Texas Commission on Environmental Quality Enforcement Update and A Look Ahead

Kelley Drye Client Advisory

The Texas Commission on Environmental Quality (“TCEQ”) 2021 Enforcement Report has a new look—lending itself to being read on-screen, rather than spiral-bound. The TCEQ releases an Enforcement Update” toward the end of each calendar year. This is not coincidence, but is instead a statutory requirement imposed on the agency.[1] The Texas Water Code requires that the report be issued by December 1st of each year and that it include certain data and comparisons of that data to prior years.[2] The report must include key enforcement metrics, such as the number of inspections, violation notices, enforcement actions, and penalty amounts.[3] The report must also include a comparison with [the agency’s] enforcement actions for each of the preceding five fiscal years.”[4]

Takeaways From the TCEQ’s 2021 Enforcement Update

  • TCEQ resources were stretched, as the number of public and private facilities and/or individuals regulated by the TCEQ grew by 19,000, from 2020 to 2021.[5]
  • The TCEQ responded to increased demand, and COVID-19 restrictions, in part by conducting more off-site and virtual investigations, which it will likely continue to use, even as COVID-19 restrictions lift.[6]
  • Water was the highest-cited media with most violations related to public drinking water.[7]
  • Permit violations were less common than statutory or rule-based violations.[8]
  • Fewer businesses are conducting self-audits, despite the advantages offered by the Texas Environmental, Health, and Safety Audit Privilege Act.[9]

Investigations Continue to Increase and Go Virtual

TCEQ’s enforcement activities originate primarily” from investigations conducted by regional offices and record reviews that take place at headquarters.[10] Aside from 2018, when Texas experienced Hurricane Harvey and the recovery that followed, TCEQ investigations have been on the rise.[11] What is notable for 2021 investigations is the dramatic increase in off-site and virtual investigations, which accounted for nearly half (45%) of all investigations.[12] With COVID-19 restrictions waning and the increased investment in equipment, such as flyover and drive-by equipment, and comfort with off-site investigation procedures, the number of both on and off-site investigations will likely increase again in 2022.

Investigations stemming from complaints were steady this year.[13] Complaints, in addition to prior enforcement, drive unannounced investigations.[14] Unannounced investigations make up almost a third of total investigations.[15]

Overall, inspections revealed that the overwhelming number of inspected facilities are in compliance.[16] Overall compliance in the past six years ranges from 94 – 99%.[17] Air compliance dipped to 94%, which is likely due to the increased use of virtual fly-over inspections, with water and waste compliance remaining steady at 99% and 97%, respectively.[18]

The TCEQ Takes an Incremental Approach to the Use of its Enforcement Tools

For a more in-depth look at the TCEQ’s enforcement process, see The Enforcement Process: From Violations to Actions. The TCEQ, using its penalty policy, uses enforcement as one way to ensure that violators do not come out ahead economically to the disadvantage of those entities that spend substantial resources to comply with the law.”[19] The TCEQ uses step-up enforcement tools, starting with a Notice of Violation (“NOV”). The NOV can lead to a facility coming into compliance, or become the first step in a process that ultimately can result in administrative enforcement, civil enforcement, and/or possible criminal charges . . . .”[20] In 2021, the TCEQ, at the headquarters and regional levels, issued fewer NOVs in total than in prior years (15,745), a change the TCEQ attributes to higher compliance rates” in three areas: (1) Total Coliform rules, (2) Lead and Copper rules, and (3) Petroleum Storage Tank (“PST”) rules.[21] Further, violations by public drinking water systems has decreased, which the TCEQ attributes to extensive outreach, education, training, and technical assistance activities.”[22] However, drinking water-related violations, discussed further below, were higher than other water violations.

Stepping up in the enforcement ladder, in 2021, the TCEQ issued roughly 1,000 administrative orders, or settlements.[23] This was the lowest number of administrative orders achieved in the preceding six years, and also brought in the lowest amount of administrative penalties.[24] Assessed administrative penalties, which include deferred penalties, payable penalties, and Supplemental Environmental Project (“SEP”) costs, came in at $11,662,395, in 2021, which was a $5,500,000 decrease from 2020.[25] SEPs, which are projects meant to benefit the local Texas communities where environmental laws and regulations have been violated,”[26] are at a 6-year high, with SEPs included in nearly 14% of administrative orders.[27] Approved SEPs ranged from projects like wetlands and habitat restoration” to repair on structures or equipment that may be the cause of the violation.”[28] Businesses and governments that are in the enforcement process should consider how investments—through SEPs—may be a worthwhile investment in their local communities.

Stepping out of the administrative context, in 2021, the TCEQ obtained 24 civil judgments with penalties substantially higher than the prior five years.[29] Civil penalties required to be paid under judgments amounted to $16,000,000, which was higher than the sum of the previous five years.[30] The higher number resulted, in part, from a single $10,000,000 judgment.[31] Enforcement of environmental crimes slowed down in 2021, in part, due to the backlog created in the criminal courts during the pandemic.[32] The agency made 8 criminal convictions, which is the lowest number of convictions in five years.[33]

Trends in Media and Industry

The TCEQ issued the highest number of enforcement orders for violations dealing with water, followed by waste, then air.[34] The most frequently cited water violation related to operating practices for public drinking water systems.[35] Most violations were statutory or rule-based violations.[36] No one type of industry was subjected to enforcement more than others, but the three most-frequently cited industries, the recipients of between 13% and 16% of orders, were: (1) gasoline stations with convenience stores; (2) water supply and irrigation systems; and (3) sewage treatment facilities.[37] A larger number of businesses faced enforcement, as compared to the government, with small businesses being subject to administrative orders more than large businesses.[38]

A consistent trend is agency follow up of prior violations and prior enforcement orders. Approximately one quarter of the entities that were issued orders in 2021 had previous enforcement orders or violations in the same area within the past 5 years.[39] Continual follow up to ensure compliance with prior violations is certainly a worthwhile effort.

