PART 1. RAILROAD COMMISSION OF TEXAS
CHAPTER 6. GEOTHERMAL RESOURCES
SUBCHAPTER A. SHALLOW CLOSED-LOOP GEOTHERMAL SYSTEMS
The Railroad Commission of Texas (Commission) proposes new Chapter 6, relating to Geothermal Resources. Specifically, the Commission proposes Subchapter A of Chapter 6, relating to Shallow Closed-Loop Geothermal Systems, which includes proposed new §§6.101 - 6.112, relating to Purpose and Scope; Definitions; Applicability and Compliance; Authorization by Rule; Authorization for a Shallow Closed-Loop Geothermal System; Construction Standards; Leak Detection and Pressure Loss; Pump Installer Requirements; Operational Standards; Well Reports; Plugging; and Enforcement and Penalties, respectively.
The new rules are proposed to implement the requirements of Senate Bill 786 (88th Legislature, Regular Session, 2023). Senate Bill 786 amended Texas Water Code §27.037 to transfer regulatory authority of closed-loop geothermal injection wells to the Commission from the Texas Commission on Environmental Quality (TCEQ). Thus, the bill provided the Commission with jurisdiction and permitting authority for these wells. The TCEQ retains jurisdiction over ground-source air conditioning return flow wells, which are shallow open-loop geothermal injection wells. All other types of geothermal injection wells are now under the jurisdiction of the Commission.
Transferring regulatory authority for shallow closed-loop geothermal injection wells to the Commission will lessen the administrative burden for those who seek to drill and operate shallow closed-loop geothermal injection wells because it consolidates authority in fewer agencies. The proposed new rules retain the general process required for drilling and operating these types of wells. Some updates to the former process are proposed to provide flexibility for changes in innovation and technology.
As stated in proposed §6.101, the new rules proposed in Subchapter A of Chapter 6 specifically address shallow closed-loop geothermal injection wells, which are defined in proposed §6.102 as injection wells that are part of shallow closed-loop geothermal systems. These types of wells are limited to a depth of formations that contain water with a total dissolved solids content of 1000 parts per million (ppm) or less. This parts per million standard is proposed to ensure consistency with definitions developed by the Texas Groundwater Protection Committee.
Section 6.102 also contains proposed definitions for other terms used throughout the subchapter such as fresh water, injection well, license number, pump installer, water well driller, and well report.
Proposed §6.103 clarifies that the subchapter only applies to shallow closed-loop geothermal systems for which construction is commenced after the effective date of proposed Subchapter A. The Commission anticipates that the effective date will be January 6, 2025, and the Commission proposes §6.103 with that date. If the timeline changes during the rulemaking process, the Commission will update the effective date upon adoption of the new subchapter.
Proposed §6.103 also clarifies that the subchapter does not apply to open-loop air-conditioning return flow wells or other geothermal injection wells. Open-loop air-conditioning return flow wells remain under the jurisdiction of the TCEQ. Other geothermal systems such as geothermal systems that generate energy for sale or transfer to an energy market are not addressed in proposed Subchapter A. A person shall not drill or operate another type of geothermal injection well unless that person holds a valid individual permit issued by the Commission.
Conversely, a person in compliance with Subchapter A may cause a shallow closed-loop geothermal system to be drilled and installed and may operate the system without obtaining an individual permit. In other words, a shallow closed-loop geothermal system is authorized by rule provided it is drilled, installed, and operated in accordance with proposed Subchapter A.
Proposed §6.104 states this general rule and provides for exceptions based on the Director's review. The Director will review an owner's request for authorization for a shallow closed-loop geothermal system submitted pursuant to proposed §6.105 and the well report required by proposed §6.110 to determine whether factors are present such that an individual permit or other further action is required. If after review of the request or well report, or at any other time, the Director finds that the shallow closed-loop geothermal injection well (1) encounters groundwater that is detrimental to human health and the environment or can cause pollution to land, surface water, or other groundwater, (2) may cause a violation of primary drinking water regulations under 40 CFR Part 142, or (3) may otherwise adversely affect human health or the environment, then the Director may require the owner to obtain an individual permit, require the owner to take action to prevent the violation, or may refer the violation for enforcement action. Proposed §6.104(c) directs the owner of the system to cease injection operations if the Director makes such a determination. Injection operations shall not continue until the owner complies with the Director's requirements.
Proposed §6.105 describes the procedure for obtaining Commission authorization for a shallow closed-loop geothermal system. Prior to commencing operations for a shallow closed-loop geothermal system, the owner of the system must submit a request for authorization to drill the well. The owner must sign the authorization, certifying that the owner will use the services of a licensed water well driller and a licensed pump installer, and that the owner agrees to plug the well upon abandonment. The request for authorization shall include the TDLR license numbers for the TDLR-licensed water well driller and the TDLR-licensed pump installer. Proposed subsection (b) requires the well driller to complete the state well report form required by TDLR and submit it to the Director within 30 days from the date the well construction is completed. Additional requirements regarding the well report are included in proposed §6.110. The Commission's Special Injection Permits Unit will review the request for authorization required by proposed §6.105 and will notify the owner when the well report is received by the Commission.
Proposed §6.106 contains the construction standards with which the licensed water well driller must comply when drilling a shallow closed-loop geothermal injection well. Proposed subsection (a) contains the surface completion requirements, including the requirement to place a concrete slab or sealing block above the cement slurry around the well. Proposed subsection (a) also provides requirements for the concrete slab or sealing block. Proposed §6.106(b) contains the drilling and completion requirements for the licensed water well driller. Requirements for backfill material are included but the water well driller is also authorized to request the Director's approval for using an alternative material that is similarly impervious. Additional drilling and completion requirements are proposed in subsection (b)(3) - (10).
Casing requirements for shallow closed-loop geothermal injection wells are proposed in subsection (c) of §6.106. The licensed water well driller is responsible for complying with these requirements. Proposed subsection (d) of §6.106 outlines the fluids that may be used as antifreeze additives or denaturants for ethanol additives. Only propylene glycol and ethanol may be used as antifreeze additives for a shallow closed-loop geothermal injection well. Denatonium benzoate, ethyl acetate, isopropanol, pine oil, and tertiary butyl alcohol may be used as denaturants for ethanol additives. A water well driller may request approval from the Director for use of other antifreeze chemicals and denaturants. Director approval is required before the water well driller uses any other chemical or denaturant.
Proposed §6.107 requires that all shallow closed-loop geothermal systems have automatic shutdown devices.
Proposed §6.108 contains the requirements for licensed pump installers. The pump installer shall (1) verify all owner information prior to installing any components of a shallow closed-loop geothermal system; (2) verify that all the pumps, tubing, and connections from the well to the infrastructure and the geothermal heat exchange system are installed, tested, and backfilled in a manner that is consistent with this subchapter and any other applicable local, state, or federal guidelines, regulations, and ordinances; (3) install all subsurface infrastructure such as loops or tubing; and (4) comply with all other applicable state regulations, statutes, and local ordinances.
Standards for operating the shallow closed-loop geothermal system are proposed in §6.109. Requirements for safety, pressure testing, sampling, and siting and setback are proposed in subsections (a) - (d). Proposed subsection (e) prohibits commingling of aquifers or zones containing waters that are known to differ significantly in chemical quality. Proposed subsection (f) notes that site plans may be required by local jurisdictions.
Proposed §6.110 contains the requirement for a licensed water well driller to submit an electronic copy of the report required by §76.70 of this title (relating to Responsibilities of the Licensee -- State Well Reports) to the Director within 30 days of well completion for each well drilled. Section 6.110 also proposes minimum information that must be contained in the report. This information is consistent with the information currently required on the report under §76.70. Proposed §6.110(c) provides that filing an incomplete well report may prompt a notice of violation from the Commission. Failure to complete the well report within 30 days of the notice of violation may result in enforcement action. Proposed §6.110(d) contains the requirements for transferring ownership of a shallow closed-loop geothermal injection well and specifies that the transferee owner shall be responsible for plugging the well upon abandonment. Proposed subsection (e) allows the owner of the well to request that well reports be kept confidential. If the Commission receives a request under the Texas Public Information Act (PIA), Texas Government Code, Chapter 552, for materials that have been designated confidential, the Commission will notify the filer of the request in accordance with the provisions of the PIA so that the filer can take action with the Office of the Attorney General to oppose release of the materials.
