Some of the most significant environmental policy developments of 2013:

Elimination of the dedicated funding source for parks/conservation programs and repeal of the conservation tax credit.  The budget adopted by the General Assembly for the 2013-2015 biennium  changed the structure of conservation funding by repealing a law that dedicated revenue from the state’s real estate transfer tax (popularly known as the deed stamp tax) to the Parks and Recreation Trust Fund (75%) and the Natural Heritage Trust Fund (25%).  The change was part of a  larger legislative trend toward recapturing  earmarked revenues for the state’s general fund, replacing dedicated funding sources with year to year appropriations.  The 2013 tax reform legislation eliminated  the state tax credit for donation of conservation lands.

“Regulatory reform” legislation  focused on state and local environmental standards. The Regulatory Reform Act of 2013 (Session Law 2013-413 ) created a new requirement for review and re-adoption of  existing state rules every ten years.    Although the  legislation applies to all state programs, the General Assembly singled out  water quality standards and wetland rules for the first round of review in 2014.  You can find more on the Regulatory Reform Act of 2013 in an earlier post. The Regulatory Reform Act also puts a one-year moratorium on  adoption of  new local government ordinances that regulate something already  addressed  by  state or federal environmental  rules. The only exception would be for ordinances unanimously adopted by the local governing body — a  phenomenon only slightly  more common than unicorn sightings. A more detailed discussion of the limit on local environmental ordinances can be found here.

Reorganization and down-sizing of the state’s water quality and water resource programs. The 2013-15 budget directed the Department of Environment and Natural Resources to combine the Division of Water Quality and Division of Water Resources and reduces the budget for the reorganized  programs by $2 million (12.4%) in the second year of the biennium. The budget also makes an additional  cut of over $700,000 to water resource programs.  By  August  1, 2013, DENR had moved all stormwater  programs to the Division of Energy, Mineral and Land Resources (separating those programs  from  other water quality programs) and reorganized the remaining water quality/water resource programs into a larger Division of Water Resources.  More on  the reorganization here.

How the reorganization and position cuts  will affect DENR’s ability to deliver effective  water quality  and water supply programs remains  a question. Early on, Division of Water Resources director Tom Reeder signaled an intent to make cuts significantly beyond those required by the General Assembly — as much as $4 million versus the $2.7 million in reductions included  in the 2013-2015 state budget — and to move quickly to eliminate “unnecessary” staff positions.  Actual implementation of the cuts seems to have slowed, however, and DENR has not provided an overview of  planned reductions in water programs and staff.

Reduced state funding for water and sewer infrastructure.  Funding for water and sewer systems isn’t often thought of as environmental protection, but  compliance with  federal environmental laws requires adequate wastewater and drinking water infrastructure.  Congress created two state revolving loan programs to help finance infrastructure needed to comply with Clean Water Act and Safe Drinking Water Act requirements.  DENR manages North Carolina’s revolving loan funds.  Before July 1, 2013, local governments could also apply for  water and wastewater infrastructure  grants from the federally funded Community Development Block Grant Program  in the N.C. Department of Commerce; the Clean Water Management Trust Fund  (for wastewater projects only); and the N.C. Rural Economic Development Center.

The 2013-2015 state budget  reorganized infrastructure funding programs,  moving  the Commerce  CDBG program and the  drinking water and wastewater revolving loan  funds into  a new DENR Division of Water Infrastructure.  The General Assembly also added  a small infrastructure grant program to be  managed by  the new DENR division. The  budget eliminated state funding for the N.C. Rural Economic Development Center (which operates as an independent nonprofit agency) and created a Division of Rural Economic Development in the N.C. Department of Commerce. The N.C. Rural Economic Development Center had previously been the largest source of state grant funds for water and sewer projects.

The changes could have a significant impact on rural areas and small towns that have limited ability to take on new debt and  need infrastructure grants.  The General Assembly  appropriated  $10.8 million to the new  Dept. of Commerce program for rural economic development loans and grants,   but water and sewer projects will  have to compete with other  economic development projects for those funds.  Wastewater projects  eligible for funding by the Clean Water Management Trust Fund will  have to compete with conservation projects for the  $9.2 million appropriated to CWMTF. Only the $3.5 million appropriated for the  new DENR infrastructure grant program has been specifically earmarked for water and wastewater  grants. By comparison, in 2008 the N.C. Rural Center and Clean Water Management Trust Fund combined to award $160 million in water and sewer grants to local governments. You can find more detail and a chart showing 2013-14 and 2014-15 appropriations for state infrastructure programs here.

