TEAC
DOE
EPA
Texas Energy Advisory Council
Austin, Texas 78701
United States
Department of
Energy
United States
Environmental Protection
Agency
Office of Technology
Impacts
Washington DC 20545
Office of Energy, Minerals, and
Industry
Washington DC 20460
i
EPA-600/7-79-111b
May 1979
Integrated
Assessment of
Texas Lignite
Development
Volume II. Policy
Analyses
Interagency
Energy/Environment
R&D Program
Report
EPA/600/7-79/lllb
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RESEARCH REPORTING SERIES
Research reports of the Office of Research and Development, U.S. Environmental
Protection Agency, have been grouped into nine series. These nine broad cate-
gories were established to facilitate further development and application of en-
vironmental technology. Elimination of traditional grouping was consciously
planned to foster technology transfer and a maximum interface in related fields.
The nine series are:
1. Environmental Health Effects Research
2. Environmental Protection Technology
3. Ecological Research
4. Environmental Monitoring
5. Socioeconomic Environmental Studies
6. Scientific and Technical Assessment Reports (STAR)
7. Interagency Energy-Environment Research and Development
8. "Special" Reports
9. Miscellaneous Reports
This report has been assigned to the INTERAGENCY ENERGY-ENVIRONMENT
RESEARCH AND DEVELOPMENT series. Reports in this series result from the
effort funded under the 17-agency Federal Energy/Environment Research and
Development Program. These studies relate to EPA's mission to protect the public
health and welfare from adverse effects of pollutants associated with energy sys-
tems. The goal of the Program is to assure the rapid development of domestic
energy supplies in an environmentally-compatible manner by providing the nec-
essary environmental data and control technology. Investigations include analy-
ses of the transport of energy-related p^lutants and their health and ecological
effects; assessmWiW^iraffa development of, control technologies for energy
systems; and integrated assessments of a wide range of energy-related environ-
mental issues.
This document is available to the public through the National Technical Informa-
tion Service, Springfield, Virginia 22161.
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AN INTEGRATED ASSESSMENT OF TEXAS LIGNITE DEVELOPMENT
VOLUME II - POLICY ANALYSIS
J. C. Lacy - Project Director
R. J. Davis - Policy
F. H. Sheffield - Policy
R. L. Leonard - Scenario Development
J. R. Stewart - Air
A. P. Covar - Water
D. D. Harner - Socioeconimcs
0. W. Hargrove - Engineering
M. L. Wilson - Program Manager
April, 1979
Prepared for:
TEXAS ENERGY ADVISORY COUNCIL
Energy Development Fund
Project #L-4-7
Project Officer: David White
Office of Research and Development
U.S. Environmental Protection Agency
EPA Grant No. R806359-01
Project Officer: Paul Schwengels
Office of Environment
U.S. Department of Energy
Interagency Agreement DOE EE-78-A-28-3286
Project Officer: F. Jerome Hinkle
L
ir.5.:
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FOREWORD
Recent years have witnessed increasing awareness of the declining
availability of our most widely used energy sources - oil and natural gas -
accompanied by sharp increases in price. Both direct government policy
and the market price mechanism are now operating to stimulate a shift away
from oil and natural gas to other fuels wherever possible. One area in which
this shift is likely to be especially pronounced is the Gulf Coast. There,
massive electric utility and industrial capacity is fueled by oil and nat-
ural gas which have historically been locally plentiful. Assuming this
shift continues, other fuels will be required to power both new and existing
sources. One promising candidate to fill much of the emerging energy gap
in the Gulf Coast region over the near and medium term is lignite which
exists in the same general region and appears to be very competitive econo-
mically. There are, however, significantly different and more serious en-
vironmental consequences associated with extraction, transportation, and
utilization of large quantities of lignite than is the case for oil and
natural gas.
Thus, this study was conceived as a timely first attempt at defining
and analyzing the consequences and constraints associated with the potential
extensive use of lignite in Texas (which comprises a major portion of the
region in question), and the public policy options available for managing
this development. A notable feature of this research effort has been its
cooperative interagency character. It has been a valuable experience in
federal/state research cooperation between the Department of Energy (DOE)
and the Environmental Protection Agency (EPA), two federal agencies for
which cooperation is essential in this sensitive policy area, and the Texas
Energy Advisory Council, an agency of the State of Texas. In addition,
active involvement of the DOE and EPA regional offices was incorporated
into the design and management of the study. Efforts required to establish
this complex structure were amply compensated for by the range of viewpoints
and experience brought into the research design.
The study has been conducted under demanding constraints of both
funds and time. The time constraint has been an especially difficult one.
From the study's inception, it was agreed that major users to whom this
study would be directed were state and local policy makers (although appro-
priate elements of the federal government, including regional offices, are
considered to be major users as well). In that context it was considered
essential that the study results be available to -the 1979 session of the
Texas State Legislature (which meets once every two years). Consequently,
only eight months were available to complete this research, limiting the
level of detail at which lignite development issues could be examined.
A significant decision made early in the study's planning was to
emphasize the aggregate, regional impacts rather than the specific impacts
associated with a single mine or power plant. This decision was based on
two primary factors. First, because of its geologic and geographic distri-
bution, lignite's development will occur over a broad region of Texas rather
than be concentrated in a few limited areas. As such, it was felt that an
analysis of the regional impacts of lignite development might yield valuable
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information not recognized at the level of an individual site. Second, the
attempt to hypothetically site future plants at a more detailed geographic
level was too complex a task to be completed in a credible manner within the
constraints of the study.
Given this perspective, the study team has done an excellent job of
analyzing a number of constraints to and consequences of lignite development
at the regional level and has pointed out many potential problems which
deserve examination at a finer level of detail. Many environmental problems
do not become apparent in an analysis at the regional level of aggregation
although their cumulative impacts may be substantial. This study should,
therefore, be viewed as a "first cut" overview of the issues associated with
Texas lignite development. A finer grained analysis is still required in
future research studies as well as through the permitting process.
The reader should also be sensitive to the effect of assumptions on
conclusions in a study such as this. It was necessary, of course, to make
assumptions about a wide range of future social and economic conditions in
order to assess the potential impacts of lignite development. Varying these
assumptions could substantially alter the study's conclusions. One clear
example relates to availability of water for lignite development. Assump-
tions were made concerning future municipal and agricultural water demand
and future development of dams and other measures to augment water supply.
Given these assumptions, water availability does not appear to pose a signif-
icant constraint to lignite development in most areas of the lignite belt.
Other assumptions, however, could have resulted in quite different conclu-
sions. It was not possible within the limits of the study to examine the
sensitivity of conclusions to variations in many such assumptions. The
reader should, therefore, be aware of the context of assumptions in which
these conclusions were drawn and the resulting limits on their predictive
validity.
The project team, put together by the Radian Corporation, is to be con-
gratulated for producing a thought-provoking technical and policy analysis
report. In addition, special thanks are due to all members of the review
panel and to Bill Honker and Mike Gibson of EPA's Dallas Regional Office and
Lila Williams of DOE's Dallas Regional Office for unselfish commitments of
time and experience to the project.
Paul Schwengels, Project Officer Jerry Hlnkle, Project Officer
Office of Environmental Engineering Division of Environment
and Technology Department of Energy
Environmental Protection Agency
David M. White, Project Officer
Texas Energy Advisory Council
ii
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READER'S GUIDE
This Integrated Assessment of Texas Lignite Development was performed
by the Radian Corporation of Austin, Texas, for the Texas Energy Advisory
Council. Joint sponsors of the project, with TEAC, are the U.S. Environ-
mental Protection Agency and the U.S. Department of Energy.
The report is divided into sections, as follows:
VOLUME I - Technical Analysis
Chapter I - Potential Use of Solid Fossil Fuels
Chapter II - Lignite Development Scenario
Chapter III - Siting Constraints
Chapter IV - Environmental and Socioeconomic
Impacts
VOLUME II - Policy Analysis
Chapter V - Policy Analysis
VOLUME III - Technical Working Papers
The organization of the first two volumes of the report follows the
sequence of tasks performed in the analysis. Thus, the material in the
later chapters is developed from work presented in the earlier chapters.
Recognizing however, that most readers will not be equally interested in
all of the report's contents, it has been organized for "skipping".
Each of the first four chapters begins with an abstract, summarizing
the topics to be discussed. The technical presentation that follows is
subdivided into major subsections, each prefaced by a brief summary. The
technical presentation is followed by a summary statement of key policy
issues arising from the analysis, which will be discussed subsequently in
Chapter V. Finally, major data gaps and recommendations for further
research are listed, again in summary form. (Chapters III and IV are
organized roughly by disciplinary area, with research recommendations
at the end of each major section.) Each chapter is followed by its
own list of references.
Chapter V contains an analysis of the eighteen policy issues identi-
fied in the first four chapters. Each discussion stands alone, and con-
sists of a summary statement of the issue, a table comparing the attri-
butes of alternative actions or policy options, and a short explanatory
text. The "meat" of the analysis is in the tables. A final section of
Chapter V discusses several underlying issues bearing on lignite develop-
ment.
iii
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Volume III contains a number of technical working papers developed
midway through the research project to provide background information on
specific areas. The working papers have not been edited or extensively
reviewed prior to printing and may contain typographical and informational
errors. They do/ however, provide summaries of the information which was
readily available to the project at the time they were prepared on speci-
fic aspects of Texas lignite development. A limited number of these
volumes have been printed and will be made available on request from
David White, Texas Energy Advisory Council, 7703 North Lamar, Austin,
Texas 78757.
A reader wishing to get an overview of the report before deciding
which sections to read in detail is advised to begin with Volume I, by
reading the abstracts for each chapter, and the summaries of each major
section. Then, a brief glance at the summary statements of the issues
presented in Chapter V will acquaint the reader with the scope of the
policy analysis portion of the study.
IV
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ACKNOWLEDGEMENTS
In addition to the authors listed on the title page, a
great many people gave assistance in the preparation, review, and
production of this report. The heartiest thanks are due to these
people from the authors, and it is with pleasure that we acknowl-
edge the contributions of these individuals.
The conduct of the study was overseen by two groups:
an Overview Committee representing the three funding agencies,
and a Review Panel representing various parties of interest to
lignite development, assembled to advise and comment on the tech-
nical aspects of the work.
The Overview Committee served to steer the overall
direction of the study, and consisted of the following individuals
Mr. David M. White
Texas Energy Advisory Council
Austin, Texas
Mr. Paul Schwengels
Environmental Protection Agency
Office of Research and Development
Washington, D.C.
Mr. Michael Gibson
Environmental Protection Agency
Region VI
Dallas, Texas
Ms. Lila Williams
Department of Energy
Region VI
Dallas, Texas
Mr. William Honker
Environmental Protection Agency
Region VI
Dallas, Texas
The Review Panel consisted of an invited group of tech-
nical experts, interest group representatives, industrial and
acedemic personnel, and government agencies involved in lignite
development in Texas. This group reviewed the draft reports pro-
duced by the Radian study team, and provided expert guidance and
v
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suggestions. The present report strongly reflects the valuable
contributions of this group, as interpreted by the Radian staff
Panel members are not, however, responsible for the contents of
the final report nor does it always represent a consensus among
the group.
The following people participated on the Review Panel,
or sent deputies:
Dr. William Avera
Public Utility Commission
Austin, Texas
Dr. Hal B. H. Cooper
Civil Engineering Department
University of Texas at Austin
Austin, Texas
Mr. Hugh Davis
Heart of Texas Council of Government
Waco, Texas
Dr. Richard M. Davis
Oak Ridge National Laboratory
Oak Ridge, Tennessee
Dr. William Fisher
Bureau of Economic Geology
University of Texas at Austin
Austin, Texas
Mr. Steve Frishman
Texas Environmental Coalition
Port Aransas, Texas
Dr. Charles Groat
Louisiana Geological Survey
Baton Rouge, Louisiana
Dr. Herb Grubb
Texas Department of Water Resources
Austin, Texas
Dr. George Hardy
Bates School of Law
University of Houston
Houston, Texas
Mr. Joe Harris
County and Rural Services Division
Texas Department of Community Affairs
Austin, Texas
vi
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Mr. Howard Hickman
House Energy Resources Committee
Austin, Texas
Ms. Bobette Higgins
Texas Environmental Coalition
Denton, Texas
Mr. Tom Hill
Gas Utilities Division
Texas Railroad Commission
Austin, Texas
Dr. Jack Hopper
Utility Rate Consultant
Austin, Texas
Mrs. Laura Keever
League of Women Voters of Texas
Houston, Texas
Dr. Sally Lopreato
Center for Energy Studies
University of Texas at Austin
Austin, Texas
Mr. Mike Marshall
Ozark Regional Commission
Little Rock, Arkansas
Mr. Clifford R. Miercort
North American Coal Corporation
Dallas, Texas
Mr. Joe G. Moore, Jr.
Environmental Science Program
University of Texas at Dallas
Richardson, Texas
Mr. Steve Naeve
Houston Lighting & Power
Houston, Texas
Mr. Mike Plaster
Legislative Aide to Rep. Bill Keese
Austin, Texas
vii
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Dr. Louis R. Roberts
Texas Air Control Board
Austin, Texas
Mr. Pieter Schienkkan
Attorney General's Office
Austin, Texas
Dr. Michael Schwartz
Shell Development Company
Houston, Texas
Mr. Elof Soderberg
Lower Colorado River Authority
Austin, Texas
Mr. Peter Szabo
Petroleum and Minerals Department
Republic National Bank
Dallas, Texas
Mr. Richard L. White
Texas Utilities Generating Company
Fairfield, Texas
In addition, special thanks are due to the following
individuals for contributing their time as well as technical
materials to the project:
Mr. William H. Hoffman
Texas Department of Water Resources
Mr. Charles Gilliam
Texas Department of Water Resources
Mr. Ron Freeman
Texas Department of Water Resources
Mr. Ray Newton
Texas Department of Water Resources
Mr. Everett Rowland
Texas Department of Water Resources
Mr. Jay Snow
Texas Department of Water Resources
Mr. Dennis Haverlah
Texas Air Control Board
viii
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Dr. Ronald D. Lacewell
Texas Water Resources Institute
Texas A&M University
Dr. Spencer R. Baen
Center for Energy and Mineral Resources
Texas A&M University
Dr. Kurt J. Irgolic
Center for Energy & Mineral Resources
Texas A&M University
Dr. William R. Kaiser
Bureau of Economic Geology
The University of Texas at Austin
Dr. Martha Gilliland
Energy Policy Studies, Inc.,
El Paso, Texas
Dr. Marian Blissett
LBJ School of Public Affairs
The University of Texas at Austin
The following present or former members of the Radian
staff also contributed to the conduct of the study: Koren
Sherrill, Faith George, Bill Hamilton, Bill Thomas, Bill Menzies,
David Malish, Jude McMurry, Kirk Holland, Ann St.Glair, Laura
Dennison, Bill Coltharp, Tom Grimshaw, Gordon Page, Jim Norton,
Bill Corbett, and Biff Jones. Lindy Vaughan prepared the graphics
Special acknowledgement is due to David White, TEAC
Project Office, for technical assistance, advice, and ongoing
participation in all aspects of the study.
Finally, the greatest appreciation is due to Mrs.
Mildred Massa, for organizing and supervising secretarial support,
and for her personal dedication to the project.
IX
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ACRONYMS AND ABBREVIATIONS
CAA - Clean Air Act of 1977
DoE - Department of Energy
EPA - Environmental Protection Agency
ERA - Economic Regulatory Administration
(Department of Energy)
FUA - Fuel Use Act (Portion of National
Energy Act of 1978)
HC - Hydrocarbons
LNG - Liquefied Natural Gas
MBFC - Mandatory Boiler-Fuel Conversion
NAA - Non-Attainment Area
NAAQS - National Ambient Air Quality Standards
NEA - National Energy Act of 1978
NOX - Oxides of Nitrogen
NSPS - New Source Performance Standards
O&M - Operation and Maintenance
PAN - Peroxy Acyl Nitrate
PSD - Prevention of Significant Deterioration
PUG - Public Utility Commission (Texas)
RD&D - Research, Development & Demonstration
RRC - Railroad Commission (Texas)
SIP - State Implementation Plan
S02 - Sulfur Dioxide
TACB - Texas Air Control Board
TDWR - Texas Department of Water Resources
208 - Section 208 of the Water Pollution
Control Act Amendments of 1977,
mandating areawide wastewater
management
316a - Section 316a of the Water Pollution
Control Act Amendments of 1977,
dealing with variance procedures
for thermal discharges
xi
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CHAPTER IV: ENVIRONMENTAL AND SOCIOECONOMIC
IMPACTS OF THE DEVELOPMENT SCENARIO
TABLE OF CONTENTS
Page
ABSTRACT 233
1.0 INTRODUCTION AND STATEMENT OF PURPOSE 235
2.0 AIR QUALITY IMPACTS OF LIGNITE DEVELOPMENT. ... 237
2.1 Emissions from Lignite Development 238
2.1.1 Emissions from Mining 238
2.1.2 Emissions from Combustion 239
2.1.2.1 Potential Emissions of
Criteria Pollutants from
Single Sources 239
2.1.2.2 Control Technology for
Criteria Pollutants 240
2.1.3 Emissions from Gasification
Processes 243
2.1.4 Trace Elements and Radioactive
Emissions 243
2.1.5 Secondary Impacts 246
2.2 Projected Emissions of Criteria Pollutants . 246
2.3 Potential Long-Term Impacts of Increased
Coal and Lignite Burning 250
2.3.1 Downwind Fate of Power Plant
Emissions 250
2.3.2 Potential Ecological and Health
Impacts of Power Plant Emissions. . . 254
2.4 Research Needs 256
XII
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TABLE OF CONTENTS (Continued)
Page
3.0 IMPACTS OF LIGNITE-RELATED SOLID WASTES 257
3.1 Sources of Solid Waste 258
3.1.1 Ash 258
3.1.2 Sulfur Removal Residues 259
»
3.2 Solid Waste Characteristics 261
3.2.1 Ash and Sludge Composition 261
3.2.2 Definition of "Hazardous Waste"
under RCRA 262
3.3 Potential Volumes of Solid Waste Produced
in Texas 265
3.3.1 Waste Production from Individual
Sources 265
3.3.2 Cumulative Waste Production Levels 267
3.4 Alternative Disposal Methods and Practices- 270
3.4.1 Waste Collection and Transport . . 270
3.4.2 Disposal Options 271
3.5 Potential Environmental Impacts of Solid
Waste Disposal 273
3.5.1 Leaching Conditions 273
3.5.2 Groundwater Contamination 274
3.5.3 Groundwater Usage 275
3.6 Environmental Limitations on Suitable
Waste-Disposal Sites 276
3.7 Other Wastes 278
3.8 Research Needs , 279
Xlll
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TABLE OF CONTENTS (Continued)
Page
4.0 IMPACTS ON SURFACE AND GROUNDWATER QUANTITIES. . .281
4.1 Consumptive Water Use by the Development
Scenario 282
4.2 Impacts of Water Development 283
*
4.2.1 Impacts of Surface Water Development .284
4.2.2 Impacts of Water Rights Transfer . . .285
4.2.3 Impacts of Increased Use of Ground-
water 285
4.3 Impacts of Consumptive Water Use 286
4.3.1 Navigation 287
4.3.2 Groundwater Recharge 289
4.3.3 Stream Ecology 290
4.3.4 Freshwater Inflow to Bays and
Estuaries 290
4.3.5 Waste Assimilative Capacity 291
4.4 Impacts on Groundwater 295
4.4.1 Groundwater Consumption 295
4.4.2 Groundwater Recharge Impacts 296
4.5 Research Needs 298
5.0 IMPACTS ON SURFACE AND GROUNDWATER QUALITY . . . .299
5.1 Surface Water Quality 300
5.1.1 Point Source Effluents 300
5.1.2 Non-Point Sources 305
5.1.3 Effects on Assimilative Capacity . , .306
5.1.4 Effect of TDS Control on Water
Requirements 307
XIV
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TABLE OF CONTENTS (Continued)
Page
5.2 Groundwater Quality 308
5.3 Research Needs 310
6.0 IMPACTS ON FISH AND WILDLIFE 311
6.1 Terrestrial Ecosystems 312
6.1.1 Extent of Habitat Disturbance .... 312
6.1.2 Reclamation in Perspective 314
6.1.3 Regionwide Trends in Habitat
Quality 315
6.2 Aquatic Ecosystems 317
6.2.1 Types of Impacts on Aquatic
Ecosystems 317
6.2.2 Effects of Flow Depletion ...... 319
6.2.3 Trends in Aquatic Habitat Quality . 319
6.3 Research Needs 320
7.0 SOCIOECONOMIC IMPACTS 321
7.1 Community-Level Impacts 322
7.1.1 General Overview 322
7.1.2 Impacts Experienced by Communities- 326
7.1.2.1 Housing Demand 326
7.1.2.2 Public Services and
Facilities . 327
7.1.2.3 Local Government Response- 329
7.1.2.4 "Oldtimers" vs.
