August2, 2010

Hon. LisaJackson Administrator U.S. Environmental ProtectionAgency 1200PennsylvaniaAvenue, N.W. Washington, DC 20460 Mail Code: 1l01A

Dr. Alfredo "AI" Armendariz Regional Administrator U.S. Environmental ProtectionAgency, Region 6 1445 Ross Avenue, Suite 1200 Dallas, TX 75202 Mail Code: 6RA

DearAdministrators Jackson andArmendariz: Byfax (202.501.1450), email Oackson.lisa@epa.gov), Us. mail, andhanddelivery

Byfax (214.665.7113), email (armendariz.al@epa.gov). Us. mail, andhanddelivery

In order to deter challenges to your plan for centralized control of industrial developmentthrough the issuance ofpermits for greenhouse gases, you have calledupon each state to declare its allegiance to the Environmental Protection Agency's recently enacted greenhouse gas regulations-regulations that are plainly contrary to United States law. 75 Fed. Reg. 31,514, 31,525 

### &. 31,582 (June 3, 2010) (hereinafter, the "Tailoring Rule"). To encourage acquiescence with your unsupported findings you threaten to usurp state enforcement authority and to federalize the permitting program of any statethatfails to pledge theirfealty to the Environmental ProtectionAgency (EPA).

Onbehalfofthe State ofTexas, we write to informyouthatTexas has neitherthe authority nor the intention of interpreting, ignoring, or amending its laws in order to compelthepermitting ofgreenhouse gas emissions.

You have declared that EPA's decision to enact automobile tailpipe emission limits for greenhouse gases pursuantto Title II ofthe federal Clean AirActrenders such gases immediately "subject to regulation" for all purposes under that Act, including theTitle IPrevention ofSignificantDeterioration (PSD) preconstruction permitting program and the Title V operating permitprogram. Simultaneously, however, you recognize that permitting greenhouse gases under the Act is "absurd." In the Tailoring Rule, EPA states: "Here, we have determined, through analysis ofburdenand emissions dataas well

as considerationofextensivepubliccomment, thatthe costs to sources and administrative burdens to permitting authorities that would result from application ofthe PSD and title V programs for GHG emissions at the statutory levels as ofJanuary 2, 2011 should be considered 'absurdresults.'" 75 Fed. Reg. at 31,517. We agree.

In orderto avoid the absurd results ofEPA's own creation, you have developed a "tailoring rule" in which you have substituted your ownjudgment for Congress's as to how deep and wide to spread the permitting burden. Notably absent from your rules is any evidence that they would achieve specific results; in fact, you assiduously (and correctly) avoid ascribing what environmental benefit may be achieved by mandating permits to emit auniformly distributed, trace constituentofclean air, vital to all life, that is emittedby all productive activities onEarth.

Instead of acknowledging that congressionally set emission limits preclude the regulation ofgreenhouse gases, you instead re-write those statutorily-established limits stating, "For our authority to take this action, we rely in part on the 'absurd results' doctrine, because applying the PSD and title V requirements literally (as previously interpreted narrowly by EPA) would not only be inconsistent with congressional intent concerning the applicability ofthe PSD and title V programs, but in fact would severely undermine congressional purpose for those programs. We also rely onthe 'administrative necessity' doctrine, which applies because construing the PSD and title V requirements literally (as previously interpreted narrowly by EPA) would render it impossible for permitting authorities to administerthePSD provisions." 75 Fed. Reg. at31,541-42.

Because ofyour view that greenhouse gases become "subject to regulation" on the firstday itbecomes illegalto manufacture acarnotmeetingthe newtailpipe emission limits for greenhouse gases (on January 2, 2011), you insist that states may not issue permits after that date without considering greenhouse gas emissions. Your view is not enough. Applicable lawprovides to the contrary.

Texas' stationary source permitting program encompasses all "federally regulated

new source review pollutants," inchiding, "any polhital1.t that otherwise is subject to regulation under the [federal Clean Air Act]." 30 TEX. ADMIN. CODE § 116.12(14)(D). The rules ofthe Texas Commission on Environmental Quality (TCEQ), like the EPA's rules, do notdefinethephrase "subjectto regulation." In its Tailoring Rule, however, the EPA promulgated-without notice-a definition of the previously undefined term, "subject to regulation." This new definition (attached hereto) specifically relates to the regulation ofgreenhouse gases, spans several FederalRegister columns, and is over 600 words in length. Specifically, in the EPA's first phase ofgreenhouse gas regulation, this

new definitionraises the PSDpermittingthresholdfor new and modified "major" sources ofotherpollutants from 100tons peryearto 75,000 tons peryear (tpy) ofC02 equivalent (C02e) emissions.In the Tailoring Rule you have asked TCEQ to report to you by August 2, 2010, whether it would "interpret" the undefined phrase "subjectto regulation" in TCEQ Rule 116.12 consistent with the newly promulgated definition in EPA Rule 51.166, in all its specifics and particulars. That is, you have effectively requested that Texas agree to regulate greenhouse gases inthe exactmannerandmethodproscribedbythe EPA.

