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### TEXAS COMMISSION ON ENVIRONMENTAL QuALlTV i

### i:r,\i~S**D1VISIS~1** Protecting Texas byReducing andPreventing Pollution November 2, 2010

Alfredo "Al" Armendariz, Ph.D. RegionalAdministrator

. U.S. Environmental Protection Agency, Region 6 1445 Ross Avenue. Suite 1200 Dallas, Texas 75202-2733

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Re: Action on 30 Texas Administrative Code Chapter (TAC) 101, Subchapter H, Division 5. System Cap Trading Dear Dr. Armendariz: The United States Environmental Protection Agency (EPA) stated its intent in the October 28, 2010 letter to take favorable action on the System CapTrading (Sen program ifthe Texas Commission on Environmental Quality (TCEQ) agrees to committo a rulemaking action to address the EPA's issues. The SCT program was adopted bythe commission on March 21, 2001, and the SCT program has been awaiting an action from the EPAfor over nine years. The EPA first mentioned its concerns on October 25, 2010, requesting a verbal commitmentby November 1, 2010. and a commitment letter signedby the executive director no later than November 15, 2010. The EPA's aggressive schedule does not provide adequate timeto present the EPA's concerns to the commission or for the commission to take any action to address these concerns. The TCEQ strives to protect our state's human and natural resources consistentwith sustainable economic development. The intent ofthe SCT program is to provide maximum flexibility for the electric industry in achieving nitrogen oxides emission reductions necessary to achieve the goal ofozone attainment while maintaining reliability ofservice. However, a preliminary review of the SCT program indicates no use ofthis program by the affected companies. Additionally, companies that are subjectto the system cap requirements in Chapter 117 have other flexibility programs available, such as the Discrete Emission Reduction Credit program. TCEQ staff resources maybe more appropriately appliedto the other areas rather than initiating rulemaking to address the EPA's concerns on a program that appears to provide no practical environmental benefit. Therefore, we plan to seek approval from the commission to withdraw the SCT program from the EPA's consideration and propose a rulemaking to repeal the program. Afonnal request to withdrawthe SCT rules from the EPA's consideration will be pursued as expeditiously as practicable; however, due to the EPA's delay in informing the TCEQ ofits decision regarding the SCTprogram rules, it is not possible for the commission to consider a fonnal request priorto the EPA's deadline to take final action by December 31,2010.

P.O. Box 13087 Austin, Texas 78711-3087 512-239-1000 Internet address: www.tceQ.state.tx.usAlfredo "Al" Armendariz, Ph.D. Page 2 November 2, 2010

Please feel free to contact me at (512) 239-3900, or Ms. Susana M. Hildebrand, P.E., at (512) 239-4696, should you have any questions regarding this correspondence.

Mark R Vickery, P.G., Executive Texas Commission on**Environm~l;a.Io"o** MVjSHjbg

cc: Ms. Adina Wiley, Region 6, U.S. Environmental Protection Agency, Dallas