"Newcomers" 332
7.1.3 A Boom Town Simulation 333
xv
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TABLE OF CONTENTS (Continued)
Page
7.1.4 The Mount Pleasant Experience:
A Case Study 337
7.1.5 Variability in Community Impacts. . . 340
7.2 Regional and Subregional Impacts 341
7.2.1 Subregional Development Patterns. . . 342
7.2.2 Measures of Subregional Impact. . . . 343
7.2.3 Factors Mitigating the Extent of
Subregional Impact 345
7.2.4 Larger Implications of Regional
and Subregional Growth Patterns . . . 347
7.2.5 Implications for Planning 348
7.3 Research Needs 349
8.0 POLICY ISSUES RELATED TO IMPACTS 351
8.1 Issues Related to Finding Solutions for
Developing Problems 351
8.2 Issues Related to Administering Existing
Policy 356
REFERENCES 359
xvi
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CHAPTER V: POLICY ANALYSIS
TABLE OF CONTENTS
Page
ABSTRACT 365
1.0 INTRODUCTION. 367
2.0 CONTEXT-SETTING ISSUES 371
2.1 Implementation of Mandatory Boiler Fuel
Conversion 375
2.1.1 Summary and Conclusions 375
2.1.1.1 Alternatives to MBFC .... 375
2.1.1.2 Resolving Conflicts Be-
tween MBFC and Clean-
Air Policy 376
2.1.1.3 Economic Efficiency of
Fuel Allocation Under
MBFC 377
2.1.1.4 Texas Options and Concerns . 378
2.1.2 Background and Context 379
2.1.3 MBFC and Clean Air 381
2.1.4 Economic Efficiency & Administra-
tion of MBFC 384
2.1.5 Alternatives to MBFC 386
2.1.5.1 Common Features , . 389
2.1.5.2 Cost Control 390
2.1.5.3 Market Allocation
Mechanisms , , 392
xvi i
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TABLE OF CONTENTS (Continued)
Page
2.1.5.4 Import Quotas 393
2.1.5.5 Reduction of Fossil Fuel
Demand 393
2.1.6 Alternative Methods of Reducing
Conflicts Between MBFC and Clean
Air Policies 394
2.1.7 Alternatives for Administering MBFC
with Respect to Economic Efficiency . 398
2.1.8 Potential Roles for Texas 402
2.2 Ambient Ozone Levels 407
2.3 Control of Atmospheric Sulfates 415
2.4 Solid Waste 421
3.0 RESOURCE MANAGEMENT ISSUES 425
3.1 Water Supply 431
3.1.1 Surface Water Development 431
3.1.2 Equity and Efficiency in Water
Allocation 435
3.1.3 Water Conservation 437
3.1.4 Leverage on the Water Supply Issue. . 438
3.2 Consumptive Water Use 443
3.3 Lignite Reserve Depletion 449
3.3.1 Severance Tax on Lignite 451
3.3.2 Encouragement of Mexican Oil and
Gas Imports 452
3.3.3 Encouragement of Energy Conservation. 453
3.3.4 Encouragement of Increased Western
Coal Use 454
xviii
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TABLE OF CONTENTS (Continued)
Page
3.3.5 Removal of Impediments to Non-
Fossil Energy Sources- 455
3.4 Lignite Research, Development and
Demonstration Priorities 459
3.5 Export of Lignite-Generated Energy
Through Electric Grid System 465
4.0 RESPONSE ISSUES 467
4.1 Response Issues Related to Possible
Need for New Policies 469
4.1.1 Infrastructure Financing 473
4.1.2 Flow Reduction and Water Quality . . 479
4.1.3 Ecological Impacts of Mining .... 485
4.1.4 Control of Boom-Town Growth 491
4.1.5 Regionwide Costs and Benefits- . - 495
4.1.5.1 Alternatives for Cost-
Spreading 496
4.1.5.2 Alternatives for Benefit-
Sharing 497
4.1.6 Aesthetics and Attitudes Toward
Growth 503
4.2 Response Issues Related to Implementing
Existing Policy 507
4.2.1 State Surface Mining Program
Approval 511
4.2.2 Land Unsuitable for Mining 517
4.2.3 Multi-Agency Permit Review 525
xix
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TABLE OF CONTENTS (Continued)
Page
5.0 INTEGRATING PERSPECTIVES ON POLICY ISSUES. ... 529
5.1 Underlying Issues 529
5.1.1 Limitations in Environmental
Review 530
5.1.2 Internalizing Environmental Costs. . 531
5.1.3 Long-Range Planning Under Condi-
tions of Uncertainty 534
5.1.4 Equity versus Efficiency in Re-
source Allocation 536
REFERENCES CITED: CHAPTER V 539
xx
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CHAPTER I: POTENTIAL USE OF SOLID FOSSIL FUELS
LIST OF TABLES
Number Title Page
3-1 Status of Future Nuclear Plants to Supply Texas. . 20
3-2 Basic Provisions of the Federal Fuel Use Act ... 25
4-1 Alternative Choices for Firing New Industrial
Boilers 32
4-2 Summary of Annualized Operating Costs for Alter-
native Energy Pathways for New Industrial Boilers. 34
5-1 Summary of Annualized Operating Costs .for Alter-
native Energy Pathways for New and Existing
Utility Boilers 51
6-1 Derivation of Solid Fossil Fuel Requirements ... 59
6-2 Sensitivity of Solid Fossil Fuel Requirements in
the Year 2000 to Alternative Assumptions 59
xxi
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CHAPTER II: LIGNITE DEVELOPMENT SCENARIO
LIST OF TABLES
Number Title Page
2-1 Alternative Fuel Costs 92
3-1 Steps Taken to Derive Subregional Lignite Develop-
ment Scenario 100
3-2 Lignite "Resource Units" Held by Lessor Groups. . 102
3-3 Texas Coal and Lignite Power Plants 103
3-4 Coal and Lignite Consumption by Texas Electric
Utilities 109
3-5 Existing & Planned Texas Industrial Coal/Lignite
Use 110
3-6 Potential Requirements for Lignite Commitment . . 112
3-7 Sensitivity to Alternative Assumptions of Lignite
Commitment by the Year 2000 113
3-8 Coal and Lignite Commitments in the Year 2000, by
Subregion 119
3-9 Concentration of Lease Ownership 119
xxii
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CHAPTER III: SITING CONSTRAINTS
LIST OF TABLES
Number Title Page
2-1 Industrialization of the Lignite Belt: Pro's
and Con's 139
3-1 Water Supply & Demand Summary Analysis, in
Thousands of Acre-Feet, Neches River Basin .... 151
3-2 TDWR Supply-Demand for the Year 2000, Showing
Non-Firm Supply 152
3-3 Typical Plant Water Requirements 154
3-4 Year-2000 Steam-Electric Water Demand Estimates
by Subregion 155
3-5 Year-2000 Steam-Electric Water Supply/Demand
Estimates by Subregion 156
3-6 Critical Basins 166
3-7 Estimated S02 Emission Rate for 1500-MWe Electric
Generating Stations, Firing Lignite of Various
Grades 181
3-8 PSD Classifications 182
3-9 Significance Level for PSD Analysis 184
3-10 Design Parameters for 1500-MWe Electrical Generat-
ing Stations Used in Air Quality Modelling .... 190
3-11 Comparison of PSD Implementation Strategies. . . . 205
3-12 Siting Constraints in Flood Prone Areas 208
3-13 Extent of ETJ in Texas 213
3-14 Overall Substrate Capability as a Siting Factor,
Defined by Construction Suitability and Permea-
bility 216
xxiii
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CHAPTER IV: ENVIRONMENTAL AND SOCIOECONOMIC
IMPACTS OF THE DEVELOPMENT SCENARIO
LIST OF TABLES
Number Title Page
2-1 Emissions from a Hypothetical 1500-MWe Station
Firing a Typical Texas Lignite from the Wilcox
Group 240
2-2 Air Emissions of Criteria Pollutants from a
250 MMscfd Lurgi Plant 244
2-3 The 1976 Ambient Air Quality Concentrations in
the Urban Areas Around the Lignite Belt 246
2-4 Coal and Lignite Combustion in the Study Area:
Estimated 1985 & 2000 S02 Emissions 248
2-5 Coal and Lignite Combustion in the Study Area:
Estimated 1985 & 2000 NOX Emissions 248
2-6 Coal and Lignite Combustion in the Study Area:
Estimated 1985 & 2000 Particulate Emissions. . . . 249
3-1 Ash Content of Selected Texas Lignites 261
3-2 Maximum Concentrations of Contaminants Allowed
Under NIPDWS and RCRA 264
3-3 Comparative Volumes of Solid Waste Produced by
Coal an4 Lignite Combustion 266
3-4 Industrial and Utility Solid Waste Volumes by
Study Area Subregion 267
3-5 Cumulative Land Commitments for Solid Waste
Disposal by Study Area Subregion 268
4-1 Subregional Water Consumption by Lignite- and
Coal-Fired Power Plant Development in Year 2000. . 283
4-2 Subregional Flow Reduction Due to New Power Pro-
duction, Year 2000 287
4-3 Critical Low Flows for Selected Texas Rivers . . . 293
xxiv
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LIST OF TABLES (continued)
Number Title Page
4-4 East, Central, and Southern Existing and Planned
Steam Electric Power Plants in Texas Using
Groundwater as the Prime Cooling Source 295
5-1 Priority List of Toxic Substances 302
5-2 Comparison of Toxic Control by Selected Tech-
nologies 303
5-3 Plant Data Relating to Water Quality Parameters
for Coal Pile Runoff 306
7-1 Project Characteristics 325
xxv
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CHAPTER V: POLICY ANALYSIS
LIST OF TABLES
Number Title Page
1-1 Summary of Policy Issues 367
2-1 Reduce Dependence on Foreign Energy Imports . . . 387
2-2 Find a Compromise Between MBFC & Clean Air Goals. 395
2-3 Administer MBFC with Respect to Economic Ef-
ficiency of Allowable Gas & Oil Use 399
2-4 Ambient Ozone Levels 406
2-5 Control of Atmospheric Sulfates 412
2-6 Solid Waste Disposal 420
3-1 Water Supply 428
3-2 Consumptive Water Use 442
3-3 Lignite Reserve Depletion 448
3-4 Lignite RD&D Priorities 458
3-5 Utility Interconnection 464
4-1.1 Infrastructure Financing 472
4-1.2 Flow Reduction and Water Quality 478
4-1.3 Wildlife Impacts of Reclamation 484
4-1.4 Control of Boom-Town Growth 490
4-1.5 Regionwide Costs and Benefits 494
4-1.6 Aesthetics and Attitudes Toward Growth 502
4-2.1 Approval of State Surface Mining Program 510
4-2.2 Lands Unsuitable for Mining 516
4-2.3 Multi-Agency Permit Review 522
xxvi
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CHAPTER I: POTENTIAL USE OF SOLID FOSSIL FUELS
LIST OF FIGURES
Number Title Page
2-1 Areas Out of Compliance with National Ambient
Air Quality Standards for Ozone as of January 1,
1979 8
2-2 Growth Rate in Conventional Energy Demand for
Electric Power Generation 12
2-3 Demand Growth for Conventional Energy in In-
dustry (Excluding Feedstocks) 15
3-1 Energy Use Versus Resource Size 22
3-2 1975 Use of Oil and Gas in Texas 22
4-1 Breakeven Sensitivity to Coal Prices (Midwest
Location, 1980 Startup) 35
4-2 Breakeven Curves (Midwestern Location,
1980 Startup) 37
»
4-3 Breakeven Sensitvity to Capital Costs (Midwest
Location, 1980 Start up, Coal Versus Oil) 39
6-1 Fuel Mixes for Texas - Nominal Case 58
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CHAPTER II: LIGNITE DEVELOPMENT SCENARIO
LIST OF FIGURES
Number Title Page
1-1 Effect of Reserve Size on Rate of Increase in
Cost of Production 86
1-2 Strippable Lignite Reserves by Subregion 88
3-1 Existing and Planned Coal and Lignite Power
Plants in Texas 108
xxvi11
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CHAPTER III: SITING CONSTRAINTS
LIST OF FIGURES
Number Title
1-1 Study Area Subregions Showing Existing and
Planned Power Plants 132
2-1 Growth Centers, in Relation to Lignite Deposits. . 137
3-1 Water Availability as a Constraining Factor in
Siting 159
3-2 Critical Surface Supply 161
3-3 Year 2000 Critical Basin Segments 165
3-4 Surface Water Use 170
3-5 Groundwater Use 176
3-6 Area of Impact (Radius & Isopleth Method) .... 186
3-7 Hypothetical "Existing Facilities" Within an
Area (Equally Spaced) 189
3-8 "Proposed Facility" and Area of Impact 192
3-9 Facilities Included in Modeling 192
3-10 Worst-Case Predicted 24-Hour SOz Concentrations
Versus Distance for Hypothetical 1500-MWe Power
Plant 193
3-11 Air Quality Areas . 199
3-12 Flood Prone Areas 212
3-13 Areas Constrained by ETJ Considerations 214
3-14 Construction Suitability as a Constraining Factor
in Siting " 217
3-15 Distance from Lignite 220
4-1 Composite Site Suitability Map Showing Study Area
Subregions , . . 222
xxix
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CHAPTER IV: ENVIRONMENTAL AND SOCIOECONOMIC
IMPACTS OF THE DEVELOPMENT SCENARIO
LIST OF FIGURES
Number Title Page
2-1 Schematic Diagram of Short-Range and Long-Range
Air Quality Impacts from Single and Multiple
Point Sources 252
4-1 Waste Assimilative Capacity of the Brazos River
as a Function of Flow 292
7-1 Population Distribution, 1970 323
7-2a (No Title) 335
7-2b (No Title) 335
7-3 Quasi-Equilibrium (Without Energy Development)
Simulation ..... 336
7-4 Worst Case Boom Town Simulation 336
7-5 Hypothetical Lignite/Coal Facility Construction
By Subregion, 1985-2000 342
xxx
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CHAPTER V: POLICY ANALYSIS
Abstract
The following chapter deals specifically with eighteen
issues arising from the analysis presented in the preceding
four chapters. These issues fall into three groups. The
first contains issues which set the regulatory context into
which lignite development must be fitted. These issues
must be resolved at the federal level. The second group
consists of issues concerning the allocation of resources,
generally resolvable principally by state action. The third
group deals with anticipated problems in dealing with the
impacts of lignite development. It is divided into issues
arising over possible needs for new initiatives to protect
environmental and socioeconomic values, and issues over the
implementation of laws already in place. Alternatives
available to resolve the issues are discussed specifically.
Four key underlying issues that tie together the eighteen
are also identified. These include: limitations in re-
quirements for comprehensive environmental review; the pre-
sent incomplete internalization of the costs of chronic
health impacts, ecological and aesthetic damage; the dif-
ficulty for firms of long-range planning under conditions
of regulatory uncertainty; and the conflict between equity
and economic efficiency in resource allocation.
355
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1.0
INTRODUCTION
The substance of this Chapter is an analytical look
at ways to solve some of the most pressing and obvious problems
related to lignite development in Texas. In- the four Chapters
making up Volume I, key problem areas were evaluated and com-
pared with the availability of institutional mechanisms to cope
with them. In some cases, problems can be foreseen for which
institutional solutions do not exist, or are insufficient. So-
lutions would require policy initiatives at some level of govern-
ment. In other cases, the problem may be in the institutional
machinery itself, as when policies with conflicting objectives
create an economic or environmental impasse. Each of the first
four Chapters closes with a summary statement of policy issues
related to its subject. Table 1-1 lists all the issues so
identified.
TABLE 1-1. SUMMARY OF POLICY ISSUES
Context-Setting Issues
Mandatory Boiler-Fuel Conversion
Ambient Ozone Levels
Atmospheric Sulfate Regulation
Solid Waste Disposal
Resource Management Issues
Water Supply
Consumptive Water Use
Lignite Reserve Depletion
Lignite RD&D Priorities
Utility Interconnection
Response Issues
(Policy Formulation)
Financing Community-Level Infrastructure
Control of Water-Quality Effects of Flow Reduction
Reducing Adverse Impacts of Reclamation on Wildlife
Control of Boom-Town Growth
Equitable Geographic Distribution of Lignite's Costs & Benefits
Control of Aesthetic Degradation
(Policy Implementation)
Approval of State Surface-Mining Program
Identifying Lands Unsuitable for Mining
Coordinating Multi-Agency Permit Review
367
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In this final Chapter, these issues are again taken
up and discussed in detail. The eighteen issues are grouped
roughly according to the nature of their relationship to lig-
nite development. These groups, shown in Table 1-1, consist of:
Context-Setting Issues, resolution of which
must occur principally at the federal level,
and which affects overall rate and scale of
lignite development;
Resource Management Issues, directly or in-
directly affecting the rate and scale of
lignite development, and largely the re-
sponsibility of state government and/or
private industry;
Response Issues, which deal with the solu-
tion of problems attendant upon lignite de-
velopment. This group is further divided
into issues related to filling policy gaps
and issues related to implementing existing
policy.
Each issue is presented as a self-contained unit. A
summary statement of the study finding which underlies the issue,
and the issue itself, is followed by a table which details po-
tential means of resolving it. The tables set forth one or more
objectives which could be considered as guiding principles.
These objectives may reflect the alternative values and goals of
participating parties of interest. Alternative means of meeting
these objectives are set forth, together with specific mechanisms
of implementation. Implications of these alternatives are pre-
sented, as they relate to effectiveness, secondary impacts and
acceptability.
368
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The implementation of a policy of mandatory boiler-
fuel conversion raises perhaps the most complex set of ques-
tions of any of the issues discussed here. Accordingly, it is
given a much more extensive treatment, differing somewhat in
format from that of the other issues.
The discussion of these issues is in no way intended
to recommend any particular action. The analytical effort has
been reviewed and critiqued by a panel of 30 selected representa-
tives of various parties of interest. The intent of soliciting
this review was to help focus this effort on questions of per-
ceived importance, and to provide insight into the type of
analysis most useful to decisionmakers.
369
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370
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2.0
CONTEXT-SETTING ISSUES
No. 1. Mandatory Boiler-Fuel Conversion (MBFC)
How can a balance be struck between the mu-
tually conflicting objectives of clean air,
economic efficiency and equity in fuel dis-
tribution, and import reduction?
No. 2. Ambient Ozone Levels
Should ambient ozone levels be found to be
at or near the National Ambient Air Quality
Standard, how can the state's goals of con-
tinued industrial growth be reconciled with
the federal offsets policy?
No. 3. Control of Atmospheric Sulfates
How can forthcoming federal efforts to con-
trol ambient sulfate levels be directed so
as not to impose an unnecessary restriction
on lignite combustion at the mine mouth?
No. 4. Solid Waste Disposal
Will federal regulations regarding solid
waste disposal adequately address Texas'
needs, especially for aquifer protection,
without severely inhibiting flexibility in
selection of disposal technique?
These four "context-setting issues" all revolve around the develop^
ment and implementation of federal policy. Key decisions will be made at
that level; but a clear statement of Texas' position can be made through the
Texas Congressional delegation and formal lobbying groups. Equally important
is the development of working agreements between state and federal agencies
in the administration of these policies. Resolution of these issues will
affect both the rate and scale of lignite development, and major regionwide
siting patterns. Consequently, they set the stage for most state and local
activities relative to lignite.
371
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372
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CONTEXT-SETTING ISSUE No, 1
Mandatory Boiler"Fuel Conversion
Finding: The increased use of coal and lignite resulting from
mandatory boiler-fuel conversion (MBFC) appears to con-
flict with the goals of clean air policy. Also, the
method of administering MBFC can materially affect the
cost of conversion, both for individual industries and
for the economy overall.
Issue; How can a balance be struck among the objectives of
clean air, economic efficiency of fuel distribution,
and import reduction? In particular, what roles can
Texas play in achieving this balance?
373
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The first of these may be variably effective, but com-
plex market regulations may not result in the allocation of gas
and oil to the most economically efficient uses. Unhampered,
the market mechanism allocates resources efficiently, but may
not reduce imports. Reductions in the world oil price by cartel
action could actually raise import levels. Direct quotas are
potentially effective controls on imports, and concurrent de-
regulation of the domestic market could allocate available fuels
efficiently. To avoid major dislocations leading to fuel alloca-
tion or rationing, quotas might have to be instituted gradually.
Reducing fossil-fuel demand not only reduces import
requirements, it involves none of the air-quality conflicts
unavoidable in the other strategies. Of the various options,
nuclear power offers the only short-term gains. Both conserva-
tion and new technologies require large investments to effect
major reductions. Both because of the cumulative size of the
investment needed and the time it takes to turn over stocks of
capital equipment and housing, these options operate on a longer
time frame. A possible exception might be cogeneration and
improvements in industrial operation and maintenance procedures.
2.1.1.2 Resolving Conflicts Between MBFC and Clean-Air Policy
There are two aspects to the conflict between increased
coal and lignite use and present air-quality policy. First,
there are potential difficulties in fitting large amounts of
mandated coal use under the present PSD and National Ambient Air
Quality Standards. Second, and potentially more difficult, are
possible future interstate conflicts arising over long-distance
pollutant transport. Though not proven, evidence exists to sug-
gest the possibility of issues developing over one state's
emissions pre-empting growth in another state by tying up its
"permittable" air resources. Considering Texas' size, long-
376
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distance transport could become a problem between regions with-
in the state as well.
These potential long-term problems can be avoided en-
tirely only by turning away from fossil fuels to a large extent.
They can be delayed, however, by using the current air quality
control program to reduce both the level of emissions and their
density. These options, however, not only entail increased
costs, they imply siting control over large areas. Under the
proposed regulations for granting exemptions to the Fuel Use
Act, which require alternative sites to be considered, there ex-
ists the potential for ERA to affect siting patterns indirectly.
In so doing, it potentially conflicts with TACB and the PUC.
Thus, balancing MBFC with clean air policy appears to
involve balancing the economic and strategic disadvantage of
foreign fuel dependence against the potential disruptiveness of
growth planning on a large scale. The dilemma could be avoided
by relaxing air quality standards. However, to avoid possible
later issues over long-distance transport, radical revisions of
the concepts of PSD and fixed air quality ceilings would be
needed.
2.1.1.3 Economic Efficiency of Fuel Allocation Under MBFC
The overall economic cost of a MBFC policy can be re-
duced by assuring that the controlled fuels go to the most eco-
nomically efficient uses. The FUA and its proposed regulations,
however, do not explicitly aim at efficient fuel allocation. A
system of marketable entitlements, such as that proposed as an
amendment to Texas Railroad Commission Docket 600, if adopted
at the federal level, could be used to administer set levels of
oil and gas reductions in an economically efficient way. Ef-
ficiency considerations could also be used in evaluating applica-
tions for exemption.
377
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2.1.1.4 Texas Options and Concerns
As a state, Texas can do comparatively little indepen-
dently to alter or replace current federal MBFC policy, although
its public and private interests are expressed by its own Con-
gressional delegation and by various lobbying groups. Under
existing policy, state options are primarily in the supportive
area, easing the economic impacts of the transition to coal and
lignite through tax incentives, utility rate setting, and as-
sistance to firms in obtaining needed front-end capital.
Texas has relatively more options for resolving the
conflicts between MBFC and clean air policy. Here, it is im-
portant to avoid situations which might hamper mine-mouth siting
of lignite-fired facilities. A variety of options exist for
state agencies, in cooperation with ERA, to use emission controls
and PSD management as a means to fit increased coal and lignite
use into the present regulatory framework. Ultimately, however,
such strategies should recognize the potential for future inter-
state issues over long-distance pollutant transport.
Although the state cannot initiate such a move, Texas
would benefit by a change in administration of the Fuel Use Act
that directly recognized the need for economically efficient fuel
allocation.
Over the long term, substitution of non-fossil fuels
for imports appears an attractive strategy, less economically
disruptive than direct controls. Texas can act now to provide
incentives for conservation, cogeneration, and new energy technolo-
gies, although very large effects may not be possible without
the added push of higher prices. Gradual diversification of
the state's energy mix would also stave off long-distance pol-
lutant transport problems, and stretch out the state's supply
of lignite.
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2.1.2 Background and Context
As controversial as the whole idea of mandatory boiler-
fuel conversion has been, it is extremely likely that both the
Fuel Use Act and the regulations now proposed for its imple-
mentation will be subjected to intensive criticism as its
effects began to be felt. Industry observers believe that final
regulations similar to the draft proposed in November may go
quickly into the courts.1 Clear issues of interregional equity
in sharing the costs of conversion are involved, in which Texas
will surely take a part.
The background against which these controversies must
be settled is one of vastly increased world gas and oil reserves
and simultaneously rising U.S. oil imports. With the announcement
of huge discoveries of natural gas in Mexico, and to a lesser
extent in Canada, for which the U.S. is the only available
large-volume customer, the pressure to conserve natural gas as a
finite and dwindling resource is considerably lessened. The
importance of controlling the U.S. balance of payments, as well
as protecting national security in terms of fuel supply, however,
is correspondingly increased.
The original Fuel Use Act was somewhat open-ended.
Designed for an on-going process of administration through
exemptions, it could have been used as a variable valve controlling
the amount of natural gas and oil entering the national fuel mix.
Had the principal goal merely been to conserve limited resources,
exemption-granting could have been geared to respond to perceived
changes in the availability of oil and gas. However, in proposing
the tough stance inherent in the ERA's draft regulations, DOE has
avowedly chosen to aim at oil import reduction. To a degree, it
will be more acceptable to DOE to burn temporary oversupplies of
domestic natural gas in boilers than to replace foreign-derived
fuel oil.2
379
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DOE takes its stand for energy independence, via the
mechanism of MBFC, at a time when the nation is simultaneously
committed to a clean environment and a strong economy with high
levels of employment. While it is possible to reach a balance
between these objectives, it is not possible to maximize all of
them at the same time. The major policy conflicts connected with
implementing the Fuel Use Act, especially between state and
federal activities, arise when various groups attempt to attain
one or more of these objectives at an optimum level.
In Texas, because of the central position of oil and
gas in the state's economy, the conflicts between the three
objectives are particularly intense. Meeting national energy
independence goals may result in Texas' exporting more of its oil
and gas for use outside the state. The result would be a funda-
mental shift in the energy economy of the state, affecting the
cost of doing business in many economic sectors. At the same
time, heavy pressure will be put on the state's limited strippa-
ble lignite. Increased burning of solid fossil fuels adds
greatly to the general loading of environmental pollutants,
and mining brings its own environmental impacts. The extra
cost both of firing coal and lignite and of the required environ-
mental protection strategies ultimately diverts capital from
investments in increased production.
The following discussion outlines the three-way con-
flict between environment, economy, and energy independence as
it affects actions to be taken both in implementing and adjusting
to MBFC in Texas. Conflicts between increased coal use and air
quality are first presented. Then, the economic effects of MBFC
are discussed. Finally, specific alternatives available for
resolving these conflicts are presented and evaluated.
330
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2.1.3 MBFC and Clean Air
The principal air quality constraints that may be en-
countered in an effort to reduce gas and oil burning are those *
related to prevention of significant air-quality deterioration
(PSD). Presently, PSD covers only SOa and particulates. Over
much of the state, the entire legal increment is thought to be
available for both of these pollutants. There are considerable
areas, however, where the allowable S02 increment has been
virtually used up at this date, and others where it is partially
consumed. Siting coal-burning facilities in these areas may
require offsets, or additional pollution-control equipment. Much
of the large coastal industrial complex lies in such areas.
An additional problem is potentially posed by the
emission of NOX from coal burning. Much of the industrialized
coast is now violating NAAQS for ozone. NOX is a contributor
to the formation of ozone, along with hydrocarbons. There is
some controversy over the role NOX control should taken in con-
trolling oxidant problems in these areas. 3>1> In addition,
EPA is required under the Clean Air Act of 1977 to promulgate
PSD standards for NOX.
It is apparent from the National Energy Act and the
June 19 (1978) Regulations for Prevention of Significant Air
Quality Deterioration5 that both Congress and EPA intended
clean-air requirements to be met at the expense of boiler-fuel
conversion, if necessary. The NAAQS standards must be met or the
SIP must be revised until they are. The new PSD increments
are to be treated in the same way. Both temporary and permanent
exemptions are allowed under the NEA for situations where coal
use would violate applicable environmental standards.
331
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The draft FUA regulations appear likely to attempt a
compromise between clean air and boiler-fuel conversion by means
of new-source siting patterns. The "Fuels Decision Report"
accompanying any application for an environmental exemption must
show consideration of alternative sites. Utilities must consider
even sites outside their service territories. If the ERA
carries through its promised tough stance on exemptions, the re-
sult may be a diffusion of new installations, forced to burn coal,
away from coastal locations into areas where PSD increments
are more readily available. Emissions, though high in total,
will therefore be widely spread and have a reduced effect on
ambient air quality.
It is possible for the ERA, through its approval of
the review of alternative sites by applicants for environmental
exemptions, to overlap the authority of the Texas Air Control Board
in implementing PSD. The PSD increments, once defined, may not
legally be violated. However, the states have considerable
latitude in how they are administered. The increment can be
expanded to accommodate growth based on use of dirtier fuels by
requiring existing sources to control more stringently. Offsets
may also be used to free up part of the increment to accommodate
new sources. In addition, the states are encouraged to study and
adopt a range of economics-based procedures for allocating the
increment. Possible alternatives are marketable permits, emissions
fees, and emission density zoning. In contrast to today's first-
come, first-served practice of issuing permits, these methods
confer a monetary value on emission control and are likely to
pack more users into an available increment.
Utilities and industries may themselves become directly
involved in the controversy over effective siting authority.
382
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Already, Texas electric utilities have begun opposing one another,
in normally routine certification hearings, over the use of the
PSD increment. Under the draft FUA regulations, where utilities
may be required to investigate sites outside their own service
territories, this kind of conflict can intensify. When industrial
coal and lignite users, unable to qualify for environmental or
economic exemptions, also begin competing for the available
increment, opposition to certification could increase even more.
The PUC might thus ultimately find itself faced with secondary
issues of economic growth outside its normal bounds of activity.
Without coordination between the affected agencies, the
inevitable effects of the ERA's determinations on the pattern of
increment use may lead to delay and conflict. Since the FUA
makes no provision for administration by the states, direct
federal-state coordination is called for.
The foregoing issues basically revolve around air quality
problems at a local, or at the most multi-county level.
Potentially much more difficult conflicts between increased coal-
burning and air quality concerns appear at the multi-state level,
where atmospheric transformation and long-distance transport of
pollutants become important. Evidence exists which suggests
that high sulfate and ozone levels in Arkansas sometimes contain
a component which can be linked to emissions in the Gulf Coast,
including Texas. Not only would increased SOz emissions contrib-
ute to such problems with sulfate levels, NOX emissions, through
subsequent atmospheric reactions, could add to ozone levels.*
The net result could be that increased coal and lignite burning
in Texas might contribute to partial or complete foreclosure of
PSD increments (sulfates contribute to Total Suspended Particulates)
and high or non-attainment levels of ozone in areas considerably
downwind. Areas both within and outside Texas could be affected.
*See Chapter IV, Section 2,0
333
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Clear economic conflicts are involved. Should downwind states
enact ambient sulfate standards, the contribution to ambient levels
from out of state sources could become a serious legal issue.
2.1.4 Economic Efficiency and Administration of MBFC
Given that some level of fuel conversion is a national
priority, the mode of its administration can have a potentially
large effect both on the total cost to the economy of the conver-
sion and how the cost is spread. In spreading the cost, equity
is a concern. The total cost itself is related to the economic
efficiency with which the available fuel mix is used. Considered
over the entire economy, the cost is lowest when natural gas and
oil, as the controlled resources, are allocated to those uses
which produce the greatest economic return and/or provide the
most jobs per unit used. With respect to this latter criterion of
economic efficiency the proposed approach of ERA differs markedly
from that of the Texas Railroad Commission in administering
Docket 600.
Focusing only on natural gas, Docket 600 was based on
the perception that natural gas should be saved for purposes to
which it is uniqutely well adapted, rather than burned indiscrim-
inately as a boiler fuel. The basic idea is thus to allocate,
more than to restrict, the use of gas. Oil is therefore con-
sidered an acceptable substitute.
Consistent with the concept of economic efficiency,
it was proposed to implement the required reductions in gas use
through a system of marketable "entitlements." Firms reducing
gas consumption beyond the levels required by Docket 600 would
be awarded credits, or "entitlements" to burn that much gas,
334
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which could then be applied to new expansions or sold to other
firms. In this manner, firms making the most economically
efficient use of the available gas would eventually be the ones
using most of it.
At the same time, the entitlements concept had the
effect of placing the use of natural gas, purchase of offsets,
or purchase of pollution control equipment, on an equal footing
as air quality control measures. A firm wishing to accommodate
new growth within a PSD increment that is already partly consumed
might buy either an entitlement, an emission offset, or pollution
control equipment. All could be evaluated strictly in economic
terms. The firm might choose the cheapest option, but air quality
would be preserved in any case.
Although the entitlements provision has now gone by
the boards, and in all probability will soon be followed by
Docket 600 itself, it is of interest as one mode of spreading
the cost of large-scale conversion away from one set of fuels
and toward another. Any attempt to produce a boiler fuel mix
other than what would normally develop under existing market
conditions is bound to incur an economic cost commensurate to its
effectiveness. The entitlements concept, by maximizing the
economic efficiency with which the target fuel mix is used, tend
to minimize the overall effect on the economy of achieving that
target. It has the effect of raising the cost of gas use, so
that firms unable to compete for it in this new circumstance
must either find a substitute or curtail their activities. In
this, the entitlements concept is inequitable with respect to
existing users in the same way as a free market economy is
inequitable.
The federal program, as tentatively fleshed out in the
draft regulations for new boilers issued by ERA, differs from the
335
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state program not only in goals but in implementation. Avowedly
aimed principally at curtailing petroleum imports, the proposed
program is willing to accept a considerable economic and social
cost in the process. This cost is reflected in the 30 to 80
percent handicap placed on oil and gas use by the provisions for
granting economic exemptions. Where the Texas plan set its
curtailment goals by specifying a direct volume reduction indepen-
dent of the cost of achieving it, ERA has specified the acceptable
cost, which will determine the actual amount of curtailment.
