volume 20, no. 3 july 2015...

The members of the Texas Legislatureadjourned the Regular Session of the

84th Texas Legislature on June 1 a� er 140 long days and nights. The TexasLegislature addressed many importantissues that are facing the ci� zens of Texas as the popula� on and economy of Texas con� nue to increase rapidly. Specifi cally, the Legislature passed bills to lower franchise and property taxes, toestablish standards for pre-kindergarteneduca� on, to increase security along the Texas - Mexico border, and to increasefunding for the state’s transporta� on infrastructure.

The Texas Legislature also invested asubstan� al amount of � me and eff ort during the Regular Session to tackle water,u� lity, and governmental opera� ons issues. The popula� on and economic growth that Texas is experiencing requirethe legislators to focus on the stress anddemands placed on the natural resourcesand u� lity infrastructure of the state and proac� vely take steps to plan for the future of Texas. The informa� on below highlights the bills that were passed inseveral diff erent areas that impact the natural resources and u� lity infrastructure of Texas.

Groundwater

There were a signifi cant number of bills passed that addressed a wide-ranging number of subjects within thegroundwater context. Many of these billswere the result of the work of the Texas

Water Conserva� on Associa� on (“TWCA”) Groundwater Stakeholders Commi� ee during the legisla� ve interim period.

• HB 30 – imposes requirements onRegional Water Planning Groups(“RWPGs”) and the Texas WaterDevelopment Board (“TWBD”) tostudy and report on opportuni� es for the development of brackishgroundwater, including desalina� on projects. In terms of targetedaquifers for brackish development,HB 30 requires the TWDB tofocus on the Rustler, Blaine,Gulf Coast, and por� ons of the Carrizo-Wilcox aquifers in the fi rst report due to the Legislature nolater than December 1, 2016. j

• HB 200 – establishes a processin Chapter 36 of the Water Codefor “aff ected persons” to appeal a groundwater conserva� on district’s (“GCD”) adopted desired futurecondi� ons (“DFC”) under the Joint Planning Process prescribed byChapter 36. An aff ected person may fi le a pe� � on with a GCD for a contested case hearing on thereasonableness of an adopted DFC.The GCD will then contract with theState Offi ce of Administra� ve Hearings (“SOAH”) to conduct a hearing on thepe� � on and issue fi ndings of fact and conclusions of law in its proposal fordecision to the GCD; the GCD canaccept, amend, or reject the decisionfrom SOAH. The fi nal decision by the

GCD is appealable by the aff ected party to a local state district courtthat shares jurisdic� on with the GCD.

• HB 655 – signals the fullimplementa� on of aquifer storage and recovery (“ASR”) projectsacross Texas, and does so throughamendments to Chapters 27 and36 of the Texas Water Code. Thefi rst sec� on of the bill establishes defi ni� ons of a few important terms for the overall ASR scheme(specifi cally defi ning “ASR,” “ASR injec� on well,” “ASR recovery well,” and “project operator”). The billestablishes that the Texas Commission

RECAP OF REGULAR SESSION OF 84TH LEGISLATUREby Ty Embrey, Troupe Brewer, and Georgia Crump

IN THIS ISSUEFirm News p. 2

The Lone Star Current Interview p. 3

Municipal Corner p. 4

Unemployment Insurance -Posi� ve Changes for Public Sector Employees

Sheila Gladstone & ElizabethHernandez p. 9

Final “Waters of the UnitedStates” Rule Released

Nathan Vassar p. 9

The Texas Cement Apocalypse

Paul Gosselink & Jeff Reed p.10

In the Courts p.11

Agency Highlights p.13

lglawfi rm.com

ONE STAR CURRENTVOLUME 20, NO. 3 JULY 2015

A Publication of Lloyd Gosselink Rochelle & Townsend, P.C., for the Benefi t of Its Clients & Friends

Recap con� nued on 5

2 | THE LONE STAR CURRENT | Volume 20, No. 3

FIRM NEWS

Published by

Lloyd Gosselink

Rochelle & Townsend, P.C.

816 Congress Avenue, Suite 1900

Aus� n, Texas 78701

512.322.5800 p

512.472.0532 f

lglawfi rm.com

Georgia N. Crump

Managing Editor

Jeanne A. Rials

Project Editor

All wri� en materials in this newsle� er

Copyrighted ©2015 by Lloyd Gosselink

Rochelle & Townsend, P.C.

Lloyd Gosselink Rochelle & Townsend,

P.C., provides legal services and specialized

assistance in the areas of municipal,

environmental, regulatory, administra� ve

and u� lity law, li� ga� on and transac� ons,

and labor and employment law, as well as

legisla� ve and other state government

rela� ons services.

Based in Aus� n, the Firm’s a� orneys

represent clients before major u� lity and

environmental agencies, in arbitra� on

proceedings, in all levels of state and federal

courts, and before the Legislature. The

Firm’s clients include private businesses,

individuals, associa� ons, municipali� es,

and other poli� cal subdivisions.

The Lone Star Current reviews items of

interest in the areas of environmental,

u� lity, municipal, construc� on, and

employment law. It should not be construed

as legal advice or opinion and is not a

subs� tute for the advice of counsel.

To receive an electronic version of The LoneStar Current via e-mail, please contactJeanne Rials at 512.322.5833 or jrials@lglawfi rm.com. You can also access TheLone Star Current on the Firm’s website atwww.lglawfi rm.com.

ONE STAR

Brad Castleberry will discuss “Planningand Op� mizing Your Reuse Projects: A Legal and Regulatory Overview” at the2015 Water Reuse in Texas Conferenceon July 17 in Lubbock.

Melissa Long will be presen� ng “Distributed Genera� on: Opportuni� es and Challenges Faced by Public Power” atthe 2015 TPPA Annual Mee� ng on July 21 in San Antonio.

Sheila Gladstone will present “A Day inthe Life - Responding to Employment LawIssues at a Government Workplace” atthe Texas Bar CLE - Government Law BootCamp on July 22 in Aus� n.

Ty Embrey will be presen� ng a “Legisla� ve Update: Water Law” during a Texas StateBar Webcast on July 22.

Joe de la Fuente will present “Immunityin Contract Cases - Muddy Water” andSheila Gladstone will present “ManagingEmployee Medical Issues & Leave” at theTexas Bar CLE - Advanced GovernmentLaw Course on July 23 in Aus� n.

Mar� n Rochelle will be discussing“Water for the People in a Time ofDrought” at the Texas Bar CLE - Advanced

Government Law Course on July 24 inAus� n.

Sheila Gladstone will be discussing the“Do’s and Don’t’s of Interviewing andHiring” at the Texas Business Conferenceon August 7 in Waco.

Brad Castleberry will present “WaterIssues - That’s Water Under theBridge” at the Texas EnvironmentalSuperconference on August 7 in Aus� n.

Thomas Brocato will present a courseon “Witness Prepara� on” for EUCI on August 10-11 in Denver.

Sheila Gladstone will be presen� ng “Could Your Tweet Put You on the Street”at the Texas Proba� on Associa� on Conference on August 11 in Houston.

Ty Embrey will be giving an “84th TexasLegislature Update” at the TAGD’s TexasGroundwater Summit on August 25 inSan Marcos.

Brad Castleberry and Ashley Thomaswill be discussing “Environmental Audits”at the Texas City A� orneys Associa� on Fall Conference on September 24 in SanAntonio.

Members of the Firm collected fans and dona� ons for the Aus� n Family Eldercare Summer Fan Drive in June.

Lloyd Gosselink Rochelle & Townsend, P.C. | July 2015 | 3

THE LONE STAR CURRENT INTERVIEW

Miller: The fact that Texas leads ourna� on in so many ways, and especially in economic development, is not an accident.I’m very proud that the Texas House hasaddressed many of the challenges of ourstate -- water, transporta� on, educa� on -- in a fi scally sound, conserva� ve manner. Our work will allow Texas to stay strongand con� nue to take advantage of opportuni� es as they may come. Special purpose districts, which are the focus ofour Commi� ee, eff ec� vely created over $2 billion in local economic development.

LSC: You have served in the TexasLegislature since 2008. What have beenthe most important lessons you’ve learnedsince then?

Miller: Texas is very diverse and is servedby a very dedicated group of men andwomen. Those of us who serve in theHouse may have diff erent ideas about how to make Texas best, but we can disagreewithout being disagreeable.

LSC: What has been your biggest surprisesince being elected to the Texas House ofRepresenta� ves?

Miller: I was surprised about the amountof � me it takes to properly serve one’s district. Even though ours is a volunteerlegislature, it is not unusual to spend30-40 hours per week working on issuesfor your cons� tuents when we’re not in session, and well over 50 hours a weekwhen we are.

LSC: The Legislature has faced somemajor challenges since 2008. In light ofthe biggest challenges you’ve seen, whatwould you iden� fy as the major successes since your fi rst elec� on?

