a facility to specify 
a generic coating in the permit application. The facility would be allowed to 
use other coatings at the same maximum rate as the specified coating as long as 
the effects screening level is below the generic coating. This is allowed on a 
case-by-case basis and is specified in the permit provisions. With regard to 
internal netting, this is considered emissions bubbling which has always been 
contrary to the TACB permitting policy. The staff has retained the language as 
proposed. 
 GHASP commented that the permit alteration procedure described in sec.116. 
116(b) needs further clarification. A permit alteration should require a fee and 
standard exemptions discussed in subsection (c) should be incorporated into the 
permit immediately. The procedures for permit alterations will be further 
described in guideline documents and information packets to be developed by the 
Permits Program. Procedures need not be fully described within the rule. The 
staff has determined that permit alterations will be among the list of 
activities that do not pay a fee. The changes are relatively insignificant and 
usually require very little staff time to process. Standard exemptions are 
delayed for permit incorporation as a resource and budget saving measure. 
Facilities relying on standard exemptions for changes to a permitted facility 
must maintain the exempt status in order to be in compliance with the permit 
even though the exemption has not yet been made a part of the permit. 
 Harris suggested that the TACB adopt an amendment system similar to Texas Water 
Commission Solid Waste Permit procedures where Class 1, 2, and 3 modifications 
are clearly defined. The staff believes that its rules and procedures for 
changes to a permit are adequate and in many ways similar to the TWC procedures 
in that there are levels of changes/alleviations alternatives requiring prior 
approval, amendments, and modifications. 
 Phillips suggested revisions to sec.116.116(b) which would allow changes under 
the permit alteration procedure to occur prior to approval. This would require 
the TACB to request additional information within 30 days of application receipt 
and action to be completed within 90 days of receipt. The staff agrees that 
certain minor changes should be allowed prior to formal TACB approval. However, 
the rules already contain specific time constraints and the staff believes that 
additional time constraints are unnecessary. The staff has revised 
sec.116.116(b) to allow certain changes to the permit to occur prior to TACB 
approval. 
 Protest K suggested revisions to sec.116.116(a) which would not allow amendment 
of a minor source permit if the change resulted in the source becoming major. 
The staff believes that federal new source review applicability should be 
determined based upon the federal guidelines. Minor sources which become major 
as a result of changes are not required to undergo federal new source review, 
unless the change by itself would constitute a major source. Otherwise, a new 
permit application must be submitted. Under the current permit system, there is 
only one type of permit for all sources. The staff believes there is no 
justification for imposing a cap on the growth of minor sources. 
 TCC suggested deleting sec.116.117(b) regarding hazardous waste permits on the 
basis that TACB does not issue these permits. TACB permits may be required for 
certain hazardous waste facilities such as those subject to Prevention of 
Significant Deterioration (PSD) or nonattainment permit requirements. Therefore, 
the staff will retain this subsection. 
 GHASP stated that there should be no distance limitation exemption for lead 
smelters in sec.116.117(a), objected to subsection (b)(3) for allowing pollution 
from facilities that preexisted residential development, and suggested that 
subsection (b)(5) and (6) require should measurement of distance from property 
line to property line. Section 116.117(a) is not an exemption. It is a 
restriction disallowing permits within 3,000 feet of a residence for lead 
smelters of specified capacity. Subsection (b)(3) imposes similar restrictions 
on hazardous waste facilities. The distance requirements are established by 
statute and the staff believes they should not be changed by rule. 
 Trinity commented that sec.116.120 and sec.116.122 include matters in the 
compliance history that should not be part of the compliance record. Notices of 
violation, court or board orders, and recommendations by TACB for enforcement 
action are not judicial final actions. Therefore, they should not be considered 
evidence of compliance history. Also, the terms "major seriousness" and "major 
impact" should be defined. Trinity raised some of these same issues in its 
comments on the compliance history definitions. The staff is opposed to these 
suggestions. The compliance history rules were recently adopted (October 1992) 
and should be allowed to function for some time before making changes. 
 Phillips commented that sec.116.121 should be modified to allow sources located 
in attainment areas to be eligible for the compliance history exemption except 
that the offset ratio should be lower for attainment area sources. The 
compliance history rules were recently adopted based on recommendations of the 
Compliance History Task Force. Section 116.14 was adopted after extensive staff 
review followed by public hearings and a public comment period. The new 
undesignated head, concerning Compliance History, essentially duplicates the 
previous sec.116.14, and further substantive changes will not be made until the 
rules have functioned for a period of time to allow for evaluation of their 
effectiveness. 
 TCE stated that compliance history should be required in all cases with no 
exceptions. The compliance history should not be limited to the TACB records, 
but should include EPA and local records. Harris commented that the compliance 
history exemption may result in overlooking a problem at a facility, but did not 
specifically recommend deleting or modifying the section. GHASP commented that 
renewals, emission reduction projects, permit alterations, and standard 
exemptions should not be exempt from compliance history. The statutory language, 
in establishing compliance history provisions, reflects that the Legislature 
intended to allow the TACB to review compliance history, not to mandate that a 
compliance history be compiled and reviewed for every permit. The suggested 
revisions go beyond the scope of the proposed rulemaking. 
 Harris stated that sec.116.120 should be more specific in defining the purpose 
of the compliance history. The rule should repeat the language of Texas Health 
and Safety Code, sec.382.0518(c). The Texas Health and Safety Code, 
sec.382.0518(c), merely states that the TACB "may consider any adjudicated 
decision or compliance proceeding" in considering the issuance of a permit. 
 Protest K suggested revisions to sec.116.122(d)(2)(B) that would include 
violations in the compliance history that have administrative penalties of $500 
per violation and commented that the proposed rule only considers administrative 
penalties of more than $20,000. Protest K also specifies the type of event to be 
included in the compliance history including all violations, accidents, 
incidents, and upsets; negligence and improper training; and violations issued 
by other agencies. An individual commented that the dollar amount of fines 
should not be a factor in considering violations in compliance history. The 
compliance history rules were the result of extensive meetings by the Compliance 
History Task Force consisting of industry, environmental, and governmental 
representation. The $20,000 figure was chosen as a reasonable guideline for 
compliance evaluation. No changes to this section will be made at this time. 
 GHASP commented that all compliance activities should be included in the 
history specified in sec.116.122(a), that "similar facilities" should be defined 
in subsection (b), and that "major seriousness" should be defined in subsection 
(d). GHASP also opposed the exclusions in subsection (d) and opposed requiring 
companies to analyze their violations. GHASP suggested that sec.116.124 should 
make the file available to the public, and sec.116.126 should reduce the time 
limit from 180 days to 90 days. The TACB does not have the resources to review 
all compliance activities for every permit application. The compliance history 
is prepared by the TACB compliance staff who are familiar with terms like 
similar facilities and major seriousness. Subsection (d) only authorizes TACB to 
request information from a company if needed for clarification. Compliance files 
are public records and are available for inspection. At this point, the staff 
does not believe that a change to the 180-day period is warranted. 
 TCE and GHASP commented that public notification of proposed permit activity in 
sec.116.130 should be published in regional as well as local newspapers. TCE, 
GHASP, and one individual suggested elimination of the preliminary determination 
in sec.116.131. TCE and GHASP suggested changing the requirements of sec.116.136 
to require all public hearings to be held in the affected area. The staff 
believes that the current publication requirements in sec.116.130 are sufficient 
to keep the public fully informed of permit activity throughout the state. Many 
areas of the state publish nothing but local newspapers, which would make it 
difficult to satisfy a statewide requirement for a "regional" publication. The 
preliminary determination in sec.116.131 is a federal requirement for PSD review 
and the staff is extending this to nonattainment review to maintain consistency 
between federal permitting programs. The staff disagrees with the suggestion to 
change sec.116.136 to require all public hearings to be held locally. Many 
hearings are held locally, but this can represent a significant resource drain 
for the agency. 
 Harris commented that in sec.116.130 the type of newspaper should be defined to 
prevent publication in trade papers and the public notice format in sec.116. 132 
should quantify the emission rates. Harris and GHASP commented on the 
requirement in sec.116.136 that a hearing request should state the basis of the 
request. "Newspaper of general circulation" is a widely used term in the 
statutes of this state, including the Health and Safety Code, and its meaning 
has been developed through case law. The regulation tracks the statutory 
language in the Health and Safety Code sec.382.056. The basis of the request for 
hearing is necessary as it is a statutory criterion in the decision of whether 
to grant a hearing request. Accordingly, no changes are made. 
 TU suggested that sec.116.132(a) delete the reference to federal sources 
because they will be covered in Regulation XII. The staff agrees that this 
reference should be deleted. The federal operating permit program will not exist 
until the new Regulation XII is adopted. Therefore, it is premature to reference 
the operating permit program at this time. The staff has deleted the reference 
to federal source. 
 TCC commented that "name of permit applicant" should replace "company name" in 
sec.116.132(a)(2) and suggested language to allow flexibility in sign posting 
requirements in sec.116.133(c) for unusual situations. The staff has retained 
the current designation in sec.116.132(a)(2). The staff has changed 
sec.116.133(c) to allow flexibility in sign posting requirements upon approval 
by the TACB. 
 DuPont suggested that sec.116.137 include a requirement for the TACB to provide 
copies of all written comments received during the public comment period. These 
copies must be provided to the applicant within 90 days of publication for each 
permit application. Copies of comment letters can already be received upon 
request. There is insufficient justification to devote additional resources to 
automatically sending all comment letters. 
 GHASP suggested expanding the requirement in sec.116.134 to furnish copies of 
public notices to local pollution control offices with jurisdiction in the 
county to include counties which may be affected. It also objected to the 180-
day period for notification of the applicant of final action. The 180-day 
notification is a statutory requirement. The staff believes that the current 
requirement to notify is sufficient and no change is being made. 
 Protest K suggested that sec.116.136 be revised to change the public comment 
period for renewals to 30 days and that the TACB should mail copies of the 
permit review to all persons that provided written comments. It also suggested 
revision of sec.116.132 to account for facilities that are located outside 
municipalities. GHASP stated that standard exemption public comment should be 
for 30 days. One individual commented that the permit renewal comment period 
should be 30 days and the comment period should begin upon receipt of the permit 
application. The Texas Health and Safety Code, sec.382.056(a), provides that the 
Board, by rule, shall prescribe when notice must be published. There are no 
statutory time limits and the staff believes the limits contained in the 
proposed rules are appropriate. Copies of permit applications may be obtained 
upon request, but mandatory mailing of applications is not justified in view of 
its effect on agency resources. Further, the files are public records and are 
available for inspection by the public. Section 116.132 does account for 
facilities located outside municipalities by requiring publication in a 
newspaper of general circulation in the municipality nearest the proposed 
facility. 
 TU commented that permit extensions should be added to the list of items that 
are not required to pay a fee in sec.116.140. Eastman commented that "permit 
revisions" should be changed to "permit alterations" in the last sentence. There 
is no formal procedure referred to as a permit extension. There is no fee 
assessed for a time extension to complete sampling requirements or to respond to 
a deficiency letter. The staff position is that no changes are needed to 
sec.116.140 to accommodate TU's request. The staff agrees with Eastman's 
suggestion and has changed "permit revisions" to "permit alterations." 
 DuPont suggested that sec.116.141(b)(2) should refer the reader to sec.116. 163 
for information on PSD permit fees. Dallas commented that government entities 