Limits on DENR  authority  to prevent migration of groundwater contamination.     The Regulatory Reform Act of 2013 (Session Law 2013-413)  limits DENR’s authority to require  “cleanup, recovery, containment, or other response” to groundwater contamination inside the compliance boundary at a permitted waste disposal site.  (When the state issues a  permit for  a waste disposal site, the permit sets a groundwater compliance boundary around the facility. Inside the compliance boundary, the permit allows some  groundwater contamination associated with the waste disposal; beyond the compliance boundary, state groundwater standards must be met.)  The new law will only allow  DENR  to require  the permit holder to take action inside the compliance boundary by showing that the groundwater contamination has already caused –- or will cause — a specific water quality violation or an imminent threat to health, safety or the environment. The new law does not appear to allow DENR to require the permit holder to take steps to contain groundwater contamination  based solely on movement of contaminated groundwater beyond the compliance boundary.

Legislative intervention in  plans to restore  Jordan Lake  water quality.  The federal Clean Water Act requires the state to develop a Total Maximum Daily Load (TMDL) for any water body with impaired water quality; the TMDL puts a cap on  the pollutant causing the problem.  About five years ago, the state’s Environmental Management Commission  adopted rules designed to meet a nutrient TMDL for  Jordan Lake. The rules allocate  nitrogen and phosphorus  reductions among  the major sources of nutrient loading to  the lake — wastewater dischargers, agricultural operations, and stormwater runoff from new and existing development.  In earlier General Assembly sessions, legislation modified some requirements of the rules and extended  the compliance deadlines. In 2013,  legislation delayed  further implementation of the rules for three years to test a technology using  aeration to reduce algal growth caused by excess nutrients.  The budget provision funding the technology pilot project became  controversial for several reasons: 1.  the provision includes technology specifications that effectively require  DENR to use  the  product of a particular company;  2. some scientists familiar with the technology  questioned whether it could be effective in a water body as large as  Jordan Lake;  and 3.  EPA does not believe the Clean Water Act allows  use of in-lake treatment  as a substitute for reducing the amount of pollution reaching the lake.  See an earlier post for more on the Jordan Lake controversy and EPA’s response to the legislation.

What to look for in 2014:

Proposed  changes to water quality standards.  The review and re-adoption of water quality standards and wetland rules required under   Session Law 2013-413   has overtaken  DENR’s  planned  internal review of water programs.   As the state’s Rules Review Commission (RRC) began laying out the process for review and re-adoption of rules under S.L. 2013-413,  DENR put the internal review on hold.  Now, the S.L. 2013-413 review of water quality standards and wetland rules will be the vehicle for identifying water quality rules for change or repeal.

Because of the interrelationship of  many water quality rules, the review  of water quality standards and wetland rules required under S.L. 2013-413 will actually pull in nearly 400 water quality rules covering everything from groundwater  remediation to operation of animal waste management systems.  It seems clear, however, that both DENR and the General Assembly  have already set some priorities for review.  Reeder had earlier identified  stream buffer requirements, water quality standards for isolated wetlands and water quality classifications for shellfish waters as high priorities for DENR’s  internal review of water quality rules.   Two legislative study committees and a working group of the joint House-Senate Environmental Review Commission  have also been authorized to  look at issues related to  stream and wetland rules in the interim before the next legislative session.  Stream buffers, shellfish water classifications and wetland rules  have one thing in common — all put  design and construction constraints on development projects.

Elimination of additional  water quality and water resource  staff.  Of the cuts to water programs included in the state budget,  $2 million in reductions  must be achieved  in the second year of the biennium (2014-15)  as a result of the water resource and water quality program reorganization. As noted above, DENR has not yet provided any blueprint for reaching the targeted reductions.  Presumably, the cuts will need to be identified by the start of the 2014-2015 fiscal year on July 1, 2014.

Completion of hydraulic fracturing rules ? The Mining and Energy Commission (MEC) faces an October 1, 2014  deadline to adopt rules for hydraulic fracturing. You can find the status of the rules under development here.  The MEC plans to send all of the  rules out to public notice as a package. Final adoption can only take place after consideration of public comments. The timing may be tight –it will certainly be a busy nine months.

Legislative study  of  local government authority to adopt environmental ordinances.  The Regulatory Reform Act  provision that put a one-year moratorium on new local government environmental ordinances also directed the  Environmental Review Commission  to study and make recommendations to the 2014 session of the General Assembly on the appropriate scope of local government authority to adopt environmental ordinances. The ERC will have an initial public discussion of the issue on January 15.