Miller: Having served two sessions onAppropria� ons gave me great insight into the State budget process. In 2011, wefaced a shor� all of $26 billion and we were s� ll about to balance the budget. I think

asking the voters to put Rainy Day fundsinto water and transporta� on was huge. Another important success was to createmore transparency and accountability ofgovernment.

LSC: What do you view as the biggestchallenges facing the Legislature for theupcoming 85th Legisla� ve Session and over the next few years?

Miller: Educa� on, water, and transporta� on will con� nue to be major issues for a growing state like ours. I onceheard Dr. Norman Vincent Peale say, “Beglad you have problems. The only peoplewho don’t are six foot under.” Thereare many states that wish they had ourchallenges. We must con� nue to keep taxes low, keep regula� ons in check, and work for greater tort reform.

LSC: Can you share with our readerswhether there will be interim charges tothe Special Purpose Districts Commi� ee?

Miller: Special Purpose Districts is acommi� ee that essen� ally allows billions of dollars of local economic developmentto be created right here in Texas. Somefolks misunderstand and a few abuse thepowers of these districts. My expecta� on is that we will inves� gate ways to protect the opportuni� es that special purpose districts aff ord and fi nd ways to rein in those who would take advantage of thecurrent system.

LSC: Mr. Chairman, what do you do duringthe interim period between legisla� ve sessions to both recover from the pastsession and to prepare for the next one?

Miller: Recovery consists of a familyvaca� on and spending � me with Anne at our lake house. Prepara� on for the 85th Legisla� ve Session has already begun along with implemen� ng my re-elec� on campaign.

Doug Miller has served in the TexasHouse of Representa� ves since 2009 represen� ng District 73, which encompasses Comal, Gillespie, andKendall Coun� es. An insurance agent in his na� ve New Braunfels, Rep. Miller is a former Mayor of New Braunfels anda former Chair of the Edwards AquiferAuthority.

Rep. Miller has been ac� ve in water issues since his elec� on to the Texas House in 2008, having served on theHouse Natural Resource Commi� ee for three legisla� ve sessions prior to the 84th Legisla� ve Session. Rep. Miller is the Chairman of the Special Purpose DistrictsCommi� ee, which addressed a wide array of legisla� on related to special purpose districts, including conserva� on and reclama� on districts, and related to their crea� on, powers, and governance.

Rep. Miller is a graduate of Texas StateUniversity in San Marcos. He and hiswife, Anne, are the proud parents oftwo children, Doug Miller II and AmandaMiller.

The Lone Star Current recently had theopportunity to interview Chairman Miller,who graciously responded to severalques� ons. We appreciate his willingness to take the � me to share his unique perspec� ve with our readers.

Lone Star Current: What do you thinkis the most important aspect of yourmembership in the Texas House, and asChair of the Special Purpose DistrictsCommi� ee?

Representa� ve Doug Miller, New BraunfelsChair, House Special Purpose Districts Commi� ee


MUNICIPAL CORNER

LSC: What life experiences do you think have infl uenced your ac� ons as a public servant, including your service in the Texas House of Representa� ves?

Miller: I’ve now been in public offi ce for over 25 years. Being a small business owner and having grown up in District 73, gives mea perspec� ve that helps me tremendously as a legislator.

LSC: Tell us something about yourself that most people would besurprised to know?

Miller: When I was in college, I had a country & western danceband -- Doug Miller and the Rhythm Ryders. I’ve had the honor ofplaying with notables like Merle Haggard and Ray Benson.

To be eligible to vote early by mail basedon a disability, a qualifi ed voter must sa� sfy the standard established under the Texas Elec� on Code; a disability determina� on under a diff erent standard or defi ni� on of “disability,” standing alone, is not necessarily determina� ve of a person’s qualifi ca� on for early mail-in vo� ng. The A� orney General was asked about the disability requirements thatallow an individual to qualify for the “earlyvo� ng by mail” provisions of the Texas Elec� on Code. Sec� on 82.002 of the Code allows qualifi ed voters to cast a mail-in ballot in an elec� on prior to the offi cial elec� on day, “if the voter has a sickness or physical condi� on that prevents the voter from appearing at the polling placeon elec� on day without a likelihood of needing personal assistance or of injuringthe voter’s health.” On the applica� on for ballot by mail, a voter can simply check thebox marked “Disability,” allowing them tovote early by mail. The specifi c ques� on to the AG was whether the term “disability”as used on the mail-in ballot applica� on means only the “sickness or physicalcondi� on” in § 82.002(a), or whether it also includes defi ni� ons of disability from other sources, i.e., the defi ni� ons used by the Social Security Administra� on or the U.S. Department of Veterans Aff airs. A� er receiving input from the Texas Secretary of State, to the eff ect that § 82.002 requires the voter to believe thatshe cannot vote by personal appearance

without assistance or injuring her health,the AG opined that the plain language of§ 82.002 does not require that a personsa� sfy any specifi c defi ni� on or standard of “disability” outside of the Elec� on Code in order to qualify to vote by mail. The Codemakes no reference to a determina� on of disability made by any state governmentalen� ty or federal agency, nor does it condi� on or limit eligibility based on any such determina� on. Tex. A� ’y Gen. Op. KP-0009 (2015).

A county may pay a� orneys’ fees for a member of a commissioners court,provided that the commissioners courtdetermines that the payment willserve a public interest and not merelythe member’s private interest. TheA� orney General was asked whether the Texas Local Government Code (“LGC”)authorizes the payment of a� orneys’ fees for a criminal inves� ga� on that did not result in any criminal chargesfi led, and secondly whether individual members of a commissioners court whowere under criminal inves� ga� on may vote on the approval of county paymentof their own a� orneys’ fees and the fees of other commissioners subject to theinves� ga� on. A court has construed § 157.901 of the LGC and determinedthat it does not address county authorityto provide legal representa� on to its offi cials and employees in criminal ma� ers. However, a commissioners court

has general authority to employ privatea� orneys in the absence of cons� tu� onal or statutory limita� ons. The AG noted that the AG has previously summarized thestandards that a court would likely u� lize when reviewing the payment of criminaldefense fees. Provided the offi cial is not found guilty, criminal defense costs maybe reimbursed upon a determina� on that the prosecu� on was for an act performed in the bona fi de performance of offi cial du� es and that the expenditure will serve a public interest and not merely an electedoffi cial’s private interest. Therefore, a county has the authority to pay a� orneys’ fees for a member of a commissionerscourt who sought legal representa� on for a criminal inves� ga� on that did not result in any criminal charges fi led, provided that the commissioners court determines thatthe payment will serve a public interest andnot merely the member’s private interest.The AG noted, however, that in a previousopinion, the AG had opined that publicpolicy precluded a city council member(who had been indicted for viola� ng the Open Mee� ngs Act) from vo� ng not only on county payment of a� orneys’ fees for the member’s own defense butalso on payment of a� orneys’ fees for the defense of other council membersindicted for the same off ense. Therefore, the AG believes that a court would likelyconclude that public policy also precludesa member of a commissioners court undercriminal inves� ga� on from vo� ng on


on Environmental Quality (“TCEQ” or the “Commission”) willhave jurisdic� on over the regula� on and permi� ng of ASR injec� on wells, which are designated as “Class V” injec� on wells. The bill prescribes three diff erent authoriza� ons the TCEQ can grant for Class V injec� on wells for ASR projects: by rule, by individual permit, or by general permit.

• HB 930 – makes several addi� ons and amendments to the Texas Occupa� ons Code for the primary purpose of bringing back the water well driller and pump installer appren� ce programs. The bill grants statutory authority to the TexasDepartment of Licensing and Regula� on to establish and run its appren� ce driller and appren� ce pump installer programs.

• HB 2179 – amends several sec� ons of Water Code Chapter 36, par� cularly in Subchapter M, as it relates to the contested case hearings process involved with groundwater permitapplica� ons. A few of the major changes include allowing a GCD to act on uncontested permit applica� ons at the public mee� ngs, establishing costs by the appor� oning protocol for the costs by the applicant and other par� es for SOAH’s expenses, and specifying provisions related toa GCD’s fi nal decision following a contested case hearing.

• HB 2767 – amends Water Code Chapter 36 regardingthe authority and various du� es of a GCD. The bill makes many non-substan� ve language changes to clean up diff erent sec� ons of Chapter 36. jj

• HB 3163 – amends Chapter 36 of the Water Code tospecifi cally state that any GCD board member is immune from suit and immune from liability for offi cial votes and offi cial ac� ons, to the extent an offi cial vote or offi cial ac� on conforms to laws rela� ng to confl icts of interest, abuse of offi ce, or cons� tu� onal obliga� ons.

• HB 4112 – amends Chapter 36 of the Water Code regardinga landowner’s ownership and rights in groundwater,adding language to state that a landowner is en� tled to “any other right recognized under common law.”

