Bryan W. Shaw, Ph.D., Chainnan :\ [.~, I: I ; ,_ ,._:,,,\L,~)(/ . . . '1'1 :"11 ." . ; ,! ,l". 'o:l:',

Buddy Gar~la, CommlsslO~e~ if:,." .. " \ .. I.' 1,1,' :' I.~ ~,~2.'.'''.' .• :\7',I ~, Carlos Rubmstem, CommissIOner 'c--' ";.. .' JMark R. Vickery, P.G., Executive JJJJtJ)Y - 9 P:~1 6: t:' ,~~_ ~-o-" , ] ---------------

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')O'lo~!n'J L I . '..-' -r:;~.,.J F"I'!I I: 55

TEXAS COMMISSION ON ENVIRONMENTAL QuALlTV i i:r,\i~S D1VISIS~1

Protecting Texas by Reducing andPreventing Pollution

November 2, 2010

Alfredo "Al" Armendariz, Ph.D.

Regional Administrator .

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 Cap Trading (Sen program ifthe Texas

Commission on Environmental Quality (TCEQ) agrees to commit to a rulemaking action to

address the EPA's issues.

The SCT program was adopted by the commission on March 21, 2001, and the SCT program has

been awaiting an action from the EPA for over nine years. The EPA first mentioned its concerns

on October 25, 2010, requesting a verbal commitment by November 1, 2010. and a commitment

letter signed by the executive director no later than November 15, 2010. The EPA's aggressive

schedule does not provide adequate time to 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 consistent with sustainable

economic development. The intent of the SCT program is to provide maximum flexibility for the

electric industry in achieving nitrogen oxides emission reductions necessary to achieve the goal

of ozone attainment while maintaining reliability ofservice. However, a preliminary review of

the SCT program indicates no use of this program by the affected companies. Additionally,

companies that are subject to the system cap requirements in Chapter 117 have other flexibility

programs available, such as the Discrete Emission Reduction Credit program. TCEQ staff

resources may be more appropriately applied to 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. A fonnal request to

withdraw the 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

SCT program rules, it is not possible for the commission to consider a fonnal request prior to 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.us
Alfredo "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

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