The proposed percentage cost handicap applies to all
affected users, and is intended to force firms to accept the
added costs of using coal. Not all firms will be equally able
to bear these costs, however. In this respect, the federal approach
differs little from the state's except in degree. Unlike the
state's once-proposed entitlements concept, however, the federal
program is not aimed directly at producing an economically
efficient distribution of the ultimate fuel mix. Oil and gas
will be allocated, by this process, to users with particular
handicaps toward using coal, and who are thus exempted on the
basis of significant hardship. These are not necessarily,
however, the same users as would make the most economically
efficient use of oil and gas. Firms capable of competing
for entitlements would also, in principle, often be capable of
supporting the costs of using coal. Under the federal program,
many of these firms would fail to qualify for exemptions. Thus,
the form of administration of the ERA program, even independent
of its very high goals, may add an increment to the cost to the
nation's economy of achieving those goals.
2.1.5 Alternatives to MBFC
Table 2-1 lists several alternative strategies by
which the objective of reducing imports of foreign energy could
336
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TABLE 2-1 REDUCE DEPENDENCE ON FOREIGN ENERGY IMPORTS
Alternative Strategy
Efficacy
Secondary Impacts
Equity
Implement.blllty
1. Direct reduction of Im-
ports - quotas
Strict quotas very effective.
Very atrlct quotas Bay also
lower energy demand via high-
er prices for domestic prod-
ucts
Affects all conauBers of 1m-
porta; future fuel choices
of utilities least strongly
Domestic production of all
fuels favored
Much higher prices night aid
commercialization of gasifi-
cation and liquefaction
Windfall profits possible
Higher prlcea acrosa the
board affect those least able
to pay differentially. Ef-
forts to protect these users
also Inequitable, and erodes
conservation gains
In principle, straightforward;
becomes sure couple* with
efforts to deal with equity con-
cerns, or to Introduce by stages
Must be initiated at federal
level
OJ
CO
2. Bring D.S. energy costs/
prices Into llns with
market forces
. Price decontrol for
oil and |aw
. Crude oil equal-
ization tax
Potentially leas effective
in reducing Imports, depend-
ing upon their price and the
relative costa of ualng oil
and gaa va coal
Price Increases may not be
enough to spur large con-
servation efforts
Affects all consumers of
Imports, future fuel choices
of utilities least strongly
Deregulation favora domestic
oil and gaa production; coal
nay be leas affected
Taxation favora conservation
Taxation approach diverts
revenues - from Increased
prices out of the private,
energy-producing sector
Prices unlikely to rise
enough to(favor gasification
and liquefaction
Efficient means of fuel al-
location
Higher prlcea acroaa the
board affect uaera leaet
able to pay; Tax approach
offera meana to subsidize
these users, which erodes
conservation gains
Price decontrol may produce
windfall profits
Decontrol may become complex if
effected In stages
Tax straight forward in princi-
ple, but rebatea to some users
produces complexities, increases
administrative costs
Decontrol eventually relieves
government of administering
burden of control. Must be
initiated at Federal level
1. Offer financial/tax
Incentives for coal
. ImtroaWs price
eamtrola sad tax
imcemtlvem similar
ta> tmmmr for ell
Comtrol escalation
of Interstate
freight rate* a*
coal
Tax ImceMivra (or
coal comvevmlwi
Aaalatamce Im front-
serf financing for
comverslom
Affects Industry primarily.
Coal price only part of the
picture: capital and oper-
ating coata also higher than
oil and gaa. Prices would
have to be very strongly
controlled to overcome all
potential coat disadvantages
of coal.
To be affective, tax in-
centives would have to
overcome coat advantage of
ell and gaa. Front-end
financing better suited to
easing the impacts of man-
dated converalon than as an
incentive to convert
Price controls might reduce
coal production
Control of freight ratea
might hsvs a larger effect
on western coala
Lower coal prlcea might im-
prove economics of synfuels
Differential effecta on in-
dustries, unions directly
sffected by regulation
Price control, regulation of
freight rates complex
Tax incentives, front-end finan-
cing, complex to administer at
effective levela
Tax lucentIvea, financing can be
Implemented at atate level; all
others require federal initia-
tive
-------
TABLE 2-1 (continued)
Alternative Strategy
Efficacy
Secondary lap-act*
Equity
Implemrntablllty
4. Disincentives for oil
and gas use (In boiler*)
. Mandatory boiler
fuel conversion
. Taxes, surcharge*
to Incresse the
coat of oil and
ga* uae
. Incremental pricing
(to Induatry) of
ew gaa. LHC. la-
port*
Affect* only boiler ueee;
affect* nev industry wort
than utilities
Depending on the extent of
the cost handicap on oil and
gas, Bay hurt new domestic
production
Taxation approach divert*
revenue* froo Increased
coat into public occtor
Disadvantages boilers con-
verted from coal to oil or
ga*
Shifts costs of import re-
duction onto industry»
utllitle*, and protect*
other uacrD, thus eroding
potential conservation
gain*
Malnutrition of exemptions
may be complex, controversial
May be initiated at state or
federal level
CO
CO
00
}. leduc* demand for fossil
fuel*
. Provide Incentive*
for conservation
. Provide Incentives
for energy tech-
nologies based on
noa-foaall fuel*
. Icmove barrier* to
rapid growth of
uelesr power
Existing technologies capable
of substituting for signifi-
cant mounts of fossil energy
Some new technologies not yet
at a point for rapid com-
mercialisation
Not all problems with nuclear
are regulatory; e.g., delay*.
coat overrun*
Foaitlve effects on air
pollution problems aasoci-
ated with fossil fuels
Unknown Impact* of non-
fossil technologies
Nuclear waste dl*po*al my
involve very long-ten
hazard*
Possible change* in life-
style, especially regard-
ing transportation
Front-end financing la
greater problem for some
Industries than others; may
be a aerlous drswback for
realdential consumers
Conservation induced by
rising co*t* ha* propor-
tlnately greater effect
on those least able to pay
Incentive* and financial as-
sistance aufflcient to pro-
duce major changes would be
highly complex and costly
Inccntlvea for conservation,
new energy technologies may
be taken at atate or federal
level
Streamlining nuclear licensing
procedure requires federal
ALL OTTICHS
Requires Incressed capital
Investment without change
In productivity
Incresaed environmental
costs
Potential long-term effect
on trends in Industrial
altlng, mix of induatrie*
Greater Impacts on region*,
users for whom oil and gaa
re moat economically com-
petitive . or where *ub-
itltutlon 1* difficult
-------
be met, with specific methods of implementation. These strate-
gies and, where appropriate, implementation alternatives under
them, are compared with respect to their efficacy in meeting the
goal of energy independence, secondary impacts of employing them,
and equity concerns they raise. In addition, the alternatives
are compared with respect to the potential ease of implementing
them, along with comments regarding potential sources of support
or opposition.
2.1.5.1 Common Features
All of the strategies listed entail certain common
problems, which differ among them only in degree. Given that
energy is now imported because it is more economically attractive
to do so than to increase domestic production or change the fuel
mix, any effective import-reduction policy will force energy con-
sumers into less economical behavior. The resulting cost in-
creases can be spread from the start among all consumers. How-
ever, these increases raise equity concerns, especially for
residential consumers and the poor. The usual response is to
distribute the direct increase in the costs of energy use dif-
ferentially to utilities and industry, allowing smaller consumers
to pay lower fuel prices.
Consumer product and service prices, however, eventual-
ly reflect increased costs to industry. Thus, the key question
is not "who pays," but "in what way do we all pay." Because of
the great complexity of the mechanism by which energy costs are
translated into representative consumer cost indices, it is not
possible to calculate directly the relative effects of the two
approaches on inflation. Hence the issue tends to be handled
largely in terms of political influence.
An aspect of the problem of cost distribution is the
current interregional disparity in the costs of various fuels,
389
-------
and their proportion of use. Generally, producing regions like
Texas and the Gulf Coast use more oil and gas than nonproducing
regions. Thus, an attempt to adjust the fuel mix in an "equitable"
manner involves levelling out these regional differences. Oil
and gas producing regions inevitably experience the greatest
impacts. Since gas and oil use for space heating and domestic
uses has , under the historical pricing system, become widespread
outside of producing regions, these impacts are worsened when
efforts are made to protect the residential consumer.
The long-term erosion of the economic advantages of in-
dustrial location in oil and gas producing areas, coupled with
growth constraints imposed by air quality protection, are likely
to result in new national trends of industrial growth and siting.
For Texas, these new trends are likely to be expressed not only
in terms of total growth in heavy industry and its siting patterns
within the state, but in the overall future industry mix.
Developing conditions may promote a less energy-intensive balance
of industries than the present mix, as well as favoring industries
for which energy needs and emission levels pose fewer siting
constraints.
Finally, any large-scale substitution of coal for oil
and gas will increase the overall pollutant loading of the en-
vironment. The extent to which coal use is increased varies
among the strategies, but all seem likely to involve a signifi-
cant increase in our dependence on this very large energy resource.
2.1.5.2 Cost Control
The last two alternatives listed in Table 2-1, including
mandatory boiler fuel conversion, operate by manipulating the
cost of using energy. This can be done by providing both
disincentives for using oil and gas and incentives for the use of
390
-------
coal. The various options listed differ considerably in their
potential influence on domestic oil and gas production.
Achieving independence from imports at the same time as increasing
domestic production is a complicated matter if it is done through
direct and indirect price manipulation.
To be highly effective in controlling imports, it is
likely that a combination of strategies and options will be needed.
The more extensive the regulatory effort, the more individual
decisions and private interests are likely to be affected. Thus
these options appear likely to accumulate opposition rapidly as
their potential effectiveness increases. Conversely, a set of
options likely to be both politically acceptable and fairly
feasible to implement is also likely to be relatively low in
effectiveness.
Again because of the complexity of such a package, its
effects on the overall flexibility of the energy market, and its
implications for inflation, are of potential concern. At the
same time, they are very hard to evaluate. Two kinds of
economic effect, however, are relatively easy to see. First,
those options which use taxes to raise the prices of some
fuels relative to others divert revenue out of the private
sector and into the public sector. Second, since the market
system is a very efficient mechanism for allocating resources,
departures from it run the risk of producing allocation patterns
which result in reduced economic return from the fuels used.
The relative amount of conflict with the current body
of environmental regulation, particularly of air quality, depends
largely on the amount of coal in the resulting fuel mix. Those
options which favor domestic oil and gas production can be ex-
pected to involve less intense conflicts. No option, however,
391
-------
seems likely to result in complete replacement of imports with
domestic oil and gas. Thus, air quality conflicts are not
avoided, although more time may be made available in which to
develop policy solutions before serious problems arise.
2.1.5.3 Market Allocation Mechanisms
The second alternative strategy would do away with the
differences between world energy prices and the prices of fuels
produced in the United States. This strategy has the advantage
of resulting in an economically efficient distribution of fuels.
Its effectiveness in reducing imports, however, depends jointly
on the price of imported products relative to the cost of bringing
additional U.S. energy reserves into production. Reduction of
the world $>il price by cartel action could result in continued
or even increased levels of imports.
Two mechanisms are available to effect alignment of
U.S. fuel prices with the world market. Complete price dereg-
ulation is the most direct. However, to avoid either excessive
impacts from too-rapid deregulation or the administrative com-
plexities of trying to deregulate slowly, the alternative
method of simply taxing domestic energy to raise its price
to world levels may be considered. Such a tax also captures
windfall profits.
Like the taxation options in the cost-manipulation al-
ternatives , an equalization tax diverts revenues from the private
to the public sector. Also, it fails to encourage domestic
production but instead encourages conservation.
To the extent that oil and gas -- either imported or
domestic -- continue to be used, environmental conflicts are lessened.
392
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2.1.5.4 Import Quotas
As a means of reducing dependence on foreign energy,
import quotas are the most direct and (depending on the levels
set) effective strategy. Import restrictions coupled with price
deregulation would probably promote both conservation and new
domestic oil and gas production. Coal production would be stim-
ulated in response to rising oil and gas prices. In the absence
of domestic price controls, the market would allocate fuels
efficiently. At the same time, however, concern would be likely
to arise over the rapidity of price increases, and their effect
on the overall economy. To avoid major economic dislocations,
rationing, and similar radical measures, it would probably be
necessary to introduce import quotas in a stepwise, phased manner.
2.1.5.5. Reduction of Fossil Fuel Demand
>
The last-listed alternative strategy for reducing foreign
imports--reducing demand for themnot only meets the immediate
objective, but does so in a way that avoids the environmental
conflicts that develop with the strategies that substitute
domestic fossil fuels, especially coal for imports. Reductions
can be accomplished by substituting non-fossil energy and/or
by cutting down overall use of energy.
A key factor in any such strategy is the rate at which
demand can be reduced. Of the three options listed, nuclear sub-
stitution can be implemented more quickly than either widespread,
significant conservation or substitution of new "soft" energy
technologies. Even though solar and solar-related technologies
are available now, the Congressional Office of Technology Assess-
ment6 calculates that for solar to meet 10 percent of the U.S.
energy needs, solar sales would have to grow by more than 50
393
-------
percent per year for 20 years, and would require an investment
of more than $500 billion. Very large advances in conservation
are keyed to turnover rates in housing and large capital equip-
ment, which typically have long operating lives. However, in
the area of industrial energy use, cogeneration and improvements
in operating and maintenance procedures could be introduced
quite rapidly.
Demand reduction via conservation and new technologies
can be brought about both by incentives--tax breaks, assistance
in front-end financing--and by policies deliberately raising
the price of energy. Although the first approach is more popular,
it is the second which studies show may be most effective.7'8
2.1.6 Alternative Methods of Reducing Conflicts Between MBFC
and Clean Air Policies
Given the present policy of controlling foreign imports
through MBFC, effectively a substitution of coal for oil and gas,
conflicts inevitably arise with existing clean-air policy.
Table 2-2 compares four alternative strategies for reducing these
conflicts. The first two strategies attempt to preserve the
goals of both by adjusting the administration of current clean-
air policy to reduce the adverse consequences of increased coal
burning. The first focuses on the difficult interstate problem
of long-distance transport, while the second deals with ambient
air quality near the source. The third strategy requires the
goal of clean air to take precedence over the goal of boiler
fuel conversion. The fourth calls for air quality goals to be
reduced in order to accommodate MBFC.
The first two strategies require complex interagency
cooperation, in order to avoid problems of overlapping juris-
diction. Both strategies involve implicit regulation of new
304
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TABLE 2-2 FIND A COMPROMISE BETWEEN MBFC AND CLEAN AIR GOALS
Alternative Strategy
Efficacy
Secondary Impects
Equity
Implementablllty
U1
|. Burn much larger amounts
of coal, but with more
tringent emlaalon
control
Plant-by-plant emls-
loni
Tighter emission con-
trol requlrenenti
Require existing
aourccs to reduce
emissions
Cranta In aid of
pollution control
Areawlde emissions
Authority to re-
quire alternative
altea to be In-
veatlgated for all
new sources
Implement existing
permitting authority
to require minimum
apaclng between
aourcea, otherulae
control altlng
pattern
loth typea of atrategy Bay
be needed to control long-
dlatance tranaport problema
Unleas PSD increments are alao
revised, this atrategy any
only buy time; short-term
galna In ealaalon control off-
aet by long-ten Increaae In
numbers of usera
Higher utility costa, prod-
uct costs
Increased socio-economic
costs of widely spaced
growth of new sources.
Including potential water
pollution problem
Altered land values, land-
use patterns
Altered patterns of water
demand
Potential alteration of
lignite use trends, if
ine-nouth siting Is Ha-
lted. Coal altea are aura
flexible
If done at state level only,
ay reault In industrial
growth going elsewhere
along the Gulf
Tightening emission con-
trol requirements on ex-
isting sources nay be un-
fair to "grandfathers,"
Marginal operations. Can
be partly offset by fi-
nancial aid for pollution
control
Areawlde emission control
ay imply regional allo-
cation of population,
heavy Industry growth
Insufficient knowledge, model-
llng techniques to design and
enforce a comprehensive strat-
egy
Areawlde emission control re-
quires ERA-PUC-TACB coordination
Possible overlap with 208, basin
planning
All optlona may be Implemented
at state level, independent of
federal action
2. Burn much larger amounts
of coal, but with more
Intensive management of
PSD increment
. Set aside a portion
of the Increment for
coal and lignite
use; administer via
offsets
. Allocate the incre-
ment among user
categoric*; adminis-
ter through market-
able permits
Does little to alleviate
long-distance tranaport
problems, unless coupled
with tighter emission
controls or emission
density regulation
Allows more users to
occupy the available
increment
Encourage* voluntary emis-
sion controls, especially
through marketable permit*
Higher utility, product
costs
Same socio-economic, land
use, water demand Impacts
as above, but potentially
more clustering, less
spread of new aourcea
Special treatment of coal
and lignite burning dis-
advantages other emitters
Becauae of geographic dif-
ferences In availability
of Increment, Implies al-
location of heavy indus-
trial growth
Hay be implemented entirely at
state level
Likely to be very complex and
controveralal to administer.
Marketable permits considerably
reduce complexity
-------
None of the four strategies offers a complete solution
to the potential conflicts arising because of long-distance
transport. The first and fourth strategies ease the problem's
time frame, but may do no more than buy time in which to develop
solutions.
At bottom, the tradeoff involved in meshing import-
control and clean-air goals appears to be between the economic
and strategic disadvantages of dependence on foreign energy
sources, and the implications for the economy and society of
growth management on a large scale. Avoiding this tradeoff
seemingly requires allowing one goal to take clear precedence
over the other.
2.1.7 Alternatives for Administering MBFC With Respect to
Economic Efficiency
The proposed method of imposing a percentage handicap
on the use of oil and gas is not directly aimed at promoting
the most economically efficient uses of oil and gas. Table 23
shows two methods by which the existing policy could be adminis-
tered with economic efficiency as an explicit goal. The first
strategy is based on proposals to amend Texas' Docket 600, but
which could be applied at the national level to the same effect.
The second strategy reflects the philosophy of the Texas Rail-
road Commission in granting exemptions under Docket 600. In
a precedent-setting early case, an exemption was granted on the
basis of comparing the value of gas saved by mandated cutbacks
with the value of production foregone because of reduced supply.9
Subsequently, it was proposed, along with the "entitlements"
strategy, that exemptions be granted on a showing that:
-------
TABLE 2-3. ADMINISTER MBFC WITH RESPECT TO ECONOMIC
EFFICIENCY OF ALLOWABLE GAS AND OIL USE
Alternative Strategy
Efficacy
Secondary Impacte
Equity
Implementablllty
' laaue marketable enti-
tlement to oil and
gas use, with an over-
all Halt on total use
allowed
Very effective: worka ex-
clualvely through the Market
ayatem
Encouragea conservation and
conversion.
If price of entitlements
rises high enough, may pro-
mote coal conversion
Affords no protection to
existing users
Easily administered, requires
no sdjustment to economic and
fuel price changes
Avoids problems with detailed
regulstions based on Incomplete
understanding of Industry
operations
2. Administer economic
exemptions with regard
to the relationship
between the marginal
value of gas or oil,
the value of products
produced, and the
coat of conversion
or cutback
Some cutoff point must be
set, to aasure some con-
version; this method
favors most economl-
cslly efficient uaea
Encouragea improved effi-
ciency In new designs
Helps reduce total economic
Impact of conversion
Favors most efficient
users
Initially difficult to devise a
formula. Case-by-case imple-
mentation both complex and
liable to inequities
Open to problems with regula-
tions based on incomplete under-
standing of industry operations
-------
-------
The discounted present cost of alternative fuel
usage is greater than the discounted present cost
of the use of natural gas; and
The marginal value of the product being produced
through the use of natural gas is greater than the
total value of the natural gas saved if the exemp-
tion is not granted.10
As proposed, these criteria would essentially permit
exemptions wherever a substitute fuel was more costly to use.
Since this differs little from the economic criteria normally
used by firms in selecting fuels, very little conversion would
take place. Thus, some penalty on oil and gas use, similar to
the percentage cost test, would be called for to make such, a
policy effective. The new test, however, could be expressed
in terms of the relationship of the marginal value of product to
the increased cost of fuel substitution, rather than simply on
the cost of substitution alone. This strategy would allow an
advantage to more efficient users of gas and oil.
A problem with any MBFC implementation strategy is the
risk of regulators not fully understanding the economics of
industrial operation, and thus inadvertently proposing rules
which increase the cost or difficulty of compliance. Examples
have already arisen in the ERA's proposed regulations. ERA
defines a new facility's life as 40 years, while the chemical
industry usually considers a plant lifetime as 10-11 years,
as allowed by the Internal Revenue Service. Similarly, the
regulations propose using a discount rate of 7 percent in cal-
culating alternative costs, while a more usual figure is 15
percent.1x
401
-------
2.1.8 Potential Roles for Texas
Because of the national scope of the problem, the most
powerful of the alternative options for import control lie in
the federal arena. The state's options are limited to those
cost and tax incentives of Strategies 3 and 5 (Table 2-1) which
make it easier to comply with national conversion objectives.
It is within the state's power to institute disincentives for
continued use of oil and gas which are stricter than federal
policies. However, in so doing the state would place itself at
a disadvantage with respect to other states competing for eco-
nomic growth. The inclusion in Docket 600 of a phasedown in
gas use for existing industrial boilers, where the Fuel Use Act
has no such requirements, is a strong reason behind its probable
abandonment. Thus, the principal mode by which Texas can pro-
mote changes in import-control policy will be through its Con-
gressional delegation.
Given that Texas' major concerns are protecting domes-
tic oil and gas production, continuing economic growth and re-
ducing the discrepancies between Texas and non-producing regions
of the U.S. in the cost of becoming more energy-independent,
certain of the options in Table 2-1 are more attractive than
others. Decontrol of both oil and gas prices is more compatible
with both these concerns. Import quotas favor domestic produc-
tion, but rising oil and gas prices and the potential need for
fuel allocation would entail serious inter-regional inequities.
Conservation and substitution of non-fossil energy
helps alleviate both concerns by reducing the state's dependence
on fossil fuels. Furthermore, Texas can take the initiative in
providing investment incentives and in financing early demonstra-
tion installations. Such action might help reduce industry's
energy growth rate, and promote cogeneration. However, major
402
-------
short-term reductions in fossil fuel dependence require eco-
nomic disincentives as well, raising the cost of continuing
use of fossil energy. Again, the state would disadvantage it-
self by attempting to institute such policies, although it
could do so.
More options are available to the State among the
strategies of Table 2-2 in reducing conflicts between MBFC and
clean-air policy. Most of the options of Strategies 1 and 2,
which involve more stringent emission controls or specific
strategies for allocating PSD increments, may be initiated at
the state level. Redesignation of some areas as Class III to
permit more coal-burning under existing regulations is also a
stateactually a local--initiative. Implementation of either
of the first two strategies, especially the first, requires ex-
tensive cooperation of state agencies among themselves, with
federal agencies, and perhaps with parallel agencies in other
states. Allowing either MBFC or clean air goals to dominate
clearly, however, would require initiative at the federal level.
A major Texas objective in resolving MBFC/air quality
conflicts will be to avoid restrictions on mine-mouth siting of
lignite-burning facilities. Should clustering of power plants
along the Lignite Belt be prohibited because of possible air
quality impacts outside the state, the result would probably
be increased use of western or midwestern coal. The coal-pro-
ducing states would thus obtain the economic benefits of re-
source development which Texas would otherwise receive. Attempts
to control area-wide emissions are potentially at odds with
this goal; managing the PSD increments, however, may favor mine-
mouth siting. A marketable permits strategy for PSD implementa-
tion, under Strategy 2, also tends to increase the potential
number of facilities permitted within a given increment. These
options, however, may simply trade one set of problems for
403
-------
another, if long-distance transport problems cause interstate
air quality problems.
Those options under Strategy 4 which allow natural
gas to substitute for oil imports are also potentially advan-
tageous to Texas, in their encouragement of domestic gas pro-
duction.
Both strategies presented in Table 2-3 are in line
with Texas precedent of emphasizing economic efficiency in
resource use. Texas would be likely to benefit more from these
strategies than other regions where oil and gas use have not
historically been as cost-effective. This would help relieve
some of the inter-regional issues over the cost of implementing
a national-level boiler-fuel conversion program.
404
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CONTEXT-SETTING ISSUE No, 2
Ambient Ozone Levels
Finding; Widespread high ambient ozone levels, at or near the
National Ambient Air Quality Standard, may threaten
long-term expansion of the chemical and related in-
dustries in Texas, which, in turn, would reduce the
overall economic growth that ultimately drives lig-
nite demand.
Issue; How can the state accommodate additional growth in
these industries under the offsets policy for non-
attainment areas?
405
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TABLE 2-4 AMBIENT OZONE LEVELS
Objective
. Adjust regulatory
structure to
accommodate new
growth
Accommodate new
growth within
present reg-
ulatory structure
. Hake room for new
growth by stringent
emission controls
Alternatives
Channel new growth Into attainment areas
. Change NAAQS fro* 0.08 ppm to a higher
level*
. Seek statutory or regulation change in
non-attainment policy (Clean Air Act
Amendment!)
Improved control technology
. Successful transportation control
strstegy Implementation
Implement at ion
. EPA proposing to raise to 0.10 ppm*
. Additional health effects data may
allow much higher level, If ozone
Is considered alone
. The combination of HBFC and non-
attainment policy may force heavy
Industry to Lignite Belt
. New growth can expand into attain-
ment areas in Gulf Coast
. Possible relaxation in non-
attalnment policy
. Possible revision of criteria
for NAAQS
Possible extension of deadlines
Define "reasonable further progress"
toward NAAQS purely in terms of
hydrocarbon emission reductions
RD4D Into NO^ and hydrocarbon
controls
inspection program
Implication
. Uncertainty over atatewlde Oj
levels and extent of non-
attainment may be higher than
thought
. Gulf Coast exerts a strong at-
traction for new growth because
of existing transportation, allied
infrastructure
. Penalizes Industries which cannot
relocate
Fewer areas presently In non-
attainment
Impacts of other pollutants, forced
with ozone, with effects at 1 own-
levels
Direct method of solving the reg-
ulatory side of the problem
. Hay allow greater actual air-
quality Impacts
Effectiveness depends on proportion
of natural vs man-made emissions
expensive
Economic penalties hardest for the
pour
. Costs of strategy not paid by those
who benefit directly
In January, the NAAQS was raised to 0.12 ppm; measurement requirement* were also changed
-------
2.2 Ambient Ozone Levels
Fifteen counties comprising about 60 percent of the
population and 70 percent of the economic activity in Texas
have been designated by EPA as non-attainment areas (NAA1s) for
ozone or photochemical oxidants. It is believed that when air
quality data are obtained for other counties, additional areas
in the state will be found out of compliance with the National
Ambient Air Quality Standard (NAAQS) for ozone.*
State leaders have expressed their fear that the fed-
eral policy for dealing with growth in NAA's (offsets) will
lead to a stagnation in the growth of additional hydrocarbon-
emitting facilities such as refineries and petrochemical plants.
These industries presently account for more than three-quarters
of the state's industrial energy consumption. If growth in
these two sectors is curtailed, there will be less demand for
lignite directly (boiler fuel for new facilities) and indirectly
(less overall growth in the state).
Two basic strategies exist for coping with this prob-
lem beside continuing the status quo: altering the regulatory
approach to ozone; and increasing control of hydrocarbon and
NOX emissions.
