Groundwater Standards for PFAS — Public Health and Regulatory Relief

July 11, 2024. Yesterday, the Environmental Management Commission’s Groundwater and Waste Management Committee voted to recommend against moving forward with groundwater standards for five of eight per and poly-fluorinated substances (PFAS)  included in a Department of Environmental Quality (DEQ) rulemaking proposal. It  may be an unprecedented decision to reject health-based standards that would also provide regulatory relief to business and protect property values.

DEQ has proposed two sets of PFAS rules for EMC adoption.  One rule package proposes groundwater standards for eight  per and poly-fluorinated substances (PFAS)  prevalent in the state — PFOS, PFOA, GenX, PFBS, PFNA, PFHxS, PFBA, and PFHxA. The second rule package proposes parallel surface water standards for the same substances.  Both sets of rules establish health-based standards for ingestion of the substances in drinking water. The surface water standards also take fish consumption into consideration since PFAS can bioaccumulate in fish tissue. Scientific research has documented that these substances are toxic; accumulate in the human body;  and persist in the environment for long periods of time. Some have been identified as a likely cancer risk in humans.

Surface water standards would largely be enforced through discharge limits on industrial and municipal wastewater systems identified as potentially significant PFAS sources. The groundwater standards would be used as to set remediation goals for cleanup of PFAS contamination in groundwater; limit permitted releases of PFAS to groundwater;  and as the health threshold for providing alternative water supplies to the owners of contaminated wells.

The two sets of rules have moved slowly through the EMC committee process. Yesterday, the EMC’s Groundwater and Waste Management Committee debated whether to recommend that the full EMC send the entire groundwater rule package of eight PFAS standards out to public notice as the next step in rule-making. The committee declined to do that and instead voted to recommend that the EMC move forward with only three of the eight standards — those for PFOA, PFOS and GenX.  The committee recommendation would have the paradoxical result of rejecting health-based standards for the other five substances even though the new standards would actually reduce regulatory burden on business and potentially benefit private property owners who have detectable levels of  PFAS in their groundwater.

Background on N.C. groundwater standards.  First some background on how N.C. groundwater standards work. The EMC has adopted specific health-based groundwater standards for a number of contaminants. In the absence of a specific standard for a contaminant,  EMC rules provide that the groundwater standard will be the  “practical quantification limit” (PQL) for the contaminant. In lay language, the PQL means the level of the contaminant that can be detected using existing technology.

Today, PFAS detected in groundwater is regulated based on the detection limit for each substance;  the EMC has not adopted  a specific health-based groundwater standard for any PFAS.  Release of PFAS to groundwater above the detection limit without a permit is a violation of the groundwater rules and the detection limit serves as the goal for remediation of PFAS- contaminated groundwater.  The rules proposed by DEQ would establish health-based groundwater standards for the eight PFAS substances listed above. If adopted by the EMC, those health-based standards would replace use of the detection limit as the enforceable groundwater standard for purposes of remediation, permitting, and public health response.

Comparison of the proposed health-based standards to detection limits. DEQ  has calculated numerical health-based standards for each of the eight PFAS substances based on toxicity and/or increased cancer risk associated with ingesting the substance in drinking water. For two of the substances  — PFOS and PFOA — DEQ proposed a health-based standard that is  lower than the current detection limit. As a result, the detection limit for PFOS and PFOA would continue to be the enforceable groundwater standard since it isn’t  possible to enforce a standard below detectable levels. (The  health-based standards for PFOS and PFOA  could  become enforceable in the future if  technology advances to detect lower levels of those substances.)

For the other six PFAS substances, the proposed health-based standard would be higher than the detection limit for each substance — in some instances, significantly higher.   Adoption of those standards would  protect public health,  but  actually result in a less stringent regulatory standard than using the detection limit.  That would  benefit  a business  required to remediate contamination by one of those PFAS substances  in groundwater because the ultimate groundwater cleanup goal would be relaxed by comparison to a goal based on the detection limit.