• SB 854 – creates a streamlined permit renewal process forcertain permits. Specifi cally, the bill mandates that a GCD must renew an opera� ng permit without a hearing, provided that the applica� on is � mely and the permit holder is not reques� ng a change to the permit that would normally require a permit amendment under GCD rules.

Environmental Permi� ng

One notable bill from the session will fundamentally change thecontested hearing process for environmental permits – ma� ers referred by the TCEQ to the State Offi ce of Administra� ve Hearings for a contested case proceeding under Texas WaterCode § 5.556.

• SB 709 – provides that: (1) an applicant’s fi ling with the ALJ of a dra� permit, the execu� ve director of the TCEQ’s preliminary decision, and any other suppor� ng documenta� on in the administra� ve record establishes a prima facie presump� on that the permit applica� on meets all state and federal legal and technical requirements andthe permit would be protec� ve of the public’s health and physical property and the environment; (2) the burden shi� s to the protes� ng party in the contested case hearing to rebut the established presump� on by presen� ng evidence that the dra� permit violates specifi c state or federal legal or technical requirements; (3) the TCEQ may not fi nd that a group or associa� on is an aff ected person unless the group or associa� on iden� fi es a member of the group or associa� on who would be an aff ected person in the person’s own right; (4) that the TCEQ Commissioners may consider variousfactors for the purpose of determining whether a hearing

county payment of the member’s criminaldefense fees or the fees of other memberssubject to the same inves� ga� on. Tex. A� ’y Gen. Op. KP-0016 (2015).

The Open Mee� ngs Act does not prohibit a governmental body from holdingmee� ngs at a loca� on that requires the presenta� on of photo iden� fi ca� on for admi� ance. The A� orney General was asked whether the Open Mee� ngs Act prohibits a governmental body fromholding open mee� ngs at a loca� on that requires the presenta� on of government-issued photo iden� fi ca� on for admi� ance. The Act itself specifi cally requires that any regular, special, or called mee� ng of a governmental body shall be opento the public, with limited excep� ons

ar� culated in the Act. The Act further defi nes “open” to mean “open to the public.” There is nothing in the Act thataddresses iden� fi ca� on requirements at such mee� ngs, nor are there any Texas court cases or AG opinions that directlyaddress the legality of an iden� fi ca� on requirement under the Act. The AG notesthat a number of facili� es open to the public now require photo iden� fi ca� on for security purposes, and that mostfederal courthouses require visitors toproduce photo iden� fi ca� on before entry. As to the determina� on of “open to the public,” it is important to dis� nguish that iden� fi ca� on requirements are likely intended as a security measure to provideprotec� on to the general public and not to otherwise limit the public’s access to

these venues. In conclusion, absent directlanguage from the Legislature prohibi� ng iden� fi ca� on requirements, a court is unlikely to conclude as a ma� er of law that the Act prohibits a governmentalbody from holding open mee� ngs at a loca� on that requires the presenta� on of government-issued photo iden� fi ca� on for admi� ance. Tex. A� ’y Gen. Op. KP-0020 (2015).

Municipal Corner is prepared by TroupeBrewer. Troupe is an Associate in the Firm’sWater, Li� ga� on, and Districts Prac� ce Groups. If you would like addi� onal informa� on or have ques� ons related to these or other ma� ers, please contact Troupe at 512.322.5858 or tbrewer@lglawfi rm.com.

Recap con� nued from 1


requestor is a person aff ected, including the administra� ve record (as it exists to that point); the analysis and opinionsof the Execu� ve Director and other expert reports; and affi davits and data, so long as � mely submi� ed; and (5) the TCEQ must provide no� ce to the state senator and state representa� ve of the area in which a permit for a facility is to be issued.

Surface Water/Water and Wastewater U� li� es

In addi� on to the many pieces of groundwater legisla� on passed, there were several bills aff ec� ng surface water, the Texas Water Development Board and its State Water Implementa� on Fund for Texas (“SWIFT”), and water u� lity service that will also have signifi cant impacts on water and water management in Texas.

• HB 280 – amends Chapter 15 of the Water Code, specifi cally Subchapter G, which relates to the SWIFT. The bill makessubstan� al changes related to repor� ng and transparency requirements of SWIFT implementa� on. The bill greatly increases the informa� on that TWDB must make available on its website regarding the use of SWIFT. The bill listsseveral specifi c pieces of regularly-updated informa� on TWDB is now required to provide on its website.

• HB 685 – amends Texas U� li� es Code § 182.052 to provide that a government-operated u� lity may withhold informa� on prohibited from being disclosed under this sec� on without the necessity of reques� ng a decision from the A� orney General. Informa� on that may be so withheld is the personal informa� on in a customer’s account record, any informa� on related to the volume or units of u� lity usage, and the amounts billed to or collected from the individual for u� lity usage, if the customer has requested that such informa� on be kept confi den� al in accordance with this sec� on.

• HB 1016 – classifi es segments of the Nueces River, Frio River, Sabinal River, San Marcos River, and Comal Riverwithin the South Central Texas Regional Water PlanningArea, Region L, as being of unique ecological value. Thisdesigna� on prohibits any poli� cal subdivision or state agency from fi nancing the construc� on of a reservoir within the area, but it does not prohibit the permi� ng, fi nancing, construc� on, opera� on, maintenance, or replacement of any water management strategy to meet projected watersupply needs recommended, or designated as an alterna� ve, in the 2011 or 2016 Regional Water Plans for Region L.

• HB 1042 – designates the site of the proposed RinggoldReservoir on the Li� le Wichita River in Clay County as having unique value for the construc� on of a dam and reservoir, pursuant to Texas Water Code § 16.051(g), andfi nds the reservoir is necessary to meet water supply needs. Herea� er, a state agency or poli� cal subdivision of the state may not obtain a fee � tle or an easement that would signifi cantly prevent the construc� on of a reservoir. jj

• HB 1902 – amends Health and Safety Code § 341.039 as itrelates to the regula� on and use of graywater. The main substan� ve change to the Code is the addi� on of subsec� on 341.039(c-1), which provides instances where the Commissionmay adopt minimum standards for addi� onal uses and reuses of graywater. Specifi cally, these rules must prevent contamina� on of potable water supply, protect human health, and may require the use of backfl ow preven� on devices (and subsequent annual inspec� on and tes� ng of that device).

• HB 1919 – amends the Parks and Wildlife Code, §§ 66.007 and66.0072, to provide that a municipally owned u� lity is not required to obtain a permit from the Texas Parks and WildlifeDepartment for the following water transfers: (1) through awater supply system; (2) from a water body with no knownexo� c harmful or poten� ally harmful fi sh or shellfi sh to a water body with no known exo� c harmful or poten� ally harmful fi sh or shellfi sh; (3) directly to a water treatment facility; (4)treatedpriortothetransfer intoawaterbody;and(5) fromareservoir or through a dam to address fl ood control or to meet water supply requirements or environmental fl ow purposes.

• HB 2230 – creates a new subsec� on in Water Code Chapter 27, § 27.026, en� tled “Authoriza� on of Injec� on Wells to Inject Nonhazardous Brine from Desalina� on Opera� ons or Nonhazardous Drinking Water Treatment Residuals.”Essen� ally, the bill establishes a program whereby currently-permi� ed Class II injec� on wells, permi� ed by the Railroad Commission under Water Code Chapter 27, SubchapterC, could be used for the disposal of nonhazardous brinefrom desalina� on opera� ons and/or nonhazardous drinking water treatment residuals. Such ac� vity would be permi� ed by individual or general permit, or by rule, by the TCEQ. The bill also calls for both the RailroadCommission and the TCEQ to enter into a Memorandumof Understanding to eff ectuate the provisions of § 27.026.

• SB 523 – subjects several river authori� es in Texas to a limited review by the Sunset Advisory Commission, butwithout the op� on that they be abolished. The Sunset Advisory Commission would assess each river authority’sgovernance, management, opera� ng structure, and compliance with legisla� ve requirements. The costs of the review would be paid for by the applicable river authority.