One way to live with the status quo is to encourage
new growth in hydrocarbon-emitting industries to locate in
areas attaining the ozone standard. One school of thought be-
lieves that non-attainment policy coupled with mandatory boiler
fuel conversion will channel new industrial growth into the
On February 23, 1979, the Texas Air Control Board was officially
informed by EPA that, because of the earlier revision of the
national ozone standard from 0.08 ppm to 0.12 ppm, and changes
in measurement requirements, only Harris County will face ex-
tensive offsets.
407
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Texas Lignite Belt, creating a "Texas Ruhr Valley." Although
this scenario is plausible, it overlooks the powerful economic
affinity the oil- and gas-based industries have for the Gulf
Coast area and for each other. The increased importation of
foreign crude to Texas refineries, and the improved prospects
of deepwater ports for supertankers, increase the advantages of
a coastal location for refineries. Petrochemical plants are
located near refineries and gas fields to be near feedstock
sources. The Gulf Coast refining-petrochemical complex--which
accounts for more than half of the nation's petrochemical pro-
duction and more than one-fifth of the country's refining capac-
itycomprises a vast network of fuel, feedstock, and chemical
intermediary exchanges. Expansion of these industries and the
vast complex of service firms and related businesses is more
likely to occur in nearby attainment areas along the Gulf Coast
than in other regions or in other states. The key uncertainty
here is whether additional monitoring, required for new-source
permitting, might reveal these previously unstudied areas to be
out of attainment, too.
One possible approach seeks relief from growth con-
straints through legislative remedies or regulation changes.
The Clean Air Act requires states to demonstrate "reasonable
further progress" in meeting NAAQS. If "reasonable further pro-
gress" were to be defined in terms of emission reductions of HC
rather than ambient ozone levels, the prospects of growth cur-
tailment would be diminished.
Recent changes in the ozone standard have helped re-
lieve the non-attainment problem in the short term. The basis
of the change was given as recent medical evidence that sug-
gested ozone was not damaging at levels well above the previous
standard. However, ozone has been and continues to be regulated
as a surrogate or indicator of other pollutants in the photo-
chemical oxidants complex. These include respiratory and eye
403
-------
irritants such as PAN. There is a potential for controversy
in the standard revision, that steins from the fact that if
ozone is indeed an indicator of these other pollutants, in-
creased ozone levels means that they will increase, too.
Another alternative rests on the application of
stringent controls on existing emissions to make room for more.
Cars and trucks are significant contributors to HC emission
levels. The development of alternate mass transportation sys-
tems would reduce HC levels and mitigate other urban ills (as
well as achieve conservation of energy). However, serious mass
transit development, transportation controls and I&M inspection
programs are not popular with Americans in general and Texans
in particular. Hydrocarbons are not the only sources of ozone
precursors. NOX also participates in the reactions that pro-
duce ozone. EPA's present control strategy emphasizes HC more
than NOX; applying stronger controls to NOX emissions would add
leverage on the ozone problem. These options, however, have a
disadvantage in that they are potentially very costly. Further-
more, the costs are not limited to those who benefit directly.
Although reduced health hazards and continued prosperity are to
everyone's advantage, the greatest economic benefits will accrue
to only a portion of the state's industries and their employees.
409
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410
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CONTEXT-SETTING ISSUE NO, 3
Control of Atmospheric Sulfates
Finding; Sulfates formed downwind of coal- or lignite-combustion
sources have potentially adverse effects on visibility
and health, as well as contributing to acid rainfall
and downwind particulate loadings. However, lack of
knowledge of the mechanisms of these effects makes it
difficult to define either an impact-related ambient
standard or a control strategy that can be tied to
meeting such a standard.
Issue: Faced with uncertainty, should a standard be set now
("better safe than sorry"), or be deferred until
either more information is available, or a sulfate
problem materializes?
411
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TABLE 2-5. CONTROL OF ATMOSPHERIC SULFATES
Objective*
Reduce sulfate level* in
the ambient air below tbt
matt conservative esti-
mate of impact hazard.
ho
Alcernatlvea
Eatabllah a aulfate atandard for ambient air. (Hontana
hai auch a atandard. at * pg/m*. Callforola'a it 25 |ig/n'>.
Mist conaervatlv* estimate of threahold for adverae health
Impact 1* 8-10 |||/B'.
Lialt SOa ealaelona at the aourcet through requiring univeraal
acrubblng on all coal (EPA propoaed revlaIon of NSPS).
educe areawlde emission levels.
Through Implementation of PSD - smaller Increments of
SO, allowable
Through emission density toning
Implication!
Current eatlaiated background levela exceed lowest estimated
health threshold.
Preaent lack of a auituble control etrategy to assure com-
pliance.' Implies costly trlal-and-error regulation, pos-
sibly with requirements for retrofitting.
Benefits arc difficult to quantify.
Uncertain Influence of lonx-dlstance transport on current
ambient concentrations; standard could prove impossible to
meet.
Does not necessarily protect neighboring states from sul-
fates formed during transport In the atmosphere from Texas
sulfur emissions.
Degree of control required to manage regional sulfste is
not known.
Very high levels of removal (>6S2) may be technologically
limited. Backup system* might be needed, which would In-
crease costs considerably for small increments of emission
reduction.
Energy costs of scrubbing are high--for 901 removal, 3.81 of
plant'a power output may go to the FCD system.
Although new source emissions are effectively controlled,
existing or "grandfathcred" aources, uncontrolled by NSPS,
may emit large amounts of SOj.
Potential problems of administration If revisions are re-
quired to achieve ambient sulfate levels that are below
conservative estimates of health risk. Retrofitting exist-
ing sources might be required.
Probability of siting problems. Distribution of environ-
ments! and social Impacta.
Potential deficiencies in site availability, which could
force greater use of oil or gas.
Difficulty obtaining offsets in remoter areas once increment
is used up.
Effectively provides land use constraints that can m.irl^edly
affect property values, taxes, etc. (Note relationship to
recently passed Constitutional amendment.)
Potential administrative difficulties if no "beneficial use"
or "diligence" requirement is attached to an "air right."
< Considerable potential Inequity arising from tendency of air
rights to become marketable commodity, held by firms for
which the value of emissions (or "air use") Is high with
reupect to the value of products produced.
Very economically efficient means of controlling regional
emission densities.
-------
TABLE 2-5. (continued)
to
Objectives
Reduce eulfate level* In
the Mblent »lr below the
oat conservative esti-
mate of Impact hsierd,
as soon as possible.
(continued)
Determine an acceptable
level and define control
atrategy before regula-
tion, ao aa to avoid
potential waste of effort.
any administrative dif-
ficulties.
Alternatives
Massive conservation of fossil fuels
* Through energy conservation at the end use
Through requirements to use natural gas or aynthetlc
gaa fro* coal or lignite
Through Increased nuclear power development.
Defer sulfata regulation until atandard can be defined
based on cauae-effect relationships and an effective
control atrategy Identified by which compliance may be
aaured.
Impllcatione
Extensive federal Intervention likely to be needed If
large reductions In fossil use are to be effected.
Potential financing difficulties (sec Chapter I for
discussion).
Lower efficiency of energy use when synthetics are used.
Uncertain economics of
synthetics
Uncertain price and supply
of natural gaa
Increased coal production.
Added Inefficiency and Inequity In the national energy
market.
Potential algnlficant
economic costs.
Fotentlal requirement
for subsidies.
Substituting the uncertainties surrounding nuclear
waste disposal for those surrounding sulfates is re
placing one problem with another.
1 Public unwillingness to accept high nuclear growth
Sources permitted In the interim, and exiatlnR sources
might have to be retrofitted with extremely stringent
controls, with serlous*-and relatively suddeneconomic
consequences. Compromise could pit economic values
against measurable health and ecological risks In a
very direct way.
There la no way to retroactively alter siting patterns
should this be shown to be a necessary element of a
strategy to control Interstate pollution problems.
Riak of adverse health and ecological Impacts in the
Interim.
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2. 3 Control of Atmospheric Sulfates
Sulfates formed downwind of large combustion sources
are thought to contribute to a variety of problems. Recent
research suggests that adverse health effects once attributed to
S02 may actually be caused by sulfate particles. Sulfate par-
ticles in the air also contribute to visibility problems, and
can add to the baseline TSP loading, relative to PSD increments,*
many miles from the original combustion source. The oxidation
in the atmosphere of SOa to SC%2 also results in the formation
of HaSOit, one of the primary contributors to rainfall acidity.
The 1977 Clean Air Act Amendments require EPA to de-
velop visibility standards for Class I PSD areas, which involves
considering sulfate impacts on visibility. EPA is also required
to study the effects of sulfates on human health and welfare.
The eventual outcome may be an attempt to regulate the air qual-
ity impacts of sulfates . A workshop sponsored by Brookhaven
National Laboratory in 1977 suggested that a national ambient
standard for total water-soluble sulfates might be feasible with-
in one to two years , based on the status of measurement tech-
niques .
Sulfate standards , and associated control requirements ,
could have important consequences for Texas lignite. First,
very stringent requirements could limit the use of both oil and
solid fossil fuels. Second, evidence has been published to
suggest that, at least in more humid areas of east Texas, ambient
*It is here assumed that the reader is familiar with the Pre-
vention of Significant Deterioration policy set forth in the
Clean Air Act Amendments of 1977. Those wishing further in-
formation are referred to Chapter IV, Section 2.0.
415
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levels are already high relative to existing standards in other
states.* Such conditions could greatly hamper mine-mouth siting.
Even if standards are not already exceeded, siting could be af-
fected by strategies aimed at controlling areawide emissions.
In order to derive a standard that is both appropriate
and enforceable, it would be necessary to have considerable
certainty regarding:
The chemistry of sulfate formation in the
atmosphere, permitting the relationship be-
tween SO2 emissions and downwind sulfate
levels to be modeled.
Ambient sulfate levels that cause damage of
various kinds, including the ability to re-
late S02 emissions quantitatively to acid
rain.
The quantitative relationship between costs
of controlling sulfate formation and the
benefits resulting.
Accuracy of methods of monitoring harmful
species in the air.
*For reference, a recent study by the University of Texas Center
for Energy Studies cites the Texas Air Control Board as the
source of data used in an estimate of ambient sulfate aerosol
levels of about 20 yg/m3. By comparison, the Brookhaven work-
shop suggested a range of 5-15 yg/m3 (annual average) as a
feasible near-term standard for total water-soluble sulfates.
Montana now has a 4 yg/m3 standard, and California has a stan-
dard of 25 pg/m3.
416
-------
None of these three key areas is well enough developed today
to permit a standard to be derived (from cause-effect relation-
ships) , or to allow compliance to be determined with accuracy.
This lack of understanding of cause-and-effect linking
862 emissions to ambient sulfate standards means that such stan-
da.rds, promulgated now, would have to be asserted rather than
proved. In such a case, both precursors (SOa) and derivatives
(sulfates and, more inclusively, TSP) would be regulated with
regard to their separate environmental effects, but not their
relationship to one another. It would be a matter of luck if a
first try, made necessarily in at least partial uncertainty, hit
on an ambient level for sulfates that could be achieved consis-
tently with existing standards.
One approach to the problem would be to set a con-
servative standard, on the grounds of "better safe than sorry."
Considering the powerful factors favoring the use of lignite at
the mine mouth, the consequences of a stringent sulfate standard
could potentially curtail lignite's future. It is possible to
envision a scenario in which plants initially permitted with re-
spect to existing S02 standards were subsequently implicated in
failure to meet sulfate standards (or related visibility or
respirable particulate standards) downwind. Unable to relocate,
these plants might have to reduce their S02 emissions. Consid-
ering the economics of sulfur removal at levels above 85 percent,
it is reasonable to expect this type of adjustment to be costly.
Further mine-mouth combustion at new sites might prove cost-
ineffective. If at that time, lignite transportation away from
the mine were still cost-ineffective, coal might be substituted
for what would otherwise been increased use of lignite. Pur-
chasing coal from outside the state is considerably less bene-
ficial to the state's economy than mining and using native
lignite. Also, as was mentioned in the preceding discussion of
417
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MBFC (Context-Setting Issue No. 1), it may prove necessary to
regulate source spacing as well as SOz emissions to exert the
needed leverage on sulfate levels.
At the other end of the scale, waiting too long to in-
troduce some control on sulfates until all the requisite knowl-
edge is available at an acceptable level of certainty runs the'
risk of seeing a sulfate problem materialize before we are
ready for it.* This outcome would bring with it the same kinds
of disadvantages just pointed out. If retrofitting is con-
sidered an acceptable way of dealing with the problem, waiting
until the problem develops is a way of being more certain about
permissible emission levels. This argument is strengthened if
the likelihood of strong variability between different parts of
the nation, with regard to the rates of atmospheric chemical
reactions and the processes of rainfall acidification, are
taken into account.
The basic choice to be made in the resolution of the
sulfates question is whether to regulate now, with the risk of
over (or under) regulation, or to wait until sulfate standards
can be matched with S02 emission standards and PSD policy for
both S02 and TSP, as part of an integrated package.
*0ne conservative modeling study11 concluded that sulfate levels
as high as 35 to 45 yg/m , under worst-case conditions, could
develop in east Texas by 1985.
418
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CONTEXT-SETTING ISSUE No,
Solid Waste Disposal
Finding: Considerable volumes of solid waste will result from com-
bustion of lignite in Texas. The development scenario
indicates that most of this waste, if disposed of on or
near the plant site where it was generated, would be im-
pounded in areas where groundwater contamination could
occur if adequate care were not taken. The chemical com-
position of ash and scrubber sludge could also result in
their being designated as hazardous under EPA's proposed
testing procedures.
Issue: What should state and federal regulations require to as-
sure protection of aquifers without severely inhibiting
industry's flexibility in developing economic means of
disposal?
419
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TABLE 2-6. SOLID WASTE DISPOSAL
Objectives
lance aquifer pro-
tection with
disposal coat con-
sideration*
o
Hold down dla-
poaal coata
under RCRA
Implement RCRA
with specific
emphasis on
groundwater
protection
Alternative
Encourage recycling/
reuse of wastes
Revise NSPS to allow
coal burning without
scrubbers
Classify wastes as
hazardoua but specify
leaser requirements
Mine disposal
Classify wastes as
non-hazardoua under
RCRA
Use of lined dis-
posal ponds,
leachate collec-
tion systems,
under-dralnage
systems, etc., to
ensure maximum pro-
tection
Pre-dlsposal waste
treatment
Implementation
Encourage R D&D into technologies, markets
Classify wastes as non-hazardoua
Revise state highway and building construction
standards to allow use of ash
EPA determination in favor of sliding scale
scrubbing bused on sulfur content of coal
In promulgating revised NSPS for fossil-fuel
fired steam electric generators
Establish special hazardous waste category
for utility sludge under RCRA
Develop special standards for mine site dlapoaal
in federal and state regulations
Encourage additional research and analysis
EPA determination under RCRA that utility
wastes not hazardoua
Revise state and federal regulations to re-
quire liner, leachate collection system,
under-dralnage system as standard
Revise atate and federal regulation to
encourage/require pretreatment
Encourage R 1>&D
Implications
If wastes hazardous, difficult to find acceptable
uses without treatment
Reduces disposal costs, affected land area
Requires improved technologies
Depends on available markets
No effects on lignite S02 control standards
Stimulates demand for low sulfur coal
Higher utility coats for fuel compared to
lignite
Possibly lower cumulative SO2 emissions
Provide more administrative flexibility
Tailors controls to particular waste
Balances cost and protection needs
Possible ground and surface water contamination
1 Inhibit proper reclamation
p Reduce land area disturbed by lignite development
Ample availability of sites
1 Reduce land acquisition costs and disposal costs
1 Lowers disposal costs
Encourages recycling cf wastes
Increases chance of ground and surface water
contamination through less stringent standards
Reduces contamination potential
Increases disposal coats
Employs available technology and materials
Reduces contamination potential
> Lower initial disposal costs
Imposes treatment costs
-------
2.4 Solid Waste
Concern over the disposal of power-plant ash and sludge
runs high in Texas, both because increasing coal and lignite use
means large quantities will be generated, and because solid waste
disposal is a relatively new regulatory area. There are a variety
of ways of handling solid waste to restrict its potential to con-
taminate the surrounding environment. The solid waste issue does
not, therefore, center on the question of whether serious contami-
nation problems can in fact be prevented. The key questions are,
rather, over the classification of wastes and the standards of
practice set for their disposal. Developing such regulations
involves finding an acceptable balance between environmental
protection and disposal cost.
A degree of uncertainty is added to this process by the
difficulty of evaluating the relationship between waste disposal
and sub-surface hydrology. In Texas, ground-water recharge and
movement is generally complex and highly site-specific. Thus
it is difficult to establish general standards of disposal prac-
tice that are well suited to all possible situations. Lack of
regulatory flexibility to designate disposal practices appropriate
to each site could add to the overall cost of environmental
protection.
Two policy areas are currently under development by the
Environmental Protection Agency which will affect the outcome of
the solid waste issue. In September of this year, EPA proposed
a revision to the New Source Performance Standards for Fossil
Fuel Fired Steam Electric Generating Plants under the Clean Air
Act, which would require full scrubbing on all coal-burning
facilities regardless of the sulfur content of the fuel. Final
administrative determination of this policy will not occur until
421
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1979. EPA is also in the process of issuing regulations under
the Resource Conservation and Recovery Act of 1976. A key ques-
tion in the development of these regulations is whether ash and
scrubber sludge generated by power plants will be classified as
hazardous wastes and, therefore, subject to the provisions of
subtitle C of the Act. If not regulated as hazardous waste,
scrubber sludges will fall under subtitle D regulations which
address non-hazardous wastes.
EPA proposes to list utility solid waste from air
pollution devices as a hazardous waste to be regulated under
subtitle C, but will place it in a special category of high-
volume waste. Storage, treatment and disposal requirements are
still under development, and only minimal requirements would
apply in the interim. In either case, the long-term implication
of the Resource Conservation and Recovery Act is to increase the
costs of disposal, strengthen the site-selection requirements,
and reduce the overall flexibility of utilities in selecting
alternative disposal techniques and practices.
The lignite-bearing strata in Texas are hydrologically
connected with major aquifer systems. The Carrizo-Wilcox aquifer
system is particularly important. It runs from northeast Texas
in a southwesterly direction into south Texas. It is character-
ized by irregular outcrops of sands which serve as the recharge
areas for the aquifer. Because utilities customarily site dispo-
sal facilities within a mile or so from the power generation
plant, there may be a long-term problem of finding suitable sites
not located in recharge areas that would also be in close proximity
to a desirable power plant generating site.
Mine disposal of solid waste is an economically attrac-
tive option, especially for facilities sited next to strip mines.
422
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However, the environmental problems in mine disposal are numerous.
One problem is the disruption of the hydrologic system which occurs
during the mining process, making it more difficult to predict
with accuracy the hydraulic movement of sludge leachate from solid
waste disposed of in a mine site. Linings or placement of im-
permeable material to retard leaching would directly interfere
with mine hydrodynamics, and in many instances create conditions
very different from those existing before mining. Thus, the
aquifer-protection provisions of the Surface Mining Control and
Reclamation Act may preclude mine disposal.
423
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3.0
RESOURCE MANAGEMENT ISSUES
No. 1. Water Supply
How can adequate supplies of water be made
available for energy growth at reasonable
cost and without undue conflict between
water users?
No. 2. Consumptive Water Use
How can increasing power-plant cooling water
consumption be kept from placing an undue
burden on water supply management?
No. 3. Lignite Reserve Depletion
Is it in Texas' best interest to allow the
strippable lignite resource to be committed
largely to combustion uses?
No. 4. Lignite RD&D Priorities
How should research efforts be spread among
existing technologies and developing tech-
nologies?
No. 5. Utility Interconnection
Would interconnection of the Texas Intercon-
nect System with the interstate grid result
in export of lignite-produced electricity?
The five issues discussed here involve decisions about the allocation
and rate of development of water and lignite resources. Supplies of both
are limited and many potential users compete for them. This competition
will grow more serious with time. Decisions regarding the development of
both resources are interrelated, and are ultimately reflected in the role
lignite plays in the state's economic and environmental future. These
decisions take place at both the state and the federal level, and may in-
volve resolution of conflicts between differing state and national objectives.
425
-------
-------
RESOURCE MANAGEMENT ISSUE No, 1
Water Supply
Finding: Unless the development and allocation of water resources
is properly coordinated and planned, there may be diffi-
culty in supplying the water requirements of the develop-
ment scenario.
Issue; How can water development and allocation be managed so .
as to balance the needs of energy development with those
of other users?
427
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TABLE 3-1 WATER SUPPLY
-F-
to
oo
Objective
Aiiure timely de-
velopment of surface
nicer for lignite
development
Protect beneflclel
eurfece-veter ueee
which cannot compete
et higher water
prlcee
Protect existing
groundwater ueee from
drawdown and quality
deterioration
Alternative
Construct new meIn item
impoundments
Interbaeln tranafer
Authorization » conatructlon of reaervoirs t
Interbasln tranafer systems (e.g., Lake Living-
t-A«\
Subaldiie Identified uaee
(agriculture, Municipal
uee)
Control pumpage ratee on
an aquifer-wide baela;
coordinated aurface and
groundwater management
Implementation
Federal funding and conetructixm
Increaeed Hate/local financing » conatructlon
Private financing and conatructlon for Induetrlal
water euppliea
Price new water supplies with respect to eco-
nomic efficiency of use
Provide financial ssslstsnce from public Monies
for qualifying uses Hln the public Interest"
Eatabllah atate groundwater management authority
Require the formation of Groundwater Conaervatlon
Dlatrlcte In deelgnated aqulfere
Implication!
Large surfsce is.pound.Mnts sre a key element of fore-
cast wster supplies
Larger numbers of smaller projects may be less water-
efficient
Aesthetic and ecological impacts lead to environ-
mental opposition
Conflicts between users in upper vs lower portions
of bsslns
Rising prices disadvantage some existing users
Conflicts over alternative use of reservoir sites.
especially where underlain by lignite
Gets water from regions of high aupply to high
demand
Disrupts basin hydrodynamics
Large-acale diversions may have significant energy
demand
Increased competition could affect value/price of
water In basins from which diversions made
Conflicts between beneficiaries » baaln-of-orlgln
users
Rising prices disadvantage eome existing users
Will not necessarily affect pressure to sell exist-
ing water appropriations ss value goes up
Subsidizing cost of water for some users raises
price for others; thin increase may affect a variety
of product prices
Helps produce a more even distribution of water among
competing usera
Results in less economically efficient water distri-
bution overall
Complex administration likely to result In many
case«-by*-case conflicts
Depending on Implementation, may be very effective
tool for preventing untimely depletion and/or Ir-
reveralble degradation of groundwater
Haa potential to affect land-uae and economic growth
patterna
Would require establishment of priorities for bene-
ficial uses in which an equity/efficiency balance
must be atruck
Conceivably could work hardahip on some existing
uaera
-------
TABLE 3-1 (continued)
NJ
Objective
Protect existing
groundwater uae« from
drawdown and quality
deterioration
(continued)
Reduce competition for
urface and ground-
water by Increaalng
efficiency of uae
Alternative
Control pumpage ratea on
an aquifer-wide baala;
coordinated aurface and
groundwater management
(continued)
Free-market pricing of
new water auppllea
Incentlvea/controla to
conaerve water
iBpleBCntation
Llalt large-voliwe Industrial use of groundwater
Direct BOM Induatrlal uaea to deep or poor-
quality aquifers
Conditioning of federal funding of large water
projects
Increaaed atate share of funding
Conditioning of water appropriations & contracts
Publicly funded financial assistance for capital
Investments In conserving technologies
(especially to agriculture)
Mandatory eatabllshment of Groundwater Conserva-
tion Districts to control pumpage and Uniting
non-eaaentlal uses
Implications
Protects against Major local problems, but does not
afford widespread protection to groundwater users
Limiting Industrial use places greater demand on
aurface water, which through Increased competition
and higher prices may displace other potential sur-
face demand onto groundwater
Potential limitations on Industrial siting
Limiting groundwater sources for industry will in-
crease the cost of supply
Produces less economically efficient distribution of
groundwater to users
Spreads available resource more evenly among poten-
tial users
Depends on price increases that result, snd elastici-
ties of demands. Does not affect use of existing
supplies
Hay reduce environmental, resource-use conflicts
over reservoir building
Hay lengthen water planning horizons if use re-
duction Is significant
Some users will be penalized nore heavily than
others by higher prices
Hay result in more economically efficient allocation
of total water supply
Cains likely to be small, compared to overall growth
in water demand, except in agricultural sector
Hay lengthen water planning horizons, if use re-
duction Is significant
Agricultural u.soru have great conservation potential,
but may be least able to pay or change current
practices
May result in more economically efficient use of
total water supply
Postpones need for developing new supplies and at-
tendant higher costs
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3.1 Water Supply
As was discussed in Chapter IV, Section 4.0, water
will be made available for energy through three routes: addi-
tional surface development, transfer of existing water rights,
and increased use of groundwater, either directly or indirectly
through displacement of competing surface-water demands. The
balance among these three routes is determined by a host of
factors, and is liable to change with time. No one of these
routes is without impediment, and all three involve questions of
impact mitigation, discussed in Chapter IV.
A key aspect of the balance struck among the three
is the equitability and economic efficiency with which available
water is allocated. Equity concerns relate to the protection of
existing water users from being rendered incapable of continu-
ing to use water as they have in the past. This can arise be-
cause of increasing prices, drawdown of wells, and changing
regulatory practices concerning water rights. Economic ef-
ficiency refers to the amount of economic benefitjobs , value
added, etc.--accruing to the use of water. Existing use patterns
are very often not the most economically efficient. Consequently,
equity and efficiency concerns tend to oppose one another and
must be reconciled.
3.1.1 Surface Water Development
The Texas Department of Water Resources (Water Develop-
ment Board) plays a central role in planning the development of
surface supplies. It cooperates with federal agencies and acts
as state sponsor of federal projects when no suitable local
agency is found. In addition, independent River Authorities,
with the status of state agencies, plan, finance, construct,
and operate large storage projects on most of the Texas' intrastate
431
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streams. River Authorities can receive loans and grants from
the federal government, and can issue bonds. Revenues from the
sale of water or electric power ultimately pay for water develop-
ment costs. Other local government bodies counties, cities,
and special water districts are also empowered to conduct
various water programs. The federal agencies chiefly involved
in funding and/or constructing large projects are the Army Corps
of Engineers and the Bureau of Reclamation. However, of 63
large reservoirs in Texas, only 28 are federally owned or oper-
ated. Thus, water development in Texas can involve the entire
spectrum of government from federal to local agencies.
Several constraints upon developing additional surface
water supplies are developing as a result of emerging policy, as
summarized below.
Trend toward federal deemphasis on reservoir con-
struction. Major elements proposed by the Water
Resources Council for a national water policy in-
clude
Emphasis on non-structural alternatives to
flood control (flood plain management). This
trend is already evident in the National Flood
Disaster Protection Act of 1973.
Increasing the price of water to users
Requiring more state participation in federal-
ly funded projects
Proposed changes in calculating costs and
benefits
432
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The recent presidential veto on reservoir
appropriations also reflects this trend
Federal requirements for provision of "mitigation
lands" for lost wildlife habitat.
The federal government is pushing the concept
that developers of reservoirs which destroy
wildlife habitat must purchase a public
habitat preserve to mitigate the loss. Even
when funding for habitat-loss mitigation is
not part of the original appropriation, this
is a condition for obtaining a Corps of
Engineers permit.
Diffuse surface water impoundments.
Private landowners presently may establish
impoundments upon public watercourses for
livestock or domestic purposes without a per-
mit, as long as the reservoir does not exceed
200 acre feet.