should be exempt from the fee requirements of sec.116.141. The staff agrees with 
DuPont's proposal and has added language to sec.116.141(b)(2) that refers the 
reader to sec.116.163 for PSD permit fee information. The staff does not agree 
with Dallas that government entities should be exempt from the fees. The same 
TACB resources must be expended to process a permit application whether it 
originates from industry or government. 
 GHASP commented that sec.116.140 should assess a fee for everything. Section 
116.141 should not place a cap on permit fees, and subsection (c)(1)(G) should 
specify ambient and other air monitoring networks or equipment. Revising the fee 
structure is beyond the scope of this rulemaking and the fee cap is established 
by the legislature. The staff believes that only ambient air monitoring networks 
were intended for inclusion and has not made the suggested change. 
 EPA commented that the nonattainment rules differ from the FCAA in the five-ton 
netting trigger, the designated netting period, the baseline for beginning the 
contemporaneous period for NO [sub]x, and the procedures for determining if the 
net increases for a pollutant exceeds de minimis. EPA wanted this information 
included in the public record along with a statement that future rule changes 
may be required when EPA issues national guidance. This information is part of 
the public hearing record, and the staff acknowledges that future rulemaking may 
be required if EPA guidance documents conflict with Texas rules. 
 EPA commented that the TACB must address VOC and NO  [sub]x increases that 
occur between November 15, 1990 and November 15, 1992, that are not required to 
be offset under current state rules. The increases between November 15, 1990 and 
November 15, 1992, will be covered in the Rate-of-Progress State Implementation 
Plan (SIP). As required, increases over the 1990 baseline inventory will be 
tracked as growth. 
 Dow, V&E, Small-Craig, and TCC commented that sec.116.150 and sec.116.151 only 
apply to permit applications filed after November 15, 1992. Each of these 
commenters suggested revised language to be added to the rule to clarify this 
position. The staff agrees with the statement that applications received prior 
to November 15, 1992 will be processed under the old rules. This is consistent 
with policies agreed to by EPA. The staff has added language to sec.116.150 and 
sec.116.151 to clarify that permit applications filed prior to November 15, 1992 
are reviewed under the Regulation VI that was in effect on October 21, 1991. 
 TU and HL&P suggested a revision to sec.116.150 to clarify that lowest 
achievable emission rate (LAER) is only required for the nonattainment 
pollutant. HL&P commented that the FCAA only requires LAER for NO [sub]x and VOC 
in ozone nonattainment areas and that the wording in sec.116.150 as proposed 
could be misconstrued as being applicable to all major pollutants at a facility. 
The staff agrees with this assessment and has added the word "nonattaining" 
before "pollutant" in the first sentence of paragraph (1). This will track the 
language in sec.116.151(1). 
 Pennzoil suggested a revision to sec.116.150 to state that for each 
modification after November 15, 1992, the previously offset emissions will be 
treated as if they have been netted out for de minimis test purposes. The staff 
agrees with this assessment of how offsets are to be treated under the rules. 
However, rather than state all of the evaluation procedures in the rules, they 
will be summarized in the TACB Nonattainment New Source Review Manual which is 
currently being drafted. 
 DuPont and Bayport suggested that sec.116.150 be revised to allow small sources 
to offset only the emissions increase from the project. DuPont did not specify a 
definition of a small source. Bayport specified 250 tpy. Phillips 66 proposed to 
allow all sources to offset only the net emissions increase from the project. 
There has been much discussion about how to treat small sources that are subject 
to nonattainment review. The staff believes that sources should be treated the 
same and offset the project emissions increase for new and modified sources. The 
regulatory language in the nonattainment definitions will be changed to reflect 
this position which essentially tracks the FCAA. However, sources will be 
allowed to offset the net contemporaneous emissions increase in order to wipe 
the slate clean and avoid multiple nonattainment reviews for small increases. 
 GHASP commented that sec.116.150 should consider the cumulative impacts of 
successive emission increases of less than five tons each and suggested 
clarifying the meaning of significant in paragraph (4). The five-ton increase is 
only used to determine if a particular project will trigger netting. Also, only 
project emission increases are counted towards the five-ton trigger, i.e., 
emission reductions do not offset the increases. Once a facility has a five-ton 
increase which triggers netting, all of the previous increases, including those 
less than five tons, are included in the netting calculations for the five-year 
contemporaneous period. Therefore, these cumulative small increases will 
eventually be counted. The five-ton trigger for netting is a considerable 
reduction from the 40-ton trigger which existed prior to November 15, 1992. The 
staff has proceeded with the proposal as stated in the nonattainment definitions 
in sec.116.012 and the permitting rules in the undesignated head, Nonattainment 
Review. 
 TMOGA, Chevron, Exxon, Amoco, Shell, and Amoco Chem proposed modifying 
sec.116.150 and sec.116.151 to allow a 25 tpy increase over the life of the 
facility before emissions offsets are triggered. 
 The staff has decided to eliminate the requirement to offset net emissions 
increases and will now offset the project increase. The FCAA requires offsetting 
each time that nonattainment review is triggered. It does not specify a 25 tpy 
trigger for nonattainment review before offsets are required. The staff has 
revised  sec.116.150 and sec.116.151 to offset only the project emissions 
increase. 
 Amoco and TCC urged the TACB to develop a mechanism which would allow a source 
to use internal offsets based on BACT instead of requiring LAER. TCC requested 
that the TACB begin to develop regulatory language that would allow a source to 
use internal offsets at a ratio greater than 1:1. The source, in turn, would be 
allowed to delete or omit the offset emissions from future netting calculations. 
The staff agrees in principle. The TACB staff and EPA staff are currently 
working on this issue. Once EPA guidance becomes clearer, the TACB will 
incorporate that guidance in nonattainment review procedures. 
 Pennzoil suggested adding some language to sec.116.160(a) to clarify the 
applicability of PSD. The staff agrees in part with Pennzoil's suggestion and 
has added language to clarify and improve understanding of the rule. The 
suggested language referring to the definitions will not be included because 
definitions are not referenced elsewhere in the rules. 
 TCC suggested that sec.116.160(b)(3) specify an "administratively" complete 
permit application. 
 EPA defines complete in 40 Code of Federal Regulations,  sec.52.21(b), but does 
not define administratively complete. The staff has retained the original 
language for consistency with the federal rules. 
 TCC recommended that a statement be added to sec.116.163 explaining that the 
PSD permit fee also covers the state permit application. 
 This statement is already included in sec.116.163(c). 
 TCE stated that reductions in fugitive emissions should not be accepted for 
offset credits in sec.116.170 because they cannot be quantified. GHASP totally 
opposed emission offset credits. GHASP also suggested that fugitives should not 
be credited because of inability to measure, controls should be required before 
offsetting, and there should be restrictions on national security claims. GHASP 
suggested that payment of a fee in lieu of offsetting should not be allowed, 
future emission reductions should not be allowed for reconstruction, and the 
TACB should verify the accuracy of offset credit records. The staff disagrees 
with this assessment and plans to accept fugitive emission reductions for 
offsets. In many cases, uncontrolled fugitives are one of the major problem 
areas at a facility, and implementing control measures on fugitive sources can 
result in major improvements. The staff agrees that it can be difficult to 
quantify fugitive emissions. However, EPA has published various fugitive 
emission factors which may be used to calculate fugitive emissions. Emission 
reduction projects will be reviewed on a case-by-case basis and must meet the 
satisfaction of the permit engineer before they will be approved. The staff is 
preparing more stringent rules for fugitives to meet the Rate of Progress SIP 
requirements. Once these rules are adopted, further fugitive emission reductions 
will be required and will no longer be eligible for offsets. The option of 
payment of a fee in lieu of offsetting only pertains to rocket engine testing 
and must be accompanied by a finding from the appropriate federal agency that 
the testing is essential to national security. This is required by FCAA 173(e). 
 Dallas questioned whether private sector rocket research could qualify for 
sec.116.170(3)(C). In order to qualify for sec.116.170(3), the source must 
demonstrate that the facility is essential to national security. If a private 
research facility can obtain the required written finding from one of the 
specified agencies, then it can qualify for the offset credits. 
 GHASP opposed the standard exemption list because significant contribution of 
air contaminants is not defined. The standard exemption list was created to 
reduce the staffing resources needed to review permit applications for sources 
of insignificant emissions. Each item on the list has been evaluated and 
reviewed by the Permits program and required to go through rulemaking. The 
Permits evaluation includes emission calculations, dispersion modeling under 
different scenarios, and review of ambient impacts. The maximum allowable 
emission rates specified in sec.116.211 are considered to be the significance 
levels. Stringent conditions must be met to qualify for an exemption. Thus, the 
qualifying source must be truly insignificant in emissions. 
 Pennzoil and TMOGA recommended that the language in sec.116.211(a)(3) be 
changed back to the original wording from sec.116.6(a)(2) in the existing rule. 
Pennzoil suggested that the standard exemption list be changed to general 
permits. 
 The staff agrees that the new wording in the first sentence of sec.116.211(a) 
(3) could change the meaning and recommends restoring the original language from 
the old sec.116.6(a)(2). The Permits Program has been considering changing the 
standard exemption list to what they refer to as standard permits rather than 
general permits. However, the concept is the same, and this will need to be 
proposed in future rulemaking. 
 Harris commented that the standard exemption list does not protect against 
odorous compounds exceeding health effects or odor thresholds. Harris commented 
that a health effects analysis should be performed in some cases. The purpose of 
the standard exemption list is to allow insignificant emission facilities to 
construct without permit review. A health effects analysis is part of the review 
in determining that the source levels are insignificant, allowing for 
establishment of a standard exemption. Once adopted, a standard exemption is 
only exempt from permit review. It must still comply with all of the rules and 
regulations of the TACB. Causing a nuisance odor would be a violation, which 
would require corrective action. 
 TU, Dow, HL&P, and TCC suggested revisions to the public notice exemption for 
standard exemptions in sec.116.211(a). TCC and Dow commented that public notice 
requirements that were satisfied under the existing Regulation VI would not meet 
the new requirements. TU and HL&P suggested that previous public notice for 
renewals and federal operating permits should satisfy the public notice 
exemption. There is no intention to penalize or entrap facilities that have 
previously satisfied the public notice exemption. Accordingly, sec.116. 
211(a)(3) incorporates that concept. The staff agrees that public notice for 
permit renewal should satisfy the exemption and has added this to the rule. 
However, the federal operating permits program will not be related to new source 
review, but being proposed as a separate regulation. Therefore, it would not be 
appropriate to interconnect the public notice requirements of these two 
programs. 
 TCC and Dow commented that the effective date in sec.116.211(a) should be 
changed to reflect the new version. They also suggested that the Standard 
Exemption List (SEL) be specifically placed into Regulation VI or the General 
Rules, and suggested deletion of subsection (f) as being inconsistent with the 
Texas Clean Air Act, which prohibits local governments from adopting ordinances 
that contradict the TACB rules. TCC suggested that subsection (a)(2) be revised 
to allow carbon monoxide (CO) emissions based on Table 1 in the definition of 
major modification. The effective date of the SEL will be changed in 
sec.116.211(a) to reflect the adoption of the revised rules. The staff prefers 
the current system of maintaining a separate SEL which is incorporated into 
Regulation VI by reference. There are many requests for copies of the SEL which 
would require sending all of the Regulation VI rules if the two are merged. The 
staff agrees to minor rewording of subsection (a)(2) and has clarified that 
local program rules cannot supersede state rules. Also, the staff has revised 
the allowances for CO to reflect the figures in Table 1. 
 Phillips suggested minor rewording of sec.116.211(c) to avoid conflict of 
emissions certification under sec.116.213 with permit applicability. The staff 
does not see any conflict in the proposed sec.116.211(c). The facility must 
qualify for standard exemption before emissions certification is even an issue. 
Maintaining an emissions certification will not affect the exempt status. No 
change in the wording is needed. 
 TCE and GHASP commented that greenhouse gases should be regulated under the 
SEL. The SEL states emission limitations for the five criteria pollutants 