The Commission proposes §6.111 to outline plugging requirements for shallow closed-loop geothermal injection wells upon permanent discontinued use or abandonment. Proposed subsections (a) and (b) contain the technical requirements for plugging, and proposed subsection (c) requires the person who plugs the well to submit a signed statement to the Commission not later than the 30th day after the well is plugged. The Commission will coordinate with TDLR, groundwater conservation districts, and Commission field offices to investigate complaints regarding abandoned and/or deteriorated shallow closed-loop geothermal injection wells.
Proposed §6.112 describes the process the Commission will follow to enforce violations of Subchapter A or the conditions of a permit issued under proposed §6.104(b). Section 6.112 also contains proposed penalties for violations.
Jared Ware, Analyst for the Oil and Gas Division, has determined there will be a small cost to the Commission as a result of the proposed new rules. The Commission's Special Injection Permits Unit will need to devote a portion of the responsibilities of two full-time employees to review authorizations for shallow closed-loop geothermal systems. So, a portion of those employees' salaries is attributed to enforcement of the proposed new rules. Mr. Ware has determined that for the first five years the new rules will be in effect, there will be no fiscal implications for local governments as a result of the new rules.
Mr. Ware has determined that the public benefit anticipated as a result of enforcing or administering the new rules is compliance with state statutory requirements and decreased regulatory burden due to consolidating regulatory functions with the Commission.
Mr. Ware has determined that for each year of the first five years that the proposed new rules will be in effect, there will be no additional economic costs for persons required to comply as a result of the proposed new rules. The new rules are proposed to implement the Commission's jurisdiction over shallow closed-loop geothermal injection systems, which were previously regulated by the TCEQ. Generally, the proposed new rules incorporate existing regulatory requirements and the process for persons required to comply is the same. Some persons required to comply may experience a decrease in costs due to the reduced administrative burden caused by consolidated jurisdiction in the Commission.
In accordance with Texas Government Code, §2006.002, the Commission has determined there will be no adverse economic effect on rural communities, small businesses or micro-businesses resulting from the proposed new rules. As discussed above, there will be no additional economic costs for persons required to comply as a result of adoption of the proposed new rules; therefore, the Commission has not prepared the economic impact statement or the regulatory flexibility analysis required under §2006.002.
The Commission has determined that the proposed rulemaking will not affect a local economy; therefore, pursuant to Texas Government Code, §2001.022, the Commission is not required to prepare a local employment impact statement for the proposed rules.
The Commission has determined that the proposed new rules do not meet the statutory definition of a major environmental rule as set forth in Texas Government Code, §2001.0225; therefore, a regulatory analysis conducted pursuant to that section is not required.
The Commission reviewed the proposed new rules and found that they are neither identified in Coastal Coordination Act Implementation Rules, 31 TAC §29.11(b)(4), nor would they affect any action or authorization identified in Coastal Coordination Act Implementation Rules, 31 TAC §29.11(a)(3). Therefore, the proposed new rules are not subject to the Texas Coastal Management Program.
During the first five years that the rule would be in effect, the proposed new rules would not: increase fees paid to the agency; create or eliminate any employee positions; increase or decrease the number of individuals subject to the rules' applicability; expand, limit, or repeal an existing regulation; or affect the state's economy. The proposed new rules would not create or eliminate a government program, but would relocate administration of the program to a different state agency, consistent with Senate Bill 786 (88th Legislature, 2023). The new rules are not the sole cause of a need for increased future legislative appropriations; however, due to delegation to the Commission of several new initiatives from the Legislature, including administration of this program, the Commission will need increased appropriations in the future.
Comments on the proposal may be submitted to Rules Coordinator, Office of General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967; online at www.rrc.texas.gov/general-counsel/rules/comment-form-for-proposed-rulemakings; or by electronic mail to rulescoordinator@rrc.texas.gov. The Commission will accept comments until 5:00 p.m., on Tuesday, November 12, 2024. The Commission finds that this comment period is reasonable because the proposal and an online comment form will be available on the Commission's web site more than two weeks prior to Texas Register publication of the proposal, giving interested persons additional time to review, analyze, draft, and submit comments. The Commission encourages all interested persons to submit comments no later than the deadline. The Commission cannot guarantee that comments submitted after the deadline will be considered. For further information, call Mr. Ware at (512) 463-7336. The status of Commission rulemakings in progress is available at www.rrc.texas.gov/general-counsel/rules/proposed-rules. Once received, all comments are posted on the Commission's website at https://rrc.texas.gov/general-counsel/rules/proposed-rules/. If you submit a comment and do not see the comment posted at this link within three business days of submittal, please call the Office of General Counsel at (512) 463-7149. The Commission has safeguards to prevent emailed comments from getting lost; however, your operating system's or email server's settings may delay or prevent receipt.
The Commission proposes the new rules under Texas Water Code, §27.037, which gives the Commission jurisdiction over closed-loop geothermal injection wells and the authority to issue permits for closed-loop geothermal injection wells. Section 27.037 also requires the Commission to adopt rules necessary to administer the section and to regulate closed-loop geothermal injection wells.
Statutory authority: Texas Water Code, §27.037.
Cross-reference to statute: Texas Water Code, Chapter 27.
§6.101.Purpose and Scope.
This subchapter implements the state program for shallow closed-loop geothermal systems under the jurisdiction of the Commission consistent with state and federal law, including laws related to protection of underground sources of drinking water.
§6.102.Definitions.
The following terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Commission--The Railroad Commission of Texas.
(2) Director--The director of the Oil and Gas Division or the director's delegate.
(3) Fresh water--Groundwater containing 1000 parts per million (ppm) or less total dissolved solids.
(4) Groundwater conservation district--Any district or authority created under Section 52, Article III, or Section 59, Article XVI, Texas Constitution that has the authority to regulate the spacing of water wells, the production from water wells, or both as defined in Texas Water Code §36.001.
(5) Individual permit--A permit, other than an authorization by rule or general permit, for a specific activity at a specific location.
(6) Injection well--A well into which fluids are injected.
(7) License number--The number assigned to a water well driller or pump installer by the Texas Department of Licensing and Regulation (TDLR).
(8) Open-loop air conditioning return flow wells--Class V Underground Injection Control (UIC) wells used to return groundwater, which has been circulated through open-loop, heat pump/air condition (HAC) systems, to the subsurface. These wells are regulated by the Texas Commission on Environmental Quality under 30 Texas Administrative Code §331.11 and §331.12.
(9) Owner--The owner of a shallow closed-loop geothermal system subject to the requirements of this subchapter.
(10) Person--A natural person, corporation, organization, government, governmental subdivision or agency, business trust, estate, trust, partnership, association, or any other legal entity.
(11) Pitless adapter--An adapter that provides a water-tight connection between the drop pipe from the submersible pump inside a well and the water line running to the service location. The device not only prevents water from freezing but also permits easy maintenance of the system components without the need to dig around the well.
(12) Point of injection--For a Class V well, the last accessible sampling point prior to fluids being released into the subsurface environment.
(13) Pump installer--A person who installs or repairs well pumps and equipment. The term does not include a person who:
(A) installs or repairs well pumps and equipment on the person's own property for the person's own use; or
(B) assists in pump installation under the direct supervision of an installer and is not primarily responsible for the installation.
(14) Shallow closed-loop geothermal injection well--An injection well that is part of a shallow closed-loop geothermal system. These types of wells are limited to a depth of formations that contain water with a total dissolved solids content of 1000 parts per million (ppm) or less.
(15) Shallow closed-loop geothermal system--A closed-loop geothermal injection well, including all pumps and tubing and connections from the injection well to the infrastructure and the geothermal heat exchange system, that operates as a heat source or heat sink in concert with a heating, ventilation, and air conditioning system designed to heat or cool infrastructure. All energy used from this type of well is consumed by the onsite infrastructure and is not provided to an energy market.
(16) TDLR--The Texas Department of Licensing and Regulation.
(17) Total dissolved solids--The total dissolved (filterable) solids as determined by use of the method specified in 40 Code of Federal Regulations Part 136.
(18) Tracking number--The designated number assigned by TDLR for a specific well report.
(19) Water well driller--A person or company possessing a water well driller's license issued by TDLR.
(20) Well report--The State of Texas Well Report administered by TDLR.
§6.103.Applicability and Compliance.
(a) This subchapter applies to shallow closed-loop geothermal systems in this state for which construction is commenced on or after January 6, 2025.
(b) This subchapter does not apply to:
(1) open-loop air-conditioning return flow wells used to return water that has been used for heating or cooling in a heat pump to the aquifer that supplied the water; or
(2) other geothermal injection wells.
