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F I S C A L I M P A C T R E P O R T

SPONSOR Wirth

DATE TYPED 2/15/05

HB 515

SHORT TITLE Air Quality Permit Standards & Procedures

SB

ANALYST Hadwiger

APPROPRIATION

(in $000s)

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Department of Environment (NMED)

New Mexico Oil and Gas Association (NMOGA)

SUMMARY

Synopsis of Bill

House Bill 515 would allow the Department of Environment (NMED) or a local agency to deny,

condition, modify, suspend or revoke an air quality permit if the applicant has:

1.

knowingly misrepresented a material fact in the permit application,

2.

failed to disclose information required by the provision fo the Air Quality Control Act,

3.

been convicted in any court of a felony or other specified crimes within the past ten

years,

NMED could consider aggravating or mitigating factors in making its determination.

Permit applicants would be required to file a disclosure statement with NMED on a form devel-

oped by NMED in cooperation with the Department of Public Safety (DPS). Upon request of

NMED, DPS would be required to prepare “an investigative report” on the applicant based on

the disclosure statement within 90 days of the receipt of the statement. DPS could review crimi-

nal history information from the FBI or other law enforcement agency. While the report is being

prepared, NMED could request information on any person who could reasonably be expected to

be involved in management activities of the permitted facility or has a controlling interest in the

facility. Applicants would be required to cooperate with the investigation. If additional infor-

House Bill 515 -- Page 2

mation is required after filing of the disclosure statement, a permitee or applicant would have to

provide the additional information within 30 days or face revocation or denial of a permit.

HB515 specifies exceptions to the disclosure statement provisions.

Significant Issues

According to NMED, currently, polluters with a history of noncompliance with environmental

statutes, regulations, and permits are treated the same as sources that are in full compliance. The

violation of environmental statutes, regulations, and permits can adversely affect the health of

New Mexicans and the quality of their environment. HB 515 allows the department to consider

an applicant’s compliance history in making permit decisions, making it more likely that sources

will comply with environmental requirements.

The New Mexico Oil and Gas Association (NMOGA) identified the following concerns with re-

gard to HB515:

1.

The bill proposes to add a “bad actor” provision similar to that already contained in the

Solid Waste Act, Hazardous Waste Act and Water Quality Act. These provisions were

intended to give the regulatory agencies authority to keep criminal organizations from

participating in businesses regulated under the authority of these laws. There is no evi-

dence that adding this provision to the Air Act is necessary for such purpose.

2.

This provision may be used to substantially delay permit applications and increase the

applicant’s costs in obtaining a permit. The Air Quality Bureau already has the authority

to deny or revoke an air quality permit application if the applicant has knowingly mis-

represented or withheld information, so the proposed changes do not strengthen NMED’s

authority in that regard.

3.

HB515 may penalize operators that self-report, as they would have a more visible track

record of violations compared to operators that conceal problems; thus creating a disin-

centive for reporting.

4.

HB515 would create a significant new barrier to doing business in New Mexico that

would make this State less attractive to new business or to the retention or expansion of

existing businesses.

PERFORMANCE IMPLICATIONS

NMED has three performance measures that could be impacted by this bill. First, HB515 will

facilitate achievement of NMED’s goal that 95% of facilities will take corrective action to miti-

gate air quality violations discovered as a result of inspections by providing more incentive for

polluters to mitigate violations discovered during inspections. Second, to the extent that HB515

improves compliance, it would help the NMED improve visibility in New Mexico. HB515 may

make it difficult for NMED to achieve a third performance measure—to make decisions on 90

percent of all air construction permit applications within 90 days. or within additional time al-

lowed by statute. The purpose of this performance measure is to assure timely processing of ap-

plications and maintain a business-friendly permitting process. The need for investigative re-

ports may delay permit processing. NMED indicates that its experiences with similar reports

pursuant to other statutes have shown that permits can still be processed to meet statutory dead-

lines.

House Bill 515 -- Page 3

FISCAL IMPLICATIONS

NMED indicated that existing sources of income should be sufficient to fund the additional re-

view of disclosure information.

ADMINISTRATIVE IMPLICATIONS

The Environmental Improvement Board would have to revise 20.2.70 NMAC – Operating Per-

mits and 20.2.72 NMAC – Construction Permits to conform the provisions regarding application

content and the basis for permit denial. NMED may require more staff to review disclosure

statements and evaluate investigative reports.

OTHER SUBSTANTIVE ISSUES

NMED indicated that, under current statute, the department manages air quality through regula-

tions and permits. The Air Quality Control Act allows the department to deny an air quality per-

mit if the source will not comply with applicable air quality requirements, but nothing allows the

department to deny an application based on the applicant’s enforcement history. NMED has

such authority under other environmental laws, including the Solid Waste Act, Hazardous Waste

Act, and Water Quality Control Act. Consequently, NMED must treat applicants regulated under

one of these laws differently than other applicants, granting permits to some but not to others.

According to NMED, a "bad actor" provision in the Air Quality Control Act would provide an-

other incentive for applicants to comply with environmental requirements. Based on past experi-

ence, the department would implement this provision for only a small percentage of air permit

applicants. Yet for that small number of applicants, the "bad actor" provision would be an impor-

tant and effective means to obtaining continued compliance with environmental requirements.

POSSIBLE QUESTIONS

1.

How would HB515 affect DPS staff/resources needed to prepare the investigation re-

ports.

DH/yr