Using the  proposed health-based standard for those substances could also benefit the owners of private wells with  PFAS levels above the detection limit but below the proposed health-based standard. Those well owners would be reassured that the level of  PFAS in their well does not pose a health risk that requires an alternative water supply.  It would also  remove a cloud over their property that could affect its value since PFAS in the groundwater would no longer exceed the  state regulatory standard.

Committee action. The majority in committee today voted to recommend that the full EMC move forward with health-based standards only for PFOS, PFOA and GenX. It was difficult to discern from the discussion any clear rationale for the recommendation to abandon adoption of health-based standards for the other five PFAS when those standards would have provided greater clarity on health risk; reduced the regulatory burden on business; and protected  property values.

Next steps.  The committee asked DEQ to provide a revised fiscal analysis of the rule package based on adoption of standards for just three of the eight PFAS. The full EMC could then vote (possibly in September) on whether to send the groundwater rule-making package out to public notice. The EMC can accept the committee recommendation or decide to go out to notice  with the larger package of groundwater standards proposed by DEQ. The EMC would make a final decision on adoption of some or all of the proposed groundwater standards after considering comments received in response to the public notice.

Obstructing Environmental Standards

January 26, 2024. In North Carolina, adopting a new state rule involves many steps and multiple levels of review. But the rulemaking process has recently obstructed a water quality standard in ways not intended by  the  N.C. Administrative Procedure Act (APA). As a result,  the rule setting a water quality standard for 1,4 dioxane — a toxic pollutant and likely human carcinogen — cannot go into effect even though there has been no legally supported objection to the rule.

1,4 dioxane. The U.S. Environmental Protection Agency (EPA) has identified 1,4 dioxane (used in solvents and other products) as a toxic pollutant associated with a number of adverse health effects, including liver damage and increased cancer risk. EPA published those findings in a 2020 health risk assessment of 1.4 dioxane  that focused primarily on occupational exposure.  In 2023, EPA released a revised  health risk assessment  of 1,4 dioxane considering risk to the public through exposure in drinking water. The new assessment  concludes that 1,4 dioxane in drinking water  “presents an unreasonable risk to human health”. (The revised assessment was released for public comment in September 2023; it is not clear whether EPA has finalized the assessment since closure of the comment period.)

As early as 2015, drinking water systems using the Cape Fear River system as a water source detected 1,4 dioxane in their drinking water.  Those water systems include the Town of Pittsboro and the City of Fayetteville. Investigation of  1,4 dioxane releases to the river by the  N.C. Department of Environmental Quality (DEQ)  led to upstream municipal wastewater systems.  As documented by DEQ, several cities — including Greensboro, Reidsville and Burlington —  have  periodically released wastewater containing high levels of  1,4 dioxane to the Cape Fear River system (which includes the Haw River).    In most cases, the 1,4 dioxane  could be traced back to a specific industrial facility discharging process water to the municipal sewer system.

As DEQ worked with these communities to address 1,4 dioxane spikes in their wastewater discharges, the N.C. Environment Management Commission (EMC) proposed and adopted a numerical water quality standard for 1,4 dioxane. A water quality standard establishes the safe concentration of a water pollutant in surface waters. DEQ permit writers then use the standard  to set appropriate limits on wastewater discharge permits (National Pollutant Discharge Elimination System or “NPDES” permits)  to maintain a  safe level in the water.  In developing the standard for 1,4 dioxane, the EMC relied on state and federal studies to calculate a safe concentration of 1,4 dioxane in surface water.  The proposed state water quality standard of 0.35 micrograms per liter (or 0.35 parts per billion) aligned with the concentration EPA studies associated with higher cancer risk.

The EMC adopted the water quality standard for  1,4 dioxane standard in March 2022. Two years later, the 1,4 dioxane rule is still not in effect and it is not clear when or if it will be.

