Compliance SEPs for Local Governments
The SEP Statute, Texas Water Code Section 7.067 allows certain Local Governments in an enforcement action to perform a SEP to come into compliance with environmental laws or to remediate the harm caused by those violations.
The SEP Statute defines a Local Government as a school district, county, municipality, junior college district, river authority, water district, or other special district or political subdivision created under the constitution or a statute of this state.
Under the exception defined in the SEP Statute, a Local Government respondent that meets certain requirements is eligible to offset up to 100 percent of its administrative penalty through the performance of a “Compliance SEP” or “C-SEP” that brings the Local Government into compliance with the underlying administrative order.
Common C-SEP Proposals:
1) A repair on structures or equipment that may be the cause of the violation; or
2) Remediation of environmental harm, such as a cleanup of a spill.
For example, a city that is under enforcement for exceeding its effluent limitations may propose a C-SEP to repair, replace, or upgrade its wastewater treatment plant equipment in order to use the penalty to correct those violations. The respondent must agree to come into compliance with all of the violations regardless of whether the penalty offset will provide enough funds to complete the compliance activities.
C-SEPs are available to Local Governments that (1) have not previously committed a violation at the same site with the same underlying cause in the preceding five years, as documented in a TCEQ order, and have not agreed to perform the project before the date the TCEQ initiated the enforcement action (“Applicable Local Government”); or (2) qualify under a financial inability to pay analysis conducted by the TCEQ’s Financial Administration Division (“Financially Qualified Local Government”).
Approval for a “Financially Qualified Local Government” C-SEP:
Local Governments who have a need for corrective action and have had the same underlying cause for the same violation at the same site within 5 years will be screened for financial ability to pay using the following screens. An affirmative response to any of the screens below disqualifies the Local Government respondent for a C-SEP.
1) A Financial Test to demonstrate financial assurance for any TCEQ program and Compliance Costs plus penalty < 1% of Total Revenue; or
2) Bond Rating: Moody’s – Higher than Ba; Standard and Poor’s or Fitch’s – higher than BB+; and Compliance Costs plus penalty <1% of Total Revenue; or
3) Unrestricted reserves from General Fund and Enterprise Fund less Penalty less Compliance Cost/Operating Expense > 16.6% (2 months).
The SEP Statute requires the TCEQ to ensure that the Local Government respondent does not systematically avoid compliance through the use of the SEPs. So, in addition to assessing the respondent’s qualifications to perform a C-SEP, an agency investigation must not show that the Local Government respondent delayed compliance to qualify for a C-SEP.
If you have questions regarding the financial screening process, please contact the Financial Administrative Division at 512/239-6263.
If you have any questions regarding the C-SEP, please contact the SEP program at 512/239-2223 or by email at email@example.com.