In a Rare Occurrence, Texas’ Anti-Regulation Stance Hurt Business
How anti-regulation politics may have been a problem for the energy industry.
Businesses in energy-related industries in Texas say they have been unable to take full advantage of the natural gas boom that is roaring across the state because of a delay in the issuing of greenhouse gas permits — an instance in which Texas’ anti-regulation stance might have actually hurt business.
The Environmental Protection Agency began requiring the permits more than three years ago, but the Texas Commission on Environmental Quality refused to enact the rules, arguing that it was illegal to regulate greenhouse gases. That left the responsibility to the EPA, which is only slightly larger than its Texas counterpart and has a small permitting division. As a result, the backlog of applications grew quickly, as did the complaints.
Texas lawmakers directed the state’s environmental agency last year to begin following the federal regulations. But it will take months for the agency to implement its own rules to take over the permitting.
The state has long fought with the federal government over regulations, especially those from the EPA. The chairman of the Texas agency, Bryan Shaw, who is among the many state officials who question the science of climate change, has repeatedly criticized the EPA for developing rules that could cripple the Texas economy.
Electric power retailers, along with energy transport and chemical companies, have told the TCEQ that the delay has put Texas at a competitive disadvantage against other states that had agreed earlier to issue the permits. Some executives said they have considered building in other states because of the delays.
More than 20 planned industrial facilities in Texas, including chemical plants and power-generating stations, have been waiting more than a year for the EPA to issue the greenhouse gas emissions permits needed to begin construction. The delays have slowed the companies hoping to take advantage of the natural gas boom. Dow Chemical, for example, has been waiting more than a year for an EPA permit to begin construction on a plant near Freeport that would make ethylene, a petrochemical made from shale that is in high demand. The company had received a $1 million state grant to help pay for the $1.7 billion plant, which would employ thousands.
ExxonMobil had to delay construction of an ethylene facility in Baytown that it had hoped to begin building in March 2013. It did not receive EPA approval until November.
“Permit approval times are the leading indicator of how quickly our nation is capturing the benefits of shale energy,” Stephen Pryor, the president of ExxonMobil Chemical, said in a speech last year. “Delays could add billions in project costs, restrain job creation and erode America’s new competitive advantage.”
Several industry lawyers and consultants estimated that the TCEQ would issue permits several months faster than the EPA, where in some cases the delays have been as long as two years.
“If it takes six months or a year to start a facility, well, then that’s a year you’re not going to be making any money,” said Bill Jamieson, director for air quality at the environmental consulting firm SWCA. “There’s no question that equity firms and large investors look at that as risk.”
Facilities that process or compress gas before sending it through pipelines were also put on hold, which has led to drillers venting excess gas in a process called flaring, which emits toxic chemicals that could sicken residents nearby.
“I do know that there’s just tons of flaring going on in the Eagle Ford area right now because we haven’t been able to get sufficient pipes in the ground,” said Celina Romero, a lawyer for the Texas Pipeline Association, referring to the boom in South Texas shale production. According to the association, more than 50 planned projects since early 2011 have been significantly delayed by the permitting process, putting 48,000 jobs at risk.
TCEQ officials have maintained that they lacked the authority to issue greenhouse gas permits until the Legislature asked them to do so last year. The agency will take several more months to develop guidelines to take over the process.
“The producers are probably going to stop drilling in part of the Barnett Shale in Texas because of this,” Michael Heim, president of the energy resources firm Targa Resources, testified last year to state lawmakers. “All we’re asking for is to put Texas on an even footing with the states around us.”
Targa had planned to begin operating two natural gas processing facilities in mid-2013. But it received the permits to build both plants only in the last six months. In correspondence records obtained through a public information request, EPA officials have described receiving weekly calls from many other energy companies, including FGE Power, which announced plans to begin building a natural gas-fired power plant in West Texas by August, but is still waiting on its permit.
Environmental advocates say the delays are an example of how Texas’ stance against climate change regulations can hurt big business. They also question whether the TCEQ needed state legislators to give it the authority to follow the rules. “Texas will ultimately become the last state to issue its own greenhouse gas permits,” Adrian Shelley, executive director of Air Alliance Houston, told the TCEQ at a public hearing late last year. “The reason for that is that we waged a long ideological battle with the federal government over the issue.”
But Pamela Giblin, an Austin-based lawyer who represents many oil and chemical companies, said it would have been difficult for the state to follow rules that it had challenged in court. Next month, the U.S. Supreme Court will hear Texas’ argument that the EPA’s greenhouse gas permitting program is illegal. “If they had taken up the program, there might have been some pressure then to abandon the arguments and to leave the litigation alone,” Giblin said.
If Texas wins the case, “they’re going to look really astute for having taken a firm position.”
But there is no guarantee that will happen. Supreme Court justices have declined to hear Texas’ argument that greenhouse gases should not be considered a danger to public health and welfare.
Jamieson said companies thrive on regulatory certainty, and fighting rules can be more costly than following them.
“It really comes down to politics as to why this was done the way it was done,” he said. “You can look back on a number of instances in the state of Texas where utilities have challenged some pretty significant EPA regulation, and they’ve spent a lot of money, and the end result is: they have the regulation.”