What went wrong?  Once a state agency adopts a rule, the N.C. Rules Review Commission (RRC) must review and approve the rule before it can go into effect.  Under the APA, the RRC can only object to a rule on four grounds:

1. The rulemaking agency didn’t have authority under state law to adopt the rule;

2. The rule language isn’t clear;

3. The rule isn’t reasonably necessary to implement state law  or a federal law or rule;

4. The agency failed to comply with APA rulemaking procedures.

In May 2022, the RRC  objected to the EMC’s 1,4 dioxane water quality standard. The RRC objection did not question the EMC’s authority to adopt the rule; the clarity of the standard; or the scientific basis for it. The objection was that the EMC failed to comply with APA rulemaking procedures because — in the opinion of the RRC — the fiscal analysis of the rule was flawed. But the APA does not allow the RRC to object to a rule based on the content of a fiscal analysis; the Office of State Budget and Management (OSBM) has responsibility for certifying the analysis. In fact, RRC staff legal counsel had previously advised the RRC that it did not have the authority to object to a rule based on the content of a fiscal analysis approved by OSBM.

As consistently interpreted and applied in the past (by the Rules Review Commission itself), the EMC complied with APA rulemaking requirements by submitting an OSBM-certified fiscal analysis. After unsuccessful efforts to resolve the RRC objection,  the EMC authorized its legal counsel in September 2022 to challenge the RRC action in court as exceeding the RRC’s authority.  At the time, the  EMC voted by a nearly 2/3 majority to pursue judicial review of the RRC objection.

In January 2024 — after a turnover among EMC appointments —  a new EMC majority appointed by legislative leaders and the Commissioner of Agriculture voted to drop the legal action challenging the RRC objection. Dismissing the lawsuit allows the RRC objection to stand and prevents the 1,4 dioxane standard from going into effect. There is no path around the RRC objection.  Nothing in the APA supports the voiding of an environmental standard in the absence of any legitimate objection to the rule or the rule adoption process.

What next?  Another version of the 1,4 dioxane standard (based on the most recent EPA health risk criteria) has been included in a new package of water quality rules the EMC just began to work on.  EMC Chair J. D. Solomon has indicated an intent to move the 1,4 dioxane standard forward in that process. The problem is that the new rule will go through the same process as the original 1,4 dioxane standard — a process that required nearly two years for EMC adoption; additional months for RRC review;  and resulted in the rule being voided nearly four years after the rulemaking process began based on an RRC objection lacking any basis in the Administrative Procedure Act. It is unlikely that the local governments opposed to the original 1,4 dioxane standard (as reflected in their comments to the Rules Review Commission when the rule was under review)  will be more enthusiastic about the somewhat stricter standard in the new rulemaking package.

Meanwhile, DEQ continues to rely on the backstop of the “narrative” water quality standard in 15A NCAC 2B.0208 to address 1,4 dioxane. That rule  provides specific direction to DEQ permit writers on how to set  a water quality standard for a toxic pollutant that does not yet have a numerical standard in EMC rules.  In recent years, DEQ has relied on the rule to set in-stream pollutant concentrations and then wastewater permit limits for 1,4  dioxane and PFAS chemicals. In another legal twist, however, the City of Asheboro has challenged the enforceability of  15A NCAC 2B.0208 in an appeal of conditions on Asheboro’s renewed  NPDES permit  — including conditions related to 1,4 dioxane. That case is pending in the Office of Administrative Hearings.

Postscript: Yesterday, the Raleigh News and Observer reported that the City of Burlington detected high 1,4 dioxane levels (545 parts per billion) in wastewater samples taken at the South Burlington Wastewater Treatment Plant on January 23, 2024.  As noted above, EPA studies associated  0.35 ppb with a 1/1 million increased cancer risk and EPA has previously advised that 1,4 dioxane levels in drinking water should not exceed 35 ppb which correlates to a 1/10,000 increased cancer risk.