TSPE* studies indicate these stock ponds
typically impound much more water than is ac-
tually needed. These ponds number in the
hundreds of thousands, and collectively ac-
count for evaporative losses of significance
to water planners.
*Texas Society of Professional Engineers. Cited in McNeely and
Lacewell, 1977.12
433
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Barriers to state financing
In 1977, state voters rejected increasing the
state's water-development bonding authority
from $400 million to $800 million. With in-
creased voter concern over cutting taxes,
large public expenses will be subject to in-
creasing scrutiny, and bonding increases made
more difficult.
Environmental opposition.
Aesthetics (scenic stretches of rivers may be
impounded)
Loss of valuable and limited bottomland and
riparian habitat
Requirements to maintain estuarine inflows in
order to sustain ecosystem productivity. Require-
ments have not yet been quantified, but may add
to the overall need for surface water development.
Resource use conflicts. Issues arise over;
Inundation of farmland
Inundation of minerals, including lignite
Removal of tax-producing property
The problem of resource-use conflicts is dramatically
illustrated in the case of the proposed Tennessee Colony Reser-
voir on the Trinity River west of Palestine. The reservoir site
is underlain by substantial lignite deposits posing the question
of:
434
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Will the Surface Mining Control and Reclamation
Act effectively preclude mining in major flood-
plains?
Should the lignite be extracted prior to reservoir
construction, or should the area be inundated,
thus precluding mining of the lignite altogether?
What should be the reclamation requirements for a
lignite mine intended for later inundation as a
major reservoir?
How are conflicts to be resolved between owner-
ship or leasehold interests in the surface estate
and in the lignite?
3.1.2 Equity and Efficiency in Water Allocation
Surface water users are protected by a system of
legal rights which assure continued enjoyment of rights once
granted. New rights must be granted, and new projects planned
and operated, in such a way as to avoid interference with exist-
ing water rights.
However, much of the additional surface water supply
made available for use will be impounded in large reservoirs.
The rights to this water are assigned to the developing agency,
such as a river authority. The developer then sells the water
on contract to potential users. The price of water is usually
set so as to recover the cost of building and operating the
project. Because of a variety of economic and engineering fac-
tors, these prices are rising fast; water in existing reservoirs
may sell for $15 per acre-foot, while in some new impoundments,
the price may be as high as $75. As was pointed out in Chapter IV,
435
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Section 4.0, agricultural interests may not be able to compete
at such prices.
Most agricultural uses are not as economically ef-
ficient as manufacturing or industrial uses, including power
generation.* Thus, rising prices may, by shifting water into
the hands of the more efficient users, who can pay more, in-
crease the efficiency with which the overall supply is used.
Agriculture, however, is a major economic activity in Texas. A
decline in agricultural growth or activity, related to higher
water prices, would be widely perceived as inequitable.
Groundwater users have virtually no protection at
present. Groundwater is considered a property right, and sur-
face owners are permitted to withdraw water from beneath their
land without constraint. By the Right of Capture principle,
groundwater pumping may legally draw down water levels in adja-
cent wells. This situation is likely to become more common as
groundwater substitutes to a greater degree for expensive new
surface water supplies. Large well fields, withdrawing water
for industrial or power-production purposes, can have a signifi-
cant local effect.
Legislation has been introduced in the Sixty-Sixth
Legislature which proposes to establish a marketable groundwater
right that could be transferred by sale to more economically
beneficial users. The proposed legislation would amend existing
groundwater law by conferring a property right to surface owners
for the water underlying their land. The Right of Capture
^Detailed analyses of the economic impacts of water use by major
economic sectors, based on input-output analysis, are given in
the TDWR document, Continuing Water Resources Planning and De-
velopment for Texas, 2 Vols., Austin, Texas, May 1977.
436
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principle that allows unlimited groundwater withdrawal would,
in effect, be replaced with a property right subject to legal
protection and to sale by the owner of the surface estate.
3.1.3 Water Conservation
Problems of supply and allocation can be reduced in
intensity, and planning given a longer horizon, by measures which
cut down on water waste. Water reuse has already begun to ex-
pand in industry, under economic pressure. Especially for in-
dividual large users, recycling and reuse can produce significant
economic benefits. Consequently, those basins where manufactur-
ing is a dominant water use may be in a better position to adjust
to lignite-related increases in water demand than other basins.
Potentially large water savings can be realized in agriculture
through existing technology. Use patterns in the agricultural
sector, however, especially in irrigation, are harder to shift
than industrial ones. This is so in large part because of the
large capital expenditures required for equipment. Individual
farmers and ranchers may have more difficulty financing newer,
water-saving technologies than industrial operations. Munici-
pal demand is very difficult to curtail, largely because there
are few opportunities to conserve enough water to have basinwide
significance. Also, many individual household decisions are
needed to produce a measurable demand reduction.
Conservation is one of the key concepts embodied in
the Water Resources Council's proposals for a national water
policy.* The Council saw pricing as a key mechanism to force
conservation. Large enough price changes, however, can also
^Federal Register, July 15, 1977, Part VI. These proposals met
with substantial opposition, particularly from water-short
states, and subsequent action has been delayed.
437
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lead to a net shift of water supplies out of agriculture and
into more economically efficient uses. Thus, pricing may be a
very difficult stimulus to calibrate.
3.1.4 Leverage on the Water Supply Issue
Because the general water-supply issue has so many
facets, a variety of federal and state entities can exert lever-
age upon it to varying degrees. In general, however, the state
legislature and water agencies appear to have the central re-
sponsibility for water planning decisions.
The state, through the Water Development Board and
the River Authorities and other local water agencies, can take
a greater role in water development, as federal participation
slackens. To do so, however, requires a resolution of the con-
flicting attitudes which produced the recent defeat of proposals
to extend the state's financial base for water projects. Con-
tract water prices are set by those agencies developing supplies,
which are very often state bodies. If the state takes on a
greater role in development, a greater portion of the new con-
tract water supply will be priced in this way.
Major reforms in water management, which could permit
groundwater to be managed jointly with surface water, and/or give
protection to groundwater users, would require action by the
state legislature. Based on existing state water policy alone,
the outlook for systematic, basinwide planning, conservation,
and allocation of water supply appears unpromising. Counter-
vailing doctrines are firmly entrenched in state water law and
reinforced by practice. Current federal efforts to establish an
updated, uniform water policy could conceivably break the impasse
by mandatirig state legislative reform. A thorough analysis of
the implications for Texas of the policy options developed by
438
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the Water Resources Council is both premature and outside the
scope of this study. However, it is clear that their emphasis
on modern, hydrologically sound planning could clear the way at
the state level for substantial improvements in water management,
Such policy recommendations, however, will have to overcome
strong objections.
Conservation could be encouraged by both federal and
state action. As is true with energy, conservation can be ef-
fected both through disincentives for usesuch as price in-
creasesand incentives for conservationsuch as tax credits
or financial assistance. The development of a national water
policy can introduce a variety of disincentives for excessive
use through measures designed to shift more of the cost burden
to the actual water user. These measures, however, would affect
only that portion of Texas' water supply in which federal par-
ticipation is required. For water projects outside federal
jurisdiction, the responsible state agency can select its own
measures to encourage conservation. A potential option open
at both the state and federal level is to provide assistance,
especially to agricultural water users, in financing water-
conserving technologies.
Finally, the resource-use conflicts outlined in
Section 3.1.1, above, which can potentially delay or curtail
some surface water projects, require compromises between state
and federal, or state and private interests.
439
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RESOURCE MANAGEMENT ISSUE No, 2
Consumptive Water Use
Finding: Power plant cooling accounts for most of the consumptive
water use associated with the lignite development scenar-
io. Among currently used cooling modes, those which hold
down consumptive use result in higher thermal discharges,
while technologies discharging little thermal effluent
consume more water.
Issue; How can a balance be struck between the objectives of
controlling unnecessary consumptive use and reducing
thermal discharges, without excessive costs?
441
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TABLE 3-2 CONSUMPTIVE WATER USE
ro
Objective
Balance vatcr conser-
vation needs tilth
altla( flexibility
and economic con-
siderations
Balance reduction of
thermal dischargee
with ecoMMilc com-
Ideratlone
Minimise both consump
tlve une and thermal
dischargee
Alternative
Tailor selection of cool-
Ing mode to sits-spsclfic
factors of water supply
and climate
Encourage use of vet cool-
Ing towers
Encourage the use of dry
cooling towers
Impl
tat la
levlse EPA regulations regarding permitting of
once-through systems
Apply EPA thermal discharge limitations to cool'
Ing Impoundments st the point of discharge from
the pond, not of the plant'a dlschsrge Into It
Condition permitting on a showing that the most
wster-effIclent cooling mode economically fessl*
ble for the elte has been chosen
Designate wet towers as Best Available Demon-
strated Technology for control of thermal pol-
lution
Apply thermal discharge limits to cooling Im-
poundments st point of plsnt discharge Into the
pond
Continue present requirements for studies/
demonstrations In support of once-through cool-
Ing
Designate dry towers as 1ADT
Apply dlschsrge limits to point of plsnt re-
lease to Impoundment
Continue preeent requirements for once-through
cooling
Impllestlone
Allows cost factors to motivate conaervatlve use of
water supplies
Hetlsnds impacti, siting difficulties may hold dove
use of once-through
Allows more thermal dischsrges, but a large propor-
tion will be in off-atream cooling Impoundments
Imposes no direct major siting limitations on any
geographic region
Higher total water consumption, statewide
Lower plsnt efficiency, increased cost
Thermal discharges to ponds reduced; dischsrges to
nstursl watercourses may increaae In number
Planta in humid esstern sress more severly pensliied
than those in drier southern areaa
Large ssvlngs in water consumption, thermsl dis-
chsrges
Large plant efficiency penalties (> 10Z)
High cost (four to five times that of once-through)
Towers may be very large, with aesthetic impact on
landscape
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3.2 Consumptive Water Use
A complex issue relating to water availability and
quality revolves around the choice of power plant cooling tech-
nologies. In all steam electric power plants, regardless of
fuel, the steam is recondensed after passing through the turbine,
and recycled. About two-thirds of the fuel energy used to raise
the steam in the boiler is still present in the spent steam as
it leaves the turbine. This heat is removed by passing the
steam through a series of tubes bathed in water. It is this
condenser cooling water which carries off the waste heat not
used in generating power.
A plant may be designed to use this condenser cooling
water only oncethe so-called once-through cooling system.
Condenser cooling water may also be recycled. One method is
to use a cooling tower where the condenser water is cooled by
evaporation so that it can be used again. To prevent excessive
salt buildup, a blowdown stream is withdrawn from the tower
and replaced with fresh make-up water. The blowdown water is
usually warm, but not as hot as water discharged directly from
the condenser. A third method involves constructing an impound-
ment for cooling purposes, The plant takes cooling water from
the impoundment and returns it directly without an intermediate
cooling step. Cooling impoundments may also have to be blown
down to control salts, but the discharge is not usually warm
enough to be considered a thermal effluent. In all three methods,
substantial amounts of water are consumed through evaporation.
Of the three, once-through cooling on a large multi-
purpose reservoir or at a coastal location consumes the least
water. Thermal impacts in the receiving waters are highest,
however, with this option. Also, it is difficult to obtain
suitable sites in such locations, because of the value of the
443
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property for other uses. For many utilities, no such sites may
be available within a reasonable distance of demand centers
served. Finally, EPA requires extensive and time-consuming
ecological studies to demonstrate that once-through cooling
will not result in damage to pre-existing aquatic ecosystems.
Cooling towers consume more water, because they remove
heat from recirculating cooling water by evaporation. They
also increase the cost of power both by adding to plant operat-
ing and maintenance costs and by lowering its efficiency. The
thermal impacts of plant discharge are considerably lowered,
however. Cooling towers are best adapted to use in dry climates.
In more humid areas, they consume more water and create greater
plant inefficiencies. In Texas, cooling towers are not now
considered economical in the humid eastern and coastal locations,
in which most lignite is likely to be used. In drier south
Texas, however, cooling towers may be used effectively.
Cooling impoundments also remove heat by evaporation,
which takes place at the surface of the impoundment. They are
an economic alternative to towers for recirculating systems in
the more humid parts of Texas. A cooling impoundment in east
Texas and a tower in south Texas, serving identical plants,
would consume roughly the same amount of water. Thermal impacts
of plant discharge in the impoundment itself may be very high,
depending on its design, but impacts on natural watercourses
are small or even, in completely self-contained systems, zero.
The Texas Department of Water Resources favors the
use of once-through cooling, and considers control of unnecessary
consumptive water use a key water management objective. EPA,
under legislative mandate to control thermal effluents, dis-
courages once-through cooling. Furthermore, EPA's regulations
make a distinction between cooling ponds, which do not impede
444
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the flow of navigable waters, and cooling lakes, which do.
Cooling lakes require the complex 316a procedure to permit
once-through cooling, and discharge limitations apply to the
point of discharge from the plant.
The Texas Department of Water Resources appears will-
ing to apply discharge limitations at the point of discharge
from the impoundment. TDWR will soon be authorized to adminis-
ter the NPDES program by which power plant discharges are per-
mitted. However, even then, EPA could not approve the issuance
of a permit which allowed thermal discharges into an impoundment
defined as a cooling lake.
From the utilities' perspective, flexibility in the
choice of cooling mode is important from the standpoint of cost
control. Thus, dry cooling towers, which both save water and
eliminate thermal effluents would not be acceptable to utilities
because of their very high costs and efficiency penalties.
Thus, the cooling-method issue can be seen as a three-
way conflict, involving a balance between controlling consumption
(TDWR), controlling thermal discharge (EPA), and controlling
costs (utilities). The principal leverage in this situation
lies with EPA. In 1976, EPA's New Source Performance Standards
for water dischargers from steam electric stations were overturned
on the grounds that adequate concern for water conservation was
not represented in them. New standards have not yet been issued.
In developing such standards, possible means of strik-
ing a balance among the three conflicting goals involve the
recognition of the following points:
Climatic conditions dictate different cooling
methods in different areas, based both on cost
and conservation objectives.
445
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In naturally warm climates, such as Texas,
aquatic ecosystems have been shown capable
of tolerating temperatures at levels com-
parable to those in waters receiving ef-
fluents from once-through cooling.
Although new impoundments, stocked with
selected fish species, do not constitute
natural, stable, aquatic ecosystems, many
have for years sustained fish populations
even at high ambient temperatures.
446
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RESOURCE MANAGEMENT ISSUE No, 3
Lignite Reserve Depletion
Finding: According to the lignite development scenario used in
this study, most or all of the state's lignite reserves
currently considered economically strippable are likely
to be committed to combustion uses by the end of the
century.
Issue; Should the state attempt to control this rate of com-
mitment in the interest of lower long-term energy
costs?
447
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TABLE 3-3 LIGNITE RESERVE DEPLETION
Objective
Control lignite con-
sumption by Increaeln]
It* price
Control lignite de-
velopment by reducing
demand
OO
Alternetlve*
Dee of eeverence tax to
reduce consumption
Encourage the Import of
Mexican oil and gaa
Encourage conservation
Encourage increaaed uae
of Ueetern coal
Encourage, nuclear de-
velopment
Implementation
State legislation
Tax could be applied to impact mitigation and/or
RDSD Into Improving the economics of resource'
recovery and use (See Resource Management Issue
Ho. 4)
International agreement between U.S. and Mexico
Seriea of Independent transactions between
FEMES and U.S. oil and gas companies
National Energy Act
State Energy Conservation Program
Avoid universal full scrubbing requirement in
NSFS revision
Restrain Increaeea In Western coal rail tariffs
Restrain severance taxes in coal-producing
states
Expedite federsl coal leasing program
Encourage streamlined licensing, standardlza*-
tlon, early site-certification policies at
federal level
Implications
< Tsx may need to be high in order to significantly
affect use
< Burden of tax falls on energy users (i.e., Texas
residents and utilities)
Increased utility bills for Texas residents (non-
exportable)
Utilities already using lignite experience higher
costs without being able to change fuels
Easy to administer
May be limited in effectiveness by MBFC policies
Involves international transactions
Environmentally desirable to continue to use
cleaner fuels
Supply disruptions possible
Lessens ecological* social, and environmental Im-
pacts In lignite belt
Effects limited to dampening overall demand (i.e.,
limited effect on lignite development)
Requires extensive public education and action to
achieve algnificont results
Energy may be made available cheaply through conser-
vation, as compared to new production
Lessens ecological, social, and environmental Im-
pacts on lignite belt
Effectiveness is subject to price Increases beyond
control of state
Increase rail transport needs
Fewer siting constraints (requires proximity to r.itl
rather than to lignite)
Improved air quality & greater aitlng flexibility
Increases demand for slurry pipeline
Lessens ecological, social, and environmental im-
pacts in lignite belt
Increased competition between Texas and other states
for Western cool
Greater uncertainty about development; long lead tines
Safety concern, waste disposal problems increase
Public opposition
Significant air quality benefits
Water consumption increaaea
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3.3 Lignite Reserve Depletion
Projections of lignite demand used in the development
scenario indicate that all or most of what is now considered
the economically recoverable near-surface lignite reserve will
probably be committed for use by the year 2000. This does not
mean that all the strippable reserves will actually be consumed
by then, but rather that they will be owned or leased by utili-
ties or industries and committed for eventual use in an existing
or planned facility.
This finding inevitably leads to the basic question
of whether it is in fact in the best long-term interest of Texas
to use its near-surface lignite deposits at such a rate, or
whether the rate and scale of development should be managed to
protect the reserve from premature depletion. In a few decades,
it may be increasingly desirable to use synthetic gas and liq-
uids , not only as fuel but as chemical feedstocks. The demand
for synthetic feedstocks could be quite high in Texas, if the
petrochemicals industry continues to grow.
If, by this time, lignite is not available, or the re-
maining reserves are very expensive, coal would probably have
to fill the gap. If coal were to make up a greater part of the
fuel mix in the next few decades, however, the lignite reserve
might be "stretched" well into the next century. Lignite may
well be worth more--both as a commodity and in its beneficial
effect on the state's economyas a feedstock for synthetics
production.
The speed of depletion relative to the available re-
serve is sensitive to economic factors that make it feasible
to recover deeper seams and thinner seams. If economically
recoverable reserves are estimated on the basis of stripping
449
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to 200 feet, rather than 150 feet, the total is increased by
more than 30 percent. Thus, improvements in mining technology
or increases in price could strongly affect the rate of reserve
depletion. Similarly, improvements in lignite utilization tech-
nology which lower operating costs permit higher-cost lignite
supplies to be used without a net economic loss.
Even considering the effects of these economic forces,
however, the ultimate limiting factor is the physical limit of
the lignite deposits. The amount of Texas lignite available by
strip-mining is small, compared with other coal resources. Thus,
economic factors can modify the time frame of the reserve-deple-
tion issue, but cannot eliminate it.
Left to itself, the market system will tend to allocate
a given supply of lignite to short-term boiler uses.* Therefore,
any attempt to curtail this trend will involve manipulating
price and/or variables affecting lignite relative to competing
fuels. If such manipulation can result in lower long-term energy
costs, it may be viewed as a legitimate policy alternative. How-
ever, excessive interference with the market mechanism, or arbi-
trary allocation of lignite, would not only be difficult and
costly to administer, but would meet with extremely strong op-
position in Texas.
Several alternatives may be identified by which lig-
nite use could be controlled. All face some impediment due to
economic or regulatory uncertainty, and each could have a wide
*It is also possible, however, that potential industrial users
of lignite as a feedstock can or do perceive the situation as
described here. These interests are not prevented from acquir-
ing and holding lignite reserves now, as insurance" against
future needs.
450
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range of effects on lignite consumption, depending on how it is
applied.
3.3.1 Severance Tax on Lignite
The effect of a severance tax would be either to raise
revenue or to reduce consumption of lignite, or both, depending
on the amount of the tax. To affect consumption, the level of
the tax would have to be sufficient to make alternative fuels
more economically attractive than lignite. Revenues from the
tax could be applied to amelioration of impacts in the lignite
development region, or to the encouragement of energy sources
for use in the post-2000 period when lignite use begins to de-
cline.
A major disadvantage of a severance tax is its impact
on Texas consumers. Since lignite is expected to be consumed
almost exclusively within Texas, the cost of the tax would be
passed on primarily to Texas utility ratepayers and consumers.
To the extent that lignite is used by industries which export
their products out of state, the tax can be passed on to resi-
dents in other states.
Viewed principally as an intrastate tax, the question
is whether the benefits of the tax outweigh the costs to Texas
residents which would result.
Texas presently has severance taxes on oil and gas
production, which go to the General Revenue Fund to finance
state services and facilities. These taxes are 7.5 percent of
the wellhead value of gas and 4.6 percent on oil production.
The rationale for these taxes is to raise revenue for the state
rather than to influence consumption levels. The point at
451
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which a severance tax on lignite would begin to affect consump-
tion is influenced by several factors, including the delivered
price of alternative fuels.
The option of imposing a tax on lignite rests with
the state legislature. Such action can be taken independently
of the federal government.
3.3.2 Encouragement of Mexican Oil and Gas Imports
The Mexican government has recently announced estimates
of large amounts of oil and gas reserves, possibly the equivalent
of 200 billion barrels of oil or more. The possibility of bring-
ing these oil and gas resources to the United States through
California and Texas is being actively pursued by several major
concerns.
Introduction of a large, reliable, new supply of
Mexican oil and gas into Texas fuel markets at a reasonable
price would tend to weaken the trend toward coal and lignite.
The principal energy rationale for conversion to coal has been
the long-term shortage of oil and gas. These new supplies may
not dramatically affect the fuel choice of utilities, but could
significantly alter the future demand for lignite by industrial
concerns along the Gulf Coast. The imposition of federal re-
strictions on boiler fuel choice, however, can significantly
lessen the impact of Mexican oil and gas by diverting it into
uses where lignite is not a competitor.
The State of Texas, by itself, can help streamline the
process of permitting and constructing pipelines within its bor-
ders. The key decisions regarding the price paid to Mexico and
the pricing of Mexican fuels for U.S. consumers, however, rest
with the federal government.
452
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Reliance on imports from Mexico would extend the cur-
rent imports-related balance-of-payments problem. Supply in-
terruptions and foreign pricing policies would be continuing
concerns. However, spreading our import base might also be seen
as a way to lessen our vulnerability to the vagaries of any one
supplier.
3.3.3 Encouragement of Energy Conservation
The cornerstone of the National Energy Plan as pro-
posed by President Carter is conservation of energy. To the
extent that conservation can decrease energy demand, the demand
for developing lignite will be diminished.*
In principle, energy conservation could result in con-
siderable savings in lignite used. According to sensitivity
tests applied to the development scenario in Chapters I and II,
widespread use of existing technologies might be able to cut the
amount of lignite committed in the year 2000 by 60 percent, com-
pared with the moderate, Nominal Case. Savings this large which
would require very large front-end investments may be difficult
to finance.
Incentive measures, such as tax credits for investment,
would not be likely to produce savings near the level theoretical-
ly possible. Price disincentives directed at reducing energy
use would be needed to effect large savings. The state could
institute incentives without prejudicing continued economic
growth. A state-level system of price disincentives, however,
would place Texas industry at a disadvantage relative to other
*Volume I, Chapter I contains a discussion of the extent of con-
servation possible in Texas, and the factors constraining wide-
spread conservation efforts.
453
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states and reduce its ability to attract new growth. Price
disincentives might be less inequitable if applied at the fed-
eral level. Federal initiatives could also be taken to provide
financial incentives for conservation.
3.3.4 Encouragement of Increased Western Coal Use
At present, there are no state or federal policies
specifically aimed at increasing the use of western coal vis-a-
vis other coal. The reverse is true in the case of proposed
New Source Performance Standards under the Clean Air Act,
which are intended to encourage use of eastern and midwestern
coal.
Efforts to increase the use of western coal in Texas
would likely reduce lignite use, because the two fuel sources
are in close competition at present. The ratio of coal use
to lignite use is projected to be about 40:60 through 1985,
based on announced plans. This indicates that neither fuel
has a compelling advantage, at least on a statewide basis.
Recently proposed NSPS requiring full scrubbing re-
gardless of sulfur content (i.e., requiring scrubbers on all
new western coal units where none was required previously) will
tend to enhance the attractiveness of lignite even more. This
strong trend would have to be overcome by any strategy to in-
crease the use of coal relative to lignite.
The most effective measures to encourage coal use
relative to lignite involve federal action. Leverage from
the standpoint of scrubber requirements would have to be ap-
plied through EPA action. Currently, EPA policy is tending
454
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toward increasing control levels rather than relaxing them to
a point where low-sulfur coal could be burned without scrub-
bers. A change in the Interstate Commerce Commission's atti-
tude toward granting increases in rail tariffs for coal unit
trains could at least prevent further erosion of coal's at-
tractiveness in Texas. Expedition of the federal coal leasing
program by the Department of Energy could have a short- to
mid-term effect on supplies of western coal available. The
resulting impact on use in Texas, however, would tend to respond
more to scrubber requirements and freight rates.
Severance taxes imposed by producing states can be a
significant component of delivered cost in Texas. The state of
Texas is one of the litigants in a current court case, claiming
that Montana's severance imposes an unconstitutional restraint
on interstate commerce. The state thus has a direct avenue of
action in this area, although the final decision will be made
in a federal court.
3.3.5 Removal of Impediments to Non-Fossil Energy
Sources
Encouraging non-fossil fuel energy sources, including
nuclear power, will help meet the energy demand that lignite
might otherwise fulfill. One problem with this alternative
is that few actions are within the direct authority of the state.
The policy initiatives encouraging expanded development of
nuclear and other power sources must be taken primarily by the
federal government.
Of the non-fossil energy sources, nuclear power has
the greatest potential for short-term displacement of lignite.
To date, Texas has not experienced strong public opposition
455
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to nuclear power plants. Four plants are under construction
in Texas and others are planned. Opposition has increased in
response to large cost overruns and construction delays. Cost
overruns also plague large new coal-fired stations, however.
Nuclear waste disposal problems may be the major con-
cern which will require resolution if a significant increase in
the use of nuclear power is to occur. The possibility of nuclear
power offsetting demand for lignite in fact appears to be dimin-
ishing at present.
456
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RESOURCE MANAGEMENT ISSUE No
Lignite RD&D Priorities
Finding; Based on the lignite development scenario, it is likely
that all or most of the currently economically recover-
able Texas lignite reserve may be committed by the end
of the century. Economics indicate that most of these
commitments will be for conventional combustion uses.
Issue: How should Texas lignite research funding be spread among
existing technologies and developing technologies?
457
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TABLE 3-4 LIGNITE RD&D PRIORITIES
oo
Objective
Encourage expanded re-
covery of lignite
resource*
Encourage expended
developnent of lignite
reeource through removal
of berriere to continued
production end uee of
the reeource
Encourage developecnt of
technologic* which
promise environmental
end econoeilc improve-
ente in Industrial
uee of lignite
Alternative*
A* sen* technical. ecommlc and environmental lap act* of
surface Mining for thinner and deeper aeaaw
Aaaeaa technical, econoalc and environmental iapacta of
In-altu |aalfication techniquea
Aaaeaa utilization of In-altu gaaif1catIon product |aaea
Reeearch empheele on removal of barrier* to production
end uee of the reeource. Including euch ereee eet
Improved mining technology
Improved economic* of uee
Reclamation techniquee
Transportation
Mining and power plant altlng pattern*
Mining Impecte on equlfere
Surface water quality and quantity
Sludge end aah dlepoeel
Air quality, especially additive Impact*
Varloua eocloeconomlc berriere
AB*eaa technical, economic end environmental
Impecte of Industrial lignite utilisation techniquee
Atmoepherlc reeeerch
Implementation
Continue appropriations for the Texa* Energy Development
Act of 1977
Continue appropriation, for the Texaa Energy Development
Act of 1*77, with allowance for policy research
Continue appropriation for the Texae Energy Development
Act of 1977, with allowance for policy research
-------
3.4 Lignite Research, Development and
Demonstration Priorities
Given current estimates of the near-surface lignite
reserve and estimates of lignite demand by electric utilities
and industry based on the Fuel Use Act, it appears likely that
most or all of the recoverable near-surface resource may be
committed by the year 2000. It also appears likely that the
bulk of this resource will be used by electric utilities in
conventional combustion processes. The demand for lignite by
industry also appears to be of significance. The technologies
through which lignite use will occur, however, are subject to
technical, economic and environmental uncertainties. (Also see
Resource Management Issue No. 3.)