(c) Compliance with this subchapter does not relieve the driller or installer from compliance with the requirements of TDLR regulations adopted under Texas Occupations Code, Chapters 1901 and 1902.
§6.104.Authorization by Rule.
(a) An owner in compliance with this subchapter is authorized by rule to cause to be drilled and installed and to operate a shallow closed-loop geothermal system and is not required to obtain an individual permit except as provided by subsection (b) of this section.
(b) The Director will review the request for authorization required by §6.105 of this title (relating to Authorization for a Shallow Closed-Loop Geothermal System) and the well report required by §6.110 of this title (relating to Well Reports).
(1) The Director will review the request for authorization and the well report to determine whether the shallow closed-loop geothermal injection well:
(A) encounters groundwater that is detrimental to human health and the environment or can cause pollution to land, surface water, or other groundwater;
(B) may cause a violation of primary drinking water regulations under 40 CFR Part 142; or
(C) may otherwise adversely affect human health or the environment.
(2) If upon review of the request for authorization or the well report, or at any other time, the Director determines that a condition listed in paragraph (1) of this subsection exists, the Director may take any of the following actions:
(A) require the owner to obtain an individual permit;
(B) require the owner to take such actions (including, where required, closure of the injection well) as may be necessary to prevent the violation; or
(C) refer the violation for enforcement action.
(c) If the Director makes a determination under subsection (b) of this section, the owner shall cease injection operations until the owner complies with the Director's requirements. The owner may request a hearing to contest the Director's determination.
§6.105.Authorization for a Shallow Closed-Loop Geothermal System.
(a) Request for authorization.
(1) Prior to commencing operations for a shallow closed-loop geothermal system, the owner of the system shall submit to the Director a request for authorization to drill the injection well. The request shall be signed by the owner, include the TDLR license numbers required by paragraphs (2) and (3) of this subsection, and include the following statement: "I declare under penalties prescribed in Section 91.143, Texas Natural Resources Code, that I will use the services of a licensed water well driller as required under 16 Texas Administrative Code §6.105(a)(2), a licensed pump installer as required under 16 Texas Administrative Code §6.105(a)(3), and I agree to plug the well upon abandonment."
(2) All shallow closed-loop geothermal injection wells shall be drilled and completed by a water well driller who holds a current and valid water well driller's license issued by TDLR. Prior to commencing operations for a shallow closed-loop geothermal injection well, an owner shall provide to the Director the name and TDLR license number of the TDLR water well driller.
(3) All pumps and other equipment associated with shallow closed-loop geothermal systems shall be installed by a pump installer who holds a current and valid pump installer's license issued by TDLR. Prior to commencing installation of the pumps and other equipment, an owner shall provide to the Director the name and TDLR license number of the pump installer.
(b) Inventory. Drillers of shallow closed-loop geothermal injection wells authorized by rule shall inventory wells after construction by completing the TDLR state well report form and submitting the form to the Director within 30 days from the date the well construction is completed. Any additives, constituents, or fluids (other than potable water) that are used in the closed loop system shall be reported in the Water Quality Section on the state well report form.
(c) Approval. A request for authorization for a shallow closed-loop geothermal system will be reviewed by the Commission's Special Injection Permits (SIP) Unit. The SIP Unit will notify the owner when the TDLR state well report form is approved by the Commission. The owner may operate the system as soon as the owner receives the SIP Unit's approval.
§6.106Construction Standards.
(a) Surface completion. Water well drillers drilling a shallow closed-loop geothermal injection well shall place a concrete slab or sealing block above the cement slurry around the well.
(1) The slab or block shall extend at least two feet from the well in all directions and have a thickness of at least four inches. The slab or block shall be separated from the well casing by a plastic or mastic coating or sleeve to prevent bonding of the slab to the casing.
(2) The surface of the slab shall be sloped so that liquid drains away from the well.
(3) A pitless adapter may be used if:
(A) the adapter is welded to the casing or fitted with another equally effective seal; and
(B) the annular space between the borehole and the casing is filled with cement to a depth not less than 20 feet below the adapter connection.
(b) Drilling and completion requirements.
(1) The water well driller shall backfill the annular space of a shallow closed-loop geothermal injection well to the total depth with impervious bentonite, or a similar alternative impervious material that has been approved by the Director.
(2) The water well driller shall fill the top 30 feet with impervious bentonite, or a similar alternative impervious material that has been approved by the Director. Where no groundwater or only one zone of groundwater is encountered during drilling, sand, gravel, or drill cuttings may be used to backfill up to 30 feet from the surface.
(3) At all times during the progress of work, the driller shall provide protection to prevent tampering with the well or introduction of foreign materials into the well.
(4) Borehole diameter shall, at a minimum, allow for the insertion of a pipe sized to ensure all concrete is properly located, distributed, and cured based on the overall design and operation of the shallow closed-loop geothermal injection well. Loop tubing shall be installed for the purpose of filling the annulus between the tubing and the borehole with sand and grout material.
(5) No section of the annulus between the tubing and borehole wall shall remain open after completion of the well.
(6) For tubing material and connection requirements, the applicable American Society for Testing and Materials (ASTM) standards for the polyethylene (PE) tubing material shall be used. Tubing shall not be forced into the borehole or past an obstruction in such a manner that the structural integrity of the tubing may be compromised. This includes but is not limited to instances of cave-in, bedrock dislodgement, partial blockage, or overburden.
(7) All heat exchange loop pipe connections to be placed in the borehole shall be connected by heat-fusion, electrofusion, or a similar joints process. In addition to heat fusion or electrofusion joints, non-metallic mechanical stab-type insert fittings shall meet applicable ASTM standards.
(8) Wells that use a plastic loop require the placement of a high solids bentonite slurry grout with at least 20 percent solids by weight for any depth interval of the boring that is in a confining or semi-confining layer containing significant silt and/or clay.
(9) If copper tubing is used for heat exchange applications, all below grade copper connections shall be joined by brazing using a filler material with a high melting temperature such as a material with 15% silver content or equivalent.
(10) A water well driller shall obtain prior approval from the Director before installing any tubing material other than copper in a well.
(c) Casing requirements. The water well driller shall ensure the following casing requirements are met for each shallow closed-loop geothermal injection well.
(1) Steel well casing wall thickness shall be dependent on casing length and shall be determined using American Petroleum Institute (API) or American Water Works Association (AWWA) standards but in no circumstance shall have less than a .233-inch wall thickness.
(2) Plastic well casing or screen shall not be driven. Plastic well casing shall meet the requirements specified in the ASTM Standard F480, Standard Specification for Thermoplastic Well Casing Pipe and Couplings Made in Standard Dimension Ratios (SDR) as amended and supplemented. Plastic casing shall also meet the American National Standards Institute (ANSI) standards for "Plastic Piping System Components and Related Materials."
(3) If the use of a steel or polyvinyl chloride (PVC) sleeve is necessary to prevent possible damage to the casing, the steel sleeve shall be a minimum of 3/16 inches in thickness and the PVC sleeve shall be a minimum of ASTM D1785 Schedule 80 sun-resistant and 24 inches in length. Any sleeve shall extend 12 inches into the cement slurry.
(4) Shallow closed-loop geothermal injection wells are not required to be cased into bedrock.
(5) Temporary casing shall be installed to prevent overburden cave-in prior to the installation of tubing material and grouting of shallow closed-loop geothermal injection wells unless other means to temporarily stabilize the open boring are used. If temporary casing is not installed, the completion of well construction should proceed as soon as possible upon completion of the borehole.
(d) Fluid.
(1) Propylene glycol (Chemical Abstract Service (CAS) No. 57-55-6) and ethanol (CAS No. 64-17-5) are the only antifreeze additives a water well driller may use for shallow closed-loop geothermal injection wells.
(2) Denatonium benzoate (CAS No. 3734-33-6), ethyl acetate (CAS No. 141-78-6), isopropanol (CAS No. 67-63-0), pine oil (CAS No. 8002-09-3), and tertiary butyl alcohol (CAS No. 75-65-0) may be used as denaturants for ethanol additives. A water well driller shall obtain prior approval from the Director before using any other antifreeze chemicals and denaturants.
(3) The owner and driller involved in the design and installation of the well system shall report the release of 10 pounds or more of ethanol to the ground surface or groundwater as a reportable quantity release under 40 CFR Part 302. If a shallow closed-loop geothermal injection well consists of 20 percent ethanol by volume, then a release of as little as 7.6 gallons of water/ethanol solution meets the reportable quantity release threshold of 10 pounds of ethanol.