Burlington notified both DEQ and downstream water systems of the recent 1,4 dioxane spike (test results from the day before  had been only 2.4 ppb) and contacted an industrial facility in Burlington suspected to be the source.  The Town of Pittsboro, which has a drinking water intake in the Haw River downstream of the Burlington wastewater discharge,  immediately reduced its Haw River withdrawal and asked Pittsboro water system customers to conserve water until the slug of  1,4 dioxane  contaminated water passes the intake and concentrations  of 1,4 dioxane at the intake drop to safe levels.

Other 2023 N.C. Environmental Legislation

December 19, 2023. The previous post covered significant water quality legislation enacted by the North Carolina General Assembly in 2023. This post briefly summarizes other 2023 environmental legislation.

AIR QUALITY. The legislature put two provisions in the Appropriations Act of 2023 (House Bill 259) to prevent state agencies from adopting rules intended to reduce emissions of greenhouse gasses such as carbon dioxide (CO2) in the state. Other air quality provisions expedite permitting and construction of new or expanded sources of air pollutants.

Prohibit cap and trade programs for CO2 emissions.  House Bill 259, Sec. 12.5,  prohibits any state agency  from requiring electric utilities to participate in a cap and trade program for CO2 emissions. The provision targeted proposed state rules that would have required N.C. electric utilities to  participate in a multi-state cap and trade program (the Regional Greenhouse Gas Initiative) to reduce CO2 emissions. For more on the proposed RGGI rules see an earlier post.   The broadly written 2023 provision prohibits any state cap and trade program for reduction of greenhouse gas emissions from electric utilities.

Prohibit emission standards for new vehicles. A new statute section, G.S. 143-215.107F, prohibits adoption of emissions standards for new motor vehicles including rules intended to increase the number of zero-emission vehicles in North Carolina. The legislation responds to Governor Cooper’s Executive Order 271 which directed the Department of Environmental Quality (DEQ) to  draft rules modeled on  California’s Advanced Clean Truck rule. The California ACT rule requires truck manufacturers to gradually  increase the percentage of zero-emission medium and heavy duty trucks sold in that state over several years.  N.C. DEQ had already completed draft clean truck rules and a regulatory impact analysis estimating the economic costs and benefits of the proposed rules as required by EO 271.  The rules had not yet been presented to the Environmental Management Commission (EMC) to begin the rulemaking process.

The economic impact analysis  for the draft North Carolina clean truck rules showed a significant net economic benefit to the state. The analysis considered two alternative timelines for zero-emission truck goals. Earlier implementation resulted in a net economic benefit to the state of $175.6 million to  $880.5 million (depending on a range of estimated health benefits). Beginning implementation a model year later resulted in a net benefit of $162.3 million to $865.9 million.

Limit the vehicle emission inspection program. Some background — As required by the Clean Air Act, North Carolina has a State Implementation Plan (SIP) for ozone pollution describing how the state will meet the federal ozone standard.  N.C.’s  ozone SIP counts pollution reductions associated with identifying and correcting faulty vehicle emission systems toward meeting the standard. The  U.S. Environmental Protection Agency (EPA)  approved N.C.’s current ozone SIP based on vehicle emission inspections in 19 N.C. counties. The SIP included counties in the emissions inspection program based on the potential for vehicles registered in those counties to contribute to an exceedance of the ozone standard.

The 2023 state law directs DEQ to eliminate emissions inspections in 18 counties and request  EPA  approval of a revised ozone SIP that only requires emissions inspections in Mecklenburg County. The impact of a revised SIP on North Carolina’s ability to meet the ozone standard statewide will likely turn on factors such as the declining percentage of vehicles with older emissions control equipment and increases in low or zero emission vehicles. The law allows one year for DEQ to submit the revised SIP to EPA for approval; EPA then has 18 months to approve or disapprove the revised SIP. Emission inspections will continue to be required  in all 19 counties until EPA approves a revised SIP.

