Sunday, January 18, 2009

By its own reckoning, the Texas Commission on Environmental Quality conceives of the penalties it levies against polluters as a kind of schoolmarmish scold. All the commissioners were appointed by Gov. Rick Perry, who has cast himself as pro-business and has said that government regulations on emissions will lead to fewer jobs. In the 2006 election cycle, the last one for which complete numbers are available, Perry received $2.9 million from the mining, electric power, oil and gas, chemical, and waste management industries, according to an analysis by Texans for Public Justice, a group that tracks spending in politics. Read the article at the Austin American-Statesman


Do businesses pay for pollution?

Five years after being told to do more, Texas regulators still seen as lenient toward polluters.

By Asher Price
Sunday, January 18, 2009

Five years after a state auditor determined that the state's main environmental regulatory and permitting office did little to penalize polluters, critics say shortcomings remain in making violators pay.

Even as they have toughened some rules and policies, the office's commissioners have bickered about others, leaving fundamental questions unanswered about how strictly the state should punish the pollution violations.

The Texas Commission on Environmental Quality still caps penalties on polluters at $10,000 for each violation per day, regardless of its severity. And it still hasn't decided whether a history of violations should warrant harsher penalties.

By its own reckoning, the commission conceives of the penalties it levies against polluters as a kind of schoolmarmish scold.

"Just as a teacher in a classroom uses many tools to enable students to learn, the TCEQ uses a broad range of tools to enable and require businesses and governments, large and small, to comply," reads its 2008 Enforcement Report.

Matt Baker, until recently head of enforcement at the state environmental office, said the commissioners continue to grapple with their enforcement role.

"The penalty policy we have today is not broken," Baker says. "The commissioners have the same goals in mind, and that's a clean environment. It's the approach you take to get there, and there are philosophical differences in how you get there. It's a balancing act, and how much enforcement you have, how big a penalty you have. It's really a philosophical question."

In some respects, changes to the state's enforcement policy have reaped results: Last year the state issued 1,624 penalties, the most since the mid-1980s, and assessed $16.9 million in fines. About $2 million was written off by Texas for prompt payment of penalties. The state actually will collect $10.1 million from violators, and the rest will be channeled by them into state-regulated environmental projects.

In California, which has among the toughest environmental laws in the nation, the Air Resources Board, one arm of the state's environmental agency, collected $29.85 million in penalties in 2007, according to the most recent available information. Louisiana collected nearly $4.1 million in fines in 2007 and directed polluters to pay nearly $5.9 million into environmental projects.

In Texas, which has the largest petrochemical complex in the world, 49 percent of penalties were directed to small businesses and 38 percent to large ones, according to the environmental commission's latest enforcement report.

A Texas example

The recent pollution history of prominent Texas company Exxon Mobil Corp. helps put the numbers in perspective.

On a January day nearly three years ago, the three-member Texas Commission on Environmental Quality told Exxon Mobil that it owed $8,662 for a single pollution episode. Investigators had found that the company had failed to obtain permits and to record unauthorized emissions, according to state records.

Despite the fines, Exxon Mobil's Harris County chemical plants violated pollution rules at least nine times over the rest of 2006, belching into the air tons of carbon monoxide, smog-related chemicals and carcinogens. One of the emissions violations, according to state records, ran 201 hours.

The total bill for those penalties came to $146,450.

But the violations kept occurring. In 2007 the firm was fined 10 separate times to the tune of $247,066 — an incidental cost, critics say, for a corporation that had $11.66 billion of profit in the final three months of that year, or $264,000 every three minutes.

"You hope that you hold a company accountable for violating the law with a certain threat of a high penalty that will deter the company from violating the law in the first place, or deter them from doing it again," said Tom McGarity , an environmental law professor at the University of Texas. "But you figure they have written the penalty into the cost of doing business. It costs more to do something about it, to remedy the problem."

In a statement, Russ Roberts, a spokesman for Exxon Mobil, said: "We have made significant improvements on environmental performance and remain committed to continuing to reduce emissions. At the same time, we see an increase in TCEQ enforcement activities toward the same end. We look forward to continuing our cooperative relationship with the agency as we accomplish our environmental goals."

The Texas Commission on Environmental Quality has long functioned as a paradox.

On the one hand, it sports a staff of 2,900, many of them experts in fields as far-ranging as nuclear waste disposal and hydrogeology, and a budget of $566 million.

On the other hand, its mission statement explicitly ties environmental interests to business ones: "The Texas Commission on Environmental Quality strives to protect our state's human and natural resources consistent with sustainable economic development," the statement says.

Its top leaders have left the agency to lobby for some of the very industries it regulates, and commissioners have not followed recommendations by administrative law judges and its own office of public interest counsel to halt coal-fired power plants. (Critics say their emissions are harmful.)

Environmentalists have long felt the agency was too cozy with the businesses it was meant to oversee; state Sen. Eliot Shapleigh, D-El Paso , calls it a "lapdog for industry."

"Politicians represent their districts and do what they have to do," commission Chairman H.S. Buddy Garcia responded. "We follow the law and try to be as straightforward as possible, using common sense and science."

