entpro.txt
entpro.txt
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Texas Natural Resource Conservation Commission
Austin Texas
Memorandum
To: Lawrence Pewitt, P.E.
Randy Hamilton, P.E.
Stephen E. Anderson
Hank Curry
From: Jim Braddock, General Counsel
Date: July 3, 1991
Subject: Enterprise Products Company - Prevention of
Significant Deterioration (PSD) Requirements Mont
Belvieu, Chambers County
Enterprise Products Company (EPC) formerly owned a complex in
Mont Belvieu, Chambers County, which contained facilities
related to natural gas liquids including units for
fractionation, isomerization, storage and distribution. EPC
has sold a number of the facilities citing a need to
minimize estate taxation, but continues to operate the
facilities it has sold.
Currently there are four pending PSD permit applications for
the complex with four different owners; they are:
1. PSD-TX-789, Enterprise Products Company - Cogeneration
unit.
2. PSD-TX-790, EPC Venture, Inc. (EPCV) - Heat Pump
3. PSD-TX-796, Belvieu Olefins Partners (BOP) - Oleflex Unit.
4. PSD-TX-797, Belvieu Environmental Fuels (BEF) - Methyl
-tertiary-butyl-ether (MTBE) Unit.
Concern has been raised as to whether any or all of the above
referenced applications should be consolidated into one
application. Justification for such an action would be that
the units involved in two or more of the applications
constitute one "source" as defined in the PSD rules:
All of the pollutant-emitting activities which belong to the
same industrial grouping, are located on one or more
contiguous or adjacent properties and are under the control of
the same person (or persons under common control)
Pollutant-emitting activities shall be considered as part of
the same industrial grouping if they belong to the same "Major
Group" (i.e., which have the same first two digit code as
described in the Standard Industrial Classification Manual).
The focus of this opinion is whether the pollutant emitting
activities are under the control of the same person (or
persons under common control). There is limited information
and guidance available for use in making a determination
regarding control. The use of the term control rather than
ownership suggests that under certain facts either ownership
or operational authority could, by itself, constitute control.
A request has been made to initially focus on the BEF and BOP
projects. These two organizations, based on information
supplied by EPC, appear to clearly have separate ownership.
Himont USA, Inc., (Himont) which owns fifty percent of BOP, is
represented to be a subsidiary of an Italian Company
(Montedison, S.P., Milam, Italy) and does not have any
ownership interest in BEF, EPC or EPCV. It does, however,
have fifty percent ownership of three existing units in the
complex: the P/P Splitter, the P/P Splitter Turbine Upgrade,
and the propylene dehydrator.
Accordingly, based on ownership, it does not appear that
either BOP or BEF can be said to be part of the same PSD
source with each other or with the EPC or EPCV projects.
However, the fifty percent ownership of BOP by Himont raises
questions whether it "controls" BOP and the three
aforementioned existing units for which it also has fifty
ownership. In other words should the three units be
considered as the same source as that in the pending PSD
application of BOP.
EPC has submitted the partnership agreement creating and
governing BOP. It provides for a four member management
Committee with each partner having one member per twenty-five
percent ownership share. Thus, Himont would have two of the
four members. Action by the management committee cannot be
taken without the concurrence of at least three of the four
partners. Accordingly, Himont is unable to control the BOP
operation as it cannot by itself control the management
committee.
As stated earlier, consideration must also be given to the
question of whether the operation of the BOP and BEF
facilities by EPC constitutes control by EPC for the purpose
of aggregating those units with others owned and operated by
EPC under the PSD definition of source. EPC has provided an
August 11, 1989 PSD determination by EPA (John Calcagni)
relating to construction of the new Denver airport as support
for the proposition that ownership is the significant factor
in deciding what constitutes control.
However, the EPA opinion stresses the limited number of facts
regarding the proposed airport that were available at the time
of the opinion. It does not preclude a determination that an
operator could be in control of a proposed facility even prior
to construction if the facts warrant such a conclusion. EPC
has provided a draft operating Agreement that would, if
signed, form the authority under which EPC would operate the
BOP owned plant. The operating agreement places restrictions
on EPC's authority in the operation of the plant. It provides
that BOP would retain ultimate authority over all decisions.
It restricts EPC from making an unbudgeted expenditure in
excess of ten percent of the budget or which cannot be
terminated by BOP without penalty within two years of the
expenditure. It also restricts capital expenditures in light
of the capital expenditures budget which is established by
BOP. Within this framework, EPC does have the authority to "
... perform such actions as may seem advisable or expedient in
the Plant operator's reasonable discretion, for the
advancement of the interests of the owner in connection with
the Operation, repair maintenance modification and use of the
facility..."
These provisions, taken as a whole, suggest that one could not
reasonably state that EPC would control the BOP operation.
While EPC has the authority to make routine decisions in the
operation of the plant, BOP returns authority to make or
approve all significant decisions regarding plant operations
including the expenditure of capital funds. EPC simply does
not have sufficient authority under the proposal to "control",
the plant.
EPC has represented that the operating Agreement for the BEF
plant will be substantially the same as the proposed Agreement
for the BOP plant. If the actual operating Agreements are
similar to that proposed it appears that neither the BEF nor
the BOP projects would constitute the same source with any
other units at the complex.
The applications involving EPC and EPCV are far more
complicated regarding the PSD "source" issue. EPC, through
its attorney, has requested that an opinion on that issue be
reserved as EPC and EPCV may decide to restructure those
applications in a manner which could affect any determination
made under the present facts. If you feel that an opinion on
the EPC/EPCV applications is needed please advise me and it
will be prepared. otherwise, I shall reserve any opinion on
those applications.