Self-Audits Are Infrequent

The Environmental, Health, and Safety Audit Privilege Act provides incentives for persons to conduct voluntary audits of their compliance with environmental, health, and safety regulations at regulated facilities, and to implement prompt corrective action.[40] The incentives include an evidentiary privilege for certain information gathered during the audit and immunity from administrative and civil penalties for certain violations voluntarily disclosed as a result of such an audit.[41]

Passing over 2018 data, which was likely low due to Hurricane Harvey, notice of intent to conduct a self-audit is lower than the previous five years.[42] Of those businesses and government entities who conducted self-audits, two thirds disclosed violations.[43] Businesses with previous notices of violation or enforcement orders may consider a self-audit to determine whether an investigation by the agency would reveal compliance with or violation of the statues, rules, and permit conditions that were the subjects of prior enforcement.

A Look Ahead: Be Prepared for Increased Investigations and Swift Enforcement

As the 2021 Enforcement Report lays out—investigations, which may take place with little advance notice, are on the rise. In 2022, Texas businesses can expect further scrutiny, leading to increased inspections and stricter enforcement, as a result of the national prioritization of environmental justice. The Biden-Harris administration’s campaign to secure environmental justice,” has started to take effect. In late March of this year, the U.S. Environmental Protection Agency (“EPA”) issued its 2022-2026 Strategic Plan, which sets forth EPA’s goal of taking decisive action to advance environmental justice and civil rights.”[44] As part of achieving this goal, EPA seeks to strengthen civil rights enforcement in communities overburdened by pollution” by, among other things conduct[ing] affirmative investigations in overburdened communities . . . .” [45] EPA also sees the timeliness and effectiveness of complaint investigations and resolutions,” as part of its goal of strengthening enforcement of civil rights laws, another tool it will use to advance environmental justice.[46]

With this national policy trickling down to the TCEQ as a co-regulator, keep in mind that most investigations are completed at the regional level, so become familiar with your TCEQ regional office. Consider taking advantage of TCEQ resources, including seminars, webinars, and even access to consultants through its confidential EnviroMentor program. Subscribe to TCEQ e-mails to stay on top of rule changes and updates to investigation and enforcement information. Evaluate whether conducting either an informal or formal self-audit to evaluate your facility’s recordkeeping practices, compliance with previous violations, and problem areas, makes sense. Further, contact us for more information about inspection best practices.

[1] See Tex. Water Code § 5.126.
[2] See id.
[3] See id.
[4] Id.
[5] See Tex. Comm. on Envt’l Quality, Annual Enforcement Report, Fiscal Year 2020, at VI, available at: https://​way​back​.archive​-it​.org...; Texas Comm. on Envt’l Quality, Annual Enforcement Report, Fiscal Year 2021, at 2, available at: https://​sto​rymaps​.arcgis​.com/s... (“2021 Enforcement Update”).
[6] See 2021 Enforcement Update at 8.
[7] Id. at 27.
[8] Id. at 28.
[9] Id. at 11; See Tex. Comm. on Envt’l Quality, A Guide to the Tex. Envt’l, Health, and Safety Audit Privilege Act, Nov. 2013, available at: https://​www​.tceq​.texas​.gov/​d​o​w​n​l​o​a​d​s​/​r​u​l​e​s​/​p​u​b​l​i​c​a​t​i​o​n​s​/​r​g​-​1​7​3.pdf, at 11 (“Immunity under Audit Act §10 is from administrative and civil penalties relating to certain self-disclosed violations.”).
[10] 2021 Enforcement Update at 7.
[11] Id. at 8.
[12] Id.
[13] Id. at 9.
[14] Id.
[15] Id.
[16] Id. at 12.
[17] Id.
[18] Id.
[19] Id. at 7.
[20] Id. at 10.
[21] Id.
[22] Id.
[23] Id. at 13.
[24] Id. at 15.
[25] Id. at 15.
[26] Id. at 17.
[27] Id. at 15.
[28] Id. at 17.
[29] Id. at 18.
[30] Id.
[31] Id. (relating to the KMCO Chemical Plant)
[32] Id. at 20.
[33] Id.
[34] Id. at 22.
[35] Id. at 27.
[36] Id. at 28.
[37] Id. at 21, 23.
[38] Id. at 26.
[39] Id. at 24.
[40] See Tex. Health & Safety Code Ann. § 1101.101-.105 (Subchapter C: Privilege); § 1101.151-.158 (Subchapter D: Voluntary Disclosure; Immunity).
[41] Id.
[42] Id. at 11.
[43] Id.
[44] EPA, 2022-2026 Strategic Plan, March 28, 2022, at 22, available at: https://​www​.epa​.gov/​s​y​s​t​e​m/fil...
[45] Id. at 22-23.
[46] Id. at 32.