§6.107.Leak Detection and Pressure Loss.
A shallow closed-loop geothermal system shall have automatic shutdown devices to minimize leaks of refrigerant, antifreeze, or oil in the event of a pressure or fluid loss.
§6.108.Pump Installer Requirements.
The pump installer shall:
(1) verify all owner information prior to installing any components of a shallow closed-loop geothermal system;
(2) verify that all the pumps, tubing, and connections from the well to the infrastructure and the geothermal heat exchange system are installed, tested, and backfilled in a manner that is consistent with this subchapter and any other applicable local, state, or federal guidelines, regulations, and ordinances;
(3) install all subsurface infrastructure such as loops or tubing; and
(4) comply with all other applicable state regulations, statutes, and local ordinances.
§6.109.Operational Standards.
(a) Safety. The following information shall be prominently displayed on the shallow closed-loop geothermal system:
(1) name and telephone number of the person to contact in the event of a system shutdown;
(2) name and telephone number of the person to contact for routine maintenance; and
(3) types of fluids used in the shallow closed-loop geothermal system.
(b) Pressure testing. Shallow closed-loop geothermal injection wells shall be pressure-tested with water at 100 psi (690 kPa) for 30 minutes prior to backfilling of connection (header) trenches. Any leaking loop shall be repaired or replaced prior to completing the well.
(c) Sampling. Any required sampling shall be done at the point of injection, or as specified in a permit issued by the Commission under §6.104(b) of this title (relating to Authorization by Rule).
(d) Siting and setback. All wells shall be located at least 10 feet from potable water sources and sewer lines, and at least 25 feet from potential sources of contamination that include but are not limited to septic tanks/fields, livestock pens, or material storage facilities.
(e) Commingling prohibited. All shallow closed-loop geothermal injection wells shall be completed so that aquifers or zones containing waters that are known to differ significantly in chemical quality are not allowed to commingle through the borehole-casing annulus or the gravel pack and cause degradation of any aquifer containing fresh water.
(f) Local regulation. The Commission does not require the submittal of site plans for wells authorized by rule under this subchapter. However, a site plan may be required by a local health agent, other local governmental entity, and/or a groundwater conservation district.
§6.110.Well Reports.
(a) The water well driller is required by §76.70 of this title (relating to Responsibilities of the Licensee -- State Well Reports) to submit a well report to TDLR electronically through the Texas Well Report Submission and Retrieval System (TWRSRS). The driller shall provide an electronic copy of the well report to the Director within 30 days of well completion for each well drilled.
(b) At a minimum, a completed copy of the well report must include the following information for each well drilled:
(1) the name and address of the well owner;
(2) the county in which the well was drilled;
(3) a list of any other wells drilled at the same time;
(4) the owner well number (if assigned);
(5) the well's Latitude/Longitude (WGS 84 datum in either Degrees/Minutes Seconds or Decimal Degrees);
(6) the elevation (surface level of drill site expressed in feet above sea level);
(7) the drilling start date and end date (expressed in month/date/year);
(8) the borehole diameter in inches;
(9) the bottom depth in feet;
(10) the drilling method;
(11) the driller's name; and
(12) the water well driller's TDLR license number.
(c) Incomplete well reports may be subject to a notice of violation from the Commission. Failure to complete a well report within 30 days of a notice of violation may result in enforcement action.
(d) If a well is transferred, both the transferor owner and the transferee owner shall notify the Commission of the transfer within 30 days of the date of the transfer. The transferee owner shall be responsible for plugging the well upon abandonment.
(e) Texas Occupations Code §1901.251 authorizes the owner or the person for whom the well was drilled to request that information in well reports be made confidential. If such person seeks to request confidentiality, the person shall file a written request with the Commission via certified mail. If the Commission receives a request under the Texas Public Information Act (PIA), Texas Government Code, Chapter 552, for materials that have been designated confidential, the Commission will notify the filer of the request in accordance with the provisions of the PIA so that the filer can take action with the Office of the Attorney General to oppose release of the materials.
§6.111.Plugging.
(a) Upon permanent discontinued use or abandonment of a shallow closed-loop geothermal injection well, the owner shall plug the well according to the following standards:
(1) All removable casing shall be removed and the entire well shall be pressure filled with cement from bottom to the land surface using a pipe correctly sized to ensure all cement is properly located, distributed, and cured; and
(2) The well may be filled with fine sand, clay, or heavy mud followed by a cement plug extending from land surface to a depth of not less than ten feet below the land surface.
(b) Any fluids injected into the closed loop system shall not endanger fresh water.
(c) Not later than the 30th day after the date the well is plugged, a driller or well owner who plugs an abandoned well shall submit to the Commission a signed statement that the well was plugged in accordance with this subchapter.
§6.112.Enforcement and Penalties.
(a) A well which violates any requirement of this subchapter or a condition of a permit issued under §6.104(b) of this title (relating to Authorization by Rule) is subject to appropriate enforcement action. The Director may require owners or drillers to submit additional information deemed necessary to protect fresh water. If the required information is not submitted, the owner may be prohibited from using the well until the information is received by the Director.
(b) If a person violates any requirement of this subchapter or a condition of a permit issued under §6.104(b) of this title, the person may be assessed a civil penalty by the Commission. The penalty may not exceed $10,000 a day for each violation. Each day a violation continues may be considered a separate violation. In determining the amount of the penalty, the Commission will consider the person's history of previous violations, the seriousness of the violation, any hazard to the health or safety of the public, and the demonstrated good faith of the person.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 24, 2024.
TRD-202404591
Haley Cochran
Assistant General Counsel, Office of General Counsel
Railroad Commission of Texas
Earliest possible date of adoption: November 10, 2024
For further information, please call: (512) 475-1295
CHAPTER 25. SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS
SUBCHAPTER S. WHOLESALE MARKETS
The Public Utility Commission of Texas (commission) proposes new 16 Texas Administrative Code (TAC) §25.512, relating to the Texas Energy Fund Grants for Facilities outside of the ERCOT Region. This new rule will implement Public Utility Regulatory Act (PURA) §§34.0103 and 34.0106 as enacted by Senate Bill (SB) 2627 during the Texas 88th Regular Legislative Session. The proposed rule will establish procedures for applying for a grant award and the requirements and terms for grants to finance modernization, weatherization, reliability and resiliency enhancements, and vegetation management for transmission and distribution infrastructure and electric generating facilities in this state outside the ERCOT region.
Growth Impact Statement
The agency provides the following governmental growth impact statement for the proposed rule, as required by Texas Government Code § 2001.0221. The agency has determined that for each year of the first five years that the proposed rule is in effect, the following statements will apply:
(1) the proposed rule will not create a government program and will not eliminate a government program;
(2) implementation of the proposed rule will not require the creation of new employee positions and will not require the elimination of existing employee positions;
(3) implementation of the proposed rule will not require an increase in legislative appropriations because Texas Constitution article III, § 49-q provides that "money in the Texas energy fund may be administered and used, without further appropriation;
(4) implementation of the proposed rule will not require a decrease in future legislative appropriations to the agency;
(5) the proposed rule will not require an increase and will not require a decrease in fees paid to the agency;
(6) the proposed rule will create a new regulation;
(7) the proposed rule will not expand, limit, or repeal an existing regulation;
(8) the proposed rule will not change the number of individuals subject to the rule's applicability; and
(9) the proposed rule will not affect this state's economy.
Fiscal Impact on Small and Micro-Businesses and Rural Communities
There is no adverse economic effect anticipated for small businesses, micro-businesses, or rural communities as a result of implementing the proposed rule. Accordingly, no economic impact statement or regulatory flexibility analysis is required under Texas Government Code §2006.002(c).
Takings Impact Analysis
The commission has determined that the proposed rule will not be a taking of private property as defined in chapter 2007 of the Texas Government Code.
Fiscal Impact on State and Local Government
David Gordon, Executive Counsel, Executive Director Division, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code § 2001.024(a)(4) as a result of enforcing or administering the section.
Public Benefits
Mr. Gordon has determined that for each year of the first five years the proposed section is in effect, the public benefit anticipated as a result of enforcing the section will be more resilient transmission and distribution infrastructure and electric generating facilities in this state outside of the ERCOT region. There will be no probable economic costs to persons required to comply with the rule under Texas Government Code § 2001.024(a)(5) because the rule is designed to deliver grant money to qualifying transmission and distribution infrastructure and electric generating facilities.
