Local Government Compliance SEPs
House Bill (HB) 2694 in the 82nd Legislature revised the Texas Water Code Section 7.067 to allow the TCEQ discretion to approve a Supplemental Environmental Project that would assist local governments that are respondents in enforcement actions to come into compliance with environmental laws or to remediate the harm caused by those violations.
This type of SEP is called a "Compliance SEP." HB 2694 was effective on September 1, 2011, and the TCEQ now offers this option to qualifying local government respondents.
Definition of a local government:
The statute defines a local government as a school district, county, municipality, junior college district, river authority, water district, or other special district or other political subdivision created under the constitution or a statute of this state.
Qualifying for a Compliance SEP:
A local government respondent may qualify to offset up to 100 percent of an assessed penalty by performing an approved Compliance SEP in settlement of an unresolved enforcement action. During the approval process, the TCEQ will review the following:
- whether the respondent meets the definition of a local government described in Section 7.067, Texas Water Code;
- whether the respondent has the financial ability to pay. Local government respondents will be screened for financial ability to pay using the following screens:
- Uses a Financial Test to demonstrate financial assurance for any TCEQ Program and Compliance Costs plus Penalty < 1% of Total Revenue; or
- Bond Rating: Moody's--higher than Ba; Standard & Poor's or Fitch's –higher than BB+; and Compliance Costs plus Penalty < 1% of Total Revenue; or
- Unrestricted Reserves from General Fund and Enterprise Fund less Penalty less Compliance Cost/Operating Expense> 16.6% (2 months).
An affirmative response on any of the above disqualifies you from qualifying for a Compliance SEP.
A local government that is declined the opportunity to perform a Compliance SEP based on this screening may appeal the determination to the Deputy Director of the Office of Legal Services ("OLS"). If the OLS Deputy accepts the appeal, then OLS staff will work with Office of Administrative Services staff utilizing the Muni-Pay model to make a final determination; and
- if there is a need for corrective action.
The statute requires the TCEQ to ensure that the local government respondent does not systematically avoid compliance through the use of SEPs. So, in addition to assessing the respondent's financial ability to pay the administrative penalty, the ability of the respondent to remediate the harm or come into compliance, and the need for corrective action, an agency investigation must not show that the local government respondent delayed compliance to qualify for a Compliance SEP.
Also, a local government respondent that does not satisfactorily complete a Compliance SEP may become ineligible to perform a future Compliance SEP.
Types of projects that may qualify for a Compliance SEP are those where
- the corrective action can be readily identified;
- the cost of the corrective action can be identified through the use of an estimated line-item budget. A local government respondent will not receive SEP Offset credit for administrative costs. (Administrative costs are defined by the SEP program to be non-direct costs that are not necessary and reasonable for performance of the SEP. Examples would be the operating costs of the respondent organization, salaries for personnel that are already compensated by the respondent organization, or the cost of buildings and rent.); and
- the corrective action can be completed within a specified time period after the effective date of the Agreed Order.
Examples of Compliance SEP proposals are:
- a repair on structures or equipment that may be the cause of the violation.
- remediation of environmental harm, such as a cleanup of a spill.
Compliance SEP Process:
To be considered for a Compliance SEP, a respondent local government must submit a signed custom SEP application to the OLS. If the proposal is conditionally approved by the SEP Coordinator, it must be incorporated in an Agreed Order and receive final approval by the Commission or Executive Director. The Agreed Order will specify the terms of the Compliance SEP.
The local government respondent must agree to report financial and performance information to the TCEQ on an agreed upon schedule.
If the penalty amount assessed for a specific enforcement action is greater than the cost to perform the Compliance SEP, a local government respondent may use the remaining penalty balance, with TCEQ approval, for another SEP.
Want to apply? See more detailed information and forms.