Update on Texas Legislative Session House Bill 2726 – Commencement of Construction

The term “commencement of construction” is very important within the context of facility modifications and the potential need to obtain a final permit to construct in advance of actual construction activities.  The provisions of House Bill 2726 (HB 2726) if finalized, would ease the requirement to have a final permit to construct in hand before beginning construction on certain projects at existing facilities.

In April 2019, ALL4 provided an update regarding commencement of construction as addressed in House HB 2726 of the 86^th Texas Legislature.  HB 2726 specifically addresses commencement of construction of a project following the issuance of a draft permit for an amendment to a New Source Review (NSR) air quality permit (i.e., construction commencement before issuance of a final permit).

TCEQ is required to follow their rule making process to incorporate HB2726 into the TX Administrative Code. Under this process, on January 10, 2020 the proposed rulemaking was introduced via Docket No.: 2019-1588-RUL – Commission Approval for Proposed Rulemaking Chapter 116, Control of Air Pollution by Permits for New Construction or Modification was presented to Texas Commission of Environmental Quality (TCEQ) on January 10, 2020.

A summary of Docket No.: 2019-1588-RUL is presented below:

A.) Summary of what the rulemaking would do:

Chapter 116 would be amended to provide the framework and associated conditions to support the pre-permit construction activities allowed by Texas Health and Safety Code (THSC), §382.004. The new §116.118 rule would include requirements establishing the applicability and scope of the rules, as well as, restrictions and limitations. Additional existing sections in Chapter 116 would be revised to add cross references to new §116.118 to address construction and modifications.

B.) Scope required by federal regulations or state statutes:

Proposed new §116.118 would allow an applicant for a permit amendment to begin construction once the draft permit is issued, as provided for under THSC, §382.004. Construction is at the applicant’s own risk and the rule language reflects that the commission shall evaluate the permit application without considering construction initiated under this rule.  THSC, §382.004 also specifies that pre-permit construction is only allowed “to the extent permissible under federal law” and certain restrictions in proposed §116.118 relate to permit actions which, under federal law, are not eligible for pre-permit construction.  Therefore proposed 116.118 specifically excludes projects which trigger federal Prevention of Significant Deterioration (PSD) permitting, Nonattainment Review permitting and case-by-case Maximum Achievable Control Technology (MACT) determinations. These proposed conditions are included for consistency with federal law and to ensure the rules meet United States Environmental Protection Agency (U.S. EPA) criteria for approvability as a state implementation plan (SIP) revision.

Applicants for an air quality NSR permit would have more flexibility to commence construction when modifying an existing facility.  The proposed rule provides the option to begin construction before the final permit is issued by TCEQ and allows for a reduction in wait time for permit approval.  Thus, completing construction and beginning operation sooner than if applicants would have to wait for final permit issuance as opposed to issuance of the draft permit.  However, if the final permit issued by TCEQ includes differences from the draft permit, the applicant may incur additional costs to retrofit or modify the facility construction to meet the conditions of the final permit. These regulations are not applicable to greenfield applications.

TCEQ is acting as required by HB 2726 to establish new requirements for at-risk permitting and the commencement of construction process as related to NSR permitting.

The steps for final rule adoption include:

• The public comment period ended March 7, 2020.
• The commissioners discussed HB 2726 and voted to adopt on July 15, 2020.
• Since the commissioners voted to adopt, the rule is sent to “adoptions” and then published in the Texas Register. Publication in the Texas Register is estimated to be on or about July 31, 2020.
• The anticipated rulemaking effective date would be August 8, 2020, as that is 20 days after final publication in the Texas Registrar.

The future predicted dates are subject to the regulatory process of TCEQ and may be delayed.

Stay tuned for additional updates as HB 2726 makes its way through the rule making process over the next few weeks. Have questions? Reach out to Houston Project Manager, Meghan Skemp at mskemp@all4inc.com or 281.937.7553 x307.