Local Employment Impact Statement
For each year of the first five years the proposed section is in effect, there should be no effect on a local economy; therefore, no local employment impact statement is required under Texas Government Code § 2001.022.
Costs to Regulated Persons
Texas Government Code § 2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under subsection § 2001.0045(c)(7).
Public Hearing
The commission staff will conduct a public hearing on this rulemaking if requested in accordance with Texas Government Code § 2001.029. The request for a public hearing must be received by November 7, 2024. If a request for public hearing is received, commission staff will file in this project a notice of hearing.
Public Comments
Interested persons may file comments electronically through the interchange on the commission's website or by submitting a paper copy to Central Records, Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326. Austin, Texas 78711-3326. Comments must be filed by November 7, 2024. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rule. The commission will consider the costs and benefits in deciding whether to modify the proposed rule on adoption. All comments should refer to Project Number 57004.
Each set of comments must include a standalone executive summary as the last page of the filing. This executive summary must be clearly labeled with the submitting entity's name and should include a bulleted list covering each substantive recommendation made in the comments.
Statutory Authority
The rule is proposed under Public Utility Regulatory Act (PURA) §14.001, which grants the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by this title that is necessary and convenient to the exercise of that power and jurisdiction; §14.002, which authorizes the commission to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §34.0103, which authorizes the commission to use money in the Texas Energy Fund to provide grants for modernization, weatherization, reliability and resiliency enhancements, and vegetation management for transmission and distribution infrastructure and electric generating facilities in this state outside of the ERCOT region; and §34.0110, which authorizes the commission to establish procedures for the application and award of a grant under PURA chapter 34, subchapter A.
Cross Reference to Statute: Public Utility Regulatory Act §§14.001, 14.002, 34.0103, and 34.0110.
§25.512.Texas Energy Fund Grants for Facilities Outside of the ERCOT Region.
(a) Purpose. The purpose of this section is to implement Public Utility Regulatory Act (PURA) §34.0103 and §34.0106 and establish requirements and terms for grants to finance modernization, weatherization, reliability and resiliency enhancements, and vegetation management for transmission and distribution infrastructure and electric generating facilities in this state outside of the ERCOT region.
(b) Eligibility.
(1) Applicant eligibility. To be eligible for a grant under this section, an applicant must:
(A) be an electric utility, electric cooperative, municipally owned utility, or river authority that owns or manages transmission or distribution infrastructure or one or more electric generating facilities in this state outside of the ERCOT region, or own a qualifying facility as defined by the Public Utility Regulatory Policies Act of 1978 (PURPA) §201, codified at 16 U.S.C.A. §§796(17) and (18); and
(B) be compliant with the requirements in the Lone Star Infrastructure Protection Act (codified at Texas Business and Commerce Code §117.002).
(2) Project eligibility. A project consists of one or more measures that share a specific objective over a defined duration. A measure may be an action or series of actions, acquisition of equipment, or construction of infrastructure. Measures that are inter-dependent must be submitted within the same project.
(3) Objectives. To be eligible for a grant under this section, a project must meet one of the following objectives.
(A) Facility modernization. This objective relates to upgrading or replacing infrastructure or equipment and improvements to facility or system situational awareness. Advanced metering installation and analytics, substation automation, water conservation, cooling system upgrades, and installation of heat-resistant technologies meet the facility modernization objective.
(B) Facility weatherization. This objective relates to measures that protect, strengthen, or improve the energy efficiency, operational parameters, or safety of a structure against the natural elements. Elevation of critical equipment, drainage system improvements, structure reinforcement, insulation and heating of critical areas and equipment, installation of advanced irrigation systems, and installation of weather-resistant equipment and fire or flood barriers meet the facility weatherization objective.
(C) Reliability and resiliency. This objective relates to helping facilities prevent, withstand, mitigate, or more promptly recover from power outages and events involving extreme weather conditions, uncontrolled events, cyber and physical attacks, cascading failures, or unanticipated loss of system components that pose a material threat to the safe and reliable operation of an electric utility's transmission, distribution, and generation systems. Fortification against flooding, pole upgrading, powerline hardening, battery storage, onsite fuel storage capacity increases, generation uprates, cybersecurity enhancements, and fortification against physical threats meet the reliability and resiliency objective.
(D) Vegetation management. This objective relates to actions taken above and beyond those supported by an applicant's current rates to prevent or curtail vegetation from interfering with electric infrastructure. Data-driven trimming and removal scheduling, GIS-based vegetation mapping, drought-resistant vegetation installation, and measures taken to prevent the growth of trees, shrubs, and other vegetation meet the vegetation management objective.
(4) Funding exclusions. Proceeds of a grant received under this section must not be used for the following:
(A) compliance with weatherization standards adopted before December 1, 2023;
(B) debt payments;
(C) operation of a facility that will be used primarily to serve an industrial load or private use network (PUN), except as provided in paragraph (5) of this subsection;
(D) construction or operation of a natural gas transmission pipeline, or any project related to natural gas transmission or distribution infrastructure;
(E) construction of new electric generation resources; or
(F) operations expenses associated with any project funded by a grant under this section.
(5) Electric generating facilities that serve an industrial load or PUN are eligible for a grant under this section, subject to the following conditions:
(A) transmission and distribution infrastructure that serves an industrial load or PUN must be on the public use side of the meter and geographically located entirely within this state; and
(B) an electric generating facility that serves an industrial load or PUN must operate in such a manner that the portion of nameplate capacity that will serve the maximum non-coincident peak demand of the industrial load or PUN is less than 50 percent of the facility's total nameplate capacity.
(c) Application. An eligible applicant may submit one or more applications for a grant under this section. Each application may contain multiple projects. An applicant must not submit an application containing a project with an objective, as described in subsection (b)(3) of this section, within 24 months of the date the applicant previously submitted an application requesting a grant for a project with that objective. Each application must be submitted electronically in a form and manner prescribed by the commission and contain the information required by this subsection.
(1) Applicant. An application must be submitted at the highest entity level (e.g., most senior parent or owner). Applications for projects with multiple owners must be submitted by the highest level of the entity with managing authority (e.g., owner with controlling interest, managing partner, or cooperative).
(A) Applicant information. Each application must include applicant information, including:
(i) the applicant's legal name;
(ii) the applicant's form of organization; and
(iii) the applicant's primary contact name and title, mailing address, business telephone number, business e-mail address, and web address.
(B) Applicant experience. Each application must include information on the applicant's history and experience, including:
(i) the applicant's history of transmission, distribution, and electric generation operations in this state and this country;
(ii) information describing the applicant's quality of services and management;
(iii) information describing the applicant's efficiency of operations;
(iv) evidence that the applicant is in good standing with financial institutions and is meeting all compliance requirements; and
(v) evidence of past grant management and administration.
(2) Project. An application must be organized by project and objective. Each application must include the following information for each project:
(A) Project information, including:
(i) proposed project name;
(ii) project objective, as specified in subsection (b)(3) of this section;
(iii) grant amount requested for the project;
(iv) description of the proposed project;
(v) demonstration of the project's eligibility under subsection (c) of this section;
(vi) a description of the operational attributes of the transmission or distribution infrastructure or electric generating facility for which the applicant is requesting a grant;
(vii) the name, location, owner, and applicable share of ownership of the transmission or distribution infrastructure or electric generating facilities included in the project; and
(viii) the priority of the project relative to any other projects also proposed under this section by the same applicant.
(B) Expected benefits of the proposed project receiving a grant under this section, including:
(i) a description of the expected benefits, including the location and magnitude of the expected benefits;
(ii) a description of the project's ability to address regional and reliability needs;
(iii) evidence of past performance of similarly sized and scoped projects, as applicable; and
(iv) an explanation for why this project should be funded by a grant under this section, as opposed to other available funding sources.
(C) Project implementation details, including:
(i) a proposed project schedule with anticipated dates for major project milestones;
(ii) evidence of the technical feasibility of the project, including staffing plans, material contracts, and required permits, as applicable;
(iii) evidence of how any assets purchased with a grant under this section will be maintained through the depreciable life of the asset; and
(iv) performance metrics and targets for the project.
(D) Budget information and a description of estimated project costs, including, as applicable:
(i) capital expenses, such as equipment, hardware, software, development, construction, and capital commitments required for the project to reach completion;
(ii) operating expenses in conjunction with the project and that result from the project, such as maintenance;
(iii) estimated timing requirements of the funds; and
(iv) the portions of the proposed budget funded by:
(I) this grant program, limited to capital expenses;
(II) applicant cost-share; and
(III) other sources, including federal grants.