regulated by the federal National Ambient Air Quality Standards. Carbon dioxide 
and methane, the commonly known "greenhouse gases," do not have any federal 
ambient or emission standards. It is beyond the scope of this rulemaking to 
attempt to establish such standards. 
 Shell commented that sec.116.211(a)(6) should be deleted because it prevents 
use of a standard exemption at a facility once a permit provision precludes use 
of a standard exemption. Shell has misinterpreted this paragraph which is not 
new, but which existed in identical wording in the existing sec.116.6(a)(5). 
This paragraph only restricts applicability of a standard exemption which would 
conflict with an existing permit provision. There is no general exclusion 
against all standard exemptions. 
 GHASP suggested that the phrase "protection of the environment" in sec.116. 
211(d) be added to "protection of health and property." In sec.116.212, GHASP 
objected to the 15-day comment period and requirement for a hearing request to 
specify the location relative to the facility. To the extent that the TACB has 
authority, existing TACB rules and regulations prohibit a person from causing a 
condition of air pollution, which includes protection of health and property. 
The additional language recommended by GHASP is unnecessary and the staff is 
opposed to the suggestion. The 15-day comment period and requirement to specify 
location are both reasonable requirements and should be maintained. 
 DuPont suggested that the reference date for the SEL in  sec.116.211 should be 
deleted because of the fact that facilities constructed under previous lists 
still operate under the conditions that were in effect at that time. The 
reference date is included as information to identify the most recent changes to 
the list. The staff will continue this practice. 
 Dow suggested that new language be added to sec.116.211(a)(1) and (2) that 
specifies "net emission increases for proposed projects" rather than "total 
actual emissions authorized under standard exemption." The commenter also 
suggested that subsection (b) specify "nonattainment review or PSD review" for 
clarification and that the first sentence in sec.116.212 should be revised to 
specify the Texas Health and Safety Code, sec.382.058(b) for public notice 
exemptions. Net emission increases concern nonattainment and PSD review. In 
addition to the limitations contained in subsection (a)(1) and (2), facilities 
must satisfy PSD and nonattainment requirements. Dow's proposed revisions to 
subsection (a)(1) and (2) should not be adopted because emission increases that 
trigger nonattainment review cannot qualify for standard exemption. The staff 
agrees with the suggested revisions to subsection (b) and the first sentence of 
sec.116.212, and they will be included in the rule. 
 Trinity commented that public notification should not be required for standard 
exemptions in sec.116.212. These public notification requirements are only 
applicable to concrete batch plants. The requirement was placed in the Texas 
Health and Safety Code by the State Legislature and the statute can only be 
changed by the Legislature. 
 TCC suggested some minor rewording in sec.116.213 for clarification of the 
Regulation VI headings which are applicable to the certified emissions 
registration. GHASP commented that a permit revision should not be allowed under 
this section without TACB approval and the information should be certified by a 
professional engineer. Phillips suggested clarification of sec.116.213 regarding 
submission of voluntary emissions certifications to TACB versus keeping it on 
site. The staff agrees with TCC's suggested clarification and has added it to 
the rule. The comment by GHASP refers to a permit revision, but this section 
deals with emissions certification for standard exemptions. However, most of the 
engineers who work in industry do not obtain professional engineer (PE) 
registration. Also, since the PI-7 standard exemption form does not require PE 
certification, it would seem inappropriate to require it for a voluntary 
emissions certification. The rules already specify cases in which a PE 
certification is required; that is, for complex sources as defined in the rule, 
and it would be inappropriate to extend the same requirement to exempt sources. 
The staff agrees with Phillips' comment and sec.116.213 will be reworded to 
clarify that the applicant may certify and register the emission rates, but will 
not be required to formally submit it to the agency until it applies for a PSD 
or nonattainment permit. 
 DuPont recommended that the permit renewal period be extended to ten years. 
Recent statutory changes have altered the renewal periods. A future rulemaking 
will be used to incorporate the statutory changes. 
 Trinity commented that a permit renewal should not be denied on the basis of 
how emissions are measured as stated in sec.116.311(a)(3). The commenter also 
disagreed with subsection (a)(4) as requiring BACT to be proven before obtaining 
a renewal. The staff disagrees with these statements. Subsection (a) (3) is 
merely a reiteration of sec.116.111(b) which requires a preconstruction permit 
applicant to demonstrate that appropriate means of measuring stack emissions are 
available upon request by the TACB. Since this demonstration must be made before 
obtaining a preconstruction permit, it is not a new requirement for obtaining a 
permit renewal. Subsection (a)(4) does not require BACT, it requires control 
technology that is economically reasonable and technically practicable 
considering the age of the facility and the impact of its emissions in the 
surrounding area as required by the Texas Health and Safety Code, 
sec.382.055(e). 
 TCC and Amoco Chem commented that sec.116.311(b) regarding compliance history 
should be deleted and track the requirements of sec.sec.116.120-116.126. TCC 
suggested rewording of  sec.116.314. Section 116.311(b) is identical to 
sec.116.11(b) in the previous Regulation VI and sec.116.314 is the same as the 
existing sec.116.12(d). The recommended changes are beyond the scope of the 
proposed revisions. 
 An individual commented that the word "substantial" should be deleted from the 
term "substantial compliance" in sec.116.311(b), that the public comment period 
is not specified for renewals in sec.116.312, that the comment period should 
begin upon receipt of the application, and the application should be made 
available for inspection. "Substantial compliance" is a term used in the TCAA 
and reflects an intention to not require absolute compliance with every rule 
before renewing a permit. Noncompliant situations vary to such an extent that it 
would be difficult to further define substantial compliance without being over-
or under-inclusive. The 15-day public comment period for renewals is stated in  
sec.116.136 and copies of permit applications are kept on file in the 
appropriate regional office for public inspection. The staff disagrees that the 
public comment period should begin upon receipt of the application. The 
established procedures for public comment are deemed adequate. 
 GHASP commented that upsets should be included in sec.116.311 evaluation for 
permit renewal, the compliance history information requested in subsection (b) 
should be mandatory, and substantial compliance should be defined. In sec.116. 
312, the words "nearby counties" should be added to the requirement to notify 
agencies with jurisdiction in the county. Permit fees in sec.116.313 favor large 
companies by charging a lower dollar per ton fee for higher emissions and 
setting a maximum fee of $10,000. Protection of flora, fauna, ecosystems, etc. 
is not specified in sec.116.314(a). An upset condition is considered to be an 
excessive emission which is beyond the immediate control of the facility and is 
not authorized in a permit. There are specific requirements in the General Rules 
that deal with upset conditions. Compliance history is prepared by the TACB as a 
tool to aid in reviewing permit applications and information is only provided by 
the applicant upon request. The staff has made no changes to sec.116.312 
regarding notification of local agencies. Changes to the fee structure in 
sec.116.313 are beyond the scope of this rulemaking and may be considered in 
future rulemaking. Section 116.314 deals with the review schedule for renewal 
applications. The specific environmental protection authority of the TACB is 
described in other rules and in the Texas Health and Safety Code. Approval of a 
permit renewal does not preclude compliance with the other rules. 
 Phillips commented that permit renewals should be eliminated because the new 
federal operating permit program will require renewal and sec.116.213 should be 
revised to allow the refund of a portion of the emission-based renewal fee 
whenever emission rates are reduced during the permit review. The TCAA requires 
renewals of state preconstruction permits. An overpayment of the fee is refunded 
at the time the permit renewal is issued. 
 TCE commented that an application for an emergency order must clearly 
demonstrate that the catastrophic event was beyond the control of the operator 
and that emergency order applications should be closely scrutinized by the TACB. 
The staff agrees that emergency orders should be closely scrutinized and 
believes that the rule language accomplishes this by requiring a detailed, sworn 
application to be reviewed by the TACB. 
 GHASP is opposed to the granting of emergency orders on the basis that 
polluters are rewarded for mistakes. GHASP stated that emergency orders should 
require a 30-day public comment period and hearing and should better define some 
of the terms in the rules. The TCAA authorizes the issuance of emergency orders. 
The rules allow the TACB authority to review the situation and make a 
determination as to the validity of the claims. All emergency orders are the 
subject of a contested case hearing either before or immediately after the 
issuance of the order. In view of this, the staff does not believe additional 
public notification is warranted. 
 Several comments regarding the revisions to Standard Exemption 89 were made by 
Philcare. The comments are as follows: subsection (a)(2) should allow computer 
records as an alternative to written records; subsection (a)(5) should apply 
only to sterilizers using less than 100 pounds of ethylene oxide (ETO) per year; 
nonrecirculating water sealed vacuum systems specified in subsection (b)(1) 
should not be allowed; limit of 1,000 pounds per year of ETO allowed in 
subsection (c) should be raised to 2,000 pounds per year; the reference to 
condensed ETO in subsection (c)(3) should be changed to water containing 
dissolved ETO. The requirement to maintain written records should not prevent 
the use of computer disk storage because hard copies can always be obtained and 
the "written" records can be viewed on the computer screen. The vent stack 
requirement will be retained for all sterilizers because of the high toxicity of 
ETO. There are many small hospitals that have existing nonrecirculating water 
sealed vacuum sterilizers. The impacts of these units were evaluated by 
performing screening models. The determination was made that the impacts would 
be insignificant if the annual usage was limited to 100 pounds of ETO per year. 
It was also determined that the potential for significant health impacts 
justified the 1,000 pound per year cutoff for permit exemption consideration. It 
is only the larger hospitals that would fall into the greater than 1,000 pounds 
per year category. The staff believes that the large facilities have a much 
greater potential for ambient health impacts and should undergo a detailed 
permit review including BACT evaluation and dispersion modeling for ambient 
impacts. The staff agrees with the suggested changes to the wording in 
subsection (c)(3) and has specified "water containing dissolved ETO." 
 THA made several comments on Standard Exemption 89. The comments are as 
follows: delete all of the requirements in subsection (a)(3), except semiannual 
leak testing; subsection (a)(5) should specify upblast discharge and clarify 
that stacks on multi-level roofs must only extend 15 feet above the roof where 
the stack is located; the compliance date in subsection (c)(5) should be set at 
six months after adoption of the rules rather than November 30, 1993; subsection 
(b)(2) should specify that sterilizers on the same or contiguous property must 
be owned by the same entity; the exemption should be consistent in addressing 
the three ranges of usage of less than 100 pounds, 100 to 1,000 pounds, and over 
1,000 pounds; clarify whether exactly 100 pounds usage is included in the first 
or second tier. The staff agrees with these changes with the exception of the 
clarification of the three ranges of ETO usage and has incorporated them into 
the final rule. The staff believes that usage of exactly 100 pounds of EO is 
clearly part of the second tier. Subsection (b) specifies "less than 100 pounds" 
and subsection (c) specifies "between 100 and 1,000 pounds." The staff has 
retained the proposed language on this item. 
 Standard Exemption 124 was proposed as a recommendation of the Permits Workshop 
Team to allow the construction of emissions control equipment required by rule. 
Industry was concerned about emission increases of collateral pollutants which 
may result from the required control equipment. The standard exemption was 
developed to allow these emission control projects to proceed without the time 
delays and additional TACB resources that would be required to review the flood 
of new permit applications. 
 There is concurrent action at this time by the TACB Regulation Development 
Division to adopt new rules in Regulation VII which would create a category of 
standard permits to authorize these emission control projects required by that 
regulation. As a result, the staff believes that the new Standard Exemption 124 
is not needed at this time and has withdrawn it from this rulemaking proposal. 
Further, amendments to the TCAA contained in House Bill 2049 from the recently 
concluded legislative session direct the agency to establish standard exemptions 
or standard permits for emission control equipment installation that constitutes 
a modification subject to appropriate conditions restricting applicability. The 
staff intends to propose such provisions in the near future. 
     