Assuming that these findings are correct, it is logi-
cal that the state's energy Research, Development and Demonstra-
tion (RD&D) priorities should focus on three general objectives:*
To encourage development of mining technologies
which would allow recovery of the lignite re-
source which lies at depths below the currently
strippable range,
To continue to identify and mitigate barriers
to economically, environmentally and socially
acceptable recovery and use of the resource,
To encourage the development of technologies
which will make the industrial use of lignite
more economically and environmentally attractive.
*These objectives assume that the overall RD&D policy of the
state is that expressed in .the Texas Energy Development Act of
1977. This calls for funding of R&D into technologies which
"offer the realistic promise of significant energy contributions
within 25 years and which are of particular importance to Texas."
459
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The reasoning behind the first objective is that if
the bulk of the near-surface lignite will be committed for con-
ventional direct-firing applications by the year 2000, it would
be prudent to begin now to expedite investigation of in-situ
extraction of deep basin lignite resources and more efficient
recovery of surface mineable resources. Such technologies must
be available before near-surface resource production begins to
decline in the early twenty-first century.
An obvious approach to speeding up the commercializa-
tion of in-situ extraction is to conduct RD&D on underground
gasification techniques. In addition to developing the gasifi-
cation process itself, there is a need for RD&D into ways of
cleaning up the product gas and economically utilizing it. Low
heating value and logistics problems provide unique problems
for utilization. The deep basin lignite represents a substan-
tial resource but before it can be used to meet future energy
demands it must be economically feasible to extract and to use.
Significant environmental barriers to in-situ gasifica-
tion must also be overcome. Of particular concern is possible
contamination of aquifers by the product gas, volatile materials,
ash and partially combusted lignite. Legal questions also arise,
relating to ownership of the lignite resource in the case of
severed surface and mineral rights.
An important way of extending the economically recover-
able strippable lignite reserve is to improve the economics of
surface mining methods. RD&D focused on increasing the range of
economic stripping ratios could significantly increase the
strippable reserve. (Also see Resource Management Issue No. 3.)
The second objective assumes that one way to maximize
energy development is by removing environmental, socioeconomic
450
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and policy-oriented barriers. For example, research on means of
achieving more efficient and environmentally acceptable means of
disposing of ash and scrubber sludges will reduce the barriers
to efficient utilization of existing technology.
The third objective recognizes the apparent conflict
between fuel use policy, environmental policy and economic
growth with regard to the state's industrial base, particularly
along the Gulf Coast. The Nominal Case Scenario developed in
Chapter I estimates industrial use of lignite and coal based
on assumed requirements of the Fuel Use Act. As pointed out in
the siting analysis and in Chapters I and II, however, substan-
tial uncertainty exists as to whether the objectives of the FUA
can be accomplished concurrently with the need for environmental
protection and improvement along the Gulf Coast and within the
economics of coal/lignite versus oil/gas use in industrial opera-
tions. Although the constrained use of lignite by industry would
extend the supply of lignite for electric power, industrial
growth and stability may be impaired if sufficient fuels are not
available. The development of technologies such as atmospheric
fluidized bed combustion which offer promise of improving eco-
nomic and environmental attractiveness of lignite use is there-
fore important.
Because of post-2000 supply limitations, the develop-
ment of utilization technologies for which commercial availabil-
ity is not expected in the next two decades does not currently
appear cost-effective. Examples of such technologies include
liquefaction and chemical processes based on lignite feedstocks.
The charge of the Texas Energy Development Act of 1977 to en-
courage research in technologies which have the potential for
"significant energy contributions within 25 years" is of special
significance in this regard.
451
-------
RD&D is carried out by a variety of groups in the
state, paid for by federal and private monies, as well as by
state funds. The Texas Energy Advisory Council, however, can
strongly influence research priorities, as well as providing
significant sources of research funds, through its administra-
tion of the Texas Energy Development Fund. If the objectives
outlined above are to be pursued, this fund should continue to
receive appropriations from the state legislature. Further
focus could also be provided to the direction of lignite research
by the establishment of a mechanism for coordinating all state-
funded RD&D related to lignite or, more broadly, to energy in
general.
452
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RESOURCE MANAGEMENT ISSUE No, 5
Utility Interconnection
Finding; Certain utilities within the Texas Interconnected System
(TIS) are planning new lignites-fired power plants with
interties into the interstate grid. Federal policy sup-
ports such interconnection.
Issue; Will interconnection increase the rate of reserve deple-
tion and create an undue burden on Texas utilities and
ratepayers?
463
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TABLE 3-5 UTILITY INTERCONNECTION
Objectlves
Alternatives
Implications
Provide for Increased
economies of ecale and
reliability for all
Texas electric utilities
vlthout undue economic
Impact* on TIS
and customers
Mandated Interconnection of TIS with Interstate grid for
emergency transfers only, with guarantees of no additional
federal regulation
Would likely require new legislation to exempt TIS
from regulations
Would not result In significant sdded lignite demand
Would enhance reliability of neighboring systems at
the expense of TIS
Would not improve efficiency of all TIS membera
Mandated Interconnection of T13 with interatate grid,
coupled with ratea for intersyatem sales which fully
compensate exporting utility
Possible long-term tranafer of lignite-generated power
to non-TIS consumers
Imposition of federal regulation on TIS membera
Equity concerns could be addressed through a rate
structure which could possibly lower customer rates
in the exporting utility service area
Minimize federal Involve-
ment In Intrsstate power
grid and preserve Texas
lignite resource for Texaa
users
Resist Interconnection
Protracted legal battlea
Possible Increased rates to non-TIS members within Texas
Minimal export of lignite-generated power
Spread the benefits of low-
cost lignite-generated
power to non-TIS consumers
Mandated Interconnection of TIS, with ratea reflecting
only production coats
Possible long-term and continuous export of lignite-
generated energy from TIS to non-TIS members (Including
other Texaa consumers), at the expense of TIS members
Texas would bear additional environmental coats, in-
cluding Increased competition for PSD increments, etc.)
-------
3.5 Export of Lignite-Generated Energy Through
Electric Grid System
A major issue facing the Texas electric utility in-
dustry and state and federal regulatory agencies is the future
status of the Texas Interconnected System (TIS). The TIS is
the nation's only intrastate electricity grid. TIS is com-
prised of several large investor-owned utilities and several
dozen publicly owned utilities which together account for ap-
proximately 85 percent of the state's electricity sales. At
issue is whether this grid system should be linked with the
large interstate grids surrounding Texas.
There are three clear-cut viewpoints on this issue,
corresponding to three parties of interest.
The majority of the TIS members oppose interconnec-
tion, alleging that this would reduce reliability of the TIS
system, impose additional federal regulations, and increase
costs to TIS consumers. The concern which relates to lignite
development is that eventually, relatively low-cost lignite-
generated electricity might be exported to consuming states
in much the same way natural gas is exported out-of-state at
below market prices.
Some TIS members,* which are also corporately linked
with interstate non-TIS members, favor interconnection to im-
prove system reliability and reduce operating costs. The
National Energy Plan, as proposed by the Carter Administration,
also favored interconnection.
^Central and South West Corporation (C&SW) member utilities.
455
-------
The President's proposed National Energy Plan viewed
power to require interconnections as a tool needed to ease a
rapid transition from oil and gas to coal. Viewed in the
national perspective, severe imbalances between utilities in
the availability and cost of power could be avoided in this
way. Depending on their current and planned fuel mixes, the
impact of rapid conversion on utilities could differ consider-
ably. Thus, interconnection might increase the impacts for
some, while moderating them for others. The desired result
would be a more even distribution of the cost of fuel conver-
sion to all U.S. electricity consumers.
A key uncertainty in this issue is the extent to
which lignite can be regarded as cheap compared with coal.
Factors which can influence this comparison in the future in-
clude changes in the relative prices of the two fuels, and
increasing difficulty in finding sites for lignite plants near
the lignite deposits. Policy formulation affecting long-range
transportation of sulfates could have a strong impact on the
number of plants that could be built in the lignite belt itself.
456
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4.0
RESPONSE ISSUES
Issues Related to Possible Need for New Policies
No. 1 Financing Community-Level Infrastructure
No. 2 Control of Water-Quality Effects of Flow
Reduction
No. 3 Reducing Adverse Impacts of Reclamation
on Wildlife
No. A Control of Boom-Town Growth
No. 5 Equitable Geographic Distribution of
Lignite's Costs and Benefits
No. 6 Control of Aesthetic Deterioration
Issues Related to Implementing Existing Policy
No. 7 Approval of State Surface-Mining Program
No. 8 Identifying Lands Unsuitable for Mining
No. 9 Coordinating Multi-Agency Permit Review
The issues gathered under the heading of "Response Issues" all focus
on the effects of lignite development, rather than factors controlling the
rate and scale of such development. The Response Issues listed here are con-
cerned with problems of site selection, as well as mitigation of post-
operational impacts. Two main groups of issues have been identified, which
distinguish between real policy gaps and areas where basic policy directions
exist, but need to be worked out in detail.
467
-------
-------
4.1
Response Issues Related to Possible Need
for New Policies
No. 1. Infrastructure Financing
How can adequate front-end monies be placed in
the hands of local governments, faced with in-
creased demands for services, in a timely man-
ner?
No. 2. Flow Reduction and Water Quality
How can water use and water quality be jointly
regulated so as to compensate for reductions in
waste assimilative capacity resulting from in-
creased consumptive use?
No. 3. Wildlife Impacts of Reclamation
How can incentives be developed that will en-
courage landowners to include wildlife values
in post-mining land use?
No. 4. Control of Boom-Town Growth
What can be done to control the intensity of
boom-and-bust cycles related to energy develop-
ment?
No. 5. Regionwide Costs and Benefits
How might the economic and social costs of lig-
nite development be spread equitably among all
the beneficiaries of that growth?
No. 6. Aesthetics and Attitudes Toward Growth
Should attempts be made to control, or compen-
sate for aesthetic impacts?
The first six Response Issues refer to problems which appear at
present to have no institutional solutions, or where such solutions may be
deemed inadequate. Initiatives lie largely with state agencies and the
state legislature. All of these problems are specific to Texas, and occur
on a more or less local scale.
460
-------
-------
RESPONSE ISSUE No, 1
Infrastructure Financing
Finding; Lignite mining and mine-mouth power plant construction
have caused and will continue to cause temporary and
site-specific shortages of local government services
and facilities. The problems of providing adequate
services and facilities involve issues of timing and
equity.
Issues; (1) How can needed services and facilities be provided
in a timely manner?
(2) How can adequate revenues be provided to the re-
sponsible local agencies?
471
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TABLE 4.1.1 INFRASTRUCTURE FINANCING
NJ
Objective*
Anticipate future develop-
ment la order to extend
planning horizon and
provide adequate lead
time
Provide timely and
adequate financial re-
aourcea to local
governments to Met
udden and eignifi-
cant new damande
Insure equitable alloca-
tion among local
governments of revcnuea
fro* mining and develop-
ment.
Altematlvea
Increaae planning capability of local communities and regional
COG 'a
Reduce uncertainty factora in altlng and development proceaa
* State/federal assistance In front-end financing
Induatry aaalatanca In front-end financing
Direct compenaation to Indlvlduala
Greater reliance on uaer fee*
Voluntary local government compacts resulting In "revenue
sharing"
State collection of local taxes for difiburaeatent based on
impact formula
Shift mor* responsibility to the atata for funding local
aarvlcea and facilities
Implementation
Utilize NEA planning aaaistance for communities affected
by coal development
Utilize other existing mechanisms (i.e., Sections 701
and 208 of the Water Pollution Control Act Amendments
of 1972; RCRA)
Require aocloeconomlc Impact statement aa part of atate
permitting proceaa (RKC and PUC)
Eatabllah county ordinance-making powers
Grants for development of new services/facilities
Loans (from government to commercial)
Bond or loan guaranteea
Give communities affected by lignite development funJ-
ment grants
Constitutional amendment allowing publicly owned utlll-
Mandatory prepayment of taxea
gn g
Provision of some or all services and facilities
Goodwill payments to affected comnumity
Taxca-ln-progrcss should be included in utility rate base
Alter tax structure to deemphaslze property and sales
tax and emphasize such revenue-raising devices as public
school tuition, transportation tolls, park entry
feea, etc.
Statutory enabling and coordinating legislation
State-level assessment and collection of property taxea
with dlaburscmcnt back to affected communities
ill Ml 1
affected area
More atate highways and parka
State Housing Authority
-------
4.1.1 Infrastructure Financing
Local governments in small and medium-sized com-
munities face several problems when experiencing rapid develop-
ment, whether from lignite or from some other stimulus.
School districts, counties, and municipali-
ties have a constitutional debt ceiling
which limits their ability to raise necessary
revenue;
New residential developments in a growing
area create a net deficit in the school
system. On an average, each new house will
impose more expenses on a school district
than it will generate in revenue through
property taxes, especially if there is a
great influx of mobile homes. As this cycle
continues, a greater burden is placed upon
non-residential land within the school dis-
trict, especially open space or farmland.
This is one factor that leads to the early
conversion of farmland to urban uses and
compels local governments to seek commercial
and industrial developments which will gen-
erate more tax revenue per acre than other
forms of land use;
« There can be considerable bureaucratic
lag-time in receiving financial assistance
for infrastructural improvements. For ex-
ample, at least three years or more may be
47!
-------
required to receive grants for waste
water treatment plants under Section
201 of the Clean Water Act. Also, fewer
funds are available to small communities
for sewage treatment improvement than to
large communities.
Federal impact assistance programs are
often implemented very slowly. Also,
authorized levels for assistance often
exceed the actual amount appropriated by
Congress. Im some instances, funds are
authorized in substantial amounts, but
never appropriated at all.
In the case of education, capital expenses
such as new classrooms are the responsibil-
ity of local school districts. There are
no funds available at either the state or
federal level for school district assistance
with these capital expenses. Local districts
do receive assistance from the State Minimum
Foundation program, which pays approximately
50 percent of operating and maintenance
costs. The level of assistance is directly
tied to the average daily classroom en-
rollment.
Jurisdietional problems often make it
difficult for one political entity to
qualify for assistance if the project
is located in another's jurisdiction.
474
-------
Project impacts are rarely confined to
the jurisdiction in which the facility
is sited.
The state has no energy impact assistance programs
for areas which might be affected by lignite development.
Planning assistance is available pursuant to the National
Energy Act in the amount of $20 million nationally. A region
will be eligible after it has been designated by the governor
of the state as being affected by rapid energy development.
Generic impact assistance legislation has been proposed to
Congress. The legislation, S1493, sponsored by Senator Gary
Hart of Colorado, would provide more extensive impact assis-
tance to energy development areas. The legislation was de-
veloped in cooperation with a National Governor's Association
task force which worked in conjunction with an administration
task force on impact assistance. The basic framework of the
Hart bill was incorporated into the impact assistance portion
of the National Energy Act.
The Coastal Energy Impact Program (CEIP) , implemented
in accordance with Section 308 of the Coastal Zone Management
Act Amendments of 1976, provides planning assistance, loans and
loan guarantees, bond guarantees, and grants for amelioration
of loss of environmental and recreational resources in com-
munities which are affected by coastal energy development.
The program is administratively complex and has been slow in
its initiation in many states. The CEIP has developed a
methodology for calculating the impacts on a given community
which might have application for an inland energy impact
program.
47
c
-------
-------
RESPONSE ISSUE No, 2
Flow Reduction and Water Quality
Finding; Consumptive water use related to the development scenario
can reduce in-^stream flows, resulting in lowered capacity
to assimilate waste. The problem is not always severe,
however, and could frequently be relieved by coordinating
the management of water use and water quality.
Issue: Will the current institutional system develop in the
direction of such coordinated management?
477
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TABLE 4.1.2 FLOW REDUCTION AND WATER QUALITY
Objective*
Control or prevent water
quality degradation.
--J
CO
Kquallce the coat of
pollution control be-
tween dlecharger* and
coaeumera of water.
Alternatives
Condition water appropriation on Maintenance of 7-day.
2-year low flowa:
/ At preaent level* (nondegradatlon)
/ At levels which will allow atandarda to be juat Met
(allowable degradation)
/ At Intenaedlat* levela (analogoua to current PSD
Incremental
Baalnwlde Coordinated Planning. Define consumptive use/
assimilative, capacity relationships. Allocate both con-
sumption and waste loading Jointly, in a forward-looking
anner. The provisions of Section 208 of the wster pol-
lution Control Act Amendments of 1972 may provide a mech-
anism, through the concept of Beat Management Practlcea.
Monitor both water quality and flow regime jointly, for
early detection of problems. Adjust waateload allocatlona
and/or reaervolr releases to compensate for reduced flow:
/ So as to maintain current water quality
/ So as to meet standards
/ So aa to meet intermediate quality levela
Baalnwlde water treatment, funded jointly by consumers
and dischargers on a pro-rata basisI
/ To maintain current quality
/ To meet atandarda
/ To meet Intermediate quality levels
Implications
Solvea the equity problem of pollution control cost
by preventing it
Requires extensive modeling
May Involve considerable new legislative and regulatory
activity to implement aa a nondegradation or intermediate
degradation policy
Controls degradation a priori
Significantly greater government involvement In siting
Requires very sophisticated modeling
Eliminates equity problem of pollution control. Intro-
duces potential equity problems In siting, allocating
economic opportunity
Because both quality and quantity are highly variable
dally and seasonally, degradation trends may bo ad-
vanced before they can be unequivocally detected
Requires an increased level of monitoring
Equalizesor at any rate distributespollution control
coata, and may result in lower totsl expenditure
Requires considerable organlcatlon and probably In-
volves a long lead time
Determining an acceptable proratlon of cost* would be
extremely difficult
Sizing and locating facilities would be a complex problem
-------
4.1.2 Flow Reduction and Water Quality
As is discussed in Chapter IV (Section 4.0), the
consumptive use of water that accompanies the development
scenario is expected to reduce flows measurably in at least
some basins. The widespread introduction of solid fossil fuels
will entail roughly the same requirement for water regardless
of whether lignite or coal is used. Economics presently in-
dicate that lignite use will take place largely at the mine
mouth, however, coal facilities are potentially less limited
as to site. Thus, lignite use may tend to concentrate power
generation in the Northeastern and North Central Subregions.
Adding to the significance of this concentration is the rela-
tively small size of most of the basins crossing the lignite
trend in these subregions. A given consumptive demand will
have larger impact on flows in smaller river basins.
In Section 4.0 of Chapter IV, it is demonstrated that
lowering flow reduces assimilative capacity. Thus, if waste-
loads remain unchanged, lower flows could cause a demonstrable
deterioration in water quality in stream segments already carry-
ing heavy waste loads. According to the water quality regula-
tions published by the Texas Department of Water Resources,
the policy of the state is to prevent degradation of water
quality unless it can be shown to be necessary to the public
good.
Another issue concerns the potential impact of flow
reduction on achieving the water quality goals implicit in
stream standards or quality criteria. Stream standards are
set with reference to the seven-day, two-year low flow and
consist of a set of water quality criteria and requirements
intended to protect known suitable uses for the water from the
479
-------
stream. In streams with water quality problems, wasteload
allocations are made so as to assure that the standards are
met under seven-day, two-year low flow conditions. If the
actual seven-day, two-year flow is reduced, then new wasteload
allocations must be made if water quality is to be protected.
The mechanism of reallocating wasteloads to adjust
for changes in water quality is built into the present admin-
istrative system. However, in the past, flow reduction has
not been a significant contributor to quality problems. Re-
allocating wasteloads to compensate for flow reduction would
place the economic burden of water quality control on a dif-
ferent group than that responsible for the problem.
This dilemma can be avoided by recognizing that sur-
face waters serve two economic functions: assimilation of
wastes and provision of water for cooling and/or raw material.
Both are allocated by state regulatory bodies, whose activities
can be coordinated so as to prevent the use of one from cur-
tailing the enjoyment of the other. The recent merger of all
Texas' water agencies under a single aegis can greatly facili-
tate the development of a coordinated management program.
Joint management of waste discharge and in-stream
flows could be effected through one of two possible strategies,
or a combination of both. Reservoir releases timed so as to
maintain a certain minimum low flow could compensate for the
effects of consumptive use on assimilative capacity. Such a
scheme might also be required to protect downstream water
rights. However, many reservoirs are not designed to be
capable of the necessary flexibility of operation. A second
strategy would, therefore, be to attack the problem from the
timing of wasteloads, where stream-flow cannot be controlled.
-------
Wastes can be held during periods of low flow, for release
when larger volumes of water are available.
An important distinction exists between the concept
of low-flow maintenance and the use of flow augmentation to
control pollutant concentrations. The former essentially seeks
to maintain the status quo against changing conditions in the
watershed. Existing dischargers are neither penalized nor
benefitted by such a strategy. The latter, however, seeks to
alter existing hydrological conditions so as to dilute pollutants
discharged into the stream. This type of strategy can be ad-
ministered as a substitute for effluent clean-up. Thus, dis-
chargers could be able to meet water quality standards at lower
cost than otherwise. EPA does not advocate flow augmentation as.
a means of pollution control. Waste storage for release ac-
cording to streamflow conditions appears to be a potentially
more acceptable approach.
The impending identification of required freshwater
inflows into bays and estuaries may help to resolve the prob-
lems potentially caused by flow depletion. The release of
these flows at the proper season may tend to counteract the re-
duction of low flows by consumptive use. Also, in finding
mechanisms' to deliver the required amounts of water it may be-
come necessary to develop institutional means of coordinated
reservoir operation. Currently, required downstream withdrawals
and floodwater releases are the dominant considerations in tim-
ing reservoir releases. The estuarine inflow requirement places
instream flows on an equivalent basis. Coordinating reservoir
operation with instream flow needs for estuarine freshwater
delivery and considering instream flow needs with respect to
assimilative capacity are logical extensions of a similar
management technique.
431
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Section 208 of the Water Pollution Control Act Amend-
ments of 1972 may provide a mechanism to manage instream flows
with respect to water quality, although this approach is not
now being assessed in the Section 208 program. The concept of
Best Management Practices presented in this piece of legisla-
tion has so far been construed in terms of wastewater dis-
chargers. If it were interpreted to mean management of assimila-
tive capacity as well, then water quality plans formulated under
Sections 201, 208, and 303 of the Act could include provisions
for maintaining instream flows.*
The problem of reduced assimilative capacity due to
consumptive use is not an intractable one, and possible solu-
tions can be readily identified. Thus, the key issue here is
whether the appropriate institutional structures will be de-
veloped to bring the problem and the solutions together.
*Section 201 refers to individual municipal dischargers, Section
208 to areawide wastewater planning, including non-point sources
Section 303 requires basin-wide water quality planning, includ-
ing wasteload allocation.
432
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RESPONSE ISSUE No, 3
Wildlife Impacts of Reclamation
Finding; Habitat conditions over much of the lignite belt are
poor for wildlife, and could be improved by reclama-
tion. At the same time, there is a large and growing
demand for outdoor recreational opportunities easily
accessible to residents to the metropolitan belts on
either side of the lignite trend. Currently, ecosys-
tem quality is not highly valued by landowners in
general, and experience to date suggests a preference
on the part of many to reclaim with monocultures of
cultivated forage grasses, with very little value to
wildlife.
Issue; How can incentives be developed that will encourage
landowners to include wildlife values in postmining
land use?
4.33
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TABLE 4.1.3 WILDLIFE IMPACTS OF RECLAMATION
Objectives
Prevent net degrade
lion of wildlife
habitat efter
lolnf
CO
Provide additional
wildlife-related
recreational op-
portunltlee
Alternatives
Strict interpretation of
language In Section
713.11 of the Federal
Surface Mining Act con-
cerning restoration of
land to ita former, or
higher, capability of
Provide tax Incentive*
to reclaim landa for
wildlife valuea
Encourage public par-
ticipation in permit
review
Promote the development
of a system of privately
annged recreation landa
acccaalble to the public
by leaae or fee. center-
ing around reclaimed
lignite landa
Implementation
Strong regulatory atance by OSM or Railroad Com-
mlaalon considering a straight monoculture a re-
duction in the capability of land to support a
variety of uses.
Strong sdviaory role of Department of Parks and
Wildlife, and U.S. Fish and Wildlife Service in
approval of postmlning land use and stlpulstlon
of mitlgatlve measures to Include management of
surrounding habltst during mining.
Allow s temporary or permanent reduction or re-
bate of property tax on acreage reclaimed and
managed for wildlife valuea.
Implement a atrong campsign to raise public con-
sciousness, provide ssslstance (such SB trans-
portation to hearings or rebste of expenses) to
promote public involvement.
Arrange for TDPW to lease land reclaimed for
wildlife from owners following reclamation.
Landowners provide access to public by short-
term use fees; long-term use secured by sub-
lesse from TDPU. Use monies are remitted to
landowner to defrsy costs of maintenance.
Implications
Potential conflicts between landowners wanting
productive aouocultures and regulatory ageiu-ies
preventing them from free exercise of judgement
regarding use of their own land. Operators
likely to favor monocultures as cheaper, easier
reclamation alternatives.
Conflicts with landowner over privilege to
manage lands in own Interests.
Lack of Incentive to maintain habitat value
after reclamation.
Hay not be sufficient economic Incentive to re-
plsce overgrazing, poor management practices,
or to compensate for perceived economic gain
from reclaiming for graxlng.
Possible polarization of public opinion and
loss of objectivity In planning, implementing
reclamation.
Large expense of s thorough program; TDPW may
not be sble to finance, snd federal agencies
might be resented locally.
Public opinion has no real leverage on permit-
ting.
Spreads cost of developing recreation lands
among several entitles; TDPU Is curreutly
limited finmu-lnlly.
Provides economic Incentive to landowners to
restore snd maintain habitat.
If lenses by TDPW extend beyond mine proper.
Incentive is provided to Improve manageaient
of unmlned Isnds.
-------
4.1.3 Ecological Impacts of Mining
One of the basic conflicts regarding the restoration
of wildlife habitat as a post-mining land use is that other land
uses are generally perceived to be more profitable. The Surface
Mining Control and Reclamation Act, and the recently proposed
Rules for the Permanent Regulatory Program, require that recla-
mation return land to a state capable of supporting all former
possible uses (as measured against good pre-mining land manage-
ment practices in the area), or "higher and better" uses. This
approach is intended to prevent despoilation while still allow-
ing the landowner the freedom to choose new uses for mined land
which will increase its value. Although the "highest and best
use" concept is an open-ended one, wildlife habitat per s_e is
seldom considered "highest and best."
