EPA gives final "no" to Texas refinery permits

HOUSTON (Reuters) - The U.S. Environmental Protection Agency has told Texas pollution regulators that flexible air-quality permits issued by the state since 1994 for refineries, chemical plants and power plants did not meet the standards set by the U.S. Clean Air Act.

The plants have continued operating under the permits as EPA and the Texas Commission on Environmental Quality work to resolve the dispute which began in September.

"EPA is disapproving the permit program after determining that it allows companies to avoid certain federal clean air requirements by lumping emissions from multiple units under a single 'cap' rather than setting specific emission limits for individual pollution sources at their plants," the federal agency said in a statement on Wednesday.

The 27 refineries in Texas will continue to operate as the EPA weighs changes the Texas commission has proposed to flexible permit rules. The EPA said on Wednesday it also was developing a program to convert the flexible permits into more detailed permits.

The TCEQ is the Texas agency charged with implementing the federal Clean Air Act under EPA supervision. The commission has long been criticized as being lax in regulating the state's petrochemical infrastructure.

TCEQ Chairman Bryan Shaw said the flexible permits complied with the Clean Air Act.

"The Flexible Permitting Program has contributed to improved air quality in Texas, and if the state is prevented from using the program, air quality could actually suffer," Shaw said in a statement.

Environmentalists praised the EPA's decision.

"The Clean Air Act is the same law that polluters in all other 49 states have to follow, and it's time that polluters in Texas follow it, too," said Luke Metzger of Environment Texas.

Leading U.S. independent refiner Valero Energy Corp faulted the decision. San Antonio-based Valero has six Texas refineries, the most owned by a single company. The plants employ 2,700 people.

"When the flex permit program was rolled out in 1994, EPA and environmental groups applauded it, and EPA approval seemed implicit," said Valero spokesman Bill Day in a statement. "Now, 16 years later, EPA is reversing course, and our facilities are caught in the middle, creating significant uncertainty at a time when our economy can least afford it."

Texas refineries have a combined crude oil throughput of 4.75 million barrels, equal to 26.8 percent of national refining capacity.

(Reporting by Erwin Seba; editing by Carol Bishopric)

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