• SB 912 – amends Chapter 26 of the Water Code to exemptcertain accidental spills from wastewater collec� on and treatment facili� es from TCEQ repor� ng requirements, if the spills occur at facili� es owned by local governments, are 1,000 gallons or less in volume, are not associatedwith larger volume spills, and are controlled such that theydo not enter state streams, adversely impact public orprivate water supply sources, and are not a danger to thepublic or environment. Notwithstanding this exemp� on, monthly repor� ng of such spills to TCEQ is required. jj


• SB 1148 – amends several sec� ons of Texas Water Code, Chapters 5 and 13, to address issues that have arisen dueto the transfer of the rate and CCN programs from the TCEQto the PUC. Specifi cally, the bill grants exclusive jurisdic� on to the TCEQ to authorize a person to temporarily operatea u� lity that discon� nues opera� on or is referred for appointment of receiver under Water Code § 13.4132. Thebill adds provisions that require a municipally owned u� lity to provide, upon request, the number of ratepayers wholive outside the corporate limits of the municipality and thenames and addresses of those ratepayers. If a ratepayer hasrequested to keep their personal informa� on confi den� al under U� li� es Code § 182.052, then the u� lity may not provide that ratepayer’s address. Under the bill, if the PUCis required to give no� ce of a hearing on a Class A or Class B u� lity’s intent to change rates, the PUC may delegate this duty to a SOAH administra� ve law judge. The bill also extends the period for which the PUC may suspend the eff ec� ve date of a Class B u� lity’s rate change from 205 days to 265 days beyond the proposed eff ec� ve date. The bill provides that the TCEQ and PUC shall coordinate, as needed, to authorizean emergency rate increase under Water Code § 13.4133.Finally, the bill adds Water Code Chapter 13, Subchapter K-1,establishing the PUC’s procedures and rule-making authorityfor the issuance of emergency orders.

Electric U� li� es

Approximately 120 electric u� lity-related bills were fi led during the session. The following are some of the more notable bills thatmade it through the process.

• HB 939 – prohibits property owners’ associa� ons from adop� ng or enforcing restric� ve covenants against the installa� on or maintenance of permanently-installed standby electric generators; authorizes regula� on of same.

• HB 1101 – provides more than $200 million in assistanceto low-income ratepayers by extending the life of theSystem Benefi t Fund (created as part of the 1999 electric deregula� on law) un� l such � me that all money in the fund has been expended (by September 2017). Money forthe System Benefi t Fund comes not from tax dollars, but from fees Texans already have paid on their electric bills.

• HB 1535 – modifi es the way in which electric rates are determined through the PUC rate-se� ng process for electric u� li� es that operate outside of the ERCOT grid. Rates may be changed through accelerated rate increasesthat correspond to transmission system investments. jj

• SB 774 – requires the PUC to: (1) conduct a study and makea report to the legislature not later than January 15, 2017,analyzing alterna� ve ratemaking mechanisms adopted by other states; (2) make recommenda� ons regarding appropriate reforms to the ratemaking process in this state;and (3) include in the report an analysis that demonstrates

how the commission’s recommended reforms would improvethe effi ciency and eff ec� veness of the oversight of electric u� li� es and ensure that electric rates are just and reasonable.

• SB 776 – requires that municipally-owned u� li� es obtain cer� fi cates of convenience and necessity when extending transmission facili� es outside their home service territories.

• SB 933 – provides: (1) that a person, including an investorowned electric u� lity or a municipally owned u� lity, may not interconnect a facility to the ERCOT transmission grid thatenables addi� onal power to be imported into, or exported out of, the ERCOT power grid unless the person obtains acer� fi cate from the PUC sta� ng that public convenience and necessity requires or will require the interconnec� on; and (2) for procedures and deadlines to implement the bill’srequirements.

Government Transparency

Governmental transparency was a major focus going into thesession, and the legisla� ve advocates thereof were successful in passing several bills aimed to increase that transparency.Bills amended the Texas Public Informa� on Act, the Texas Open Mee� ngs Act, and Texas statutes related to confl icts of interest and their required disclosure.

• HB 23 – amends several sec� ons of the Local Government Code as they relate to local governmental en� � es and “vendors,” defi ned by the bill to be a person who “enters or seeks to enter into a contract with a local governmenten� ty,” and the required confl icts of interest disclosures for certain rela� onships between local governmental en� � es and vendors. The bill also amends the defi ni� on of “local governmental en� ty” to include a water district created under Chapter 49 of the Water Code.

• HB 685 – allows a public informa� on offi cer for a poli� cal subdivision to comply with a public informa� on request by referring the requestor to a publicly accessiblewebsite maintained by the poli� cal subdivision, so long as the informa� on is iden� fi able and readily available.

• HB 1295 – increases transparency in governmentalcontracts with certain “business en� � es” by amending the Government Code to specifi cally state that a governmental en� ty or state agency may not enter into a contract with a business en� ty unless the business en� ty, in accordance with the Government Code and rules adopted a� er passage of the bill, submits a “disclosure of interested par� es” to the governmental en� ty or state agency at the � me the business en� ty submits the signed contract to the governmental en� ty or state agency. The Texas Ethics Commission is requiredto dra� a form for such disclosure of interested par� es.

• HB 3357 – allows no� ce of each mee� ng held by the governing body of a water district or other district or


poli� cal subdivision to be provided to the county clerk or posted on the district’s or subdivision’s internet website.

• SB 1760 – amends several provisions of the Tax Code forpurposes of increased transparency. For example, this billrequires at least 60% of the members of a district’s governingbody to vote in favor of the order se� ng a tax rate that exceeds the eff ec� ve tax rate. Also added is a requirement that in its No� ce of Tax Rate Increase a district must describe the purpose for which the proposed tax increase will be used.

Elec� ons

Three bills amending the Texas Elec� on Code are worth no� ng. These bills will have signifi cant impacts on elec� ons of various municipali� es, poli� cal subdivisions, and local governmental en� � es.

• HB 484 – makes several changes to the Elec� on Code rela� ng to the eligibility criteria of a person running for offi ce. In par� cular, the bill amends § 140.001(a) that sets forth the eligibility requirements for running for and holdingpublic offi ce in the state, and adds an addi� onal requirement that a person running for offi ce must be registered to vote in the territory from which the offi ce is elected. jjj

• HB 2354 – amends the Elec� on Code by changing the May uniform elec� on date from the second Saturday in May to the fi rst Saturday in May. jj

• SB 733 – allows a poli� cal subdivision, other than a county or a municipal u� lity district, to change its elec� on date to the November uniform elec� on date, so long as it does so by December 31, 2016.

Municipal Regula� on – Oil & Gas Opera� ons

The most signifi cant legisla� on to come out of the session with regard to municipal authority includes HB 40, an intensely-nego� ated bill on an issue that pi� ed oil and gas industry interests against municipal home-rule authority, and HB 1794,a bill that dras� cally limits the level of civil penal� es that local governments can recover in environmental enforcement suits.

• HB 40 – makes various fi ndings related to the benefi ts of oil and gas opera� ons in the state. The bill adds § 81.0523, “Exclusive Jurisdic� on and Express Preemp� on,” to the Natural Resources Code. This sec� on provides that oil and gas opera� ons are subject to the exclusive jurisdic� on of the state, and except as provided in the statute, municipali� es or other poli� cal subdivisions may not enact or enforce an ordinance or other measure that bans, limits, or otherwiseregulates an oil and gas opera� on within the boundaries or the extraterritorial jurisdic� on of the municipality or poli� cal subdivision. Municipali� es may enact measures that regulate only above-ground ac� vi� es related to an oil and gas opera� on, including regula� ons governing fi re and emergency response, traffi c, lights, or noise, or

impose no� ce or reasonable setback requirements, so long as such measures are commercially reasonable, donot eff ec� vely prohibit oil and gas opera� ons conducted by a reasonably prudent operator, and are not otherwisepreempted by state or federal law. A measure is consideredprima facie to be commercially reasonable if it has beenin eff ect for at least fi ve years and has allowed the oil and gas opera� ons to con� nue during that period. jj

• HB 1794 – amends provisions in Chapter 7, Texas Water Codeto provide that, in rela� on to civil penal� es recovered in an environmental enforcement ac� on under the Texas Water Code, the fi rst $4.3 million of the amount recovered shall be divided equally between the city or county that brought thesuit, and the State of Texas. Any amount recovered in excessof $4.3 million shall be awarded to the state. In determiningthe amount of an administra� ve penalty sought by a city or county, the trier of fact (a judge or jury) shall consider factorsthat the TCEQ must consider under current law, and a suitfor a civil penalty that is brought by a city or county must bebrought not later than the fi � h anniversary of the earlier of the date the person who commi� ed the viola� on: (a) no� fi es the TCEQ in wri� ng of the viola� on; or (b) receives a no� ce of enforcement from the TCEQ with respect to the allegedviola� on.

The Texas Legislature took substan� al steps during the Regular Session to address the myriad issues that exist in Texas. The billsthat we have highlighted were some of the bills that survived thelegisla� ve process to become law. Many other bills fi led did not, as demonstrated by the bill fi ling / bill passage sta� s� cs that came out of the Regular Session. Beginning with the start of thebill-fi ling period in November 2014, 6,276 bills were fi led in the House or Senate. Of that number, only 1,322, or 21% of the billsfi led, were passed by the Texas Legislature.

Legislators now shi� the focus of their eff orts to campaigns and interim legisla� ve work. The party primaries for all House members and many Senate members will be held in March2016, with the general elec� ons for those posi� ons scheduled for November 2016. With no special Called Session an� cipated, the legislators will also spend signifi cant � me working on and studying issues during the legisla� ve interim in prepara� on for the next Regular Session that begins in January 2017.

