New clean air rules could cost Austin region billions, report says

If the Austin area runs afoul of new federal clean air standards, the region’s economy could suffer tens of billions of dollars in losses over the next three decades, according to a new report by a coalition of local governments.

Triggering a cascade of new government regulations, a violation of new smog rules could discourage two major employers from expanding in Central Texas, according to the report prepared by Capital Area Council of Governments, a regional planning group.

According to the report, an official with chip fabricator Samsung said the company “would very likely not” embark on a major expansion within the next decade if the region fails the new standards — though another Samsung official told the American-Statesman that’s putting it too strongly and that no Central Texas expansion is currently planned.

The report says cement manufacturer Texas Lehigh, based in Buda, would also forgo an expansion.

The thwarted expansions, taken with other losses in federal money for highway projects, could lead the region to lose from $24 billion to $41 billion between 2018 and 2046, according to the analysis, “The Potential Costs of an Ozone Nonattainment Designation to Central Texas.”

The report comes as Texas and other states try to press the Obama administration to back off proposed new standards. As with so many disputes over environmental regulations, lawsuits are likely.

The current standard for ozone emissions is 75 parts per billion; the U.S. Environmental Protection Agencyproposes reducing that threshold to the range of 65 to 70 parts per billion.

There’s actually a good chance Central Texas will meet the new standards, which the EPA will announce by Oct. 1.

The federal smog standards — and related penalties — are meant to reduce premature deaths, asthma, cases of bronchitis, hospital and emergency room visits and days when people miss work or school.

The Austin area spends roughly $30 million on vehicle inspections and repairs per year to ratchet down smog levels.

About half the money comes through the $16 annual vehicle emissions inspection that residents of Travis and Williamson counties have annually.

The efforts have helped drop the levels from 77 parts per billion in 2008 to 68 parts per billion this year. And federally mandated fuel standards that take effect in 2017 are expected to reduce Austin’s ozone levels to 65 parts per billion by that year. (Only about 10 to 15 parts per billion of the emissions are directly in the control of Austin; most of it blows in from other areas.)

That puts Austin on a trajectory of compliance — unless EPA takes only 2014 to 2016 data into account and opts for the lower part of the ozone range.

In that case, the region could lose billions of dollars through lost capital investment, longer-term loss of earnings, property income and taxes.

A violation could trigger new federal regulations, including one that requires companies to demonstrate that new facilities meet a number of special pollution abatement requirements before they qualify for a pollution permit.

That means another layer of regulation for manufacturers, such as Samsung, that emit pollutants — such as nitrogen oxides and volatile organic compounds — that react in the presence of sunlight to form smog, as part of their manufacturing operations.

Tim Jones, who handles environmental regulation and policy for Austin Samsung and who chairs the Clean Air Force of Texas, a group that coordinates efforts to improve air quality, has said the prospect of getting new permits for an expansion would take at least nine months, according to the report.

This “delay in construction in a nonattainment area compared to the time it would take for the facility to be built in an attainment or unclassifiable area creates costs for the company in terms of lost revenue and increases in construction costs,” notes the report, which estimates a major expansion could employ 1,500 more people. “This could in turn also cause a company to choose to expand elsewhere.”

Samsung’s Austin campus employs 2,500 workers and is its biggest chip-production facility outside of South Korea.

Company spokeswoman Catherine Morse told the Statesman that while the enhanced “regulatory red-tape” that comes with failing air quality rules would be a factor in any future expansion plans — there are currently none for Central Texas operations — it’s one of several.

On the other hand, Central Texas has a demonstrated need for more cement production.

The Cement Council of Texas estimates that demand for cement will outstrip the production capacity of Texas plants, with a 26 percent growth in demand expected over the next five years or so.

The report predicts that “there is a very good chance that a cement company will seek to build a new cement plant along the I-35 corridor within the next 5-10 years and the most likely location for such a plant would be the Austin-Round Rock” area.

But, the report adds, discussions with the cement council and Texas Lehigh Cement Co. “lead CAPCOG to believe that a nonattainment designation would almost certainly preclude the construction of a new cement plant within the region” because any additional pollution abatement controls would put the plant at a competitive disadvantage, according to the report.

Texas Lehigh officials didn’t respond to Statesman requests for comment.

There could be other consequences of a failure: The federal government can withhold money for highway projects, and annual vehicle emissions testing could be extended to Hays and Bastrop counties.

Business interests say new smog standards are unnecessary and burdensome; whatever the EPA announces Oct. 1 appears likely to be challenged in court.

“The impacts of the (smog) standard on the economy are going to be devastating,” said Stephen Minick, vice president for government affairs at the Texas Association of Business.

In the meantime, Central Texans can continue to take voluntary measures — however small — to tamp down smog, said Andrew Hoekzema, air quality program manager at the council of governments: carpool more; avoid extra side-trips, especially in the months of May, June, August and September — the highest smog periods; and, if you’re considering a new car, buy it by the end of 2016 — that helps show regulators Austin’s overall fleet is growing cleaner.

The report includes this dire warning: “A nonattainment designation is a threshold that, once crossed, has at least 23 years of economic consequences for the region for some of the regulatory requirements even under the most optimistic circumstances.”

---