At least one of the commissioners has voiced skepticism about issues such as mankind's role in global warming.

Easy on businesses?

All the commissioners were appointed by Gov. Rick Perry, who has cast himself as pro-business and has said that government regulations on emissions will lead to fewer jobs.

In the 2006 election cycle, the last one for which complete numbers are available, Perry received $2.9 million from the mining, electric power, oil and gas, chemical, and waste management industries, according to an analysis by Texans for Public Justice, a group that tracks spending in politics.

Most of that money, nearly $2 million, came from oil and gas interests.

The business-friendly commission was pushed to act after a damning December 2003 report in which the state auditor found that the agency had been slow to collect fines and was not hard enough on polluters, focusing too much on voluntary compliance instead of enforcement.

The auditor's office got involved shortly after the national environmental advocacy group Environmental Defense Fund released a report with similar conclusions.

In the five years since the audit, the environmental commission has revamped its enforcement process.

Baker says collection rates are at 90 percent, the state works faster than ever to penalize polluters (down to 226 days from 329 days for cases not litigated) and, starting in 2007, the agency started adding private economic benefit realized by the violator into its penalty calculations.

"It's a big wake-up call," Baker said. "People are realizing a significant amount of dollars are being pulled from their back pocket."

In 2006, concerned about the amount of penalty money that had been unpaid — an estimated $5 million of the $135 million invoiced by the agency in fiscal year 2005 was still outstanding in 2006 — the environmental agency said it would not renew permits, registrations, certifications or licenses to individuals with a delinquent penalty or fee.

But the agency has yet to decide how to punish inveterate polluters, companies like Exxon Mobil and other chemical companies that operate on the Gulf Coast, one of the most polluted regions in the U.S..

"Some states are more likely to negotiate a settlement (with polluters), or give them more time to come into compliance, and protect them from citizen suits, and that fairly typifies" the Texas Commission on Environmental Quality, said Victor Flatt, a professor of law at the University of Houston who studies how states punish polluters.

High fines and tough enforcement can be a moneymaker for the state, Flatt said.

"A lot of agencies get money from their enforcement fines," he said. "It pays for itself, or can pay for itself. Texas is missing out on that."

"Higher per capita spending by states on environmental enforcement programs," write Flatt and other authors in a draft of an article titled "Environmental Enforcement in Dire Straits," "is strongly associated with better program compliance, and thus, presumably better environmental results."

The issues were thrown into relief at a work session in May, when Commissioners Larry Soward and Bryan Shaw butted heads over the stiffness of penalties. Currently, polluters pay up to $10,000 per violation per day.

"That's a business decision, and it's cheaper to violate than to comply," Soward said at the work session. "Our penalties should mean something."

"If you got a company that discharges lead, mercury, arsenic, carbon monoxide and particulate matter, and you say we're going to lump all those together and only pay a $10,000 fine, that's an easy decision for that company to say, 'I'll pay that fine instead of pay for all of those.' "

Shaw took a different tack: "We don't need to be suggesting the industry is polluting and spewing on purpose. We need to find ways to encourage them to be proactive."

It had been the sixth time the commissioners discussed the issue, but unable to make a decision they decided to schedule at least one more work session in 2008 to revisit the policy. Emblematic of the slog to punish polluters, the meeting was eventually rescheduled for this year.

Ways to reduce fines

Fines by the Texas Commission on Environmental Quality, levied against everyone from the corner dry-cleaning business to Exxon Mobil, led to the elimination or reduction of 8.3 million pounds of pollution at a cost of $521 million to violators for things like the retrofitting of plants with new equipment, according to the agency's 2008 Enforcement Report.

But not all the $16.9 million in penalties will end up in state coffers.

Exxon Mobil, like many other companies that violate state environmental laws — Texas Petrochemicals, for one, racked up nine citations worth $101,818 during the first eight months of 2008 — can earn a 20 percent break on penalties if the case is settled without a contest.

The environmental commission, which says it does not give the penalty reduction to its worst violators, says the strategy is intended to save the state the cost and hassle of slogging through the court system. The policy applies to companies large and small.

Polluters can also pay up to half their penalties with cleanups of abandoned illegal dump sites; asbestos abatement; erosion control; plugging abandoned wells; provision of drinking water for colonias; placement of ozone monitoring equipment in schools; or provision of emergency equipment in communities. (Nonprofits and local governments can pay entire penalties in these sorts of cleanups.)

Violators facing large fines almost always opt to participate in cleanups.

In a client advisory report last summer, lawyers for corporate law firm Frost Brown Todd wrote that the projects save polluters the cost of trial, earn them credit with regulators for projects they might have done anyway, improve a company's compliance status and reduce the risk of future enforcement actions.

"It always turns out to be cheaper for the company, or they wouldn't do it," said McGarity, the UT law professor.

Penalty policy has long been a complicated issue for the agency, said state Sen. Kirk Watson, D-Austin, who once served on the Air Control Board, a predecessor to the environmental commission.

"The history has been the agency has barked far more than it has ever bitten," he said.;