Ty Embrey is a Principal in the Firm’s Water and Districts Prac� ce Groups, Troupe Brewer is an Associate in the Firm’s Water,Li� ga� on, and Districts Prac� ce Groups, and Georgia Crump is a Principal in the Firm’s Energy and U� lity Prac� ce Group. If you have any ques� ons concerning legisla� ve issues or would like addi� onal informa� on concerning the Firm’s legisla� ve tracking and monitoring services or legisla� ve consul� ng services, please contact Ty at 512.322.5829 or tembrey@lglawfi rm.com, or Troupe at 512.322.5858 or tbrewer@lglawfi rm.com, or Georgia at 512.322.5832 or gcrump@lglawfi rm.com.


As with most legisla� ve sessions, the majority of employment-related bills

fi led during the 2015 Texas Legislature failed to pass. However, one bill thatpassed and was signed by the Governor willbe helpful to public sector “reimbursing”employers that win disputed claims forunemployment, only to fi nd later that they are s� ll required to pay because the former employee le� a subsequent job quickly.

The loophole under current law worksthis way: Employer A terminates a workerand proves the reason was misconduct,making the worker ineligible forunemployment insurance. The employeethen gets another job at Employer B,but leaves again quickly. When theemployee fi les for unemployment a second � me with the Texas Workforce Commission (“TWC”), this � me receiving benefi ts, Employer A is on the hook and

charged for unemployment because theemployee worked there recently enoughto be covered in the look-back period.Unlike most private employers thatpay unemployment insurance to a poolthrough tax rates, public sector employersare “reimbursing” employers, meaningthey pay out-of-pocket the cost of theunemployment claim dollar-for-dollar.The loophole can be a costly problem forpublic sector en� � es that spend money fi gh� ng a claim and win, only to pay in the end for a later employer’s termina� on decision.

House Bill 3373 closes this loophole so thatreimbursing employers that terminate anemployee for misconduct are not liablefor paying benefi ts resul� ng from the employee’s separa� on from a subsequent employer. Employers who are chargedunder the previous loopholes can disputethe bills to the TWC. Bo� om line: if you

righ� ully win an unemployment claim, you should not later have to pay thatemployee’s unemployment benefi ts.

The bill comes with some uncertainty forprivate employers. The reimbursementsformerly charged to prior reimbursingemployers will somehow have to be paid,presumably through a TWC chargebackpool. It remains to be seen whetherthe shor� all will be made up by future increases to tax rates of private sectoremployers.

Sheila Gladstone is the Chair of theEmployment Law Prac� ce Group, and Elizabeth Hernandez is an Associate in theprac� ce group. If you would like addi� onal informa� on or have ques� ons related to this ar� cle or other ma� ers, please contact Sheila at 512.322.5863 or sgladstone@lglawfi rm.com, or Liz at 512.322.5808 or ehernandez@lglawfi rm.com.

UNEMPLOYMENT INSURANCE - POSITIVE CHANGESFOR PUBLIC SECTOR EMPLOYEES

by Sheila Gladstone and Elizabeth Hernandez

FINAL “WATERS OF THE UNITED STATES”

RULE RELEASEDby Nathan E. Vassar

The U.S. Environmental Protec� on Agency (“EPA”) and the Army Corps

of Engineers (“Corps”) recently releasedtheir fi nal rule regarding jurisdic� on over “waters of the United States” (the“Rule”), intended to clarify the scopeof the agencies’ jurisdic� on under the federal Clean Water Act. The Rule is theproduct of signifi cant stakeholder input stretching over a year through more than400 public mee� ngs and over a million fi led comments.

The Rule includes three categories ofwaters: (1) waters that are jurisdic� onal by rule; (2) waters that are excludedfrom EPA/Corps jurisdic� on by rule; and (3) waters that will undergo a case-by-case “signifi cant nexus” analysis. Among the most signifi cant provisions in the fi rst category is the inclusion of “tributaries”

and “adjacent waters,” new terms of artintended to address water bodies thathave been the source of uncertainty sincea pair of U.S. Supreme Court decisions in2001 and 2006. The “tributary” defi ni� on captures waters that fl ow directly or indirectly to tradi� onal navigable streams, as well as the bed and banks of streams thatexhibit physical indicators of fl ow to such streams. Further, the “adjacent waters”defi ni� on includes nexus waters that are bordering, con� guous, or neighboring. EPA and the Corps have included bright-line distance parameters from the high-water mark of tradi� onal navigable waters for waters in this category.

The regulated public works communitypressed EPA and the Corps for the secondcategory of waters (those that are excludedfrom EPA/Corps jurisdic� on by rule), in

order to avoid permi� ng and enforcement concerns over por� ons of wastewater and stormwater infrastructure. Accordingly,among other excep� ons, the Rule retains the waste treatment exclusion (includedsince 1972), and also builds in exclusionsfor wastewater recycling structures andreten� on basins (for reuse purposes), as well as dry land stormwater controlfeatures. The Rule also con� nues to carve out groundwater, although groundwatercould serve as the hydrological connec� on between other jurisdic� onal water bodies.

The Rule’s fi nal category of waters establishes two sets of water bodies thatare subject to a signifi cant nexus analysis, which examines whether such watersexhibit a “chemical, physical, or biological”connec� on to tradi� onal categories of jurisdic� onal waters. The fi rst set within


this category iden� fi es the following fi ve types of waters that EPA and the Corpsconsider appropriate for case-by-caseanalysis. These include: (1) Texas coastalprairie wetlands; (2) prairie potholes;(3) Carolina/Delmarva bays; (4) pocosins(a type of palustrine wetland with deep,acidic, sandy, peat soils); and (5) westernvernal pools in California. The second setof waters within this category includeswaters within the 100-year fl oodplains of tradi� onal jurisdic� onal waters and those waters within 4,000 feet of theordinary high water mark or high � de line of tradi� onal jurisdic� onal waters.

Although the Rule addresses manyques� ons that had been raised in the past 14 years (since the U.S. Supreme Court

struck down the former jurisdic� onal rule), its applica� on to specifi c circumstances will depend upon a variety of factors anddetails, including the applica� on of the Rule’s new defi ni� ons and exclusions. Further, the regulators’ applica� on of the “signifi cant nexus” test will reveal the extent of EPA/Corps domain overwaters in the subject category. Theregulated public works community shouldconsider the Rule’s implica� ons upon poten� al permi� ng requirements and enforcement, while also recognizing theoverlap and extent of Texas’ own waterquality jurisdic� on under Chapter 26 of the Texas Water Code.

The Rule was published in the FederalRegister on June 29, 2015, and thus

becomes eff ec� ve on August 28, 2015 (60 days a� er publica� on). Several interested persons, including the State of Texas,immediately fi led suit, claiming viola� ons of the federal Administra� ve Procedures Act and the U.S. Cons� tu� on’s Commerce Clause and Tenth Amendment. Otherchallenges are an� cipated before the 14-day fi ling deadline.

Nathan Vassar prac� ces in water u� lity and water quality law, focusing onregulatory compliance, EPA enforcement,water quality issues, and water resourcesdevelopment. For more informa� on, please contact Nathan Vassar at 512-322-5867 or nvassar@lglawfi rm.com.

THE TEXAS CEMENT APOCALYPSEby Paul Gosselink and Jeff Reed

Industry projec� ons reveal the demand for cement in Texas will exceed the supply for the fi rst � me by 2018. At about the same

� me, the EPA is expected to reduce the ozone standard from 75 ppb to 65 or 70 ppb. As a result, por� ons, if not all, of Central Texas are expected to be designated as “non-a� ainment areas” for ozone, making construc� on of addi� onal produc� on capacity signifi cantly more expensive. This ar� cle suggests a strategy for cement producers who want to expand their facili� es or build new cement plants in this imminent new regulatory environment.

There are three primary factors that will dictate when andhow this apocalyp� c confl uence of events could materialize:(1) demand; (2) produc� on and import capacity; and (3) the extent of the reduc� on in the proposed ozone non-a� ainment standard and whether it withstands legal challenge (and if so, when itbecomes eff ec� ve).

Texas’ popula� on and economic growth are showing no signs of slowing down. Popula� on is expected to increase to 30 million by 2020, up from 25 million according to the 2010 Census.Consequently, the demand for roads, buildings, oil rigs/wellcement, and other infrastructure is booming and is predicted tocon� nue.

A cover story in the TACA Conveyor recently projected that demandfor cement in Texas will exceed its in-state produc� on capacity in 2016, and its combined produc� on and import capacity by 2018. These projected dates are not “set in concrete,” but are reliableindicators that this situa� on will occur soon. Normal market response by the industry would be to expand produc� on. However, adding capacity or building a new cement plant is expensive and� me-consuming. Moreover, the normal permit process gauntlet can become more demanding depending on several poten� al regulatory changes, including the EPA’s Commercial/Industrial

Solid Waste Incinerator rules, Nonhazardous Secondary Materialrules, Greenhouse Gas regula� ons, and changes to the Na� onal Ambient Air Quality Standards (“NAAQS”) for ozone.