(3) An applicant must provide a notarized affidavit, signed by an executive officer of the applicant, affirming that the information provided in the application is true, accurate, and complete.
(4) Information submitted to the commission in an application for a grant under this section is confidential and not subject to disclosure under Government Code chapter 522.
(5) An applicant must separately file a statement indicating that an application for a grant award has been presented to the commission for review with the date of the application submission, the eligible objective and project, and the total grant amount requested per objective.
(d) Application review. The commission will approve in full, approve in part, or deny each project in an application based on the screening and evaluation criteria outlined in this subsection. Evaluations and other recommendations provided by the TEF administrator are advisory only. All final decisions on whether to approve or deny each project will be made by the commission.
(1) Applications will be reviewed in the order in which the commission receives them.
(2) Applications and proposed projects will be screened for eligibility under subsection (b) of this section.
(3) Each eligible project will be evaluated to determine whether it is reasonable. The following factors may also be considered in the evaluation:
(A) the applicant's past performance, personnel, and resources to implement the project;
(B) the project's expected benefits;
(C) the project's ability to address regional and reliability needs;
(D) the applicant's stated priority level for the project under subsection (c)(2)(A)(viii) of this section;
(E) the project's attributes;
(F) the project's cost; and
(G) any other factors the commission deems appropriate.
(4) The TEF administrator may request that an applicant provide any additional information necessary to screen and evaluate any project in an application.
(e) Grant award amount.
(1) The amount of a grant award is based on program funding availability and application evaluation by the TEF administrator. Applications may be funded entirely, or the commission may fund a portion of the proposed application.
(2) Grants will be awarded only to fund eligible capital expenditures or vegetation management expenses incurred to implement projects in approved applications. Any expenses funded by a grant under this section must not be included in any rate base.
(3) A single applicant will not be awarded more than $200 million in grants under this section.
(4) In order to receive a grant payment under this section, applicants must enter into a grant agreement in the form and manner specified by the commission. The TEF administrator may separate or combine projects across applications into any number of grant agreements. Failure to enter into a grant agreement or an uncured breach of the executed grant agreement will be grounds for the TEF administrator to determine that an applicant is ineligible to obtain any future grant payments under this section. The TEF administrator may tailor any applicable reporting requirements, period of performance, milestones, performance metrics and targets, deliverables, and payment schedules for individual projects, all of which will be included in the grant agreement.
(f) Grant payment process.
(1) Payment terms for each project will be determined by the TEF administrator and specified in the corresponding grant agreement. A grantee must comply with reporting requirements outlined in the grant agreement to be eligible for grant fund disbursement.
(2) A grantee may receive grant funds in advance of incurring expenses, as specified in the grant agreement.
(3) The commission will withhold payments for expenses that are found ineligible.
(g) Period of performance.
(1) Each project's period of performance will be stated in the respective grant agreement based on the project schedule provided in the grantee's application. The grant agreement will specify project milestones.
(2) Activities related to eligible expenses of the project must commence within 12 months of execution of the grant agreement. All projects must complete work by December 31, 2030, or an earlier date if specified in the grant agreement.
(h) No contested case or appeal. Review of an application for a grant under this section is not a contested case. A commission decision on a grant award is not subject to a motion for rehearing or appeal under the commission's procedural rules.
(i) Project monitoring. Reporting and monitoring requirements for each grantee will be specified in the grant agreement. Asset performance and maintenance will be monitored for a period specified in the grant agreement for any asset funded by a grant under this section. The TEF administrator must track each grantee's project progress and provide the commission with regular updates.
(j) Expiration. This section expires May 1, 2045.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 26, 2024.
TRD-202404630
Andrea Gonzalez
Rules Coordinator
Public Utility Commission of Texas
Earliest possible date of adoption: November 10, 2024
For further information, please call: (512) 936-7244
CHAPTER 41. AUDITING
SUBCHAPTER B. RECORDKEEPING & REPORTS
The Texas Alcoholic Beverage Commission (TABC) proposes to amend 16 TAC §41.12, relating to Compliance Reporting by License and Permit Holders. The proposed amendments increase the amount of time licensees and permittees are allotted to complete and submit compliance reports and provide additional relief to businesses who fail to timely submit a report.
The current rule requires TABC-licensed businesses with a premises in Texas to complete a compliance self-assessment, known as a compliance report, each year. The report is due within 90 days from the date the agency notifies a licensee or permittee to complete the report. If a compliance report is not submitted within the 90-day period, TABC may issue a written warning for the failure and the business has 30 days to complete the report before TABC may initiate an administrative enforcement case. The proposed amendments to §41.12: (1) clarify that the rule applies to those permittees and licensees with a premises; (2) increase the time allotted to submit a compliance report from 90 days to 180 days; and (3) extend the time for initiating an administrative enforcement case by removing the 30-day grace period to complete an unsubmitted report and not initiating an administrative case until a subsequent report is due and not submitted for a second time.
TABC presented the proposed amendments at a stakeholder meeting on August 8, 2024, and received no comments.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Andrea Maceyra, Chief of Regulatory Affairs, has determined that during each year of the first five years the proposed amendments are in effect, there will be no fiscal impact on state or local governments because of enforcing or administering the amended rules. Mrs. Maceyra made this determination because the proposed amendments do not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed amendments. Mrs. Maceyra also does not anticipate any measurable effect on local employment or the local economy because of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed amendments are in effect, Mrs. Maceyra expects that the amended rules will have the public benefit of giving TABC-licensed businesses additional time to submit compliance reports. Mrs. Maceyra does not expect the proposed amendments will impose economic costs on persons required to comply with the amended rules.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TABC has determined that the proposed amendments will not have an adverse economic effect on small or micro businesses, or on rural communities. As a result, and in accordance with Government Code §2006.002(c), TABC is not required to prepare a regulatory flexibility analysis.
GOVERNMENT GROWTH IMPACT STATEMENT. TABC has determined that for each year of the first five years that the proposed amendments are in effect, they:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will not create a new regulation;
- will expand, limit, or repeal an existing regulation;
- will not increase or decrease the number of individuals subject to the rule's applicability; and
- will not positively or adversely affect the Texas economy.
TAKINGS IMPACT ASSESSMENT. TABC has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TABC will consider any written comments on the proposal that are received by TABC no later than 5:00 p.m., central time, November 10, 2024. Send your comments to rules@tabc.texas.gov or to the Office of the General Counsel, Texas Alcoholic Beverage Commission, P.O. Box 13127, Austin, Texas 78711-3127. TABC staff will hold a public hearing to receive oral comments on the proposed rule at 10:00 a.m. on October 24, 2024. Interested persons should visit the TABC's public website at www.tabc.texas.gov, or contact TABC Legal Assistant Kelly Johnson at (512) 206-3367, prior to the meeting date to receive further instructions.
STATUTORY AUTHORITY. TABC proposes the amendments pursuant to TABC's rulemaking authority under Texas Alcoholic Beverage Code §§5.31 and 5.361. Section 5.31 authorizes TABC to prescribe and publish rules necessary to carry out the provisions of the Alcoholic Beverage Code. Section 5.361(a-1) states that TABC "by rule shall develop a plan for inspecting permittees and licensees using a risk-based approach that prioritizes public safety," and further states that "the inspection plan may provide for a virtual inspection of the permittee or licensee that may include a review of the permittee's or licensee's records..."
CROSS-REFERENCE TO STATUTE. The proposed amendment implements Alcoholic Beverage Code §§5.31 and 5.361.
§41.12.Compliance Reporting by License and Permit Holders.
(a) (No change.)
(b) Each permittee and licensee with a premises in Texas must prepare and file an automated compliance report with the commission as instructed by the commission. The commission may require that the report be filed using a specified digital application.
(c) The commission will annually notify each permittee
and licensee of the requirement to file its compliance report. The
license or permit holder will have 180 [90]
days from the date of the notification to file the report.
(d) The commission may issue a written warning to a
permittee or licensee who fails to file the mandated compliance report
within 180 [90] days of being notified by the
commission. The commission may initiate an administrative case to
cancel or suspend the license or permit of any permittee or licensee
who does not file a [the] compliance report for
the subsequent reporting period [within 30 days]
following issuance of the written warning.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 27, 2024.