Aside from encouraging operators to use reclamation to
enhance habitat wherever possible, and to avoid or fully restore
certain riparian and wetland habitats, neither the law nor the
rules appear to focus on concepts of ecosystem integrity. The
bulk of the requirements for mitigating or avoiding adverse
impacts on fish and wildlife refer to species and individuals
(Section 816.92 of the proposed Rules). Habitat loss and at-
trition in general,' however, not hazards from mining, appear to
be one of the most significant problems facing fish and wildlife
in the Lignite Belt. The reader is referred to Chapter IV,
Section 6.0 for a discussion of wildlife management problems in
the Lignite Belt.
A key feature of the Texas situation is that virtually
all of the surface mineable lignite is under private land. Thus,
post-mining land uses are chosen by individuals for whom econom-
ics , rather than conservation ethics, will typically be the key
factor in the decision. The current trend in Texas is for many
405
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surface owners to choose for their land to be restored to cul-
tivated pastureland. The resulting monocultures are often more
profitable than the original assemblage of plant species, but
are of much less value as wildlife habitat. If wildlife values
are to compete successfully with cultivated pasture, a key issue
involves determining whether productive monocultures are a "higher
and better" use of the land than a mixture of native species.
Both the Texas Department of Parks and Wildlife (TDPW) and the
U.S. Fish and Wildlife Service are in a position to influence
this determination, through their review and approval of miti-
gation measures associated with the chosen post-mining land use.
Public involvement is required in the permitting
process. Decisions to grant or deny permits must take into
account the results of public hearings. There is no requirement,
however, for the decision to be made on the basis of public in-
put. Thus, hearings provide little direct leverage. More sig-
nificant than this, there has historically been very little
public concern expressed over the effects of mining on habitat.
Thus, there is no reason to expect that there will be much public
pressure brought to bear in favor of identifying wildlife habitat
values as a widespread reclamation goal.
The situation appears to be one in which economic
incentives to private landowners are likely to have the strongest
influence on reclaiming for wildlife. Tax incentives are an
obvious possibility, but might prove difficult to set so as to
achieve the desired result. A second alternative might be to
attempt to make reclamation a means to fill a growing need for
wildlife-based recreation. Hunting privileges have long been
leased in Texas. However, other forms of outdoor recreation
such as hiking, camping, and photography, in which wildlife is
a definite factor, are also amenable to a leasing or user-fee
system.
435
-------
This alternative would provide a mechanism by which
reclaimed mined lands would be made available, for a fee, to
the public. The elements of this alternative include:
Providing an economic incentive to the landowner
to specify reclamation for wildlife
Providing landowners with incentives to manage
both reclaimed and surrounding land for wildlife
Relieving the owner of part of the economic risk
in selecting wildlife, rather than grazing, as a
reclamation goal.
An arrangement for TDPW to lease lands reclaimed specifically
for wildlife-related recreation would obligate the owner to
avoid practices--such as overgrazing or allowing indiscriminate
hunt ing--which degrade the restored habitat for its intended
use. It would also provide a base income from the land, even
if the demand for public use is low. Public use would provide
additional income. The landowner, if free to set his own fees,
would have an incentive to improve and maintain his property.
In the past, TDPW has had difficulty financing the
purchase of large tracts of land for public recreation. A sys-
tem of leasing might prove a means of making more land available
to the public than would otherwise be the case. Additional
funding might still be required, however, to assist TDPW in
leasing large amounts of land.
A state severance tax on lignite would be one option
for obtaining needed funds. Another might be the release of
monies collected as mandatory reclamation fees, required by
437
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SMCRA from all operators. Intended to pay for reclaiming
abandoned coal mined lands nationwide, these fees place a dispro-
portionate burden on states which, like Texas, have few unre-
claimed coal mined lands to reclaim. Using these fees in Texas,
to solve a Texas problem related to reclamation, would help to
resolve this inequity.
488
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RESPONSE ISSUE No,
Control of Boom-Town Growth
Finding; Without proper planning, some communities hear mine-
mouth lignite power plants may undergo a sudden spurt
of economic and population growth, followed by sharp
decline as the construction of the facility is com-
pleted.
Issue; What can be done to reduce the intensity of such
boom^-and-bust cycles?
489
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TABLE 4.1.4 CONTROL OF BOOM-TOWN GROWTH
Objective:
(educe the tHMt of
Che "boom" part of
the cycle
Stretch out the
"boom"
Limit the number of
Instances of the
BOOB and bust cycle
Soften the "buet"
art ol the cycle
Alternative!
Msperss growth earns
eeveral communities
* Encourage conatructlon
worker* to comjsute frcm
urban areaa
Maximize recruitment
froB local area
Phase construction of
power plants to extend
the construction pbsse
Power parks or clustered
development
Promote diversified
economic growth In non-
extrsctlve Industrial
development
Implementation
Power plant altlng authority
Land use controls
Voluntary consideration by utility or Industry
In siting
Vsnpools, carpools or bualng program sponsored
by utility or construction contrsctor
Coordination between utility, conatructlon con-
tractor, and government employment agencies
Establish local training programs
Coordination between utllltlea to avoid
simultaneous demands In a single area
Informal coordination by PUC
Power plant siting authority
Powsr plant siting authority
Variance froa PSD
ProBote Industrial development dlatrlcts
Encourage cogeneratlon
Implications
gecsuse of the relstlvely high density of com-
Bunltles slong lignite belt, this disperaenent
will probably occur naturally
An organized meana of ma*s transportation will
Increase safety, reduce tardiness, decrease
Individual costs
. Psrts of lignite belt are cloae enough to major
urbsn areaa to attract commuters
Not sn appropriate government activity
Rarely is skilled labor available in small towns
Currently company conducts programs (most ap-
propriate)
State could establish vocational training
Phased construction of units and plants Is most
important of all alternatives
Single areas sffected severely
ka'qulres long-range planning and careful co-
ordination
Utilities and Industries can benefit from
economies of scale
Requires sore transportation of lignite
-------
4.1.4 Control of Boom-Town Growth
The term "boom and bust" suggests visions of apocalypse.
Therefore, it often arouses more public concern and attention than
many other more threatening problems associated with coal and
lignite development.
Although the "boom and bust" phenomenon has been a
serious social problem for small, isolated communities in the
West, the comparatively dense pattern of towns along the Lignite
Belt, coupled with the proximity of large urban areas will natural-
ly reduce the tendency toward serious "boom and bust" problems
in Texas.* Also, PSD effectively creates a spacing pattern which
will tend to disperse the location of coal- and lignite-fired
units.
Several alternatives are available for addressing this
issue. One approach is to reduce the "boom" in the boom and
bust cycle. Another is to lengthen the construction period,
resulting in a longer, but less intense "boom" and a smaller
"bust." A third strategy would favor concentrating development
in a smaller number of locations instead of creating scattered
minor socioeconomic and environmental impacts over a large region.
Finally, the "bust" part of the cycle can be reduced by creating
a diversified industrial base which would last beyond the con-
struction phase and, in time, the mining phase, This alterna-
tive would be hampered if PSD increments were consumed over large
areas by one or two power plants, thereby reducing the potential
for other heavy energy-using industry.
*See Chapter IV, Section 7.0.
40!
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RESPONSE ISSUE No, 5
Regionwide Costs and Benefits
Finding; The most probable pattern of lignite development, at
least in the short term, involves siting power plants
at the mine mouth, which transmit power to the large
urbanized areas on either side of the Lignite Belt.
Issue; How might the economic and social costs of lignite de-
velopment be spread equitably among all the benefici-
aries of that development?
493
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TABLE 4.1.5 REGIONWIDE COSTS AND BENEFITS
Objective*
Alternative*
Implementatlon
Implication*
Share the coata
of energy pro-
duction with
beneficiaries
outside th« tig-
nit* Belt
The coete of Impact
Mitigation to ba car-
ried by utility
ratepayer*
Severance tax on lignite, with revenue* for
Impact Itlgatlon'In the Lignite Belt
Government lurcharge on utility bllla with
distribution to affected local government* In
(.Ignite Belt
Utility aurcharge with rebate to affected local
government* In Lignite Belt
Payment by utllltlaa (voluntary or government-
mandated) to Jurisdiction* affected by lignite
development
Internalize* cunt uf developmentreduce* "hid-
den costs"
Mitigation coata In direct proportion to energy
usevery equitable
Higher utility bill*, tranaferrlng resources to
area* affected by lignite development
Difficult to calculate "net Impacts" so that rate-
payer* are not overchargedImprecise
Does not resolve question of how to transfer funds
from utility to locsl government* for services and
facilities
Consumer opposition likely
The coata of Impact
mitigation to be
carried by atat* and
federal government*
State/federal legislation to aetablleh Impact
aa*l*tance program
adoption of lignite eevarance taxrevenue*
eanerked for mitigation of Impact*
Spread* cost of mitigation to taxpayer* state-
wide and/or nationwide
Recognize* general public benefit of lignite
development
Assistance can go directly to local governments
Increaaed administrative costs"red tape**
Provide addi-
tional oppor-
tunities for
econdary
growth la
producing
region*
Dlveralfy develop-
E*t*bll*h regional development commission
Develop coordinated atata government progrem
(such *a TIC Involvement) to encourage citing
In region
Insures long-term stable and balanced economic
growth with attendant beneflte
Requires directing economic development to the
Lignite Beltconcerted and coordinated effort
Effort* may be limited by certain factors auch
aa transportation, labor supply, infrastructure
Other region* of atate may object to priority
attention for Lignite Belt
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4.1.5 Regionwide Costs and Benefits
Mining of lignite and construction of mine-mouth power
plants will clearly result in appreciable economic benefits to
the Lignite Belt region of Texas. Because of these benefits and
because of the advantages of using this readily available al-
ternative energy source, maximum development of the lignite re-
source is generally viewed as desirable and economically bene-
ficial on balance.
Lignite development will, however, impose certain
economic costs on the Lignite Belt region along with the bene-
fits, and may also result in future regional economic develop-
ment which is heavily dependent on a single resource. The
costs of this pattern, which translate into higher taxes or
user fees, include: increased demands on public services and
facilities, such as schools, police and fire protection, hos-
pitals, etc.; and the need to finance new infrastructural de-
velopment such as roads, streets, sewage treatment systems,
waterworks, and utilities. Certain essentially non-economic
costs also result. These include traffic congestion and noise,
pressures on social and political institutions, loss of wildlife
habitat, aesthetic change, air quality degradation, and social
and environmental impacts. The economic benefits resulting
from lignite development are obvious, but because neither mining
nor power generation is labor-intensive, growth immediately re-
lated to it may be very narrowly based.
Since the lignite resource runs through essentially
non-metropolitan areas of the state, the energy developed in the
region will be exported to other areas, namely the large metro-
politan areas on both sides of the Lignite Belt. In terms of
value added to the economy, these energy-consuming areas may de-
rive substantially more of the benefits from lignite development
495
-------
than the producing region. Of concern is whether, despite the
obvious direct economic benefits of development to the region,
the Lignite Belt may, on balance, receive comparatively few of
the long-term benefits, experience a disproportionate number of
costs, and find itself overly dependent on the economic fortunes
of lignite.
There are two basic strategies for developing a more
equitable distribution of costs and benefits between the Lignite
Belt and beneficiaries of lignite development outside the pro-
ducing region. One strategy involves spreading the costs more
widely, and providing assistance to local areas in mitigating
growth impacts. The other seeks to compensate the lignite
region by increasing its share of the jobs and other economic
benefits resulting from the use of the energy produced there.
4.1.5.1 Alternatives for Cost-Spreading
Calculation of "net costs" to local governments in
the region is difficult. Some maintain that incremental long-
term revenues exceed long-term costs resulting from energy ac-
tivity. This leads to the conclusion that the principal problem
for local governments in attempting to provide adequate new
services and facilities is one of timing of aid, not amount of
aid. Others contend that a new long-term deficit in local govern-
ment budgets results, and that the only recourse is to raise
taxes to make up the difference. This debate was at the center
of Congressional consideration of the Coastal Energy Impact
Program under Section 308 of the Coastal Zone Management Act of
1976. One implication of the "no net revenue loss" argument is
to give more emphasis to planning assistance, loans, and loan/
bond guarantees, which tend toward reimbursable front-end
financing. The "net budget deficit" concept emphasizes grants
and other non-reimbursable methods of assistance.
496
-------
Impact mitigation measures are usually hampered by
inability to be precise. Ideally, assistance should go to
those bearing the costs, in the exact amount of those costs,
and at the time the assistance is needed. It is not only dif-
ficult to calculate net costs precisely, but it is also dif-
ficult to devise revenue transfer mechanisms which can be both
precise and administratively efficient.
Revenue-raising devices such as a severance tax on
lignite production, a state surcharge for power produced by
utilities using lignite, or a sales tax with dedicated revenues,
will likely encounter significant utility ratepayer opposition.
The 1978 special legislative session removed the four percent
sales tax from utility bills in order to reduce already high
utility bills. Such devices would also tend to affect small
consumers, more than large users.
A severance tax could be applied specifically to
lignite development, whereas sales taxes or surcharges on
utility bills would tax all energy generation, regardless of
fuel source.
4.1.5.2 Alternatives for Benefit-Sharing
Some argue that direct compensation to persons who
incur the costs of energy development is preferable to assis-
tance to local governments. This approach would require cash
compensation to individuals, who could in turn decide which and
what level of local government services they would like. Auto-
matic provision of new services and facilities would not be pre-
sumed. Compensation devices include rebates or lower utility
rates in affected communities, and direct government payments.
497
-------
Cogeneration refers to the simultaneous generation of
electricity and process heat. Traditional coal generation power
plants use only about 30 percent of the heat potential of the
energy source. By utilizing the waste heat in the form of
process steam for industrial purposes, the plant efficiency can
be raised to about 75 percent. Cogeneration provides an attrac-
tive way to maximize use of the lignite resource and simultaneous-
ly attract energy-consuming industries to the region.
Revising the State Implementation Plan for air quality
to require the most stringent controls possible would have the
economic effect of allowing more industrial growth in a given
area. Improvements in air quality through controls on existing
and new air pollution sources would preserve part of the allow-
able increment under the Federal Prevention of Significant De-
terioration (PSD) policy for use in accommodating new growth.
Reclassification of the Lignite Belt from Class II to
Class III under PSD would allow a greater degree of air quality
deterioration (i.e., industrial expansion).
None of the alternatives mentioned are exclusive of
the others. All the courses of action mentioned could be im-
plemented at the same time, although it is not likely that both
government and utilities would be used simultaneously as mechan-
isms for transferring financial resources to the Lignite Belt.
A coordinated program combining impact assistance features and
incentives for non-lignite-based economic development could
significantly reduce any possible regional disparities in the
distribution of costs and benefits as use of the lignite re-
source accelerates.
-------
A key unknown in all of this is the degree to which
lignite development will act as a catalyst for rural industrial-
ization. There is widespread belief that lignite development
will lead to a wide variety of secondary economic growth in the
Lignite Belt. Thus, this issue is not generally perceived, as
significant. However, as discussed in Chapter III, there are
several reasons to suspect that such growth in the Lignite Belt
may be limited, or dispersed over a much larger area than the
immediate vicinity of the lignite mining districts.
499
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RESPONSE ISSUE No, 6
Aesthetics and Attitudes Toward Growth
Finding; Lignite development will alter the appearance of the
landscape both directly, through mining and use, and
indirectly through residential and commercial develop-
ment. Although many feel this activity will cause
visual blight and erode the overall quality of life
in the Lignite Belt, most Texans appear to be relatively
more receptive to growth and its consequences than the
nation as a whole.
issue; Should these aesthetic concerns be addressed, and if
so, how?
501
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TABLE 4.1.6 AESTHETICS AND ATTITUDES TOWARD GROWTH
Ui
O
N>
Objective
with haphazard aec-
f re verve elected
areaa trom de-
velopment In
and enhance
character of
the landscape.
Maximize the
distribution of
the economic bcne-
flttt of llgnito-
related develop-
ment In order to
Inlalze antago-
nistic local
attltudea toward
growth.
Alternative*
Land uae control*
Reduce billboard
Encourage good de-
velopment
Government purchase
of ecentc areas for
use perke
Strict land use con-
trols which prohibit
11 but agricultural
uses
* Government purchase
of "scenic ease-
Men te"
Declare some areas
"unsuitable for mining'
' Ineure that realdenta
derive benefits fro*
new power stations
Inaure that the de-
velopments are fairly
assessed such that
eventually residents
benefits from project
Implementation
Existing municipal zoning
Granting counties ordinance making powers
Subdivision ordinances
Existing Highway Beautlflcatlon Act and
nance
Requires land uae planning and local con-
sensus
More state parks
More national forests
More county parka
County zoning powera
National or atate land use controls
' Land title remains with farmer/rancher, atate
paya owner In exchange for a promise not to
alter landscape; mainly along highways
See Response Issue No. 9
" Discourage location of power plants outside
of service areas through siting authority
Provide for payment In lieu of taxes by
publicly owned utilities
Uniform tax assessments
Implications
Land use controls are very controveralal In
enabling legislation
Strictly voluntary
Planning and acquisition should begin early to
avoid high costs.
Texas Parks I Wildlife Dept. should step up land
acquisition program
Involves "confiscation** or "taking" issue;
pollticslly unacceptable; least expensive preser-
vation technique; requlrea legislation.
* This has the effect of alternative discussed
Immediately above except the atate or county pays
and the landowner Is compensated; would require
enabling legislation.
Resource is unused
Mineral owners deprived of revenues
Unfair to utilities which do not serve the
lignite belt.
Might tend to reduce lignite use
* Would require enabling legislation
-------
4.1.6. Aesthetics and Attitudes Toward Growth
There are some environmental and social impacts which
are difficult to assess because they do not measurably affect
human health, nor do they create direct or measurable economic
costs. There is no consensus as to what constitutes "quality
of life." Nevertheless, there is often opposition to major
energy or manufacturing facilities based on perceptions that
growth and change are inherently bad.
It appears that the opposition to energy development
in Texas is relatively less than in much of the rest of the
nation. Such objections as have developed have been centered
largely on economic, rather than aesthetic, issues. One factor
behind this may be that Texas has a tradition of oil and gas
production, which in the past has stimulated boom-town develop-
ments in producing areas and major refining petrochemical com-
plexes along the coast. The development of the Lignite Belt,
which in many areas coincides with the oil boom areas of the
past, may be viewed by some residents as merely a reenactment
with a different fuel and different methods of extraction and
use. The frontier ethic, with its impetus toward conquest of
the land and sense of individual rights to independent action,
is still strong in .Texas. Nevertheless, the alterations of the
landscape by direct and indirect impacts of lignite devleopment
can occur in such a way that opposition to continued develop-
ment will mount.
Three basic approaches to mitigating aesthetic concerns
and anti-growth sentiments have been identified here. The first
seeks ways to control the growth and nature of development through
land use controls (zoning and subdivision ordinances) , highway
beautification, and voluntary land use planning, in which local
governments' capital improvements are designed to reduce the
503
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likelihood of haphazard growth. The second objective addresses
the aesthetic and growth concerns by carving out and setting
aside areas which will be preserved from future developments.
Since Texas has much less land set aside for public parks than
most other parts of the country,* this alternative may rep-
resent a particularly effective method of reducing or precluding
anti-growth feelings through preservation. Finally, the third
alternative recognizes the fact that many of the negative at-
titudes toward growth are borne by those who perceive that they
have everything to lose and nothing to gain from future develop-
ment.
One method for implementing the third strategy is to
ensure that the residents of the area affected by lignite develop-
ment will benefit by reduced or stabilized utility rates, and by
reduced taxes. If the electricity is "exported" to another
service area or if the affected communities do not receive tax
benefits, residents may feel exploited and alienated. On the
other hand, it is not reasonable to prohibit utilities from
developing lignite outside their service areas nor is it reason-
able to prohibit publicly owned utilities from development be-
cause they are exempt from taxes. (The problem related to
service areas is compounded by the competition among utilities
over sometimes very limited air resources - i.e., PSD increments.)
Some form of payments-in-lieu-of-taxes could either be permitted
or required to address the growing problem of energy development
by tax-exempt entities.
^According to the 1975 Texas Outdoor Recreation Plan, published
by the Texas Parks and Wildlife Department, state parkland in
Texas amounts to 6.3 acres per 1,000 persons, compared to 30.7
per 1,000 nationwide.
504
-------
These three strategies each overlap measures of deal-
ing with other Response Issues. Planning orderly growth and
avoiding haphazard sprawl not only reduces the adverse aesthetic
effects of rapid community growth, it allows more efficient and,
in some cases, less costly development of new services, such as
streets, sewers and water supply. Thus, aesthetic conerns can
be worked directly into the resolution of issues over infra-
structure planning and financing. The concept of protecting
unique natural, cultural, or historical areas is the basis of
the Federal Surface Mining Control and Reclamation Act's pro-
vision for declaring lands unsuitable for mining. Finally,
Responses Issue No. 5, dealing with equitable sharing of the
costs and benefits of lignite development, addresses means of
increasing the Lignite Belt's share of the positive impacts of
development.
305
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4.2
Response Issues Related to Implementing
Existing Policy
No. 8. Approval of State Surface-Mining Program
What options are available to Texas with
regard to obtaining state jurisdiction
over surface mining under the federal law?
No. 9. Lands Unsuitable for Mining
Should the state act prospectively now to
designate areas unsuitable for mining?
No. 10. Multi-Agency Permit Review
Should the state establish a formal mecha-
nism to coordinate siting decisions?
The last three Response Issues address problems of carrying out ex-
isting policy directions. Decisions required center mainly around the defini-
tion of regulatory procedures and clarification of jurisdictions. Number 8
involves federal, as well as state action. Numbers 9 and 10 are exclusively
Texas problems.
507
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4.2
Response Issues Related to Implementing
Existing Policy
No. 8. Approval of State Surface-Mining Program
What options are available to Texas with
regard to obtaining state jurisdiction
over surface mining under the federal law?
No. 9. Lands Unsuitable for Mining
Should the state act prospectively now to
designate areas unsuitable for mining?
No. 10. Multi-Agency Permit Review
Should the state establish a formal mecha-
nism to coordinate siting decisions?
The last three Response Issues address problems of carrying out ex-
isting policy directions. Decisions required center mainly around the defini-
tion of regulatory procedures and clarification of jurisdictions. Number 8
involves federal, as well as state action. Numbers 9 and 10 are exclusively
Texas problems.
507
-------
503
-------
RESPONSE ISSUE No, 7
Approval of State Surface-Mining Program
Finding; Disapproval of the state's surface-mining regulatory pro-
gram by the Office of Surface Mining (Department of In-
terior) could result in direct federal regulation of the
mining of Texas lignite.
Issue; What policy options are available to Texas with regard
to submittal and approval of the state program in order
to maintain exclusive jurisdiction over lignite mining
and reclamation?
509
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TABLE 4-2.1 APPROVAL OF STATE SURFACE MINING PROGRAM
Objectives
Maintain continued
xclualve etate
jurisdiction over
surface lining by
(lining approval of
th* stale program
Ul
M
o
Alternatives
Submit atate program
without change
Amend state law and
regulatlona according to
state Interpretation of
what would be "consistent
with" federal require-
ments
Amend state law and
regulatlona only after
receiving definitive
Indication from OSM
regarding necessary
changes
Rewrite atate law en-
tirely to track federal
law verbatim
Implementation
Submit existing law, regulations, procedures,
etc., without change according to OSM program
approval procedures
No new or amended legislation required
Amend state law and regulations In next session
of legislature
Submit program for approval or seek six-month
extension to have adequate time to amend law
Amend state law and regulations
Seek six-month extension on submission to gain
time to amend state law
Introduce complete new bill which tracks
language of federal law for every provision
required for program approval
ImplIcations
Reduced or possibly no chance of federal approval
* Additional costo and/or restrictions on mining and
reclamation due to federal controls
* Reduced/preempted state authority over mining
Places burden on federal agency to specify short-
comings of state program
Places burden on state to interpret what changes are
necessary to conform with federal law
Lack of federal guidance nay make amendments dif-
ficult to adopt
Reduced chance of federal approval
Maximizes state discretion to decide on essential
changes
Demonstrates good faith effort to conform
Clear federal guidance may never come
Lack of time before next legislative session
Improved chance of federal approval, with resulting
coats/benefits
State resistance to adopting entirely new law when
present one was tailored to comply with federal law
may be substantial
Improved, if not guaranteed chance of federal ap-
proval
-------
4.2.1 State Surface Mining Program Approval
The Federal Surface Mining Control and Reclamation Act
was adopted in 1977 to provide a comprehensive national frame-
work for the regulation of surface mining and reclamation activi-
ties with regard to coal, including lignite. Implementation of
the federal legislation takes place in two steps. The first
step was the promulgation of interim program regulation
addressed federal enforcement procedures and specified seven
performance standards which must be met by any surface mining
operator. The second phase of the implementation is the promul-
gation of nationwide permanent program regulations for all surface
and underground coal mining operations.
Proposed rules on the permanent program were published
on September 18, 1973, 43 Federal Register No. 181, and are
scheduled for final promulgation in March, 1979. States are
required to submit a program in accordance with the federal regu-
lations by February 3, 1979, although a six-month extension is
available. The Office of Surface Mining in the Department of
Interior has six months from that date of submittal to either
approve or disapprove the state program.
Texas adopted a state surface mining regulatory law in
1975, entitled the Texas Surface Mining and Reclamation Act. The
state law covers surface mining for both coal/lignite and
uranium, whereas the federal law addresses only coal. Pursuant
to the state law adopted in 1975, the Texas Railroad Commission
adopted regulations requiring reclamation of surface-mined lands
to their original or a substantially beneficial condition. In
addition, provisions are made for designating areas as unsuitable
for mining, restoring the mined area to its approximate original
contour, and requiring the posting of performance bonds to
ensure that reclamation is completed.
511
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The Texas Surface Mining and Reclamation Act was
drafted during the period of congressional consideration of
federal surface mining controls, and was considered on the
premise that federal legislation would pass either in the near
future or at some later date. As a result, the Texas law is more
similar to the federal law than any other existing state statute.
Texas has had an advantage over other states in that
surface mining in the state is relatively new and is not as well
established as the industries in states such as Kentucky and
West Virginia. Therefore, the Texas Railroad Commission has had
a better opportunity to lay a groundwork for regulation without
having to contend with a long history of mining in the state.
In June, 1977, the Library of Congress, Congressional
Research Service, issued a report on state surface mining laws
in comparison with the proposed federal legislation. In that
report Texas was compared favorably to other states with respect
to the comprehensiveness and stringency of the state law. The
following assessment is provided in the Library of Congress
report:
In comparison to other state laws on surface
mining and 'reclamation, the law enacted by Texas
would undoubtedly have to be considered to be one
of the most comprehensive and most stringent.
Many of the provisions relating to the reclama-
tion standards established for the industry are
either identical to or very similar to those
contained in the federal legislation. Further-
more, in many of the sections where differences
between the state law and the federal proposal
do occur, the State Railroad Commission has in-
cluded language encouraging modification of the
state law in the event that more stringent federal
legislation is subsequently enacted.
512
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The Office of Surface Mining has provided policy
guidance to states as to what changes will be required in in-
dividual state programs in order to gain approval to assume
exclusive jurisdiction over surface mining within that state.
This guidance is in the form of a memorandum from the national
office, which specifies which provisions of the federal statute
are applicable to state statutes and must appear in the same or
a similar form in the state law.
Part 730 of the proposed permanent program regulations
sets out general requirements for regulatory programs in the
various states. The approach taken is that the law and regula-
tions must be "consistent" with the federal requirements although
provision is made for the state to apply for a variance from the
federal performance standards and other requirements for permit-
ting bonding, inspection and enforcement in order to take into
account geological, topographic, climatic, hydrologic and other
regional conditions which support alternative approaches. A
state law or regulatory provision which is considered more
stringent than the federal requirements is construed as consistent,
or at least not inconsistent with the federal act and regulations.