While any of these changes could be signifi cant to the cement industry, the most important is the impending reduc� on in the ozone standard. It is the third leg of the “cement apocalypse”triangle. The reduc� on of the standard will send many central Texas coun� es into non-a� ainment status, as shown on the following map prepared by Element Markets, a leading brokerof off sets for NOx and VOCs (the precursors that form ozone or smog). There are other projec� ons by other experts and agencies, but these maps depict the risks to the Texas cement industry.


Michigan v. EPA, No. 14-49, 2015 WL2473453, (U.S. June 29, 2015).

The Supreme Court of the United States

ruled that the EPA must consider costs inse� ng emission limita� ons of mercury and other pollutants from coal-fi red power plants. The EPA es� mated that

the proposed rule would cost $9.6 billionannually, with only $4 million to $6million in benefi ts. The Court found that, considering the Clean Air Act requirement

IN THE COURTS

The poten� al impact on the cement industry is signifi cant because, once a county is designated non-a� ainment for ozone, any signifi cant increase in NOx or VOC emissions must be off set by corresponding, or even greater, reduc� ons. Off se� ng can be accomplished by either reducing exis� ng emissions at the same plant or buying emission reduc� on credits (“ERC”) for reduc� ons at other facili� es. The purchase and sale of ERCs occurs in an open market and prices are dictated by supply and demand;they are not set by the government. The system fl ourishes in the Houston-Galveston region where the sales price of VOCs haspeaked at more than $300,000 per ton of emissions. The price

in the DFW area is much less because the demand is lower. Theprice ERCs may reach in Central Texas is unknown, since CentralTexas has narrowly stayed in a� ainment.

Why do we raise this issue now and call the situa� on an “apocalypse”? The � ming is crucial - the revised ozone standard will arrive at approximately the same � me that the demand for cement is expected to exceed supply. The EPA is set to issue itsfi nal rule revising the ozone standard in October 2015. Within two years, the EPA must designate non-a� ainment areas. Texas then has three years to adopt and submit a State Implementa� on Plan (“SIP”) implemen� ng off set requirements.

Texas may, and probably will, challenge the ozone standard rule incourt. The rule could be stayed during the appeal process, but ifnot, it could reasonably be expected to be eff ec� ve in 2018. So, anyone planning to expand produc� on to take advantage of the market opportunity created by the con� nued demand for cement should consider ac� ng promptly before the new ozone standard is in eff ect. Alterna� vely, possible emission reduc� ons could be iden� fi ed at an exis� ng facility, or other sources in Central Texas could be iden� fi ed that could reduce their emissions, and from which one could purchase off sets if/when they are needed. If this is your plan, you should consider whether it is worth theinvestment risk to sign op� on contracts to � e up those off sets either before the price gets too steep or, worse yet, there are nooff sets to buy because your compe� tors purchased them. Your other op� on is to bet that the more stringent ozone standard is eventually overturned.

Time is not a friend to cement producers in Texas. The specter ofa “cement apocalypse” raises many important and complicatedissues in addi� on to those iden� fi ed here, that merit considera� on and proac� ve planning.

Paul Gosselink is a Principal in the Firm’s Air and Waste andLi� ga� on Prac� ce Groups and Jeff Reed is an Associate in the Firm’s Air and Waste Prac� ce Group. If you have any ques� ons concerning this ar� cle or any other issues please contact Paul at 512.322.5806 or pgosselink@lglawfi rm.com, or Jeff at 512.322.5835 or jreed@lglawfi rm.com.


that the EPA conclude the “regula� on is appropriate and necessary,” the EPAneeded to consider these costs beforepromulga� ng a rule.

Mississippi Commission on EnvironmentalQuality v. EPA, No. 12-1309, 2015 WL3461262 (D.C. Cir. June 2, 2015).

The D.C. Court of Appeals denied in theiren� rety all challenges and consolidated pe� � ons to review the EPA’s 2008 ozone nona� ainment area designa� ons. Environmental groups, industry groups,and states challenged the designa� ons on various grounds, including the commoncomplaint that the EPA was not usingupdated air quality data. The court ruledthat the EPA, by accep� ng qualifi ed data up un� l 2011, used adequately updated data and made an overall reasonabledecision within its discre� on. The groups also challenged the cons� tu� onality of the designa� ons and the EPA’s authority under the Clean Air Act to supersede states’recommended designa� ons. For instance, in Wise County, Texas, the court upheldthe EPA’s designa� on, despite the state’s challenge that using the state’s resourcesviolated the 10th Amendment.

Eco Services Opera� ons v. EPA, No. 11-1189 (D.C. Cir. June 3, 2015).

The D.C. Court of Appeals rejected allchallenges from environmental groupsand industry pe� � oners alike, and upheld the EPA’s fi nal non-hazardous secondary materials (“NHSM”) rule. The NHSMrule provides procedures for classifyingcertain materials as either “solid wastes”or “fuels” under the Clean Air Act. Solidwastes and fuels are subject to more orless strict emission standards, respec� vely. Environmental groups took issue withseveral categorical exemp� ons to the rule, while industry groups disputed the EPA’sregula� on of fi rm-to-fi rm transfers and asked the court to vacate the agency’sclassifi ca� on of sewage sludge. In a four-page, unpublished decision, the court heldthat the agency acted within its discre� on.

Sierra Club v. McCarthy, No. 13-cv-3953,2015 WL 889142 (N.D. Cal. Mar. 2, 2015).

Six states, including Texas, have fi led a no� ce in the Ninth Circuit Court of

Appeals to review a consent decreebetween the EPA, the Sierra Club, andthe Natural Resource’s Defense Councilfor the 2010 na� onal ambient air quality standard (“NAAQS”) for sulfur dioxide. Thedecree requires that the EPA designateremaining parts of the country in threephases from July 2016 to December 2020.The complaining states allege that theconsented-to phased approach violatesthe EPA’s Clean Air Act authority becauseit exceeds the three-year deadline theagency has to make area designa� ons a� er a standard has been revised.

Edwards Aquifer Authority v. Bragg, No.13-1023 (Tex. 2015).

On May 1, 2015, the Texas Supreme Courtdenied a pe� � on for review fi led by the Edwards Aquifer Authority (“EAA”) seekingto overturn the decision of the Fourth Courtof Appeals holding that the EAA’s denial ofa permit authorizing use of groundwaterwas a compensable taking of property.The appellate court had determinedthat: (1) because the Edwards AquiferAuthority Act provided that the Legislatureintended that just compensa� on be paid if implementa� on of the Act causes a taking of property, and (2) because the Bragg’sproperty value was diminished as a resultof the EAA’s denial of an applica� on for a groundwater permit, the EAA owedcompensa� on to the Braggs. The Court par� ally based its opinion on its earlier reasoning in Edwards Aquifer Authorityv. Day. By denying the pe� � on, the Court has allowed the appellate decision tobecome fi nal and good law, which could have signifi cant impacts on groundwater permi� ng. Specifi cally, because groundwater permit applicants could usethe case to argue that a denial of a permitapplica� on cons� tutes a regulatory taking of property, groundwater permi� ng authori� es may bear a costlier burden when denying permit applica� ons.

An addi� onal issue in the case was whether the general 10-year statute of limita� ons for regulatory takings claims had run. TheBraggs argued that because they � mely fi led their permit applica� on before the December 30, 1996, deadline for historicaluse permits, the EAA’s applica� on review process tolled the statute of limita� ons. EAA argued that enactment of the

Edwards Aquifer Authority Act itself wasthe catalyst for the regulatory takingclaimed by the Braggs, and because theAct was enacted in 1993 (or, at the latest,in June of 1996 a� er all legal challenges to the Act had been resolved), and theBragg’s appeal of EAA’s denial of theirapplica� on was not fi led un� l November 2006, the statute of limita� ons barred the ac� on. The Court disagreed with EAA and held that claims of regulatory takingsonly begin to accrue upon a fi nal decision of a regulatory authority that aff ects the value of property. Thus, even though thepermit process required applicants todemonstrate historic usage of EdwardsAquifer water prior to 1993, a claim wills� ll be ripe well over 10 years a� er the date of enactment of the Act.

Texas Commission on EnvironmentalQuality v. City of Aledo, No. 03-13-00113-CV (Tex. App. – Aus� n, 2015).

