Commentary

Houston’s Failure to Meet Smog Limits Can Lead to Opportunities to Improve Air Quality

The fact that Houston failed to meet a national air quality standard for ozone by the established deadline is no big surprise, but what is surprising is that the Environmental Protection Agency (EPA) officially announced that fact and then began wavering back and forth on the matter. What may be even more surprising are the potential consequences for that failure if they come to fruition. A lot of confusion surrounds this whole matter, and a lot of discussions, debate and decisions loom in the future. However, significant opportunities for greater efforts to clean up the air in the Houston region could result in the end.

The EPA just announced its determination that the Houston-Galveston-Brazoria (HGB) area has failed to meet the 30-year-old 1-hour standard for ozone. Notably, Houston joins Baltimore as the only two U.S. cities that have failed to meet that standard. This determination comes after a recent settlement with the Sierra Club, which had accused the EPA of failing to enforce the standard set in 1979 which required that air contain less than 125 parts per billion (ppb) of ozone for any one hour. Houston had a November, 2007 deadline to comply with that ozone limit, but fell short despite significant improvements in air quality over the years, having lowered its 1-hour levels from 220 ppb in 1991 to 125 ppb in 2011.

But here the confusion begins. In 1997, the EPA determined that a standard based on an average of ozone levels over eight hours would better protect health and the environment than the 1-hour standard, and tightened the national ozone standard to 85 ppb. In implementing the new standard, the EPA revoked the 1-hour standard in all areas of the nation where air quality met that standard for three consecutive years in an effort to allow those areas to redirect their focus toward meeting the new 8-hour standard. Importantly, though, the EPA did not revoke the 1-hour standard in areas that continued to violate that standard, such as the HGB area. Thus, as the HGB area continues to struggle to meet the 8-hour ozone standard, it must also continue to deal with the “superseded” 1-hour standard.

So, what is the practical significance of Houston’s failure to meet the old 1-hour standard? The significance is that the federal Clean Air Act (FCAA) requires the state to impose a penalty fee upon major sources of ozone-producing pollutants [primarily volatile organic compounds (VOCs) and nitrogen oxides (NOx)] in any area that fails to attain the ozone standard by the applicable attainment date. This penalty fee, commonly known as the “Section 185 fee” after the principal section in the FCAA that establishes it, is required to be imposed for each calendar year after the attainment date until the area attains the ozone standard. The FCAA sets the fee at $5,000 per ton of ozone-producing pollutants emitted by a source during the calendar year in excess of 80% of an established “baseline amount” for each year beginning after the attainment date until the area is re-designated to attainment for ozone. The fees must be adjusted annually for inflation based on the Consumer Price Index.

To meet its responsibilities under the FCCA, the Texas Commission on Environmental Quality (TCEQ) proposed rules in December, 2009, designed to implement the required fee program for the HGB area. In the 2009 legislative session, the Texas Legislature gave express statutory authority for the TCEQ to collect these fees and place them in a dedicated account. The TCEQ was also appropriated all fees collected and directed to spend this revenue “to support activities associated with the state’s efforts to comply with federal air quality standards and to address other air pollution issues in the Houston-Galveston-Brazoria nonattainment area.” In 2009, the TCEQ estimated the amount of fees to be collected at somewhere between $73 and $125 million.

However, the TCEQ halted its efforts to implement the fee program when the EPA issued “guidance” in January, 2010, which stated that if a 1-hour nonattainment area is attaining either the 1-hour or the 1997 8-hour ozone standard, the area sources of ozone precursors would not be obligated to pay the fee. Accordingly, since the HGB area met the 1997 8-hour ozone standard in 2009, the TCEQ placed its proposed rules on hold, and in May, 2010, requested a determination from the EPA that a fee program is not required for the HGB 1-hour ozone nonattainment area because ambient monitoring data has indicated measured attainment of the 1997 8-hour ozone standard.

Now, this saga has taken another confusing turn in that the EPA advised the TCEQ in July, 2011, that it was unable to approve TCEQ’s fee termination determination request, stating that its previous Guidance had been vacated by the District of Columbia Circuit Court of Appeals.  The EPA also said the HGB area has not attained the 1-hour standard and, although tremendous progress in reducing ozone has been made, preliminary data for 2011 indicated that the Houston area was not monitoring attainment of the 1997 8-hour ozone standard.

Likely as a result of all the confusion, the budget authorization for the TCEQ to spend any fees collected to support efforts to comply with federal air quality standards and, importantly, to address other air pollution issues in the HGB area, did not get carried forward for the 2012-2013 biennium. Even though the statutory authority to collect the fees and deposit them into a dedicated account still exists, there is no appropriation to TCEQ of any fees collected, and thus no authority to spend them. The TCEQ must now go back to the Legislature and again get express authority to spend the fees, as was done in 2009. Unless and until the Legislature expressly appropriates any fees collected to the TCEQ, they will simply accumulate in the dedicated account.   Of course, the Legislature doesn’t convene again until January, 2013, and then any action taken will not be effective until September 1, 2013, unless the Legislature makes an emergency appropriation of such fees during the session, which is highly unlikely.

However, if all this confusion gets settled so that the fees are collected and the TCEQ has authority to spend them, significant opportunities for greater efforts to clean up the air in the HGB region can result in the end. The TCEQ's original rules would have applied to industrial sites that release 25 tons or more of ozone-forming pollutants each year, estimated to be as many as 300 oil refineries, chemical plants and other large industrial facilities in the region. It is estimated that fees coming from such facilities could generate as much as $125 million annually for programs to improve air quality in the HGB area, starting with 2008 and continuing each year until the area reaches attainment of the 1-hour ozone standard.

As it currently stands, the TCEQ is re-evaluating its previously proposed penalty fee program before moving forward, and it is unclear how the program will be implemented now. Importantly, though, if the fee collection program is not implemented in Texas, then federal law provides that the EPA is required to collect any unpaid fees, with interest, and deposit them in the federal treasury. Obviously, any fees thus collected by the EPA would not be available to Texas and accordingly would not go towards improving air quality in the HGB region.

Ozone continues to be a serious health threat, impacting children, the elderly, those with respiratory ailments, and those who work outdoors, yet the HGB area has consistently failed to meet ozone standards in the past. In 2004, Houston passed Los Angeles as the city having the worst ozone levels in the U. S., but “improved” in 2008 to the 4th worst in the nation, just behind Los Angeles, Bakersfield and the San Joaquin Valley. Despite significant improvements in air quality over the years, the HGB is barely meeting the 1997 8-hour standard of 85 ppb. Now, the new ozone standard is 75 ppb and may go even lower in 2013 after a scientific review required by the FCCA.

Millions of dollars annually collected through the required fee program will create significant opportunities to support efforts in Texas to comply with federal air quality standards. If those same millions of dollars are likewise available to address air pollution issues in the HGB area, those who live and work in the area and bear the burden of ozone air pollution may likely reap some very positive benefits from Houston’s failure to meet the ozone standard.

Further information on the Section 185 fees and the status of program implementation can be obtained on the TCEQ website at .