In Texas, thousands in fines paid by oil and gas polluters benefit the fossil fuel industry

The state allows a portion of fines to be directed to projects that remediate environmental harm. Some of those projects benefit the companies that are being penalized.

In Texas, thousands in fines paid by oil and gas polluters benefit the fossil fuel industry
Refinery complexes line the Houston Ship Channel. (Michael Stravato / The Texas Tribune)

Published in the Texas Tribune

After a Taiwanese plastics and petrochemical company leaked harmful gasses from its chemical plant in the Gulf Coast town of Point Comfort in 2021, Texas’ environmental agency fined it nearly $267,000. Instead of paying the entire fine to the state, Formosa — which uses fossil fuels to create plastics — sent half the money to the Texas Natural Gas Foundation, a nonprofit entity that promotes natural gas to the public.

Texas state law allows polluters to divert some of their fines that normally go to the state’s general revenue fund to “supplemental environmental projects,” or SEPs. The Texas Natural Gas Foundation has qualified as an SEP since 2016.

In theory, SEPs are meant to remediate industrial pollution and environmental harm by funding programs like cleanups at illegal dump sites, habitat restoration or household hazardous waste pickups in communities.

Public documents obtained by Floodlight show that SEPs like the one with the Texas Natural Gas Foundation can directly benefit the companies that are being penalized — by paying to staff and run industry programs.

According to the Texas Commission on Environmental Quality’s description of the Texas Natural Gas Foundation’s SEP, the nonprofit aims to raise $8 million to replace state government-owned diesel trucks and buses with new gas vehicles that the foundation argues are cleaner. Several school districts receive SEP funding for similar bus replacement projects.

But by allowing entities like the Texas Natural Gas Foundation to receive state funds, Texas is allowing the fossil fuel industry to reshuffle money back to itself, public documents show.

“You get back to this policy question (of) is (TCEQ) putting SEP dollars into the hands of a marketing organization that is using those dollars to create further demand for natural gas?” asked James Bradbury, an environmental lawyer and professor at Texas A&M University School of Law.

The foundation’s work has included developing curriculum for schoolchildren that energy experts have deemed “incomplete or misleading information about energy that appear out of the fossil fuel industry’s playbook,” according to a 2018 investigation from the Austin American-Statesman.

Last year, it also supported and lobbied for revised state public school standards that would “emphasize the critical role of energy in modern life” with a focus on how fossil fuel energy produced in Texas is “eradicating global energy poverty.”

To date, TCEQ records show that the Texas Natural Gas Foundation has received $217,000 from deferred fines exclusively from fossil fuel companies, including from oil and gas companies like Motiva Enterprises, which operates one of the largest refineries in the state, in Port Arthur.

In an emailed statement, a representative from Formosa Plastics did not address questions about the foundation’s industry ties but said that, with the approval of TCEQ, the company supported the foundation’s goal to reduce vehicle emissions.

The diversion of fines also raises questions about the close relationship between the polluters and the agency responsible for regulating and reprimanding them. The Texas Natural Gas Foundation was co-founded by a former Texas state representative, Republican Jason Isaac. Its executive director, Heather Ball, formerly worked at the Texas Railroad Commission, which regulates the oil and gas industry in the state. Ball did not respond to multiple requests for comment.

Another nonprofit with oil and gas industry ties that qualifies as an SEP under Texas law is the Houston Regional Monitoring Corp., which has received more than $950,000 in deferred SEPs from the state since 2016 to subsidize existing air monitors that it maintains. The corporation is a nonprofit but was first formed as a private entity about 40 years ago by refineries and plants operating along the Houston Ship Channel, according to the corporation’s lawyer, Christopher Amandes.

The Houston Regional Monitoring Corp. provides air quality data that facilities need to prove that their proposed expansions or changes that might increase pollution will not put the region in violation of federal air quality standards. It has for decades allowed dozens of facilities to use its data to expedite that step in the process.

In a statement, TCEQ said that both the Houston Regional Monitoring Corp. and Texas Natural Gas Foundation were approved to receive SEPs because their projects “provide direct, significant, immediate, and enduring enhancements to the quality of the environment, or prevent or reduce further environmental degradation.”

Since 2016, Houston Regional Monitoring Corp. has received $171,292 from Chevron Phillips Chemical Co.; $60,845 from Exxon; and $137,870 from TPC Group, which operates a chemical plant that infamously exploded in 2019.

Yet some of Houston’s biggest fossil fuel and chemical companies with facilities around the Houston port — Arkema, BASF, Chevron Phillips, Shell, TPC Group and Dow Chemical, among others — also pay the Houston Regional Monitoring Corp. annual membership fees.

The SEP funds go toward subsidizing five of the Houston Regional Monitoring Corp.’s 10 air monitors. Yet the corporation is required to share only certain data, such as volatile organic compound concentrations, from those five monitors, according to its agreement with TCEQ. A large amount of the data collected is not released to the public, Amandes said.

According to Texas’ environmental agency guidelines, SEPs cannot be used to bring violators into compliance. For example, when Chevron Phillips Chemical received its $26,000 fine in 2021 from TCEQ, the $10,000 it deferred couldn’t be given to a program that would repair Chevron’s faulty equipment or install better leak detection. The aim is to require polluters to pay for their own repairs and upgrades. Chevron Phillips did not respond to a request for comment.

But as the SEP agreement is set up, Chevron Phillips has been able to defer $171,292 in fines to the Houston Regional Monitoring Corp. for 13 violations since 2018 — essentially benefiting by redirecting fines to a nonprofit that provides the industry a service.

Amandes, the monitoring corporation’s lawyer, acknowledged that companies “get some marginal benefit from the fact that the SEP money supplements regular membership fees, so they are in effect subsidized.” But he argued that the arrangement is not a conflict of interest that requires scrutiny from TCEQ or other state regulators.

In 2003, the Texas state auditor concluded the program wasn’t achieving its main goals and TCEQ wasn’t appropriately monitoring the funds it granted. Yet there was no formal follow-up to recommendations.

Environmental advocates say that nonprofits like the Houston Regional Monitoring Corp. and Texas Natural Gas Foundation haven’t demonstrated that their programs are the best use of state funds, particularly for a program that is supposed to have a measurable public impact.

“There’s a real concern that TCEQ is effectively subsidizing a private corporation that is not publicly accountable in terms of the data they are collecting,” said Corey Williams, a director at Air Alliance Houston, about the Houston Regional Monitoring Corp. “A more equitable distribution of those fines would help draw a more direct line from the pollution to the public health impacts associated with it.”

Williams said the SEP system isn’t designed to support smaller, community-led nonprofits to set up programs that companies can pay into. The nearly $1 million that the Houston Regional Monitoring Corp. has pulled in since 2016, for example, could easily have established two air monitors within communities adjacent to industrial sites, Williams said.

Juan Flores, program manager for Air Alliance Houston — which helps find community participants to host neighborhood air monitors across Texas — said the monitors offered by the state are sparse and that the Houston Regional Monitoring Corp. hasn’t made an effort to engage with community members about its data.

In a statement, a spokesperson for the Houston Regional Monitoring Corp, said it makes its monitoring data available on several websites, including TCEQ’s and its own, and said it offers presentations to groups that ask for it.

“We’ve been dealing with these companies for decades, like Exxon,” said Flores. “I know these companies monitor themselves. But come on. I don’t mean to sound so negative, but we don’t have a lot of good things to say about their past.”

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