On July 8, 2015, the Third Court of Appealsissued its decision in a case involvinga suit by two municipali� es that were denied party status at a TCEQ contestedcase hearing concerning an applica� on for a permit to construct and operate asolid waste transfer sta� on. The TCEQ had granted the permit, a decision thatwas vacated and remanded by the TravisCounty district court. The district courtdetermined that the TCEQ’s denial of partystatus cons� tuted a denial of due process to the two municipali� es. However, the appellate court held that the municipali� es failed to demonstrate any legally protectedinterest that would be aff ected by the TCEQ’s issuance of the permit. The court’sstraigh� orward opinion relied on the applicable statutory and administra� ve rule authority outlining the interests thatmust be demonstrated by a person seekingparty status to a hearing. The court notedthat it is the burden of the person or en� ty seeking party status to show that there is alegally protected interest, and because theci� es failed to do so, the court reversed the district court.

GG Ranch, Ltd. v. Edwards AquiferAuthority, No. SA-14-CV-00848 (W.D.Tex.).

On June 2, 2015, the federal district courtin San Antonio provided some guidance


AGENCY HIGHLIGHTS

Environmental Protec� on Agency

Rule Recalling SIPs for Affi rma� ve Defenses. In response toa Sierra Club pe� � on for rulemaking ques� oning the EPA’s interpreta� on of the Clean Air Act, the EPA issued a fi nal rule recalling the State Implementa� on Plans (“SIP”) for 36 states, including Texas. By November 22, 2016, the aff ected states must revise their SIP plans to no longer include affi rma� ve defense provisions that stop industry from being fi ned for excess emissions during startup, shutdown, or malfunc� on periods.

Emissions Factors Revised. On April 20, 2015, the EPA fi nalized new and updated refi nery and chemical manufacturing plant emissions factors, which included upda� ng how operators es� mate emissions of vola� le organic compounds (“VOC”) from fl aring gas. The new VOC emissions factor is about 4 � mes greater than before for es� ma� ng vola� le organic compounds. Permi� ees will have the op� on to monitor actual emissions rather than rely on the EPA’s published emission factors.

Guidance Issued on Extending Post-Closure Period for HazardousWaste Disposal Sites. The EPA issued a dra� guidance on April 29, 2015, to assist regulators in determining and extending thelength of post-closure care for hazardous waste disposal facili� es under Sub� tle C of the Resource Conserva� on and Recovery Act. Generally, post-closure care con� nues for 30 years a� er a site closes, but the statute provides the discre� on to adjust that

period to the state permi� ng authority.

Na� onal Coal Ash Rule Published. On April 17, 2015, theEPA published a fi nal rule crea� ng the fi rst na� onal coal ash management and disposal standards under Sub� tle D of the Resource Conserva� on and Recovery Act. The rule will be eff ec� ve October 14, 2015, and will regulate the disposal of coal combus� on residuals as solid waste, but not as hazardous waste.

Texas Commission on Environmental Quality

Lower Brazos Watermaster Program Eff ec� ve June 1. The TCEQhas fully implemented the Lower Brazos Watermaster Program,which will have jurisdic� on over the Lower Brazos River Basin including, and below, Possum Kingdom Lake. All water rightsholders within the new watermaster area must comply with 30Texas Administra� ve Code Chapter 304 requirements, including installa� on of a measuring device, fi ling “Intent to Divert” declara� ons, and submi� ng reports. Molly Mohler, previously a Watermaster Specialist in the Concho River WatermasterProgram, is the Brazos Watermaster.

Rules Adopted Authorizing Certain Injec� on Wells into the Edwards Aquifer. On June 3, 2015, the TCEQ adopted rulesimplemen� ng S.B. 1532 of the 83rd Texas Legislature in 2013. The rules modify the current prohibi� on of certain injec� on ac� vi� es in the Edwards Aquifer by allowing TCEQ to authorize such

on how the Bragg case (noted above)should be applied. This case involvedlandowners who fi led applica� ons for Edwards Aquifer groundwater use permitsa� er the December 30, 1996 deadline. Relying on Bragg, the plain� ff s argued that their takings claim accrued uponthe EAA’s denial of their historical useapplica� on. The court dis� nguished Bragg, however, because the Braggs hadfi led their historical use applica� on before the established deadline for doing so. Thecourt held that the law established in Braggdoes not extend to applica� ons fi led a� er the December 30, 1996 deadline. Althoughnot binding precedent on Texas law, theopinion will likely prove persuasive inlimi� ng the scope of Bragg, at least whereEdwards Aquifer permits are concerned. It

remains to be seen whether Texas courtswill apply Bragg outside of the EdwardsAquifer.

The court also considered the plain� ff s’ equal protec� on and due process claims and found that neither was persuasive.The plain� ff s claimed that the Act’s dis� nc� on between historical users and future groundwater users violated theCons� tu� on’s equal protec� on clause. The court held that the plain� ff s were not treated diff erently from any other applicant that fi led for a historical use permit a� er the deadline to do so. The plain� ff s also claimed that denial of the applica� on violated the Cons� tu� on’s due process clause because the EAA’s denialwas irra� onal in light of similar regula� on

of oil, gas, and other mineral interests. Thecourt held that the State has a “uniquelycompelling” interest in managing itswater resources and EAA’s denial ofthe applica� on was a ra� onal means of advancing that interest. Therefore,the court held that the plain� ff s did not present a legi� mate due process claim that could be reviewed by the court.

In the Courts is prepared by a� orneys from the Firm’s diff erent prac� ce areas. If you have ques� ons or need any addi� onal informa� on, please contact our Editor at editor@lglawfi rm.com.


ac� vi� es by rule or general permit. The rules limit authoriza� on to injec� on wells within the boundaries of the Barton-Springs Edwards Aquifer Conserva� on District, but not in the District’s or the Edwards Aquifer Authority’s territory. Under the rules,the TCEQ may authorize the injec� on of freshwater previously withdrawn from the Edwards Aquifer for the purpose of providingaddi� onal recharge. The TCEQ may also authorize the injec� on of rainwater, stormwater, fl oodwater, or groundwater through an improved natural recharge feature. Addi� onally, the rules allow the TCEQ to authorize, by general permit, injec� ons of concentrate from a desalina� on facility or injec� on of wastewater as part of an engineered aquifer storage and recovery facility. The rulesbecame eff ec� ve June 25, 2015.

Changes Proposed to 30 TAC Chapters 217 and 317 Design CriteriaRules. On May 29, 2015, the TCEQ published proposed rules toupdate the design criteria for domes� c wastewater treatment systems. The Chapter 217 proposed rule will add new and clarifyexis� ng defi ni� ons, add design criteria and approval processes for the rehabilita� on of exis� ng infrastructure, add design criteria for new technologies, and generally modify rule language to improveclarity. As part of the rulemaking, the TCEQ reinstated Chapter317 to bring facili� es constructed prior to 2008 back under TCEQ regula� on to resolve the regulatory uncertainty created from the adop� on in 2008 of the Chapter 217 rules. A public hearing was held on June 23, 2015.

Texas Water Development Board

Bech K. Bruun Appointed Chair. On June 11, 2015, GovernorAbbo� appointed Bech Bruun as Chairman of the Texas Water Development Board. Bruun has served as a TWDB board membersince September 2013, and replaces former Chairman CarlosRubinstein, who will remain on the board un� l his re� rement is eff ec� ve on August 31. Prior to joining the TWDB, Bruun held several posi� ons in Governor Perry’s administra� on, including Appointments Director. Bruun has also served as the Governmentand Customer Rela� ons Manager for the Brazos River Authority, Chief of Staff to State Representa� ve Todd Hunter, and General Counsel to the House Commi� ee on Judiciary and Civil Jurisprudence. Bruun holds a bachelor’s degree in businessadministra� on from the University of Texas at Aus� n and a law degree from the University of Texas School of Law. Bruun willserve at the pleasure of the Governor un� l his term expires on February 1, 2019.

Public U� lity Commission of Texas

Project No. 42330 - Rulemaking Proceeding to Propose NewProcedural Rule 22.146, Rela� ng to Limita� ons on Discovery in Rate Proceedings. The purpose of this project, opened by the PUCin March 2014, was to amend the PUC procedural rule governingdiscovery in rate proceedings. A proposed rule was publishedon November 7, 2014, numerous par� es fi led comments in December 2014, and a public hearing was held in January 2015.The PUC declined to take ac� on to approve a fi nal rule; on May 7 the proposed rule was automa� cally withdrawn by law.

Project No. 42740 - Rulemaking to Amend Substan� ve Rule 25.101, Rela� ng to Cer� fi ca� on Criteria. The Commission openedthis rulemaking in August 2014 to address two issues related torou� ng transmission lines: (a) route devia� ons to accommodate engineering constraints a� er a route has been approved; and (b) elimina� on of the preference for transmission routes to parallel pipelines. The new rule was adopted on April 22, 2015. The newrule inten� onally omits pipelines from a list of types of rights-of-way that generally may be compa� ble with transmission lines. This change is intended to remove any preference for parallelingor u� lizing pipeline rights-of-way, while not prohibi� ng such considera� on. The PUC decided to not make any rule changes regarding route modifi ca� ons due to engineering constraints.