  Subchapter A. Definitions 
 
  31 TAC sec.sec.116.10-116.12 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.10. General Definitions.  Unless specifically defined in the Texas 
Clean Air Act (TCAA) or in the rules of the Board, the terms used by the Board 
have the meanings commonly ascribed to them in the field of air pollution 
control. In addition to the terms which are defined by the TCAA, and in 
sec.101.1 of this title (relating to General Rules), the following terms, when 
used in this chapter, shall have the following meanings, unless the context 
clearly indicates otherwise. 
   
     De minimis impact -A change in ground level concentration of an air 
contaminant as a result of the operation of any new major stationary source or 
of the operation of any existing source which has undergone a major 
modification, which does not exceed the following specified amounts. 
 
  [graphic] 
   
     Emissions unit -Any part of a stationary source which emits or would have 
the potential to emit any pollutant subject to regulation under the Federal 
Clean Air Act. 
   
     Federally enforceable -All limitations and conditions which are enforceable 
by the Administrator of the United States Environmental Protection Agency (EPA), 
including those requirements developed pursuant to Title 40 of the Code of 
Federal Regulations, Parts 60 and 61 (40 CFR, 60 and 61), requirements within 
any applicable State Implementation Plan (SIP), any permit requirements 
established pursuant to 40 Code of Federal Regulations, sec.52.21 or under 
regulations approved pursuant to 40 Code of Federal Regulations, Part 51, 
Subpart I, including permits issued under the EPA-approved program that is 
incorporated into the SIP and that expressly requires adherence to any permit 
issued under such program. 
   
     Lead smelting plant-Any facility which produces purified lead by melting 
and separating lead from metal and nonmetallic contaminants and/or by reducing 
oxides into elemental lead. Raw materials consist of lead concentrates, lead 
bearing ores or lead scrap, drosses, or other residues. Additional processing 
may include refining, alloying, and even oxidizing into lead oxide. A facility 
which only remelts lead bars or ingots for casting into lead products is not 
considered to be a smelter. 
   
     New source-Any stationary source, the construction or modification of which 
is commenced after March 5, 1972. 
   
     Nonattainment area -A defined region within the state which is designated 
by the United States Environmental Protection Agency (EPA) as failing to meet 
the National Ambient Air Quality Standard for a pollutant for which a standard 
exists. The EPA will designate the area as nonattainment under the provisions of 
the Federal Clean Air Act, sec.107(d). 
   
     Public notice-The public notice of application for a permit as required in 
this chapter. 
   
  of origin of air contaminants, whether privately or publicly owned or 
operated. Upon request of a source owner, the Executive Director shall determine 
whether multiple processes emitting air contaminants from will be treated as a 
single source or as multiple sources. 
 
   
  sec.116.12. Nonattainment Review Definitions. Unless specifically defined in 
the Texas Clean Air Act (TCAA) or in the rules of the Board, the terms used by 
the Board have the meanings commonly ascribed to them in the field of air 
pollution control. The terms in this section are applicable to permit review for 
major source construction and major source modification in nonattainment areas. 
In addition to the terms which are defined by the TCAA, and in  sec.101.1 of 
this title (relating to General Rules), the following terms, when used in the 
undesignated head regarding Nonattainment Review, shall have the following 
meanings, unless the context clearly indicates otherwise. 
   
     Actual emissions -Actual emissions as of a particular date shall equal the 
average rate, in tons per year, at which the unit actually emitted the pollutant 
during a two-year period which precedes the particular date and which is 
representative of normal source operation. The Executive Director shall allow 
the use of a different time period upon a determination that it is more 
representative of normal source operation. Actual emissions shall be calculated 
using the unit's actual operating hours, production rates, and types of 
materials processed, stored, or combusted during the selected time period. The 
Executive Director may presume that the source-specific allowable emissions for 
the unit are equivalent to the actual emissions, e.g. when the allowable limit 
is reflective of actual emissions. For any emissions unit which has not begun 
normal operations on the particular date, actual emissions shall equal the 
potential to emit the unit on that date. 
   
     Allowable emissions -The emissions rate of a stationary source, calculated 
using the maximum rated capacity of the source (unless the source is subject to 
federally enforceable limits which restrict the operating rate, or hours of 
operation, or both), and the most stringent of the following: 
 
  (A) the applicable standards set forth in Title 40 Code of Federal 
Regulations, Part 60 or 61; 
   
  (B) the applicable State Implementation Plan emissions limitation including 
those with a future compliance date; or 
   
  (C) the emissions rate specified as a federally enforceable permit condition 
including those with a future compliance date. 
     
     Begin actual construction-In general, initiation of physical on-site 
construction activities on an emissions unit which are of a permanent nature. 
Such activities include, but are not limited to, installation of building 
supports and foundations, laying of underground pipework, and construction of 
permanent storage structures. With respect to a change in method of operation, 
this term refers to those on-site activities other than preparatory activities 
which mark the initiation of the change. 
   
     Building, structure, facility, or installation-All of the pollutant-
emitting activities which belong to the same industrial grouping, are located in 
one or more contiguous or adjacent properties, and are under the control of the 
same person (or persons under common control) except the activities of any 
vessel. Pollutant-emitting activities shall be considered as part of the same 
industrial grouping if they belong to the same "Major Group" (i.e., which have 
the same two-digit code) as described in the  Standard Industrial Classification 
Manual, 1972, as amended by the 1977 supplement. 
   
     Commence-As applied to construction of a major stationary source or major 
modification, means that the owner or operator has all necessary preconstruction 
approvals or permits and either has: 
 
  (A)  begun, or caused to begin, a continuous program of actual on-site 
construction of the source, to be completed within a reasonable time; or 
   
  (B) entered into binding agreements or contractual obligations, which cannot 
be canceled or modified without substantial loss to the owner or operator, to 
undertake a program of actual construction of the source to be completed within 
a reasonable time. 
     
     Construction-Any physical change or change in the method of operation 
(including fabrication, erection, installation, demolition, or modification of 
an emissions unit) which would result in a change in actual emissions. 
   
     Contemporaneous period -As follows. 
 
  (A) For major sources with the potential to emit 250 tpy or more of a 
nonattainment pollutant, the period between: 
 
  (i) the date five years before construction on the particular change commences 
or November 15, 1992, whichever date is earlier; 
   
  (ii) the date that the increase from the particular change occurs. 
     
  (B) For major sources with the potential to emit less than 250 tpy of a 
nonattainment pollutant, the period between: 
 
  (i) the date five years before construction on the particular change 
commences; and 
   
  (ii) the date that the increase from the particular change occurs. 
     
  (C) Notwithstanding subparagraphs (A) and (B) of this definition, for major 
sources of nitrogen oxides as a precursor to ozone in ozone nonattainment areas, 
the contemporaneous period shall begin no earlier than November 15, 1992. 
     
     De minimis threshold test-A method of determining if a proposed emission 
increase will trigger nonattainment review. The summation of the proposed 
increase with all other creditable source emission increases and decreases 
during the contemporaneous period is compared to the MAJOR MODIFICATION column 
of Table I (in tpy) for that specific nonattainment area. If the major 
modification level is exceeded, then nonattainment review is required. 
   
     Lowest achievable emission rate-For any emitting facility, that rate of 
emissions of a contaminant which does not exceed the amount allowable under 
applicable New Source Performance Standards promulgated by the United States 
Environmental Protection Agency under the Federal Clean Air Act, sec.111, and 
which reflects the following: 
 
  (A) the most stringent emission limitation which is contained in the rules and 
regulations of any approved state implementation plan for a specific class or 
category of facility, unless the owner or operator of the proposed facility 
demonstrates that such limitations are not achievable; or 
   
  (B) the most stringent emission limitation which is achieved in practice by a 
specific class or category of facilities, whichever is more stringent. 
     
     Major facility/stationary source-Any facility/stationary source which 
emits, or has the potential to emit, the amount specified in the MAJOR SOURCE 
column of Table I of this section or more of any air contaminant (including 
volatile organic compounds) for which a National Ambient Air Quality Standard 
(NAAQS) has been issued. Any physical change that would occur at a stationary 
source not qualifying as a major stationary source in Table I of this section, 
if the change would constitute a major stationary source by itself. A major 
stationary source that is major for volatile organic compounds or nitrogen 
oxides shall be considered major for ozone. The fugitive emissions of a 
stationary source shall not be included in determining for any of the purposes 
of this definition whether it is a major stationary source, unless the source 
belongs to one of the categories of stationary sources listed in Title 40 Code 
of Federal Regulations, Part 51.165(a)(1)(iv)(C). 
   