Allow expansion of existing air emissions source without prior permitting. Another provision in House Bill 259 amends G.S. 143-215.108A to allow “the construction (but not operation) of a new air contaminant source, equipment, or associated air cleaning or emissions control devices prior to permit issuance”.  The provision includes exceptions for sources requiring a Prevention of Significant Deterioration (PSD) permit; those covered by specific Clean Air Act sections regulating hazardous air pollutants; and sources in non-attainment areas. Even with the exceptions, it is not clear the provision allows the state to fully comply with Clean Air Act permitting obligations.  Allowing construction of a pollution source without prior review also creates a risk that the facility will invest in equipment that does not meet standards necessary to be permitted for operation.  That creates the  related risk that state permitting staff will be pressured to approve air pollution emission sources  that do not meet operating standards because of the prior investment.

Salary bonuses based on quick processing of Title V permits. Another budget provision creates a program to give salary bonuses to DEQ air quality permitting  staff who process Title V air quality permit applications within specified time frames.  The provision raises ethical questions given the creation of financial incentivizes for permit staff to approve permits more quickly. In  recognition of that concern, the provision directs the EMC  to adopt quality control standards to ensure permit decisions comply with the law. The obvious quality control standard will be consistency with permitting processes and air quality standards. The question will be how to provide adequate oversight of DAQ permit writers to ensure that incentives for quick permit action do not undermine adequate permit review and result in flawed permit decisions.

The  bonus provision doesn’t neatly align with existing Title V permitting practices in North Carolina. The legislation is written as if each facility’s Title V permit application (or renewal) is handled by an individual permit writer as part of a single facility-wide permit review. In reality, the Title V permitting process has adapted to industry needs by dividing review of multiple pollution sources at a single facility among  permit staff who specialize in those sources and associated pollution controls. Review of the different pollution sources can also move on different tracks, allowing some to be approved more quickly than others. It remains to be seen whether shifting to the model of permit review necessary to implement the bonus program (review of all sources at a facility in a single review) will actually benefit  permit applicants.

The new provision gives the EMC authority to exclude an individual DAQ employee from the bonus program based on  overall permitting performance. Doing so would have implications under state personnel law that have not yet been discussed.

Set permit processing times for Title V permits. House Bill 259, Section 12.11,  also amends G.S. 143-215.108(d)(2) to set new timelines for DAQ to act on an application for modification of  a Title V permit. The law now requires DAQ to issue, deny or publish for public comment a complete application for a  minor modification of a Title V permit within 90 days. It requires DAQ to issue, deny or publish for comment a complete application for a major modification of a Title V permit within 270 days.  The provision also repeals language in G.S. 143-215.108 that extended the time allowed to act on a Title V permit if the EPA Administrator objected to issuance of the permit.

Create Title V permit exemption for “non-major” research and development activities. Another  provision in Sec. 12.11 directs the EMC to create a Title V permit exemption for “non-major research and development activities”  consistent with a 1995  EPA  white paper on streamlining Title V applications.  In part, the white paper describes how permitting agencies should evaluate a research and development activity under Title V. The paper reflects EPA’s  assumption that many  R & D activities are independent of manufacturing operations and standing alone would not be major pollution sources that would trigger Title V permitting. But the paper also notes that R & D  activities co-located with manufacturing and contributing to the facility’s total air emissions would need to be included in the Title V permit. In other words, the paper doesn’t create an exemption; it describes how permitting agencies should apply Title V  to different types of R & D facilities.

The language of the new state provision misses the nuance of the white paper and requires the EMC to develop a Title V exemption for research and development activities. On the other hand, it directs the new EMC  rules to include “allowance levels and minor permit modification thresholds” that would allow a permitted Title V facility to cover R & D activity by giving DAQ notice of a minor permit modification. That language seems to describe a streamlined process for modifying a Title V permit rather than a Title V permit exemption. The EMC will need to sort out the actual intent of the law in the rulemaking process.

