Title: New NOX Requirements in the State of Texas

Author: Robert B. LaCount, Jr.

rlacount@ftenergy.com

Telephone: 703-816-8645

Fax: 703-528-4926

RDI Consulting / FT Energy

1600 Wilson Blvd., Suite 600

Arlington, VA 22209

Summary

As the regulatory debate continues throughout the Eastern U.S. regarding the appropriate level of 

nitrogen oxide (NOX) reductions to adequately mitigate the formation and transport of ozone, the 

state of Texas has aggressively pushed forward with new NOX requirements. The combination of 

new electricity restructuring legislation and existing Clean Air Act mandates has resulted in a series 

of new NOX control requirements scheduled for implementation in Texas around 2003. 

On June 18, 1999, Governor Bush signed restructuring legislation, SB 7. The bill requires retail 

competition to begin in Texas by January 2002. This bill also requires reductions of NOX and SO2

emissions from "grandfathered" power plants over a 2-year period. Grandfathered plants are defined 

as facilities that were operating prior to the beginning of the Texas New Source Review (NSR) 

Permitting program and were, therefore, exempt from meeting tighter emission standards generally 

applied to new facilities. The bill calls for a 50% reduction of NOX emissions below 1997 levels 

from the grandfathered plants. This goal is being implemented by constructing three separate NOX

control areas within the state of Texas and equates to a 0.14 lb./mmBtu emission rate for the East 

Texas Region and a 0.195 lb./mmBtu emission rate for the El Paso and West Texas Regions. The 

program will impact 187 generating units at 75 different fossil fuel-fired plants. However, only 2 of 

the grandfathered plants (4 units) are coal-fired.

The Texas Natural Resource Conservation Commission (TNRCC) is implementing the SB7 

requirements through 3 separate NOX allowance markets, one for each control area. The program 

will begin in May 2003 and will require annual reductions of NOX in contrast to the seasonal 

programs in the Eastern U.S. Sources currently holding Texas NSR permits and newly constructed 

sources are not subject to the requirements but may elect to voluntarily join the program. These 

sources choosing to “opt-in” must submit requests to the TNRCC by September 1, 2000.

In addition to SB7 requirements, Texas has also moved forward with additional regulations 

impacting non-grandfathered plants as a part of the state’s ozone mitigation strategies. These 

regulations are necessary in order for the state of Texas to comply with existing Clean Air Act 

mandates requiring the development and implementation of comprehensive ozone attainment plans. 

On April 19, 2000, the state finalized NOX requirements as a part of the Beaumont-Port Arthur and 

Dallas-Fort Worth ozone attainment plans. The programs will require a nearly 90% reduction in 

NOX emissions from most of the state’s coal-fired plants. Gas-fired boilers, process heaters, and 

turbines are also covered under these regulations with limits ranging from 0.08 to 0.15 lb./mmBtu. 

The start dates for these requirements will be staggered from 2002 through 2005. The state will also 

be adopting additional requirements to address the Houston non-attainment area. The Houston plan 

is due to EPA by December 2000. Although the TNRCC recently adopted many of these new NOX

emission limitations for the ozone attainment plans, the state is still drafting the regulatory structure 

for implementing the requirements. The state has committed to providing compliance options 

through emissions trading or emissions averaging programs and is continuing to work with 

stakeholders to finalize their structure. 
In addition to the specific trading mechanisms that the state adopts, the new Texas requirements 

provide two interesting differences in comparison to the Eastern NOX programs. All of the Texas 

limitations are annual requirements unlike the May through September compliance period in the 

East. The difference in compliance length changes the cost structure for NOX controls by increasing 

the operational and maintenance (O&M) expenses and lowering the capital costs associated with 

each ton of NOX removed. The second key difference is the mix of generation in Texas. Coal 

provides just over 20% of the electricity generation in the Electric Reliability Council of Texas 

(ERCOT). This is almost a complete reversal to the NOX SIP call states where coal provides 

approximately 72% of the fossil-fueled capacity1. Both of these factors will provide new challenges 

compared to many of the other NOX programs under development throughout the country.

 

1

 EPA: “Regulatory Impact Analysis for the NOX SIP Call, FIP, and Section 126 Petitions”, September 

1998.