The term "consistent with" is defined in the federal regulations
to mean "the same or similar to."
Texas state officials have expressed concern that
despite the similarity of the Texas act with the federal law,
and the comprehensiveness of the state regulatory approach, that
the Office of Surface Mining may not approve the state program
as submitted and that, therefore, federal jurisdiction over
surface mining and reclamations will be exercised in Texas. In
a statement to the Office of Surface Mining public hearing panel
on October 27, 1978, Texas Railroad Commission Chairman Mack
Wallace stated that "flexibility and sound judgment by the state,
513
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although recognized in the act because of what the act identifies
as 'diversity in terrain, climate, biologic, chemical, and other
physical conditions...' has been precluded." In particular,
Commissioner Wallace criticized language in the proposed federal
regulations which defined the term "consistent with" to mean
"the same or similar to." He sarid that he felt that this inter-
pretation was not what Congress intended nor was it desirable
from a policy point of view.
The Texas law and programs differ from the Federal law
in the following respects: (1) reclamation is required to re-
store a substantially beneficial condition, rather than a condi-
tion which would sustain the same or a better use than those
possible before mining; (2) mixing of strata is allowed if the
operator can demonstrate to the satisfaction of the Railroad
Commission that a mixture of strata will be as suitable for re-
vegetation as segregation and replacement of topsoil; (3) no
citizen suit provision is provided; (4) the period of responsi-
bility for revegetation is slightly different, and the imple-
menting mechanisms are different than under the federal act.
Supported by recommendations of the Texas Mining Coun-
cil and the Railroad Commission, a bill proposing to enact an
entirely new state law, that would conform to federal require-
ments, has been introduced into the Sixty-Sixth Legislature.
514
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RESPONSE ISSUE No, 8
Lands Unsuitable for Mining
Finding; Roughly 375,000 acres would ultimately be disturbed by
mining in the development scenario used as the basis
of this report. There is a potential for loss of cer-
tain scenic and environmentally sensitive areas. Under
the state's surface mining and reclamation act, the
Railroad Commission may prospectively designate areas
unsuitable for mining.
Issue; Should the state act now to delineate environmentally
sensitive areas, or other areas unsuitable for mining;
or should this judgment continue to be made on a case-
by-case basis?
515
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TABLE 4-2.2 LANDS UNSUITABLE FOR MINING
Objective!
Minimize the per-
manent Ion of
critical or en-
vironmentally sen-
altlve areaa from
aurface mining,
and provide greater
regulatory cer-
tainty for poten-
tial developera
Alternative*
Conduct sensitive-areas
urvey of Lignite Belt,
and doalgnate prior to
mining areai considered
a* unaultable for Bur-
face mining.
Continue preient policy
of receiving petition!
for designation and
making dctermlnatlona
on caae-by-caie baala
at time of permit ap-
plication
Implementation
State appropriation for survey
Federal grant for survey, combined with state
matching funda
Amend state law to require prospective designa-
tion
Federal overrrlde of state authority
Implication!
Ensures early protection of aenaltlve areai
Provides advance notice to operator! about ex-
cluded areaa
May tend to be overlncluilve
Expensive and time conlumlng
Requires additional TRC funding
Designation at time of permit application subject
to more Influence from parties of Interest
Administratively simpler for TRC
May be preempted by federal requirementa in any
caae
Only requires survey of area actually aought for
mlnlng-'less expensive
on
-------
4.2.2 Land Unsuitable for Mining
Estimates of the number of acres in Texas which will
be disturbed by surface mining operations vary considerably.
The Office of Surface Mining in the U.S. Department of Interior,
utilizing U.S. Bureau of Mines figures, estimates that 251,400
acres overlie strippable reserves in Texas. Other estimates of
the area overlying lignite reserves in Texas range up to one
million acres and more. The development scenario used in this
report yields a total of 374,000 acres disturbed by mining the
reserves committed through the year 2000. Regardless of the
exact number of acres, there is a significant potential for
mining to be conducted in environmentally sensitive areas, or
areas presenting other problems, such as natural hazards, which
would make them unsuitable for mining and preclude proper reclama-
tion. A particular concern in Texas is mining in major flood-
plains which cross the Lignite Belt in several places (see
Resource Management Issue No. 1).
Both the Federal Surface Mining Control and Reclama-
tion Act and the Texas law provide for the designation for areas
as unsuitable for mining. Pursuant to Sections 102, 201, 503,
and 522 of the federal act, part 764 of the proposed permanent
program regulations issued by the Office of Surface Mining sets
out a minimum program for approved state programs by which
areas can be designated as unsuitable for surface coal mining
operations. Section 7 of the Texas Railroad Commission rules,
issued pursuant to the Texas Surface Mining and Reclamation Act,
set out a similar procedure for designation of areas as unsuitable
for mining. Texas is one of only three major mining states in
the country which presently includes a provision for designation
of areas unsuitable for mining in its state law.
517
-------
Texas' provision is the most similar to the federal
provision of any of the state laws. Several differences between
the two provisions exist, however.
The Texas provision allows a petition to be
filed by any person with the Railroad Com-
mission. If the petition is declared complete
and valid, it is placed on file with the Rail-
road Commission. Action on the petition does
not occur until an application for a surface
mining permit for the area or a portion of the
area included in the petition is filed with
the Commission. At that time, a hearing is
conducted by the Railroad Commission and a
survey of the area is made, and a determination
is made by the Railroad Commission as to whether
the area meets any of the criteria in the state
provision. In the federal rules, action must
be taken on a valid petition within ten months
of its being filed by the state agency conduct-
ing a public hearing. A determination of
whether the petitioned area should be declared
unsuitable for mining must be made no later
than twelve months after filing the petition.
The state provision directs the Railroad Com-
mission to make a determination on whether
an area should be declared unsuitable for
mining even in the absence of a petition being
on file, whereas the federal provision appears
to rely upon the filing of a valid petition
in order to trigger agency action.
513
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The Texas law does not direct, but allows the Railroad
Commission to survey the Lignite Belt in advance of a petition
being filed in order to determine prospectively whether there are
areas which potentially will be mined that would qualify for a
designation as an area unsuitable for mining. This authority is
not expressed in the Texas act, but is implied. Exercise of this
authority would likely depend upon the availability of funds to
conduct an areawide survey of the Lignite Belt, as opposed to a
discrete survey of a specific proposed mining site at the time
a permit application is filed. In addition to the availability
of funds, the desirability of providing prospective notice to
potential lignite operators in the state may influence the de-
cision whether to conduct a survey and designate areas as un-
suitable for mining in advance of any specific plans to mine
that area.
The criteria for designating areas as unsuitable for
mining are essentially the same in both the federal and state
laws. They include:
Fragile or historic lands where mining opera-
tions could result in significant damage to
important historic, cultural, ecologic,
scientific, or aesthetic values or natural
systems;
Renewable-resource lands where mining
could result in a substantial loss or reduc-
tion of long-range productivity for water
supply or food and fiber products;
Lands subject to natural hazard, such that
mining could substantially endanger life
and property.
519
-------
The effect of designating an area as unsuitable for
mining is to preclude mining altogether. Although this is an
absolute constraint on surface mining, there is a direct relation-
ship between the criteria for designating an area unsuitable for
mining and the criteria for denying a permit application. A
failure on the part of the operator to demonstrate that mining
and reclamation is feasible will result in the permit application
being rejected under other provisions of both the federal and
state laws. It is also unlikely that an operator will be able
to demonstrate compliance with the various performance standards
in the state and federal laws if features which would make an area
susceptible to a designation as unsuitable for mining are present.
520
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RESPONSE ISSUE No, 9
Multi-Agency Permit Review
Finding: Statutory responsibility relating to the siting of lig-
nite mines and associated power plants rests with sev-
eral permitting and reviewing agencies. Each has juris-
diction over only a part of the total project's impact.
Currently, there is no formal governmental mechanism
for coordinating these decisions.
Issue: Should the state establish a formal mechanism for co-
ordinating siting decisions for power plants and other
large projects?
521
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TABLE 4-2.3 MULTI-AGENCY PERMIT REVIEW
Ln
N>
NJ
Objective
Minimize unneceaeary
deley*. Jurisdiction-
si conflict*, un-
certainties and
cost* of permitting
Alternative*
TNRC coordination of
lignite-related pollclea,
procedures, regulation*
and program* among
state agencle*
establish consolidated
permit authority for
mine* and power plant*
(I.e.. state aiting
authority)
Seek delegation of
authority for federal
regulatory programs to
reduce stste-federsl
duplication and conflict
Reduce Information re-
quirements and Inpoaa
tight time deadline*
on permit a
Implementation
TNRC Initiative to review lignite activities
State legislation to eetabllsh centralised
altlng authority
Feasible amendment to atate law* and regulations
to meet Federal program qualification*
« Application to appropriate Federal agency (CFA.
Interior) for approval of atat* program
State agency review of procedure* and rule*
with revisions aimed at reducing paperwork
and time
Implication*
Relic* upon existing Institutional mechanism
Emphaalse* cooperative approach and Improved com-
munication to overcome conflicts
TNRC 1* untested In achieving coordination
Reducee fragmentation of authority
Provldee focus for public Input
Focuses regulation on comprehensive evaluation of
proposed project
Minimizes conflicts over jurisdiction
Increeees over*!! administrative coats
Historically low acceptability In Texae
Counter to current pollclee of reducing etete
bureaucracy
Minimises state-Federal conflicts
Require* etate conformance with Federal guidelines
end rules
* Does not necessarily reduce state-level conflicts
Ellmlnatee BIS requirement
Savee administrative and applicant time and coste
Speede up administrative review of permit
Less comprehensive review of Impacts
Poaalbly locreaaea litigation potential
-------
TABLE 4-2.3 (continued)
Objective
Ensure that all
significant lac
pact* are addressed
In permitting pto-
ceea and that
public Input la
praaant
Ul
NJ
LO
Alternative*
TMRC coordination of ,
lignite-related
policies, procedurea,
regulations and pro-
gram among atata
agenclta
Establish standardised
lapact assessment
methodology
Eatabllah consolidated
panlt authority
(siting authority)
Eatabllah consolidated
permit process with
lead agancy approach
Implementation
THRC Initiative to review lignite activities
Adoption of a standard assessment procedure
(such as tha Activity Aasesaswnt Routine In
tha proposed Taxaa Coastal Management Prograai)
Stata legislation to establish centralized
siting authority
Revise atate legislation to require only one
pemlt from lead sgency for the activity, rather
than individual pemlta for the separata impacts
Impllcstlons
Relies upon existing institutional sKchanleai
Enphaslxes cooperative approach and laproved
cossHmlcatlon to over cose conflicts
TNRC is untested in achieving coordination
Increases consistency In pemlt review
Improves predictability
Requires administrative adaptation
Facilitates public participstlon by using standard
format
Reduced fragmentation of authority
Provides focus for public Input
Focuses regulation on comprehensive evaluation of
proposed project
Minimises conflicts In Jurisdiction
Increases overall administrative costs
Historically low acceptability in Texas
Counter to current policiea of reducing atate
bureaucracy
Requires no new state agency
Istproves sgency lead coordination
Focuaea review process In one agency
Fscllltatea public participation
-------
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4.2.3. Multi-Agency Permit Review
The issue of conflicting and duplicating jurisdiction
and decisions is constantly a problem to government regulatory
agencies and project managers alike. The problem is not unique
to lignite-related developments, but should be raised once again
as development and utilization of Texas lignite resource ac-
celerates.
A primary policy objective is to make expeditious and
coherent decisions regarding the impacts of siting major lignite-
related facilities, especially power plants. Efforts to reduce
administrative delays, jurisdictional conflicts and unresolved
policy issues will help to achieve an expeditious determination
of where a power plant can be sited. Coordination of permit
review procedures will insure that all significant impacts of a
proposed project are considered and that the series of regula-
tory decisions concerning a project comprise a coherent package
which is consistent with broad public policy goals.
Texas is presently seeking NPDES water quality permit
authority from EPA, is revising its State Implementation Plan
for air pollution, w.ill likely seek approval of the state
surface mining program from Department of Interior, and will at
some point resume federal certification of its hazardous waste
regulatory program. The result of these transfers of authority
is expected to be a steady decline in the number of cases where
a NEPA-format EIS is required for larger power projects. (This
trend is discussed more fully in Section 5.1, below).
Several states have established a central power plant
siting authority. Texas continues to use a decentralized
regulatory approach which addresses the individual effects of
siting rather than controlling the siting activity itself. The
525
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political appeal or acceptability of establishing a central
power plant siting authority remains low in Texas.
Establishing a power plant siting authority is only
one approach to achieving improved coordination of agency de-
cisions. Another is to create a consolidated permit review
process within an existing agency whereby only one permit is
issued, but it is reviewed by the various agencies according to
their traditional jurisdiction. An example of this at the federal
level is the licensing of deep-water ports, pursuant to special
authorizing legislation, by the Department of Transportation.
Another approach is to designate a lead agency which is respon-
sible for coordinating permit review on an interagency basis. A
fourth alternative is to use a formal interagency coordinating
mechanism such as the Texas Natural Resources Council.
Texas established the Natural Resources Council in 1977.
It is comprised of the heads of twenty-five resource agencies
and chaired by the Governor. Its primary goal is to coordinate
coastal policies and administer the Texas Coastal Management
Program, but is responsible for coordinating and streamlining all
state' natural resource policies and procedures.
Conflicts, duplication, and gaps in state-level con-
flicts can be presumed, but are difficult to document. Reorgani-
zation efforts are often premised on the existence of such
problems, but find it difficult to devise an organizational
structure that reduces the net number or magnitude of such
conflicts.
Texas Railroad Commission authority to regulate sur-
face mining is the closest to a comprehensive and consolidated
regulatory approach to a given activity that exists in Texas.
Despite the comprehensiveness of the state surface mining act,
525
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jurisdiction is shared with other agencies, particularly the
Department of Water Resources.
The Advisory Committee to the Texas Coastal Management
Program discussed, but did not recommend that the Texas Air
Control Board's consideration of the land use implications of its
permit decisions be expanded to include more than simply local
zoning decisions. Such a policy change could effectively allow
air permit review to become a forum for consideration of the
broader socioeconomic and land use effects of power plants and
other facilities. The Air Control Board has in the past contended
that this would convert the agency into a siting authority with
decisions based on non-air-quality criteria.
327
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5.0 INTEGRATING PERSPECTIVES ON POLICY ISSUES
Decisions concerning the issues set forth in the
preceding sections will be made by different groups of people,
responsible to different constituencies, and often working toward
different goals. In many instances the groups participating in
these decisions may not be fully aware of each other's goals and
viewpoints. Although confrontations will arise, they will almost
always be over single issues.
This final section is an attempt to describe in broad
outlines the relationships between key policy objectives, showing
where they move in common directions and where they conflict. The
resolution of an issue in terms of a particular objective may
logically restrict choices in other areas while implying the adop-
tion of other objectives with related effects. Failure to
recognize such relationships may result in the conflicting policy
directions which tend to cancel each other's effects.
In addition, several basic underlying issues will be
pointed out. These issues concern major policy trends and their
cumulative effects. These larger issues recognize key ideas
that unify and connect the individual issues and their potential
resolution.
5 .1 Underlying Issues
A close analysis of the eighteen issues discussed in
Sections 2 through 4 above reveals a number of common threads
unifying them. Four of these basic underlying concerns warrant
specific mention:
529
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Limitations in the requirement for environ-
mental review of new projects
Environmental costs not yet internalized
Regulatory uncertainties that interfere with
long-range financial planning
Equity versus efficiency in resource allocation.
An exhaustive analysis of these complex topics is well
beyond the scope of the present study. They are included here,
however, because an analysis of policymaking with respect to
lignite would be fragmentary without mention of them. The re-
solution of any one of these policy issues has implications for
these concerns, and an awareness of them lends valuable perspec-
tive to the cumulative effect of individual decisions.
5.1.1 Limitations in Environmental Review
Between now and the year 2000, the State of Texas may
reasonably be expected to take over the administration of most
of the large federal, permitting programs pertaining to new lignite-
based facilities. These include air and water quality, surface
mining, and solid waste disposal. Since there is very little
federal land in Texas, this may result in a substantial number of
new facilities being built without undergoing a complete and for-
mal environmental review under NEPA. The only major federal
actions not now or soon likely to be administered by the state are
dredge and fill permits from the Army Corps of Engineers, and ex-
emptions or conversion orders under MBFC policy administered by
the Department of Energy. Dredge and fill permits will be required
for only a portion of the total number of mines and conversion
facilities required.
530
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Texas lacks a requirement for comprehensive environ-
mental review at the state level. Responsibility for various
environmental impacts is spread among several agencies, varying
considerably in their authority (see Response Issue No. 10).
Additional guidelines and requirements may be introduced through
the promulgation of rules and regulations for the implementation
of federal programs. The net effect, however, could be more
confusion than clarification.
NEPA and similar comprehensive review processes insti-
tuted by some states provide an avenue for public participation
both through hearings and in the courts. NEPA contains no require-
ment to use the results of the required environmental review in
the process of undertaking a major federal action. Nevertheless,
suits brought by public interest groups on the basis of the
adequacy of the review ultimately brought about not only far-
reaching expansions of its scope, but were able indirectly to
force cancellation of projects by inducing costly delays. The
impact of these suits was undoubtedly responsible in part for the
increase in environmental awareness among policymakers and in-
dustry. Now, this incentive may be at least partially withdrawn
at a time when increasing economic pressures and rising energy
demand are causing some to call for a re-examination of the
nation's environmental values.
5.1.2 Internalizing Environmental Costs
The years since NEPA1s passage have seen the development
of a body of legislation specifically aimed at protecting the
environment. These laws have formally internalized the environ-
mental costs of economic activities through the imposition of
requirements for control technology or standards of practice.
This trend may be seen as tending to replace the earlier process
531
-------
of comprehensive but non-restrictive environmental review. The
greater the internalization of environmental costs, the more
incentive there is to make environmentally sound decisions in
planning and design.
A broad variety of environmental costs have now been
internalized, and developing policy in the area of solid waste,
surface mining, and toxic substances will internalize still more.
Three kinds of environmental costs stand out, however, as remain-
ing largely external:
Chronic health impacts of air and water
pollution
Damage and deterioration of ecosystems
Aesthetic degradation.
Each of these costs is directly related to the rate and scale
of lignite development in Texas. Relevant discussions may be
found in Section 2.3, 4.1.3, and 4.1.6 above. Sections 2 through
7 of Chapter IV contain further details regarding the possible
extent of these impacts in Texas.
Two characteristics make these costs hard to inter-
nalize. First, it is presently very difficult to quantify them,
both because of incomplete scientific understanding and the
inherent subjectivity with which they are experienced. Second,
there is very little agreement on what constitutes an acceptable
level of damage or risk.
The costs of chronic health effects arising from low-
level concentrations of air and water pollutants are in principle
532
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possible to internalize by limiting emissions and controlling
waste disposal. However, it will take years of epidemiological
research to establish dose-response relationships. Even when
such information becomes available, there remains the question
of acceptable risk. Attempting to internalize these costs too
soon, before a numerical criterion can be grounded in fact, could
result in overestimating them.
Fish and wildlife values were once at the forefront of
the environmental movement. This original impetus has been
translated into regulations that are chiefly designed around indi-
vidual species. The costs that have been most successfully
internalized are those of the extinction of uncommon species.
Efforts to preserve habitat quality have not yet internalized
the costs of all habitat factors which may experience deteriora-
tion. Thus in aquatic environments, the deterioration of water
quality has been dealt with, but not interference with flow
regimes or the fragmentation of habitat by impoundments. In
terrestrial ecosystems, the costs of surface mining are being
reflected in the cost of energy, but the costs of associated
human acitivity damaging to wildlife and habitat are not. In
Texas, the impacts of surface mining and power production cannot
be considered apart from an overall trend of habitat attrition
which has greatly changed the character of ecosystems over the
course of the century. Although the costs of continuing this
long term degradation are difficult to tie to the costs of pro-
ducing energy, such a trend can effectively nullify the most
expensive efforts to reclaim mined lands and to control plant
siting.
Finally, aesthetic degradation is easily the most
problematic of all these costs. In principle, it can be incor-
porated into the broad social and economic costs of energy
533
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development and related economic growth by establishing standards
ranging from simple aesthetic guidelines for structures to strict
land use control. The difficulty is not in finding ways to
internalize costs, but in attempting to achieve a public consensus
on how much internalization is desirable. Unfortunately, aesthetic
impacts are often essentially irreversible.
The basic questions regarding the internalization of
these three kinds of environmental costs are: first, to what
extent should they be internalized; and second, how rapidly should
we attempt to do so. The value to society of preventing these
impacts must be established. The costs of forestalling them will
be large in that the impacts themselves are diffuse and involve
many media. Thus, a serious attempt to control them simultaneously
or over a short time frame might entail major economic consequences
5.1.3 Long-Range Planning Under Conditions of Uncertainty
At- the present time, government is in the process of
formally internalizing not only the cost of some kinds of environ-
mental damage, but also the cost of depleting limited reserves
of natural gas as well as the cost of increased independence from
foreign oil suppliers. All of these efforts add directly to the
costs of any industrial firm, and affect its financial position.
Since every firm experiences slightly different costs, competitive
relationships stand to be altered as well. This element differ-
entiates industry from utilities and materially increases the
potential impact on the individual firm of changes in the cost
of doing business.
534
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Considerable uncertainty surrounds several areas of
developing policy. Recently passed laws* mandate the regulation
of previously unregulated substances and new standards of prac-
tice for a large number of processes, which have yet to be
developed. The National Energy Act institutes a new and complex
procedure for authorizing fuel use in major industrial boilers,
which has yet to be tested in practice.
However, the most significant aspect of these new laws,
as relates to uncertainty, may be the trend toward requiring
continual update, expansion, and adjustment of the body of regu-
lation they authorize. Thus, Section 106 of the Clean Air Act
Amendments of 1977 gives EPA an open-ended mandate to review and
revise standards every five years, adding new ones "as may be
appropriate." Section 120 specifically requires the Agency to
consider means to protect the public from any injurious effects
of sulfates, radioactive emissions, cadmium, arsenic, and poly-
cyclic organic matter. Thus, industries can look forward to a
future in which large but unpredictable additions to their environ-
mental control costs may occur. A similar open-ended mandate is
given to the Department of Energy in requiring categories of
existing industrial boilers to switch fuels.
The net result is to make it extremely difficult for
industry to calculate the long-term risks involved in large
capital investments. Fuel choice, equipment design, siting, and
selection of environmental control measures are all affected by
this uncertainty. Significantly, with regard to government RD&D
efforts, new technologies may be rendered even more risky invest-
ments than their economics alone would suggest.
*Most notably, the Clean Air Act Amendments of 1977, Resource
Conservation and Recovery Act, and Water Pollution Control Act
Amendments of 1977 call for extending or altering current regu-
lations and standards of practice.
535
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product may experience less risk in making capital investments
under conditions of uncertainty. Thus, a trend differentially
favoring big industry may be inadvertently developing from the
totality of our policies for allocating environmental and fuel
resources.
533
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REFERENCES CITED: CHAPTER V
1. Chemical Week, November 22, 1978, p. 11.
2. Chemical and Engineering News, November 27, 1978, p. 18.
3. Files, J.T., 1978, Houston Area Oxidants Study, Environ-
mental Science Technology, 12:638-640.
4. Dimitriades, B., 1978, EPA's View of the Oxidant Problem
in Houston, Environmental Science Technology, 12:640-643.
5. Federal Register, Vol. 43, No. 118, 1977 Clean Air Act:
Prevention of Significant Air Quality Deterioration, State
Implementation Plan Requirement, Monday, June 19, 1978.
6. Office of Technology Assessment, 1978, Application of Solar
Technology to Today's Energy Needs, Vol. I, Washington,
D.C., O.T.A., vii + 525 p.
7. Demand and Conservation Panel of the Committee on Nuclear
and Alternative Energy Systems, "U.S. Energy Demand: Some
Low Energy Futures," In: Abelson, P.H., and A.L. Hammond
(eds.), 1978, Energy II: Use, Conservation and Supply,
Washington, D.C., Amer. Assoc. Adv. Sci., v+ 201 p.
8. Hirst, E., and J. Carney, "Effects of Federal Residential
Energy Conservation Programs," In: Abelson, P.H., and A.L.
Hammond (eds.), 1978, Energy II: Use, Conservation and
Supply, Washington, D.C., Amer. Assoc. Adv. Sci., v + 201 p.
9. Texas Railroad Commission, Gas Utilities Docket 719.
10. Texas Railroad Commission, Gas Utilities Docket 1055.
11. Gautam, S.R., H.B.H. Cooper, Jr., and R.W. Miksad, 1978,
"An Assessment of Air Quality Impacts of Coal and Lignite
Use in Texas," paper presented at the 71st Annual Meeting
of the Air Pollution Control Association, Houston, Texas,
June 25-30, 1978.
12. McNeely, J.G., and R.D. Lacewell, 1977, Surface Water De-
velopment in Texas, Texas A&M University, Agricultural
Experiment Station, 44 p.
539
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TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
1. REPORT NO.
EPA-600/7-79-lllb
2.
3. RECIPIENT'S ACCESSION NO.
». TITLE AND SUBTITLE
Integrated Assessment of Texas Lignite Development:
Volume II: Policy Analyses
5. REPORT DATE
May 1979 issuing date
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
8. PERFORMING ORGANIZATION REPORT NO.
}. PERFORMING ORGANIZATION NAME AND ADDRESS
Radian Corporation
8500 Shoal Creek Blvd.
P.O. Box 9948
Austin, Texas 78766
10. PROGRAM ELEMENT NO.
1NE 827C
11. CONTRACT/GRANT NO.
Grant No.; R806359-01
12. SPONSORING AGENCY NAME AND ADDRESS
U.S. Environmental Protection Agency
Office of Research & Development
Office of Energy, Minerals & Industry
Washington, DC 20460
13. TYPE OF REPORT AND PERIOD COVERED
14. SPONSORING AGENCY CODE
EPA/600/7
15. SUPPLEMENTARY NOTES
This project is part of the EPA-planned and coordinated Federal Interagency
Energy/ Environment R&D program.
16. ABSTRACT
This three volume report contains the results of a project to assess the
probable impacts of expected future development of Texas lignite resources.
This multi-disciplinary, policy-oriented study considered possible lignite
extraction and utilization options through the year 2000. The research
team attempted to identify and characterize the amjor environmental, socio-
economic, public health and institutional impacts which could result from
this process and the policy issues created or aggrevated by these impacts.
Alternative solutions to policy problems are outlined with probable
consequences of each.
Volume I contains Technical Analyses, including: evaluation of the poten-
tial for use of lignite, the likely siting patterns of lignite facilities,
and the environmental and socio-economic impacts of lignite use. Volume
II contains Policy Anslyses which identify major public policy issues
related to lignite use in Texas and discuss the alternative policies avail-
able for resolving the issues. Volume III contains technical working papers.
17.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b.lDENTIFIERS/OPEN ENDED TERMS
COS AT I Field/Group
Environments
Energy Resources
Ecological Effects
Health Effects
Integrated Assessment
97G
18. DISTRIBUTION STATEMENT
DISTRIBUTE TO PUBLIC
19. SECURITY CLASS (This Report)
21. NO. OF PAGES
20. SECURITY CLASS (Thispage)
nnr-1 acci fi oH
22.
CE
?»A Form 2220-1 (9-73)
U.S. GOVERNMENT PRINTING OFFICE: 1980- 311-726:3859
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