Financial Inability To Pay Finalized

After months of wrangling, and many "no" votes on penalties by Commissioner Larry Soward, the Texas Commission on Environmental Quality on February 25 took final action on three remaining items from the enforcement review initiative - time line streamlining, financial inability to pay, and payment plans criteria. Then they got an update on the process of turning policies into rules.

In response to a challenge by the Commissioners to cut enforcement time lines dramatically from the 292 days on average for the expedited process (those penalties for which 20% reductions might be available depending on the circumstances), staff had first submitted a proposal that would require a shortening of response times by respondents. That dog did not hunt, so they went back to the drawing boards.

The adopted plan cuts 107 out of the target 125 days from the process and includes a multi-pronged strategy and some changes made from the version as proposed. The new plan envisions a maximum of 60 days in the Enforcement Division, another 60 days for review of respondent comments, and 65 more days to prepare the case for agenda (including posting in the Texas Register). If a case is in house for more than 185 days, it will be referred to the Litigation Division.

First off, the Commissioners noted that they had no intention of increasing penalties by 25% (as proposed) if a respondent fails to settle within 30 days of receiving a draft order. Instead, the policy will authorize elimination of the 20% deferral for timely settlement. Second, the Commissioners agreed that there should be no extensions of the settlement deadline except in cases where the respondent has proposed to undertake a supplemental environmental project or where the respondent is seeking a determination of financial inability to pay (but see below).

Cases are to be assigned to an Enforcement Coordinator within 7 days after the enforcement action referral. Commissioner Larry Soward spoke up to remind staff that respondents should also be provided with the name of an agency attorney with whom to discuss the case by that same deadline. All draft orders and penalty calculations worksheets are to be mailed to the respondent within 60 calendar days after the date the case was assigned.

Cases referred directly to the Litigation Division must also be forwarded within 60 days of initial screening. Any case in which the respondent declares an intent not to settle an expedited enforcement action is to be referred to Litigation immediately. Agreed orders are to be set for agenda within 70 days, but within the 185-day timetable. Commissioner Soward also suggested that streamlining of the publication of notice in the Texas Register could cut a few more days off the time line.

The Commission then agreed to use an initial screen of 1% of an entity's annual gross revenue for operating businesses when determining financial inability to pay. If that amount would not fully pay the assessed penalty, TCEQ would conduct a more thorough analysis to include the respondent's assets where warranted. Non-operating businesses would also undergo a similar asset analysis.

Chairman Kathleen Hartnett White noted that small farms and ranches are among the types of businesses that might have low gross revenues but sizable paper assets. Staff then reassured her the scheme allows for recognition of these realities. Moreover, staff noted that 1% of gross revenue over a 3-year payout period amounts to no more than 0.333% of gross revenues being applied to penalty payments over a 3-year period.

The minimum payment for an operating small business would be $100, with a maximum payout time of 36 months. Non-operating businesses would also have to pay at least $100, but they would have only 12 months to pay their allotted portion of their assessed penalties.

Under the scheme adopted, an operating business facing an $8,000 penalty which had gross annual revenues of $500,000 would be liable only for $5,000 payable in 36 monthly installments. If the business, however, failed to make timely payments and or to complete required corrective actions, the entire assessed penalty would still be due and payable. TCEQ also agreed to consider cases in which corrective action costs were significant as special cases so as to provide flexibility and ensure environmental protection.

Asked about how soon this new policy would become operative, staffer Ann McGinley noted that TCEQ has been following these new guidelines in all draft orders issued since February 11 in anticipation of the adoption of the policy change. Staffer John Steib also pledged to make it clear in backup materials for agenda the policy criteria that were used in reaching settlement of each case.

In other action taken at the work session, the Commission approved a staff proposal to submit 30 TAC Chapter 114, Subchapter K, Division 3, Diesel Emission Reduction Incentive Program for On-Road and Non-Road Vehicles to the U.S. Environmental Protection Agency for inclusion in the State Implementation Plan. These rules were adopted as part of the Texas Emissions Reduction Plan but for whatever reason were not included in the SIP revisions previously adopted that identify TERP as a control measure for the Houston-Galveston-Brazoria, Beaumont-Port Arthur, and Dallas-Fort Worth ozone nonattainment areas or for the Austin, San Antonio, and Northeast Texas Early Action Compacts. The rules in question did, however, undergo the SIP revision notice and comment process and do not need to be taken through that step again.

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