     Major modification -Any physical change in, or change in the method of 
operation of a facility/stationary source that causes a significant net 
emissions increase for any air contaminant for which a NAAQS has been issued. At 
a facility/stationary source that is not major prior to the increase, the 
increase by itself must equal or exceed that specified in the MAJOR SOURCE 
column of Table I of this section. At an existing major facility/stationary 
source, the increase must equal or exceed that specified in the MAJOR 
MODIFICATION column of Table I. Any net emissions increase that is considered 
significant for volatile organic compounds or nitrogen oxides (NO [sub]x) shall 
be considered significant for ozone. A physical change or change in the method 
of operation shall not include: 
 
  (A) routine maintenance, repair, and replacement; 
   
  (B) use of an alternative fuel or raw material by reason of an order under the 
Energy Supply and Environmental Coordination Act of 1974, sec.2(a) and (b) (or 
any superseding legislation) or by reason of a natural gas curtailment plan 
pursuant to the Federal Power Act; 
   
  (C) use of an alternative fuel by reason of an order or rule of the Federal 
Clean Air Act sec.125; 
   
  (D) use of an alternative fuel at a steam generating unit to the extent that 
the fuel is generated from municipal solid waste; 
   
  (E) use of an alternative fuel or raw material by a stationary source which 
the source was capable of accommodating before December 21, 1976 (unless such 
change would be prohibited under any federally enforceable permit condition 
established after December 21, 1976) or the source is approved to use under any 
permit issued under regulations approved pursuant to this chapter; 
   
  (F) an increase in the hours of operation or in the production rate (unless 
the change is prohibited under any federally enforceable permit condition which 
was established after December 21, 1976); or 
   
  (G) any change in ownership at a stationary source. 
 
  
   
  
       
  For those counties which are designated nonattainment for ozone, but are not 
classified because of incomplete data (Victoria County), the new source review 
rules for a marginal classification apply to sources of VOC but not to Sources 
of NO point=4.52p  [sub]x. 
 
  [graphic] 
   
     Necessary preconstruction approvals or permits-Those permits or approvals 
required under federal air quality control laws and regulations and those air 
quality control laws and regulations which are part of the applicable State 
Implementation Plan. 
   
     Net emissions increase-The amount by which the sum of the following exceeds 
zero: the total increase in actual emissions from a particular physical change 
or change in the method of operation at a stationary source, plus any sourcewide 
creditable contemporaneous emission increases, minus any sourcewide creditable 
contemporaneous emission decreases. 
 
  (A) An increase or decrease in actual emissions is creditable only if both of 
the following conditions are met: 
 
  (i) it occurs during the contemporaneous period; and 
   
  (ii) the Executive Director has not relied on it in issuing a nonattainment 
permit for the source (under regulations approved during which the permit is in 
effect) when the increase in actual emissions from the particular change occurs. 
     
  (B) An increase in actual emissions is creditable only to the extent that the 
new level of actual emissions exceeds the old level. 
   
  (C) A decrease in actual emissions is creditable only to the extent that all 
of the following conditions are met: 
 
  (i) the old level of actual emissions or the old level of allowable emissions, 
whichever is lower, exceeds the new level of actual emissions; 
   
  (ii) it is federally enforceable at and after the time that actual 
construction on the particular change begins; 
   
  (iii)  the reviewing authority has not relied on it in issuing a Prevention of 
Significant Deterioration or a nonattainment permit, or the state has not relied 
on it in demonstrating attainment or reasonable further progress; and 
   
  (iv) it has approximately the same qualitative significance for public health 
and welfare as that attributed to the increase from the particular change. 
     
  (D) An increase that results from a physical change at a source occurs when 
the emissions unit on which construction occurred becomes operational and begins 
to emit a particular pollutant. Any replacement unit that requires shakedown 
becomes operational only after a reasonable shakedown period, not to exceed 180 
days. 
   
  (E) At major sources with the potential to emit 250 tpy or more of a 
nonattainment pollutant: 
 
  (i) increases and decreases of such pollutant resulting from authorizations or 
applications received before November 15, 1992, are creditable to the extent 
that the increases or decreases occur within the period five years prior to the 
date construction on a particular change commences and meet all other 
creditability criteria; and 
   
  (ii)  increases and decreases of such pollutant, resulting from authorizations 
or applications received on or after November 15, 1992, are creditable 
indefinitely to the extent that all other creditability criteria are met. 
     
  (F) For all major sources of (NO [sub]x) in ozone nonattainment areas, 
increases and decreases of NO [sub]x are creditable only if they resulted from 
authorizations or applications received on or after November 15, 1992. 
     
     Offset ratio-For the purpose of satisfying the emissions offset reduction 
requirements of the Federal Clean Air Act, sec.173(a)(1)(A), the emissions 
offset ratio is the ratio of total actual reductions of emissions to total 
allowable emissions increases of such pollutants. The minimum offset ratios are 
included in Table I of this section under the definition of major modification. 
   
     Potential to emit-The maximum capacity of a facility/stationary source to 
emit a pollutant under its physical and operational design. Any physical or 
enforceable operational limitation on the capacity of the facility/stationary 
source to emit a pollutant, including air pollution control equipment and 
restrictions on hours of operation or on the type or amount of material 
combusted, stored, or processed, shall be treated as part of its design only if 
the limitation or the effect it would have on emissions is federally 
enforceable. Secondary emissions, as defined in 40 Code of Federal Regulations, 
51.165(a)(1)(viii), do not count in determining the potential to emit of a 
stationary source. 
   
     Secondary emissions -Emissions which would occur as a result of the 
construction or operation of a major stationary source or major modification, 
but do not come from the source or modification itself. Secondary emissions must 
be specific, well defined, quantifiable, and impact the same general area as the 
stationary source or modification which causes the secondary emissions. 
Secondary emissions include emissions from any off-site support facility which 
would not be constructed or increase its emissions, except as a result of the 
construction or operation of the major stationary source or major modification. 
Secondary emissions do not include any emissions which come directly from a 
mobile source such as emissions from the tail pipe of a motor vehicle, from a 
train, or from a vessel. 
   
     Stationary source -Any building, structure, facility, or installation which 
emits or may emit any air pollutant subject to regulation under the Federal 
Clean Air Act. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327711 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
           
  Subchapter B. New Source Review Permits 
 
  31 TAC sec.sec.116.110, 116.111, 116.114-116.117 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.110. Applicability. 
 
  (a) Permit to construct. Any person who plans to construct any new facility or 
to engage in the modification of any existing facility which may emit air 
contaminants into the air of this state shall obtain a permit pursuant to 
sec.116.111 of this title (relating to General Applications) or satisfy the 
conditions for exempt facilities pursuant to Subchapter C of this chapter 
(relating to Permit Exemptions) before any actual work is begun on the facility. 
Modifications to existing permitted facilities may be handled through the 
amendment of an existing permit. 
   
  (b) Operations certification. 
 
  (1) To ensure that operations addressed in the applicant's permit are in 
conformance with the representations in the permit application, any person who 
has applied for and received a permit from the Texas Air Control Board (TACB) 
shall: 
 
  (A) submit the first part of the operations certification before commencing 
operations certifying that, to the best of the knowledge of an individual with 
process knowledge in a managerial capacity signing the certification, the 
facilities or changes authorized by the permit have been accomplished as 
represented, if those representations affect emissions, method of control, or 
character of emissions; 
   
  (B) submit a second certification certifying that, to the best of the 
knowledge of an individual with process knowledge in a managerial capacity 
signing the certification, the facility complies with all terms of the pre-
construction permit and that operations of the facility are in compliance with 
the Texas Clean Air Act and the rules of the TACB. This certification shall be 
submitted simultaneously with any report of testing or monitoring results 
required by the permit or, if no testing or monitoring is required, within 60 
days of the commencement of operation. The certification deadline may be 
extended by the Executive Director upon a showing of good cause by the permit 
holder; the request for extension must be filed prior to the certification 
deadline. 
     
  (2) Multiple operations certifications may be submitted on a facility-by-
facility basis for a given permit. 
   
  (3) All permits issued after the effective date of this subsection are subject 
to the provisions of this subsection. 
     
  (c) Change in ownership. 
 
  (1)  The new owner of a facility which previously has received a permit or 
special permit from the TACB shall not be required to apply for a new permit or 
special permit, and the change of ownership shall not be subject to the public 
notification requirements of this chapter, provided that within 30 days after 
the change of ownership the new owner notifies the TACB of the change. The 
notification shall include a certification of each of the following: 
 
  (A) the ownership change has occurred and the new owner agrees to be bound by 
all conditions and provisions of the permit or special permit and all 
representations made in the application for permit or special permit and any 
amendments to the permit; 
   
  (B) there will be no change in the type of pollutants emitted; 
   
  (C) there will be no increase in the quantity of pollutants emitted. 
     
  (2) The new owner of the facility is required to comply with all conditions 
and provisions of the permit or special permit and all representations made in 
the application for permit or special permit and any amendments to the permit. 
     
  (d) Submittal under seal of registered professional engineer. All applications 
for permit or permit amendment with an estimated capital cost of the project 
above $2 million, and not subject to any exemption contained in the Texas 
Engineering Practice Act (TEPA), shall be submitted under seal of a registered 
professional engineer. However, nothing in this subsection shall limit or affect 
any requirement which may apply to the practice of engineering under the TEPA or 
the actions of the Texas State Board of Registration for Professional Engineers. 
For purposes of this subsection, the estimated capital cost is defined in 
sec.116.141 of this title (relating to Permit Fees). 
   
  (e) Responsibility for permit application. The owner of the facility or the 
operator of the facility authorized to act for the owner is responsible for 
complying with this section. 
 
     
  sec.116.111. General Application.  Any application for a new permit, permit 
amendment, or special permit amendment must include a completed Form PI-1 
General Application. The Form PI-1 must be signed by an authorized 
representative of the applicant. The Form PI-1 specifies additional support 
information which must be provided before the application is deemed complete. In 
order to be granted a permit, permit amendment, or special permit amendment, the 
owner or operator of the proposed facility shall submit information to the Texas 
Air Control Board (TACB) which shall demonstrate that all of the following are 
met. 
 
  (1) Protection of public health and welfare. The emissions from the proposed 
facility will comply with all rules and regulations of the TACB and with the 
intent of the Texas Clean Air Act (TCAA), including protection of the health and 
physical property of the people. In considering the issuance of a permit for 
construction or modification of any facility within 3,000 feet or less of an 
elementary, junior high/middle, or senior high school, the TACB shall consider 
any possible adverse short-term or long-term side effects that an air 
contaminant or nuisance odor from the facility may have on the individuals 
attending these school facilities. 
   
  (2) Measurement of emissions. The proposed facility will have provisions for 
measuring the emission of significant air contaminants as determined by the 
Executive Director. This may include the installation of sampling ports on 
exhaust stacks and construction of sampling platforms in accordance with 
guidelines in the TACB "Compliance Sampling Manual." 
   