Docket No. 43950 - Applica� on of Cross Texas Transmission, LLC for Authority to Change Rates and Tariff s. On December 23,2014, Cross Texas Transmission, LLC (“CTT”), a transmission-onlycompany, fi led an applica� on for authority to change rates. CTT requested a revenue increase in the amount of $3.1 million, or4.5% over current rates, for a total revenue requirement of almost$72.7 million. The Offi ce of Public U� lity Counsel, the Steering Commi� ee of Ci� es Served by Oncor, and Texas Industrial Energy Consumers intervened in this proceeding, and reacheda se� lement with CTT. On May 1, the Commission approved the agreement fi led by the par� es, which se� led the case at about $70.4 million for CTT’s total base rate revenue requirement.

DocketNo.44435-AppealofCenterPointEnergyHoustonElectric,LLC from an Ordinance of the City of Pearland. On February10, 2015, CenterPoint fi led an appeal of the City of Pearland’s ordinance requiring u� lity facili� es to be located underground, alleging that the ordinance confl icts with CenterPoint’s authorized tariff . According to the tariff , CenterPoint’s general policy for new construc� on is to install aboveground facili� es. CenterPoint claims that new facili� es are required in Pearland in order to con� nue providing safe and reliable service. CenterPoint and the City havereached an agreement in principle, and the case has been abatedto allow the par� es to work out the details of the se� lement.

Docket No. 44572 - Applica� on of CenterPoint Energy Houston Electric, LLC for Aproval of a Distribu� on Cost Recovery Factor Pursuant to PUC SUBST. R. 25.243. On April 6, 2015, CenterPointEnergy Houston Electric, LLC fi led its fi rst applica� on for a Distribu� on Cost Recovery Factor (“DCRF”) with the PUC and ci� es. The DCRF would increase rates by $16.7 million annually, beginning on September 1, 2015. The DCRF is an interim rateadjustment that permits an electric u� lity to implement new rates to account for changes in distribu� on invested capital since its last rate case, such as transformers, poles, wires, and similar facili� es. Several par� es, including the Gulf Coast Coali� on of Ci� es, intervened and successfully nego� ated a se� lement agreement reducing CenterPoint’s DCRF revenue requirement to $13 million.The case has been remanded to the PUC for fi nal disposi� on.

Electric U� li� es File to Adjust Energy Effi ciency Cost Recovery Factors. Pursuant to the Commission’s energy effi ciency rules, electric u� li� es made their annual fi lings at the end of May 2015 to adjust their Energy Effi ciency Cost Recovery Factors (“EECRF”)


to be charged in 2016 to recover energy effi ciency program costs and performance bonuses. The fi lings also true-up any over- or under-collec� on of energy effi ciency costs resul� ng from the use of the EECRF. The amounts sought to be recovered by theseu� li� es during 2016 are: (1) Oncor -- $66.8 million; (2) CenterPoint -- $37.7 million; (3) TNMP -- $6.0 million; (4) AEP TNC -- $1.7 million;and (5) AEP TCC -- $8.9 million. City groups are par� cipa� ng in these proceedings to ensure that the amounts requested by theu� li� es comply with applicable laws and Commission rules. Ci� es will review the u� li� es’ demand and energy goals, the program incen� ve costs, the evalua� on, management, and verifi ca� on expenses, and the performance bonuses, in addi� on to other issues. Each of the cases will proceed along an acceleratedschedule to have fi nal Commission orders late this summer.

Docket No. 44746 - Applica� on of Wind Energy Transmission Texas, LLC for Authority to Change Rates and Tariff s. On May 29,Wind Energy Transmission Texas, LLC (“WETT”), a transmission-only company, fi led an applica� on for authority to change rates and tariff s. WETT is seeking a total annual revenue requirement of $124 million, which represents an increase of $11.5 million,or 10.22%, over exis� ng rates. The Steering Commi� ee of Ci� es Served by Oncor has intervened in the case to review the fi ling. If necessary, a hearing will be held in September 2015.

Railroad Commission of Texas

Leadership Changes. At the Commission’s June 9 Open Mee� ng, Commissioner David Porter was unanimously elected Chairmanof the Railroad Commission. Chairman Porter has served as acommissioner since 2011 and is responsible for crea� ng the Eagle Ford Shale Task Force, a group comprised of local communityleaders, elected offi cials, industry representa� ves, environmental groups, and landowners with the goal of working together onhow to best develop the Eagle Ford Shale and promote localand statewide economic benefi ts. Porter also founded the Texas Natural Gas Ini� a� ve in 2013, which brings stakeholders together to discuss business opportuni� es, challenges, and regulatory barriers and solu� ons for natural gas conversion and infrastructure. Also recently announced is the re� rement of the Commission’s execu� ve director Milton Rister. A� er overseeing the agency’s day-to-day opera� ons for the past three years, Rister’s last day with the Commission will be August 31. Hisreplacement has not been determined. The Commission isundergoing a na� onwide search for a new execu� ve director, which Chairman Porter explained, “will focus on a candidate withstrong leadership capabili� es and technical exper� se.”

Commission Response to Earthquakes. In June 2015, theCommission for the fi rst � me exercised its authority under its recently adopted seismic rules. The rules, adopted in responseto the frequent earthquakes in North Texas over the last severalyears, allow the Commission to require companies to conductseismic tests before applying for permits and to shut down wellslinked to earthquakes. On May 7, North Texas experienced itslargest earthquake yet, a 4.0 magnitude quake in Johnson County.Shortly therea� er, the Commission directed fi ve disposal wells, located within 100 square miles of the temblor’s epicenter and

operated by four diff erent companies, to temporarily shut down for tes� ng. The Commission’s seismologist, hired in March 2014, announced that the tes� ng found no conclusive evidence that the disposal wells caused the earthquake, and the wells wereauthorized to restart opera� ons. Commission spokesman Rich Parsons said there are no immediate plans for more tes� ng but that Southern Methodist University con� nues to monitor seismic ac� vity in the area. There is bound to be more news forthcoming about earthquakes in Texas, as HB 2, recently passedby the legislature, appropriates over $4.7 million for UT Aus� n to purchase and deploy seismic equipment throughout the state.This money will buy and install 22 permanent and 36 portableseismograph sta� ons, as well as pay for the analysis of the data acquired from the sta� ons. The Bureau of Economic Geology at UT Aus� n will operate and maintain the equipment and conduct the study, and will collaborate with Texas A&M University to modelreservoir behavior exhibited by systems of wells in the vicinityof faults. A report of fi ndings is to be made to the governor by December 1, 2016.

GUD 10432 - Statement of Intent Filed by CenterPointEnergy Resources Corp., d/b/a CenterPoint Energy Entex andCenterPoint Energy Texas Gas to Increase the Rates in theUnincorporated Areas of the Texas Coast Division. On March27, 2015, CenterPoint Energy Resources Corp., d/b/a CenterPointEnergy Entex and CenterPoint Energy Texas Gas, fi led a statement of intent with the Railroad Commission to increase its rates ona division-wide basis in its Texas Coast Division by about $6.77million. This represents an increase of about 4.5% includinggas costs, or 11.3% excluding gas costs, and would increase theaverage residen� al bill by about $1.19 per month. CenterPoint’s last full rate case in the Texas Coast Division was in 2008 when itproposed a revenue requirement increase of about $49 million, or6.35%, and received an increase of 2.62%. The Gulf Coast Coali� on of Ci� es and the Texas Coast U� li� es Coali� on of Ci� es intervened in this proceeding. A� er extensive discovery, the par� es reached a se� lement in principle. On June 30, the Hearings Examiner abated the case to allow the par� es to fi nalize se� lement documents.

Atmos Mid-Tex Division 2014 and 2015 Rate Review Mechanisms.The Proposal for Decision in the 2014 Atmos Energy Corpora� on Mid-Tex Division Rate Review Mechanism (“RRM”) case was issuedon April 29, 2015, over a year a� er the ini� al fi ling. While the 2014 RRM case was s� ll pending, Atmos fi led for its 2015 RRM increase in February 2015. Ci� es served by Atmos Mid-Tex have approved a se� lement resolving both the 2014 and 2015 RRM fi lings. The RRM mechanism is an alterna� ve to the automa� c increases available to gas u� li� es under provisions of the Gas U� lity Regulatory Act (known as “GRIP”). In 2015, the RRM mechanismsaved ratepayers about $15 million, as compared to the rates thatwould have been implemented under the GRIP mechanism. Newrates resul� ng from the se� lement became eff ec� ve June 1.

Agency Highlights is prepared by a� orneys from the Firm’s diff erent prac� ce areas. If you have ques� ons or need any addi� onal informa� on, please contact our Editor at editor@lglawfi rm.com.


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volume 20, no. 3 july 2015...

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