In other words, you have asked Texas to agree that when it promulgated its air quality permitting programrules forpollutants "subjectto regulation" in 1993, thatTexas really meant to define the term "subject to regulation" as set forth in the dozens of paragraphs and subparagraphs ofEPARule 51.166, firstpromulgatedin 2010.

The State ofTexas does not believe that EPA's "suggested" approach comports withtherule oflaw. The United States andTexas Constitutions, United States andTexas statutes, and EPA and TCEQ rules all preclude TCEQ from declaring itselfready to requirepermits for greenhouse gas emissions from stationary sources as yourequest.

We start with constitutional difficulties. As noted, Texas' stationary source permitting program encompasses all "federally regulated new source review pollutants," including "any pollutant that otherwise is subjectto regulation under the [federal Clean Air Act]." 30 TEX. ADMIN. CODE § 116.12(14)(D). This delegation of legislative authority to the EPA is limited solely to those pollutants regulated when Texas Rule 116.12 was adopted (1993) and last amended (2006). As the Texas Supreme Court has explained, "The general rule is that when a statute is adopted by a specific descriptive reference, the adoption takes the statute as it exists at that time, and the subsequent amendment thereofwould not be within the terms ofthe adopting act." Trimmer v. Carlton, 296 S.W. 1070 (1927). Thus, in order for Texas Rule 116.12 to pass constitutional muster, it must be limited to adopting by reference the definition of "subject to regulation" in existence when Rule 116.12 was last amended in 2006. In other words, Texas Rule 116.12 cannot delegate authority to the EPA to define "subject
to regulation" in2010 to includepollutants thatwere not "subjectto regulation" in2006.

For example, the Texas Solid Waste Disposal Act defines "hazardous waste" as "solid waste identified or listed as hazardous waste by the administrator of the Environmental Protection Agency under the federal Solid Waste Disposal Act." When this delegation oflegislatiVe authority Was challenged; it Was upheld by Texas' highest court, but only because the court found that "the reference to the federal act in section 361.003(15) adopts by reference the act and the regulations promulgated thereunder which were in effect on July 30, 1991, the date section 361.003(15) ofthe Texas Solid Waste Disposal Act was enacted

..." Exparte Elliott, 973 S.W.2d 737, 741 (Tex. App.-Austin 1998, pet. refd). As the Elliott court explained, "We acknowledge that section 361.003(15) may be read to say that the legislature has delegated to the EPA the powerto define hazardous waste underthe THSC [Texas Health & Safety Code] andthat definition may change from time to time at the will ofEPA without intervention or guidance from the legislature." The court noted, however, that "[s]uch a construction would in fact place in doubt the constitutionality ofthis provision," and therefore, thecourtwould "notconstrue, inthis case, the adopting statute as attempting to adopt future laws, rules or regulations ofthe federal government." The same analysis applies here: TCEQ Rule 116.12 cannotdelegate authorityto the EPAto define "subjectto regulation" in 2010to includepollutants thatwerenot "subjectto regulation" in2006.

In addition to constitutional limitations, the TCEQ is also precluded from adopting the EPA's newly promulgated definition of"subject to regulation" pursuant to the express terms ofthe Texas GovernmentCode, whichrequires public notice ofagency rulemaking. See, e.g., TEX. GOY'TCODE § 2001.023 ("A state agency shall give at least 30 days' notice ofits intention to adopt a rule before it adopts the rule."). Likewise, TCEQ rules mandate notice and an opportunity to be heard when substantive rules are enacted. See, e.g., 30 TEX. ADMIN. CODE § 20.3. Like Texas law, federal law also requires notice and hearing before Texas can revise its State Implementation Plan (SIP). See Clean Air Act § 110(1); 42 U.S.C. § 7410(1) ("Each revision to an implementation plan submitted by a State under this chapter shall be adopted by such State after reasonable notice and public hearing."). When the TCEQ promulgated Rule 116.12 in 1993, or even when it last amended the rule in 2006, it had no intention ofenacting a permitting program for greenhouse gases. Consequently, TCEQ had no reason to (nor did it) give public notice of any such intent. Obviously, Texans concerned with greenhouse gas permitting could not have known to participate and comment on the decision to require permits for pollutants "subjectto regulation" in 2006, when the EPA first discovered greenhouse gases were "subject to regulation" in 2010. It should go without saying that the nearly infinite expansion of Texas' permitting programs to include greenhouse gases withno state-level rulemaking at all would not satisfy Texas or federal lawrequiring notice and anopportunityto beheard.