  (3)  Best Available Control Technology (BACT). The proposed facility will 
utilize BACT, with consideration given to the technical practicability and 
economic reasonableness of reducing or eliminating the emissions from the 
facility. 
   
  (4) Federal New Source Performance Standards (NSPS). The emissions from the 
proposed facility will meet at least the requirements of any applicable NSPS as 
listed under Title 40 Code of Federal Regulations (CFR) Part 60, promulgated by 
the United States Environmental Protection Agency (EPA) pursuant to authority 
granted under the Federal Clean Air Act (FCAA), sec.111, as amended. 
   
  (5) National Emission Standards for Hazardous Air Pollutants (NESHAP). The 
emissions from the proposed facility will meet at least the requirements of any 
applicable NESHAP, as listed under 40 Code of Federal Regulations Part 61, 
promulgated by EPA pursuant to authority granted under the FCAA, sec.112, as 
amended. 
   
  (6) Performance demonstration. The proposed facility will achieve the 
performance specified in the permit application. The applicant may be required 
to submit additional engineering data after a permit has been issued in order to 
demonstrate further that the proposed facility will achieve the performance 
specified in the permit application. In addition, dispersion modeling, 
monitoring, or stack testing may be required. 
   
  (7) Nonattainment review. If the proposed facility is located in a 
nonattainment area, it shall comply with all applicable requirements under this 
undesignated head concerning nonattainment review. 
   
  (8) Prevention of Significant Deterioration (PSD) review. If the proposed 
facility is located in an attainment area, it shall comply with all applicable 
requirements under this undesignated head concerning PSD. 
   
  (9)  Air dispersion modeling. Computerized air dispersion modeling may be 
required by the TACB Permits Program to determine the air quality impacts from a 
proposed new facility or source modification. 
 
     
  sec.116.116. Amendments and Alterations. 
 
  (a) Permit amendments. All representations with regard to construction plans 
and operation procedures in an application for a permit, special permit, or 
special exemption, as well as any general and special provisions attached to the 
permit or special exemption itself, become conditions upon which the subsequent 
permit, special permit, or special exemption are issued. It shall be unlawful 
for any person to vary from such representation or permit provision if the 
change will cause a change in the method of control of emissions, the character 
of the emissions, or will result in an increase in the discharge of the various 
emissions, unless application is made to the Executive Director to amend the 
permit or special permit in that regard and such amendment is approved by the 
Executive Director or Board. Applications to amend a permit or special permit 
shall be submitted with a completed Form PI-1 and are subject to the 
requirements of  sec.116.111 of this title (relating to General Application). 
   
  (b) Permit alterations. 
 
  (1) A permit alteration is: 
 
  (A) any variation from a representation in a permit application that does not 
involve an increase in emission rates or a change in the character or method of 
control of emissions; or 
   
  (B) for any change in a general or special provision of a permit that does not 
involve an increase in emission rates or a change in the character or method of 
control of emissions. 
     
  (2) All requests for permit alterations which may result in an increase in 
off-property concentrations of air contaminants, involve a change in permit 
provisions, or affect facility or control equipment performance must receive 
prior approval by the Executive Director. The Executive Director shall be 
notified in writing of all other permit alterations. Any request for permit 
alteration shall include information sufficient to demonstrate that the change 
does not interfere with the owner or operator's previous demonstrations of 
compliance with the requirements of sec.116.111 of this title. 
   
  (3) Permit alterations shall not be subject to the requirements of best 
available control technology identified in sec.116. 111(3) of this title. 
     
  (c) Standard exemption in lieu of permit amendment or alteration. 
Notwithstanding subsections (a) or (b) of this section, no permit amendment or 
alteration is required if the changes to the permitted facility qualify for an 
exemption under Subchapter C of this chapter (regarding Permit Exemptions) 
unless prohibited by permit provision as provided in sec.116.115 of this title 
(relating to Special Provisions). All such exempted changes to a permitted 
facility shall be incorporated into that facility's permit at such time as the 
permit is amended or renewed. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327712 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
           
  Compliance History 
 
  31 TAC sec.sec.116.120-116.126 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327713 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
         
  Public Notification and Comment Procedures 
 
  31 TAC sec.sec.116.130-116.134, 116.136, 116.137 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.132. Public Notice Format. 
 
  (a) Publication in public notices section of newspaper. At the applicant's 
expense, notice of intent to obtain a permit to construct a facility, modify an 
existing facility, or to seek permit renewal review shall be published in the 
public notice section of two successive issues of a newspaper of general 
circulation in the municipality in which the facility is located or is proposed 
to be located, or in the municipality nearest to the location or proposed 
location of the facility. The notice shall contain the following information: 
 
  (1)  permit application number; 
   
  (2) company name; 
   
  (3) type of facility; 
   
  (4) description of the location of facility or proposed location of the 
facility; 
   
  (5) contaminants to be emitted; 
   
  (6)  preliminary determination of the Executive Director to issue or not issue 
the permit (for permits subject to the Federal Clean Air Act, Title I Part C or 
D or to 40 Code of Federal Regulations 51.165(b)); 
   
  (7) location and availability of copies of the completed permit application 
and the Texas Air Control Board's (TACB's) preliminary analyses; 
   
  (8) public comment period; 
   
  (9) procedure for submission of public comments concerning the proposed 
construction; 
   
  (10) notification that a person who may be affected by emission of air 
contaminants from the facility is entitled to request a hearing in accordance 
with TACB rules; and 
   
  (11) name, address, and phone number of the regional TACB office to be 
contacted for further information. 
     
  (b) Publication elsewhere in the newspaper. Another notice with a size of at 
least 96.8 square centimeters (15 square inches) and whose shortest dimension is 
at least 7.6 centimeters (three inches) shall be published in a prominent 
location elsewhere in the same issue of the newspaper and shall contain the 
information specified in subsection (a)(1)-(4) of this section and note that 
additional information is contained in the notice published pursuant to 
subsection (a) of this section in the public notice section of the same issue. 
 
     
  sec.116.133. Sign Posting Requirements. 
 
  (a) At the applicant's expense, a sign or signs shall be placed at the site of 
the proposed facility declaring the filing of an application for a permit and 
stating the manner in which the Texas Air Control Board (TACB) may be contacted 
for further information. Such signs shall be provided by the applicant and shall 
meet the following requirements: 
 
  (1) signs shall consist of dark lettering on a white background and shall be 
no smaller than 18 inches by 28 inches; 
   
  (2) signs shall be headed by the words "PROPOSED AIR QUALITY PERMIT" in no 
less than two-inch bold face block printed capital lettering; 
   
  (3) signs shall include the words "APPLICATION NO. " and the number of the 
permit application in no less than one-inch bold-face block printed capital 
lettering (more than one number may be included on the signs if the respective 
public comment periods coincide); 
   
  (4) signs shall include the words "for further information contact" in no less 
than 1/2-inch lettering; 
   
  (5) signs shall include the words "Texas Air Control Board," and the address 
of the appropriate TACB regional office in no less than one-inch bold-face 
capital lettering and 3/4-inch bold-face lower case lettering; and 
   
  (6) signs shall include the phone number of the appropriate TACB regional 
office in no less than two-inch bold-face numbers. 
     
  (b) The sign or signs must be in place by the date of publication of the 
newspaper notice required by sec.116.132 of this title (relating to Public 
Notice Format) and must remain in place and legible throughout the period of 
public comment provided for in sec.116.136(a) of this title (relating to Public 
Comment Procedures). 
   
  (c) Each sign placed at the site must be located within ten feet of each 
(every) property line paralleling a street or other public thoroughfare. Signs 
must be visible from the street and spaced at not more than 1,500-foot 
intervals. A minimum of one sign, but no more than three signs shall be required 
along any property line paralleling a public thoroughfare. The TACB may approve 
variations from these requirements if it is determined that alternative sign 
posting plans proposed by the applicant are more effective in providing notice 
to the public. 
   
  (d) The TACB may approve variations from the requirements of subsection (c) of 
this section if the applicant has demonstrated that it is not practical to 
comply with the specific requirements of subsection (c) of this section and 
alternative sign posting plans proposed by the applicant area at least as 
effective in providing notice to the public. The approval from the TACB under 
this subsection must be received before posting signs for purposes of satisfying 
the requirements of this section. 
   
  (e) These sign requirements do not apply to properties under the same 
ownership which are noncontiguous and/or separated by intervening public 
thoroughfares, unless directly involved by the permit application. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327714 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
             
  Permit Fees 
 
  31 TAC sec.sec.116.140, 116.141, 116.143 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.140. Applicability.  Any person who applies for a permit to construct 
a new facility or to modify an existing facility, or for an amendment to an 
existing permit pursuant to sec.116.110 of this title (relating to 
Applicability) shall remit, at the time of application for such permit, a fee 
based on the estimated capital cost of the project. The fee will be determined 
as set forth in sec.116.141 of this title (relating to Determination of Fees). 
Fees will not be charged for operating permits, permit alterations, amendments 
to special permits, standard exemptions, site approvals for permitted portable 
facilities, changes of ownership, or changes of location of permitted 
facilities. 
 
   
  sec.116.141. Determination of Fees. 
 
  (a) The estimated capital cost of the project is the estimated total cost of 
the equipment and services that would normally be capitalized according to 
standard and generally accepted corporate financing and accounting procedures. 
   
  (b) The following fee schedule may be used by a permit applicant to determine 
the fee to be remitted with a permit application. 
 
  (1) If the estimated capital cost of the project is less than $300,000 or if 
the project consists of new facilities controlled and operated directly by the 
federal government for which an application is submitted after January 1, 1987, 
and the federal regulations for Prevention of Significant Deterioration (PSD) 
Review do not apply, the fee is $450. The provisions of subsections (c) and (d) 
of this section do not apply to a project consisting of new facilities 
controlled and operated directly by the federal government. 
   
  (2) If the estimated capital cost of the project is $300,000 or more and the 
PSD regulations do not apply, the fee is 0.15% of the estimated capital cost of 
the project. The maximum fee is $75,000. For determination of fees for projects 
applicable to PSD regulations, see sec.116.163 of this title (relating to 
Prevention of Significant Deterioration Permit Fees). 
     
  (c) If the estimated capital cost of the project is less than $50 million, the 
permit applicant shall include a certification that the estimated capital cost 
of the project is correct. Certification of the estimated capital cost of the 
project may be spot checked and evaluated for reasonableness during permit 
processing. The reasonableness of project capital cost estimates used as a basis 
for permit fees shall be determined by the extent to which such estimates 
include fair and reasonable estimates of the capital value of the direct and 
indirect costs listed as follows. 
 