SOLID WASTE

Disposal of lithium- ion batteries. House Bill 600, Section 19, amends G.S. 130A-309.10(f) to prohibit landfill disposal and incineration of lithium-ion batteries. The legislation also directs DEQ to study whether it is appropriate to allow landfill disposal of some lithium-ion batteries based on the size of the battery.

Disposal of photovoltaic cells and components. The same section of House Bill 600 amends G.S. 130A-309.10 by adding a new subsection that prohibits disposal of photovoltaic cells in an unlined landfill. Under the new provision, all photovoltaic cells and  components that cannot be recycled must be disposed of in a lined municipal or industrial landfill rather than an unlined construction and demolition debris landfill.

GENERAL

Require permits to include statutory or regulatory authority for conditions. House Bill 600, Section 13, adds a new statute section (G.S. 143B-279.4A) requiring DEQ to include in every permit the statutory or regulatory authority for each permit condition. Since the new statute provision has been added to  Chapter 143B (which describes DEQ’s responsibilities as a department), it appears to apply to all DEQ permitting programs.

Prohibit denial of a permit based on failure to obtain another permit, authorization, or certification.  House Bill 259, Section 12.10, adds a new statute section (G.S. 143B-279.18) that prohibits DEQ from denying a permit based on the permit applicant’s failure to obtain another permit, authorization or certification unless that is required by state or federal law.  This provision also appears to apply to all DEQ permit decisions.

Define “administratively complete” for purposes of permit review. Another provision in House Bill 259 adds a definition of “administratively complete” to G.S. 143-213 to describe a permit application that is sufficiently complete to trigger permit processing timelines in statute:

(1) The term “administratively complete” means that all information required by statute, regulation, or application form has been submitted to the Department for the purpose of processing a permit application.

The definition applies wherever the term is used in Chapter 143 Article 21 (Water and Air Resources), Article 21A (Oil Pollution and Hazardous Substance Control), and Article 21B (Air Pollution Control).

N.C. Water Quality Legislation (2023)

December 14, 2023. Having regained a veto-proof majority in the state legislature, the N.C. General Assembly returned to a very aggressive effort to influence environmental rules in 2023. The annual Appropriations Act (House Bill 259), the N.C. Farm Act of 2023 (Senate Bill 582) and the Regulatory Reform Act of 2023  (House Bill 600) all contained provisions weakening existing environmental protections and in some cases preventing adoption of new standards. This post covers the  most significant legislation affecting state water quality protections:

AQUACULTURE PERMITTING

Replace the existing NPDES General Permit for aquaculture operations. The Clean Water Act requires a National Pollutant Discharge Elimination System (NPDES) permit for any release of waste to surface waters.  North Carolina has developed a number of  NPDES “general permits” to cover wastewater discharges from facilities engaged in similar activities and producing wastewater with similar characteristics. NPDES General Permit  NCG530000 covers wastewater from seafood packing and rinsing; aquaculture operations; and other activities producing similar wastewater. A facility can be covered under the general permit by meeting conditions in that permit; otherwise, the facility can apply for an individual NPDES permit tailored to the operation. 

Section 14 of Senate Bill 582 directs DEQ and the EMC to replace the current general permit (in effect since December 1, 2021) with the previous version of NCG530000. Reverting to the earlier permit will eliminate water quality monitoring requirements for nitrogen and phosphorus that were added to the permit in 2021.  Aside from the environmental implications of eliminating water quality monitoring for nutrients released from aquaculture operations, the provision raises another legal question and policy question: Does the provision violate the N.C. Constitution by allowing the legislature to intervene directly in the issuance of environmental permits?

Under the N.C. Constitution, the legislature adopts the laws under which state agencies operate, but responsibility for implementing those laws rests with executive branch agencies like DEQ.  The issuance of an NPDES permit (whether a general permit or an individual permit) is clearly within the authority and responsibility of the executive branch.  A legislative directive to modify or replace a specific permit appears to cross a significant constitutional line.   Aside from the constitutional  issue, legislative intervention in a permitting action sets a precedent for direct political intervention in permit decisions.  

