By Hector L. Rivero, President & CEO Texas Chemical Council and Association of Chemical Industry of Texas

If there were ever a year to remind Texans of our state’s water issues, 2011 was it.  During months of drought and heat, our reservoirs and lakes dipped, cities restricted water usage and aging water mains burst. The persistent dry conditions paved the way for a record-breaking number of devastating wildfires across Texas.

The drought was estimated to have caused at least $5.2 billion in losses, and the fires cost billions more in damage. The past summer was the hottest on record and climatologists predict the state has finished the second year of a nine-year drought.

According to a recent draft of Texas’ state water plan, without improvements to our current system, by 2060, more than 80 percent of Texas’ population could lack enough water during a drought. To deal with a population that’s expected to double by then, Texas’ water infrastructure needs $231 billion in upgrades.

Some of those water, sewer, flood-control and conservation projects will be more easily financed because voters approved Proposition 2 back in November.

Smaller government entities that build and maintain our water system (towns, cities, and municipal utility districts) can’t borrow money as cheaply as the mighty state of Texas can. So to help out, the Texas Water Development Board (TWDB) will set up a fund to lend the little entities money at lower rates of interest than they would be able to get on their own.

The cost to Texas taxpayers is virtually nothing because the loan fund – up to $6 billion at any given time – will be financed through state bonds. Those bonds are paid off via loan payments from the smaller water entities, which in turn get their money from local taxes and bill payments.

This also helps cities by creating a revolving fund because they need access to capital without having to ask voters to replenish it every few elections. By keeping the fund under $6 billion, the TWDB won’t need to get it reauthorized at the polls. That certainly helps cities to plan ahead, just like the state has helped veterans gain access to a revolving fund for mortgages and land purchases.

Because Prop 2 passed, Texans will spend more on infrastructure and less on interest. No state tax dollars will be needed, and the local savings will show up in lower water bills.

Since state lawmakers won’t reconvene until January 2013, Lt. Gov. David Dewhurst and House Speaker Joe Straus have assigned “interim charges” to examine important issues this year.

Various committees in the Texas Legislature have begun studying the impact of the drought’s effect on power generation, agriculture and the economy.

Our industry has been asked about how the drought has affected business, and what water conservation initiatives industry employs in their operations that might be considered by Legislature in developing its future water policy.

While the chemical industry uses large volumes of water, most plants return well over 95 percent of the water used to downstream sources; and that water is returned cleaner than when it was captured. Many facilities are located along the Texas coast, so they are often at the end of rivers that provide them with water for their operations. As droughts dry up our state’s rivers, lakes and reservoirs, this impacts the supply of water for cities, agriculture and manufacturers all along a river basin and can often create dire shortages for industrial facilities located downstream.

Without an adequate supply of water, manufacturers would be unable to operate, resulting in significant loss of investment and jobs in many communities.  

Another issue with wide-reaching implications to the chemical industry is the future of “fracking” (or hydraulic fracturing) for natural gas drilling. Key lawmakers are encouraging drilling operators to invoke recycling technologies in their fracking operations.

The chemical industry in Texas is poised for new investment and job growth as a result of abundant new supply of natural gas from previously untapped shale deposits. Further development of shale gas and ethane can promote even greater expansion for our industry, provided sound science is used in any new regulations on gas producers.

Water will be one of the most important public policy issues for decades. It is important that all of us do our part to support conservation, recycling technologies, and sound public policy that will ensure a supply of water for our cities, our agricultural producers, and manufacturing for generations to come.

By Hector L. Rivero, President & CEO, Texas Chemical Council and Association of Chemical Industry of Texas

At issue is the Cross-State Air Pollution Rule (CSAPR), a revised federal regulation aimed at reducing emissions from power plants in 27 states, including Texas.

Under the new rule, Texas utilities must cut sulfur dioxide emissions by 47% from 2010 levels and nitrogen oxide by 8%  by January 2012.  Officials at the Texas Public Utility Commission (PUC) say those rules could lead to rolling blackouts.

The EPA argues that the rule, issued in July 2011, aims to reduce tens of thousands of premature deaths due to asthma attacks and other respiratory ailments by reducing coal plant sulfur dioxide emissions that drift from state to state.

But the state’s power grid would lose significant generation, as electric generating units in the state scale back coal-fired production, which currently accounts for about 40% of electricity production in Texas.

“If those reductions had been in place this year, rolling blackouts would have been a certainty during the summer,” said Trip Doggett, CEO of the Electric Reliability Council of Texas (ERCOT), which operates the power grid.

There is also a very good chance that Texans will have to pay more for electricity.  Providers will have to buy cleaner-burning coal, make system upgrades and trade for emission credits.  Some plants will switch to more expensive natural gas generation.

Retrofitting and rebuilding power plants for tighter air pollution standards normally takes three to five years.  That’s been compressed into an impossible time frame, state and company officials have repeatedly said.

Steven Miller, CEO of the American Coalition for Clean Coal Electricity, warns of job losses nationwide totaling 1.4 million over the next eight years and a 23% jump in electricity rates in states dependent on coal-fired generation.

Texas Targeted?

In writing the CSAPR rules, EPA officials claimed that Texas was treated no differently from any other state, saying that Texas had the same opportunity to provide comments on the rule proposed as other states.

But the facts tell a different story: Texas was included in two significant portions of the final rule without the required legal notification.  For those two portions of the rule, every other state was provided an emission budget and a detailed rationale for its inclusion – Texas was not.

And the EPA has given members of Congress and the news media the impression that Texas is being a bad neighbor, causing many areas of the country to experience poor air quality.

Again, the facts are not on their side: EPA’s justification for including Texas in this rule lies with linkages to monitors in Granite City, Illinois (more than 500 miles away), Baton Rouge, Louisiana and Allegan, Michigan.  All of those out-of-state monitors that EPA claims are suffering from detrimental impacts due to Texas emissions are in attainment with the pollutants EPA is regulating under CSAPR.

Texas Commission on Environmental Quality (TCEQ) Chairman Bryan W. Shaw recently wrote “these regulations have vast economic effects, not limited to the direct energy generation costs that will be felt by every energy consumer, but also through the indirect effects of higher costs associated with the cost of manufacturing goods, and regrettably, the potential for lost jobs, as all sectors struggle to absorb these costs."

Shaw continued: “Under average conditions, the potential generation loss in Texas caused by this rule will have real impacts to real people.  Should Texas face another sweltering summer like this past one, there is every reason to worry about loss of life.”

On behalf of the State of Texas, Attorney General Greg Abbott has asked an appeals court in Washington D.C. to halt implementation of the proposed rule.  But unless stopped by pending litigation or presidential order, the new CSAPR regulation threatens Texas and its citizens with rolling blackouts and higher electricity prices.