  (1) Direct costs are as follows: 
 
  (A)  process and control equipment not previously owned by the applicant and 
permitted in Texas; 
   
  (B) auxiliary equipment, including exhaust hoods, ducting, fans, pumps, 
piping, conveyors, stacks, storage tanks, waste-disposal facilities, and air 
pollution control equipment specifically needed to meet permit and regulation 
requirements; 
   
  (C) freight charges; 
   
  (D)  site preparation (including demolition), construction of fences, outdoor 
lighting, road, and parking areas; 
   
  (E) installation (including foundations), erection of supporting structures, 
enclosures or weather protection, insulation and painting, utilities and 
connections, process integration, and process control equipment; 
   
  (F) auxiliary buildings, including materials storage, employee facilities, and 
changes to existing structures; 
   
  (G) ambient air monitoring network. 
     
  (2) Indirect costs are as follows: 
 
  (A) final engineering design and supervision, and administrative overhead; 
   
  (B) construction expense (including construction liaison), securing local 
building permits, insurance, temporary construction facilities, and construction 
clean-up; 
   
  (C) contractor's fee and overhead. 
       
  (d) A fee of $75,000 shall be required if no estimate of capital project cost 
is included with a permit application. 
   
  (e) An applicant for a permit or permit amendment not involving any capital 
expenditure shall be required to remit the minimum permit fee of $450. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327715 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
             
  Nonattainment Review 
 
  31 TAC sec.116.150, sec.116.151 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.150. New Major Source or Major Modification in Ozone Nonattainment 
Area.  This section applies to administratively complete applications received 
on or after November 15, 1992. Applications filed before November 15, 1992, 
shall be reviewed using the procedures outlined in this chapter in effect on 
October 22, 1991. The owner or operator of a proposed new facility which is a 
major stationary source of volatile organic compound (VOC) emissions or nitrogen 
oxides (NO  [sub]x) emissions, or which is a facility that will undergo a major 
modification with respect to VOC or NO [sub]x emissions, and which is to be 
located in any area designated as nonattainment for ozone in accordance with the 
Federal Clean Air Act (FCAA), sec.107, shall meet the additional requirements of 
paragraphs (1)-(4) of this subsection. Table I of sec.116.12 of this title 
(relating to Nonattainment Review Definitions) specifies the various 
classifications of nonattainment along with the associated emission levels which 
designate a major stationary source or major modification for those 
classifications. The de minimis threshold test shall be required for proposed 
VOC or NO point=4.52p  [sub]x emissions increases that equal or exceed five tons 
per year in moderate, serious, and severe ozone nonattainment areas. In applying 
the de minimis threshold test, if the net emissions increases aggregated over 
the contemporaneous period are greater than the major modification levels stated 
in Table I, then the following requirements apply. 
 
  (1) The proposed facility shall comply with the lowest achievable emissions 
rate (LAER) as defined in sec.116.12 of this title (relating to Nonattainment 
Review Definitions) for the nonattaining pollutant for which the facility is a 
new major source or major modification. LAER shall be applied to each new 
emissions unit and to each existing emissions unit at which a net emissions 
increase will occur as a result of a physical change or change in the method of 
operation of the emissions unit. 
   
  (2) All major stationary sources owned or operated by the applicant (or by any 
person controlling, controlled by, or under common control with the applicant) 
in the state shall be in compliance or on a schedule for compliance with all 
applicable state and federal emission limitations and standards. 
   
  (3) At the time the new or modified facility or facilities commence operation, 
the emissions increases from the new or modified facility or facilities shall be 
offset. The proposed facility shall use the offset ratio for the appropriate 
nonattainment classification as defined in sec.116.12 of this title and shown in 
Table I of sec.116.12 of this title. 
   
  (4) In accordance with the FCAA, the permit application shall contain an 
analysis of alternative sites, sizes, production processes, and control 
techniques for the proposed source. The analysis shall demonstrate that the 
benefits of the proposed location and source configuration significantly 
outweigh the environmental and social costs of that location. 
 
     
  sec.116.151. New Major Source or Major Modification in Nonattainment Area 
Other than Ozone. This section applies to administratively complete applications 
received on or after November 15, 1992. Applications filed before November 15, 
1992, shall be reviewed using the procedures outlined in this Chapter in effect 
on October 22, 1991. The owner or operator of a proposed facility in a 
designated nonattainment area for an air contaminant other than ozone, which 
will be a new major stationary source or a major modification for that 
nonattainment air contaminant, must meet the additional requirements of 
paragraphs (1)-(4) of this section regardless of the degree of impact of its 
emissions on ambient air quality. Table I, of sec.116.12 of this title (relating 
to Nonattainment Review Definitions), specifies the various classifications of 
nonattainment along with the associated emission levels which designate a major 
stationary source or major modification for those classifications. 
 
  (1) The proposed facility shall comply with the lowest achievable emission 
rate (LAER) as defined in sec.116.12 of this title for the nonattaining 
pollutants for which the facility is a new major source or major modification. 
LAER shall be applied to each new emissions unit and to each existing emissions 
unit at which a net emissions increase will occur as a result of a physical 
change or change in the method of operation of the emissions unit. 
   
  (2) All major stationary sources owned or operated by the applicant (or by any 
person controlling, controlled by, or under common control with the applicant) 
in the state shall be in compliance or on a schedule for compliance with all 
applicable state and federal emission limitations and standards. 
   
  (3) At the time the new or modified facility or facilities commence operation, 
the emissions increases from the new or modified facility or facilities shall be 
offset. The proposed facility shall use the offset ratio for the appropriate 
nonattainment classification as defined in sec.116.12 of this title and shown in 
Table I of sec.116.12 of this title. 
   
  (4) In accordance with the Federal Clean Air Act, the permit application shall 
contain an analysis of alternative sites, sizes, production processes, and 
control techniques for the proposed source. The analysis shall demonstrate that 
the benefits of the proposed location and source configuration significantly 
outweigh the environmental and social costs of that location. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327716 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
             
  Prevention of Significant Deterioration Review 
 
  31 TAC sec.sec.116.160-116.163 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.160. Prevention of Significant Deterioration Requirements. 
 
  (a) Each proposed new major source or major modification in an attainment or 
unclassifiable area shall comply with the Prevention of Significant 
Deterioration (PSD) of Air Quality regulations promulgated by the United States 
Environmental Protection Agency (EPA) in Title 40 Code of Federal Regulations 
(CFR) at 40 Code of Federal Regulations 52.21 as amended October 17, 1988, and 
the Definitions for Protection of Visibility promulgated at 40 Code of Federal 
Regulations 51.301, hereby incorporated by reference. 
   
  (b) The following paragraphs are excluded: 
 
  (1) 40 Code of Federal Regulations 52.21(j), concerning control technology 
review; 
   
  (2)  40 Code of Federal Regulations 52.21(l), concerning air quality models; 
   
  (3) 40 Code of Federal Regulations 52.21(q), concerning public notification 
(provided, however, that a determination to issue or not issue a permit shall be 
made within one year after receipt of a complete permit application so long as a 
contested case hearing has not been called on the application); 
   
  (4) 40 Code of Federal Regulations 52.21(r)(2), concerning source obligation; 
   
  (5) 40 Code of Federal Regulations 52. 21(s), concerning environmental impact 
statements; 
   
  (6) 40 Code of Federal Regulations 52.21(u), concerning delegation of 
authority; and 
   
  (7)  40 Code of Federal Regulations 52.21(w), concerning permit rescission. 
     
  (c) The term "Executive Director" shall replace the word "Administrator," 
except in 40 Code of Federal Regulations 52.21(b)(17), (f)(1) (v), (f)(3), 
(f)(4)(i), (g), and (t). "Administrator or Executive Director" shall replace 
"Administrator" in 40 Code of Federal Regulations 52.21(b)(3) (iii), and 
"Administrator and Executive Director" shall replace "Administrator" in 40 Code 
of Federal Regulations 52.21(p)(2). 
   
  (d)  All estimates of ambient concentrations required under this subsection 
shall be based on the applicable air quality models and modeling procedures 
specified in the EPA Guideline on Air Quality Models, as amended, or models and 
modeling procedures currently approved by the EPA for use in the state program, 
and other specific provisions made in the PSD State Implementation Plan. If the 
air quality impact model approved by EPA or specified in the guideline is 
inappropriate, the model may be modified or another model substituted on a case-
by-case basis, or a generic basis for the state program, where appropriate. Such 
a change shall be subject to notice and opportunity for public hearing and 
written approval of the Administrator of EPA. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327717 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
             
  Emission Reductions: Offsets 
 
  31 TAC sec.sec.116.170, 116.174, 116.175 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327718 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
           
  Subchapter C. Permit Exemptions 
 
  31 TAC sec.sec.116.211-116.213 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.211. Standard Exemption List. 
 
  (a) Pursuant to the Texas Clean Air Act (TCAA), sec.382.057, the facilities or 
types of facilities listed in the Standard Exemption List, dated July 16, 1993, 
as filed in the Secretary of State's Office and herein adopted by reference, are 
exempt from the permit requirements of the TCAA, sec.382.0518, because such 
facilities will not make a significant contribution of air contaminants to the 
atmosphere. A facility shall meet the following conditions to be exempt from 
permit requirements. 
 
  (1) Total actual emissions authorized under standard exemption from the 
proposed facility shall not exceed 250 tons per year (tpy) of carbon monoxide 
(CO) or nitrogen oxides (NO  [sub]x), or 25 tpy of volatile organic compounds 
(VOC) or sulfur oxides (SO point=4.52p  [sub]2) or inhalable particulate matter 
(PM [sub]10), or 25 tpy of any other air contaminant except carbon dioxide, 
water, nitrogen, methane, ethane, hydrogen, and oxygen. 
   
  (2) Total actual emissions authorized under standard exemption from the 
proposed facility which is located in a nonattainment area shall not exceed: 
 
  (i) the applicable major modification threshold for CO in the definition of 
"major modification" in  sec.116.12 of this title (relating to Nonattainment 
Review Definitions; 
   
  (ii) 25 tpy of SO [sub]2; 
   
  (iii) 15 tpy of PM [sub]10; 
   
  (iv) in an ozone nonattainment area, the applicable major modification 
threshold of VOC or NO [sub]x in Table 1 of the definition of major modification 
in sec.116.12 of this title. 
     
  (3)  Total actual emissions authorized under standard exemption from the 
property where the proposed facility is to be located shall not exceed 250 tpy 
of CO, or NO  [sub]x, or 25 tpy of VOC, or SO point=4.52p  [sub]2, or PM  
[sub]10, or 25 TPY of any other air contaminant except carbon dioxide, water, 
nitrogen, methane, ethane, hydrogen, and oxygen, unless at least one facility at 
such property has been subject to public notification and comment as required in 
Subchapter B or Subchapter D of this chapter (relating to Public Notification 
and Comment Procedures) or the pertinent Chapter 116 procedures that were in 
effect at the time. 
   
  (4) Construction or modification of the facility shall be commenced prior to 
the effective date of a revision of the Standard Exemption List under which the 
construction or modification would no longer be exempt. 
   