Perhaps more fundamentally, however, the EPAitselfhas notundertaken aproper rulemaking to require all SIPs to include the definition of"subject to regulation" it has justpromulgated. This revision to EPA's Part 51 rules-which layout the requirements for approvable SIPs-were preceded by no proposal whatsoever. Rather, this new requirement first appeared in the EPA's final notice announcing the "Tailoring Rule," and accordingly, has not been properly adopted. See Clean Air Act § 307(d)(l)(J); 42 U.S.C. § 7607(d)(1)(J) (requiring formal rulemaking procedures in orderto establish any requirementunderthePSD program).

And even ifEPA provided prOpel' notice and the opportunity to comment, EPA cannot lawfully adopt any rule that directly and immediately changes Texas' permit program in any respect-much less to expand the reach ofthe program so far as to be deemed "absurd." Clean Air Act Section 166(a) sets forth the SIP revision process for "otherpollutants" underthe PSD program. The only sensible interpretation ofthe Clean Air Act is one that requires the EPA to promulgate a National Ambient Air Quality Standard (NAAQS) for greenhouse gases before the EPA can require PSD permitting of greenhouse gases. Thereafter, pursuantto the express terms ofthe Clean Air Act, states

are provided with 21 months after EPA undertakes a proper rulemaking to add that new pollutantto their SIP. Clean Air Act § l66(b), 42 U.S.C. § 7476(b) ("Within 21 months after such date of promulgation such plan revision shall be submitted to theAdministrator"). EPA, however, has not developed aNAAQS for greenhouse gases, has
not undertaken a rulemaking to promulgate corresponding regulations, and has not allowed anytime for a stateresponse.

In addition to circumscribing the statutory 21-month review and implementation process afforded the states, EPA is also circumventing the statutory one-yearreview and revision process afforded Congress, which specifically states, "Regulations referred to in subsection [166](a) of this section shall become effective one year after the date of promulgation." The purpose ofthis one-year delay is to allow Congress the opportunity
to review (and approve or revise) new rules for "other pollutants" before states are required to implement them. 72 Fed. Reg. 54,112, 54,118 (Sept. 21, 2007); citing H.R. Conf. 95-564, at 151 (1977), 1977 U.S.C.C.A.N. 1502, 1532. The pathproposedby EPA painstakingly avoids suchcongressionaloversight.

Even under normal SIP revision procedures (those not involving new pollutants), the EPA has failed to provide Texas a reasonable time to submit a plan revision. Clean Air Act Section 110 sets forth EPA's authority to directthe requirements for approvable SIPs. Section 1l0(k)(5) allows states up to 18 months after proper adoption ofnew SIP expectations before requiring their implementation by the states. See 42 U.S.C. § 741O(k) ("The Administrator shall notifythe State ofthe inadequacies, and may establish reasonable deadlines (not to exceed 18 months after the date of such notice) for the submission ofsuchplanrevisions.").

Instead, EPA has demanded (in the absence of statutory authority) that Texas submit a schedule for the completion ofstatutory andrule revisions. Butnotwithstanding the above-referenced statutory requirements regarding SIP revisions, EPA has declared that it will "ensure" all sources of greenhouse gases will be permitted under the final Tailoring Rule on January 2, 2011, by moving "quickly to impose a Federal Implementation Plan (FIP) for PSD through 40 CFR 52.21." 75 Fed. Reg. at 31,526. The federal Clean Air Act, however, clearly does not authorize such bureaucratic nimbleness. To the contrary, before EPA can implement a FIP, Section ll0(c)(l) specifically requires the EPA to first make a finding that a state has failed to make a required submission, such as arevision under Section ll0(k)(5), and even then, a FIP is
not effective until after the state is afforded additional time to correct the deficiency identified by EPA. EPA has shown no intention of following the Clean Air Act procedilles orallowing states areasonable opportunityto changetheirrules.

Each ofthese objections to EPA's demand for a loyalty oath from the State of Texas would suffice to justify our refusal to make one. Indeed, it is an affront to the congressionally-established judicial review process for EPA to force states to pledge allegiance to its rules (or forfeit their right to permit) on the final day by which states mustexercise their statutory rightto challengethose same rules. Texas will not facilitate EPA's apparent attemptto thwartthese establishedprocedures and ignore the law. Inthe event a court concludes EPA's actions comport with the law, Texas specifically reserves and does not waive any rights under the federal Clean Air Act or other law with respect to the issues raisedherein.We object to adopting the EPA's definition of "subject to regulation" without directly raising any ofour substantive objections to each ofthe four EPA rulemakings that collectively comprise your greenhouse gas control initiative. Those objections will be resolved in litigation now pending in the D.C. Circuit Court ofAppeals. Given that you are unable to ascribe the benefits ofyour greenhouse permitting regime, itis difficult
to see why you would refuse to stay the effectiveness ofyour greenhouse gas rules. We therefore askyouto staythe effectiveness ofyourrules until ourchallenge is resolved.

Sincerely,

BryanW. Shaw, Ph.D. Chairman Texas CommissiononEnvironmental Quality Greg Abbott Attorney General ofTexas