TRD-202404656
Matthew Cherry
Senior Counsel
Texas Alcoholic Beverage Commission
Earliest possible date of adoption: November 10, 2024
For further information, please call: (512) 206-3491
The Texas Alcoholic Beverage Commission (TABC) proposes new Subchapter G, relating to Operating Agreements Between Permit and License Holders, and new rule 16 TAC §41.65, relating to Contract Distilling Arrangements and Distillery Alternating Proprietorships. The proposed rule is necessary to implement legislation. Senate Bill 60 (88th Regular Session) authorized holders of a distiller's and rectifier's permit and a nonresident seller's permit to enter into operating agreements for activities related to the production of distilled spirits. The bill required TABC to adopt implementing rules. The proposed rule implements SB 60 by providing a framework for permittees who engage in contract distilling arrangements and distillery alternating proprietorships as authorized in Alcoholic Beverage Code §§14.10 and 37.011.
Proposed §41.65(a) provides a citation to the provisions in the Alcoholic Beverage Code that this rule implements. Proposed §41.65(b) defines the two types of operating agreements for the production of distilled spirits that are authorized by Alcoholic Beverage Code §§14.10 and 37.011, while proposed §41.65(c) provides a definition for the term "affiliate" as used in §§14.10(a)(6) and 37.011(a). Although the term "affiliate" appears elsewhere in the Alcoholic Beverage Code, the proposed definition applies solely to the use of the word in the context of contract distilling arrangements and distillery alternating proprietorships.
Proposed §41.65(d) sets forth and clarifies who must be a party to arrangements under Alcoholic Beverage Code §37.011(a), which governs arrangements between certain Nonresident Seller's Permit holders and Distiller's and Rectifier's Permit holders. To be a valid arrangement under this proposed provision, the nonresident seller must either own an out-of-state distillery or have an affiliate that itself owns an out-of-state distillery and has a Distiller's and Rectifier's Permit.
Proposed §41.65(e) implements Alcoholic Beverage Code §§14.10(d) and 37.011(c) by clarifying that the distiller who provides services on behalf of another distiller may neither consider the product to be owned by the distiller providing the services nor sell the product at their premises.
Proposed §41.65(f) clarifies that product manufactured by another distiller under a contract distilling arrangement may not be brought back to the product owner's premises and sold directly to consumers in conformity with the requirements under Alcoholic Beverage Code §14.05. For additional clarity, this provision's reference to manufacturing refers to the actual distillation and rectification of distilled spirits and does not include the ancillary processes necessary to create a marketable product such as bottling, packaging, and labeling distilled spirits.
Proposed §41.65(g) clarifies that when a distiller or nonresident seller who engages in the activities authorized in Alcoholic Beverage Code §§14.10(a) or 37.011(a), including manufacturing, bottling, or labeling product, on another distiller's ("host distiller") premises pursuant to a distillery alternating proprietorship, the product may not be sold to ultimate consumers on the host distiller's premises under §14.05.
Proposed §41.65(h) is the inverse of subsection (f) for purposes of selling distilled spirits to a consumer under Alcoholic Beverage Code §14.05. Under subsection (h), a distiller who manufactures (i.e. distills or rectifies) its own distilled spirits and has the product bottled, packaged, and/or labeled by someone else under a contract distilling arrangement may sell the product to consumers at the distiller's premises in accordance with §14.05.
Proposed §41.65(i) requires a written agreement to be submitted to TABC before permittees may engage in a contract distilling arrangement or alternating distillery proprietorship. Additionally, the subsection outlines certain provisions that must appear in the agreement so the agency may ensure that there is a strict separation between the businesses and operations of the involved permit holders as required by Alcoholic Beverage Code §§14.10(e) and 37.011(d).
Proposed §41.65(j) requires nonresident sellers who engage in authorized activities under the proposed rule through an affiliate to submit an affidavit that describes the affiliate's qualifications under §41.65(c) of the proposed rule. This will provide the agency the ability to ensure that the nonresident seller meets the qualifications in Alcoholic Beverage Code §37.011(a).
Lastly, proposed §41.65(k) authorizes transportation of distilled spirits between premises under a contract distilling arrangement or alternating distillery proprietorship before the product has been registered with TABC. Currently, 16 TAC §45.26 prohibits removing distilled spirits from a permitted premises unless the product has first been registered with TABC. This exception to the registration requirement is necessary in these arrangements to allow the product to be submitted to the Alcohol and Tobacco Tax and Trade Bureau for a Certificate of Label Approval, which is a prerequisite for registration with TABC under Alcoholic Beverage Code §101.671.
TABC presented the proposed rule at a stakeholder meeting on August 8, 2024, and considered comments received from stakeholders in drafting the proposed rule.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Andrea Maceyra, Chief of Regulatory Affairs, has determined that during each year of the first five years the proposed rule is in effect, there will be no fiscal impact on state or local governments because of enforcing or administering the proposed rule. Mrs. Maceyra made this determination because the proposed rule does not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed rule. Mrs. Maceyra also does not anticipate any measurable effect on local employment or the local economy because of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed rule is in effect, Mrs. Maceyra expects that the new rule will have the public benefit of clarifying how industry members may engage in the authorizations under Alcoholic Beverage Code §§14.10 and 37.011. Mrs. Maceyra does not expect that the proposed rule will impose economic costs on persons required to comply with the rule, other than the minimal cost of submitting agreements and affidavits to TABC under proposed §41.65(i)-(j). But the agreements and affidavits are necessary to ensure the administrative accountability of the parties and a strict separation between the businesses and operations of those parties, as required by Alcoholic Beverage Code §§14.10(e) and 37.011(d).
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TABC has determined that the proposed rule will not have an adverse economic effect on small or micro businesses, or on rural communities. As a result, and in accordance with Government Code §2006.002(c), TABC is not required to prepare a regulatory flexibility analysis.
GOVERNMENT GROWTH IMPACT STATEMENT. TABC has determined that for each year of the first five years that the proposed rule is in effect, it:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will create a new regulation;
- will not expand, limit, or repeal an existing regulation;
- will not increase or decrease the number of individuals subject to the rule's applicability; and
- will not positively or adversely affect the Texas economy.
TAKINGS IMPACT ASSESSMENT. TABC has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TABC will consider any written comments on the proposal that are received by TABC no later than 5:00 p.m., central time, November 10, 2024. Send your comments to rules@tabc.texas.gov or to the Office of the General Counsel, Texas Alcoholic Beverage Commission, P.O. Box 13127, Austin, Texas 78711-3127. TABC staff will hold a public hearing to receive oral comments on the proposed rule at 10:00 a.m. on October 24, 2024. Interested persons should visit the TABC's public website at www.tabc.texas.gov, or contact TABC Legal Assistant Kelly Johnson at (512) 206-3367, prior to the meeting date to receive further instructions.
STATUTORY AUTHORITY. TABC proposes this rule pursuant to TABC's rulemaking authority under Texas Alcoholic Beverage Code §§5.31, 14.10, and 37.011. Section 5.31 authorizes TABC to prescribe and publish rules necessary to carry out the provisions of the Alcoholic Beverage Code. Sections 14.10 and 37.011 both direct the agency to "adopt rules regulating the shared use of the permitted premises under this section to ensure administrative accountability of each permit holder and a strict separation between the businesses and operations of the permit holders."
CROSS-REFERENCE TO STATUTE. The proposed rule implements Alcoholic Beverage Code §§14.05, 14.10, 37.011, and 101.671.
§41.65.Contract Distilling Arrangements and Distillery Alternating Proprietorships.
(a) This section implements Alcoholic Beverage Code §§14.10 and 37.011.
(b) Alcoholic Beverage Code §§14.10 and 37.011 authorize contract distilling arrangements and distillery alternating proprietorships.
(1) "Contract distilling arrangement" means an arrangement in which two distilleries contract for one distillery to engage in the activities authorized in Alcoholic Beverage Code §§14.10(a) or 37.011(a) on behalf of the other distillery.
(2) "Distillery alternating proprietorship" means an arrangement in which two or more parties take turns using the physical premises of a distillery as permitted under the Alcoholic Beverage Code.
(c) As used in this section and Alcoholic Beverage Code §§14.10 and 37.011, "affiliate" means a person who controls, is controlled by, or is under common control with the holder of a Nonresident Seller's Permit, including a subsidiary, parent, or sibling entity of the nonresident seller.
(d) The parties to an agreement under Alcoholic Beverage Code §37.011 shall consist of the holder of a Distiller's and Rectifier's Permit and the holder of a Nonresident Seller's Permit. The nonresident seller must either:
(1) own a distillery outside Texas; or
(2) have an affiliate who owns a distillery outside Texas who also holds a Distiller's and Rectifier's Permit.