  (5) The proposed facility shall comply with the applicable provisions of the 
Federal Clean Air Act (FCAA) , sec.111 (regarding Federal New Source Performance 
Standards) and sec.112 (regarding Hazardous Air Pollutants), and the new source 
review requirements of the FCAA Part C and Part D and regulations promulgated 
thereunder. 
   
  (6)  There are no permits under the same Texas Air Control Board (TACB) 
Account Number that contain a condition or conditions precluding use of the 
standard exemption or standard exemptions. 
     
  (b) Notwithstanding the provisions of this section, any facility which 
constitutes a new major source, or any modification which constitutes a major 
modification under the FCAA, nonattainment review, or Prevention of Significant 
Deterioration review as amended by the FCAA Amendments of 1990, and regulations 
promulgated thereunder shall be subject to the requirements of sec.116.110 of 
this title (relating to Applicability) rather than this section. 
   
  (c) No person shall circumvent by artificial limitations the requirements of 
sec.116.110 of this title. 
   
  (d) The emissions from the facility shall comply with all rules and 
regulations of the TACB and with the intent of the TCAA, including protection of 
health and property of the public and all emissions control equipment shall be 
maintained in good condition and operated properly during operation of the 
facility. 
   
  (e) Copies of the current Standard Exemption List are available from the TACB 
Air Quality Planning Annex, located at 12118 North IH-35, Park 35 Technology 
Center, Building A, Austin, Texas 78753, and at all TACB regional offices. 
   
  (f) Installations exempted by the TACB may be required by local air pollution 
control agencies to receive a permit or permits from that agency, or register 
with that agency. Any such requirements must be in accordance with TCAA, 
sec.382.113, and any other applicable law. 
 
     
  sec.116.212. Public Notification and Comment Procedures.   Facilities 
constructed under the Standard Exemption List that consist of permanently or 
temporarily located concrete plants that accomplish wet batching, dry batching, 
or central mixing, or specialty wet batch, concrete, mortar, grout mixing, or 
pre-cast concrete products, shall conduct public notice of the proposed 
construction unless exempted from public notice requirements by the Texas Clean 
Air Act (TCAA), sec.382.058(b). In all cases, public notice shall include the 
information specified in paragraph (1)(A) and (B) of this section. 
 
  (1) Public notification procedures. 
 
  (A)  Publication in public notices section of a newspaper. At the applicant's 
expense, notice of intent to construct shall be published in the public notice 
section of two successive issues of a newspaper of general circulation in the 
municipality in which the facility is located or is proposed to be located or in 
the municipality nearest to the location or proposed location of the facility. 
The notice shall contain the following information: 
 
  (i)  application number; 
   
  (ii) company name; 
   
  (iii)  type of facility; 
   
  (iv) description of the location of facility or proposed location of the 
facility; 
   
  (v) contaminants to be emitted; 
   
  (vi) location and availability of copies of the completed application; 
   
  (vii) public comment period; 
   
  (viii)  procedure for submission of public comments concerning the proposed 
construction; 
   
  (ix) notification that a person residing within 1/4 mile of the proposed plant 
is an affected person who is entitled to request a hearing in accordance with 
Texas Air Control Board (TACB) rules; and 
   
  (x)  name, address, and phone number of the regional TACB office to be 
contacted for further information. 
     
  (B) Publication elsewhere in the newspaper. Another notice with a size of at 
least 96.8 square centimeters (15 square inches) and whose shortest dimension is 
at least 7.6 centimeters (three inches) shall be published in a prominent 
location elsewhere in the same issues of the newspaper and shall contain the 
information specified in paragraph (1)(A)(i)-(iv) of this section and note that 
additional information is contained in the notice published pursuant to 
paragraph (1)(A) of this section in the public notice section of the same issue. 
     
  (2) Comment procedures. 
 
  (A) Comment period. Interested persons may submit written comments to the 
Executive Director, including requests for public hearings pursuant to the TCAA, 
sec.382.056, on the Executive Director's preliminary decision to issue or not to 
issue the standard exemption. All such comments and hearing requests must be 
received in writing within 15 days of the last publication date of the notices 
specified in paragraph (1)(A) and (B) of this section. Any requests for a 
contested case hearing shall include a brief, but specific, written statement of 
interest and basis for challenging the application. Such statement shall convey 
in plain language the requestor's location relative to the proposed facility, 
why the requestor believes he or she will be affected by emissions from the 
proposed facility, what the requestor's concerns are about the emissions from 
the proposed facility, and how the requestor believes emissions from the 
facility will affect him or her if permitted. This statement shall not be used 
as the basis for denial of party status in any contested case hearing. Party 
status determinations will be made based on evidence developed at the initial 
prehearing conferences. 
   
  (B) Consideration of comments. All written comments received by the Executive 
Director during the period specified in subparagraph (A) of this paragraph shall 
be considered in determining whether to issue or not to issue the standard 
exemption. The Executive Director shall make record of all comments received 
together with the agency analysis of such comments available for public 
inspection during normal business hours at the Austin office of the TACB and 
appropriate regional office. 
 
       
  sec.116.213. Registration of Emissions. An applicant may certify and register 
the maximum emission rates from the facilities qualifying for a standard 
exemption in order to establish enforceable allowable emission rates which are 
below those allowed in sec.116.211 of this title (relating to Standard Exemption 
List). All representations with regard to construction plans, operating 
procedures, and maximum emission rates in any specially certified registration 
for a standard exemption become conditions upon which the exempt facility shall 
be constructed and operated. It shall be unlawful for any person to vary from 
such representation if the change will cause a change in the method of control 
of emissions, the character of the emissions, or will result in an increase in 
the discharge of the various emissions, unless the registration is first 
revised. The special certification must include documentation of the basis of 
emission estimates and a written statement by the registrant certifying that the 
maximum emission rates listed on the registration reflect the reasonably 
anticipated maximums for operation of the facility. The specially certified 
registration shall be maintained on-site and be provided immediately upon 
request by representatives of the Texas Air Control Board or any air pollution 
control agency having jurisdiction. Copies of the certified registration shall 
be included in applications for permits for any subsequent projects that are 
subject to review under the undesignated heads in Subchapter B concerning 
prevention of significant deterioration review and nonattainment review. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327719 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
           
  Subchapter D. Permit Renewals 
 
  31 TAC sec.sec.116.310-116.314 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
 
  sec.116.311. Permit Renewal Application. 
 
  (a) In order to be granted a permit renewal, the owner or operator of the 
facility shall submit information in support of the application which 
demonstrates that: 
 
  (1)  the emissions from the facility comply with all applicable specifications 
and requirements in the Texas Air Control Board (TACB) rules and the Texas Clean 
Air Act (TCAA); 
   
  (2) the facility is being operated in accordance with all requirements and 
conditions of the existing permit, including representations in the application 
for permit to construct and subsequent amendments, and any previously granted 
renewal; 
   
  (3) the facility has appropriate means to measure the emission of significant 
air contaminants as determined to be necessary by the Executive Director; 
   
  (4)  the facility uses that control technology determined by the Executive 
Director to be economically reasonable and technically practicable considering 
the age of the facility and the impact of its emissions on the surrounding area; 
   
  (5) the emissions from the facility meet at least the requirements of any 
applicable new source performance standards promulgated by the United States 
Environmental Protection Agency (EPA) under the authority of the Federal Clean 
Air Act (FCAA), sec.111, as amended; 
   
  (6) the emissions from the facility meet at least the requirements of any 
applicable emission standard for hazardous air pollutants promulgated by EPA 
under the authority of the FCAA, sec.112, as amended. 
     
  (b) The TACB shall review the compliance history of the facility in 
consideration of granting a permit renewal. The compliance history review shall 
be conducted in accordance with the undesignated head in Subchapter B of this 
chapter concerning compliance history. In order for the permit to be renewed, 
the application shall include information demonstrating that the facility is or 
has been in substantial compliance with the provisions of the TCAA and the terms 
of the existing permit. If the facility has a history which demonstrates failure 
to maintain substantial compliance with the provisions of the TCAA or the terms 
of the existing permit, the renewal shall not be granted. If the facility has 
any unresolved nonclerical violations of the TACB rules, the renewal shall not 
be granted unless the facility is brought into compliance or is complying with 
the terms of an applicable board order or court order prior to the expiration of 
the permit as identified in subsection (c) of this section. 
   
  (c) A permit holder that fails to submit an application for review and renewal 
within 90 days after receiving notification from the TACB pursuant to subsection 
(a) of this section, will cause the subject permit to expire, unless the time 
period for the submission of the application is extended by the Executive 
Director. Permits are subject to the following renewal schedule: 
 
  (1) any permit issued before December 1, 1991, is subject for review 15 years 
after the date of issuance; or 
   
  (2) any permit issued on or after December 1, 1991, is subject for review 
every five years after the date of issuance. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327720 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
               
  Subchapter E. Emergency Orders 
 
  31 TAC sec.sec.116.410-116.418 
 
  The new rules are adopted under the Texas Health and Safety Code (Vernon 
1990), Texas Clean Air Act (TCAA), sec.382.017, which provides the TACB with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
 
  This agency hereby certifies that the rule as adopted has been reviewed by 
legal counsel and found to be a valid exercise of the agency's legal authority. 
 Issued in Austin, Texas, on August 23, 1993. 
 TRD-9327721 
  Cyril Durrenberger 
 Assistant Deputy Director 
 Texas Air Control Board 
    Effective date: September 13, 1993 
 Proposal publication date: February 23, 1993 
 For further information, please call: (512) 908-1451 
         
               
  TITLE 43. TRANSPORTATION 
 Part I. Texas Department of Transportation 
  Chapter 30. Aviation 
  
  (Editor's Note: House Bill 9, 72nd Legislature, First Called Session, 
transferred all functions, duties and rules from Title 43, Part III. Texas 
Department of Aviation to Part I. Texas Department of Transporation and 
abolished the Texas Department of Aviation. 
 The Texas Register is administratively transferring the following rules listed 
in the table below from Title 43, Part III. Texas Department of Aviation, 
Chapters 61, 63, 65, and 67 to Title 43. Part I. Texas Department of 
Transporation, Chapter 60, Subchapters A, B, C, and D. The table lists the old 
section number and the new section number that corresponds to them.) 
 
 
  
   
  
   
  
   
  
           
  TITLE 43. TRANSPORTATION 
 Part III. Texas Department of Aviation 
  
  (Editor's Note: House Bill 9, 72nd Legislature, First Called Session, 
transferred all functions, duties and rules from Title 43, Part III. Texas 
Department of Aviation to Part I. Texas Department of Transporation and 
abolished the Texas Department of Aviation. 
 The Texas Register is administratively transferring the following rules listed 
in the table published in this issue under Part I. Texas Department of 
Transporation from Title 43, Part III. Texas Department of Aviation, Chapters 
61, 63, 65, and 67 to Title 43. Part I. Texas Department of Transporation, 
Chapter 60, Subchapters A, B, C, and D. The table lists the old section number 
and the new section number that corresponds to them.)