(e) Pursuant to Alcoholic Beverage Code §§14.10(d) and 37.011(c), a distiller ("Distiller A") who manufactures, bottles, packages, or labels distilled spirits on behalf of another distiller ("Distiller B") or nonresident seller under a contract distilling arrangement may not consider the distilled spirits as being owned by Distiller A or sell those products on Distiller A's premises.
(f) A distiller who has its product manufactured at a separate location under a contract distilling arrangement may not sell the product to ultimate consumers under Alcoholic Beverage Code §14.05.
(g) A distiller ("tenant distiller") or nonresident seller who engages in the activities authorized in Alcoholic Beverage Code §§14.10(a) or 37.011(a) on another distiller's ("host distiller") premises pursuant to a distillery alternating proprietorship may not sell the product to ultimate consumers on the host distiller's premises.
(h) A distiller who manufactures its own product, regardless of whether the product is bottled, packaged, or labeled at a separate location under a contract distilling arrangement, may sell the product for consumption on or off the premises at which the manufacturing occurs in accordance with Alcoholic Beverage Code §14.05.
(i) Prior to engaging in the privileges authorized in this section and Alcoholic Beverage Code §§14.10 and 37.011, an agreement signed by each party to a contract distilling arrangement or distillery alternating proprietorship must be submitted to TABC by the permit holder who owns the ultimate product. The agreement must contain provisions specifying the nature, duration, and extent of the activities authorized under the agreement and provisions delineating a separation between each permit holder's business and operations. The agency's acceptance of the agreement does not constitute approval of the entirety of the agreement's terms and is merely an acknowledgement that an agreement containing the required provisions has been submitted.
(j) A nonresident seller who enters into a contract distilling arrangement or alternating distillery proprietorship through an affiliate must submit to TABC an affidavit describing the affiliate's qualifications under subsection (c) of this section.
(k) Notwithstanding §45.26, distilled spirits manufactured, bottled, packaged, or labeled pursuant to a contract distilling arrangement or distillery alternating proprietorship may be removed from, and transported between, distillery premises as necessary to accomplish the agreement's terms.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 27, 2024.
TRD-202404657
Matthew Cherry
Senior Counsel
Texas Alcoholic Beverage Commission
Earliest possible date of adoption: November 10, 2024
For further information, please call: (512) 206-3491
The Texas Alcoholic Beverage Commission (TABC) proposes to amend 16 TAC §45.2, relating to Definitions. TABC also proposes new rules 16 TAC §45.28, relating to Standards of Fill for Distilled Spirits, and 16 TAC §45.29, relating to Standards of Fill for Wine.
The proposed amendment to §45.2 updates the definition of distilled spirits to match the definition found in Alcoholic Beverage Code §1.04(3). The proposed new §45.28 and §45.29 adopts the container sizes and standards of fill for distilled spirits and wine authorized in the Alcoholic Beverage Code and established by the Alcohol and Tobacco Tax and Trade Bureau (TTB). These changes will ensure that the definition of distilled spirits in the agency's rules align with the definition in the Alcoholic Beverage Code, and that all container sizes eligible for a Certificate of Label Approval issued by the TTB, that are not otherwise prohibited in the Alcoholic Beverage Code, may legally be sold in Texas.
TABC presented the proposed amendments at a stakeholder meeting on August 8, 2024, and received no comments.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Andrea Maceyra, Chief of Regulatory Affairs, has determined that during each year of the first five years the proposed amendment and new rules are in effect, there will be no fiscal impact on state or local governments because of enforcing or administering the amended rules. Mrs. Maceyra made this determination because the proposed amendment and new rules do not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the amended rules. Mrs. Maceyra also does not anticipate any measurable effect on local employment or the local economy because of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed amendment and new rules are in effect, Mrs. Maceyra expects that enforcing or administering the amended rules will have the public benefit of ensuring current rules align with existing legislation, and by establishing standards of fill for containers of distilled spirits and wine that are consistent with existing federal rules. Mrs. Maceyra does not expect the proposed amendment and new rules will impose economic costs on persons required to comply with the amended rules.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TABC has determined that the proposed amendment and new rules will not have an adverse economic effect on small or micro businesses, or on rural communities. As a result, and in accordance with Government Code §2006.002(c), TABC is not required to prepare a regulatory flexibility analysis.
GOVERNMENT GROWTH IMPACT STATEMENT. TABC has determined that for each year of the first five years that the proposed amendment and new rules are in effect, they:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will create a new regulation;
- will expand, limit, or repeal an existing regulation;
- will not increase or decrease the number of individuals subject to the rule's applicability; and
- will not positively or adversely affect the Texas economy.
TAKINGS IMPACT ASSESSMENT. TABC has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TABC will consider any written comments on the proposal that are received by TABC no later than 5:00 p.m., central time, November 10, 2024. Send your comments to rules@tabc.texas.gov or to the Office of the General Counsel, Texas Alcoholic Beverage Commission, P.O. Box 13127, Austin, Texas 78711-3127. TABC staff will hold a public hearing to receive oral comments on the proposed rule at 10:00 a.m. on October 24, 2024. Interested persons should visit the TABC's public website at www.tabc.texas.gov or contact TABC Legal Assistant Kelly Johnson at (512) 206-3367, prior to the meeting date to receive further instructions.
SUBCHAPTER A. GENERAL PROVISIONS
STATUTORY AUTHORITY. TABC proposes the amendments pursuant to TABC's rulemaking authority under Texas Alcoholic Beverage Code §§5.31 and 5.39. Section 5.31 authorizes TABC to prescribe and publish rules necessary to carry out the provisions of the Alcoholic Beverage Code. Section 5.39 directs TABC to "adopt rules to standardize the size of containers in which liquor may be sold in the state."
CROSS-REFERENCE TO STATUTE. The proposed amendments implement Alcoholic Beverage Code §§5.39 and 101.671.
§45.2.Definitions.
When used in this chapter, the terms listed below shall have the following meanings:
(1) - (10) (No change.)
(11) Distilled Spirits--Alcohol, spirits of wine,
whiskey, rum, brandy, gin, or any liquor produced in whole or in part
by the process of distillation, including all dilutions or mixtures
of them, and includes spirit coolers that may have an alcoholic content
as low as four percent alcohol by volume and that contain plain, sparkling,
or carbonated water and may also contain one or more natural or artificial
blending or flavoring ingredients. [Alcohol, ethyl alcohol,
hydrated oxide of ethyl, spirits of wine, whiskey, rum, brandy, gin,
other distilled spirits, and any liquor produced in whole or in part
by the process of distillation, including all mixtures and dilutions thereof.]
(12) - (17) (No change.)
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 27, 2024.
TRD-202404658
Matthew Cherry
Senior Counsel
Texas Alcoholic Beverage Commission
Earliest possible date of adoption: November 10, 2024
For further information, please call: (512) 206-3491
STATUTORY AUTHORITY. TABC proposes the new rules pursuant to TABC's rulemaking authority under Texas Alcoholic Beverage Code §§5.31 and 5.39. Section 5.31 authorizes TABC to prescribe and publish rules necessary to carry out the provisions of the Alcoholic Beverage Code. Section 5.39 directs TABC to "adopt rules to standardize the size of containers in which liquor may be sold in the state."
§45.28.Standards of Fill for Distilled Spirits.
(a) Authorized standards of fill. The standards of fill for distilled spirits, whether domestically manufactured, domestically bottled, or imported, are subject to the container sizes and standards of fill authorized by the Alcoholic Beverage Code and the United States Department of the Treasury in 27 CFR Part 5, Subpart K.
(b) No container size or standard of fill prohibited by the Alcoholic Beverage Code shall be construed to be permitted by this section.
§45.29.Standards of Fill for Wine.
(a) Authorized standards of fill. The standards of fill for wine, whether domestically manufactured, domestically bottled, or imported, are subject to the container sizes and standards of fill authorized by the Alcoholic Beverage Code and the United States Department of the Treasury in 27 CFR Part 4, Subpart H.
(b) Wines less than 7 percent alcohol by volume are subject to 27 CFR Parts 16 and 24.
(c) No container size or standard of fill prohibited by the Alcoholic Beverage Code shall be construed to be permitted by this section.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 27, 2024.
TRD-202404659
Matthew Cherry
Senior Counsel
Texas Alcoholic Beverage Commission
Earliest possible date of adoption: November 10, 2024
For further information, please call: (512) 206-3491