ANIMAL OPERATIONS

Groundwater compliance boundaries for animal operations.  A little background — North Carolina’s groundwater protection program requires a state permit for the release of  pollutants to groundwater. Permitted waste disposal facilities (such as landfills)  have a groundwater  “compliance boundary” that (for most facilities)  extends 250 feet from the waste disposal area. Inside the compliance boundary,  pollutants in groundwater may exceed groundwater quality standards; beyond the compliance boundary, groundwater must meet all standards. Permits require regular groundwater monitoring inside and outside the compliance boundary to ensure groundwater standards are met.

There have long been concerns that animal waste systems such as swine waste lagoons and spray fields may result in groundwater contamination. But unlike other types of waste disposal facilities,  animal waste systems have not been required to routinely monitor for groundwater impacts.  State permits for animal operations have only required groundwater monitoring under very narrow circumstances.

This session, the legislature amended the animal waste system permitting law, G.S. 143-215.10C,  to  require a groundwater compliance boundary at animal operations:

“[animal operations] shall have a compliance boundary as may be established by rule or   permit for various categories of animal waste management systems and beyond which       groundwater quality standards may not be exceeded.”

The provision also directs the Environmental Management Commission  (EMC) to require investigation and corrective action (such as remediation)  if a facility violates groundwater standards beyond the compliance boundary. (See: House Bill 600, Sec.15). The provision may lead to an interesting rule-making process,  since implementation of a compliance boundary and corrective action require groundwater monitoring and animal operations have strongly resisted monitoring in the past.

 1,4 DIOXANE

Health Risk Assessment and Technology Review. The legislature directed DEQ to do a human health risk assessment of 1,4 dioxane in drinking water based on peer-reviewed studies and report back to the legislature by May 1, 2024. The purpose of the state study is unclear.  In 2020, EPA finalized a human health risk assessment for 1,4 dioxane that concluded  1,4 dioxane has  adverse effects on humans and is a likely human carcinogen.  That risk assessment focused largely on worker exposure, although it also considered public exposure to 1,4 dioxane in consumer products and surface water. In July 2023,  U.S. EPA released a Draft Revised Risk Determination for 1,4 dioxane for public comment. The  revised risk determination  evaluates risk associated with additional pathways for exposure, including  exposure to 1,4 dioxane in drinking water. The revised draft risk assessment finds that 1,4 dioxane in drinking water presents an unreasonable risk to human health.

The state study provision also directs the N.C. Collaboratory at UNC-CH to evaluate technologies commercially available to remove 1,4 dioxane from wastewater effluent at different flow volumes and report its findings on the technical and economic feasibility;  limitations of each treatment technology; and a cost benefit analysis to the legislature by May 1, 2024. (See: House Bill 600, Sec. 9)

STORMWATER.  Continuing a ten-year pattern, the legislature amended  state stormwater law to further limit state and local government stormwater control requirements. Most of the stormwater amendments appear in the 2023 Regulatory Reform Act (House Bill 600):

Treatment of stormwater from impervious areas added as part of a redevelopment project.  G.S. 143-214.7(b3)  already prevented stormwater permitting agencies from requiring new stormwater controls for existing developed areas included in a redevelopment project. But the law expressly allowed permitting agencies to require treatment for stormwater from impervious surface added during redevelopment. That authority remains in the law, but the 2023 amendment  inserts new language allowing the developer to  “elect” to provide stormwater treatment for new impervious area  — seeming to create a conflict within the law. As a result, It isn’t clear whether treatment of stormwater from new impervious area can still be required or is entirely optional. (See: House Bill 600, Sec. 2)

Prohibit stormwater permit conditions related to adjacent property.  Under a new subpart added to  G.S. 143-214.7,  DEQ  cannot require a new permit applicant to take any action with respect to an “unaffiliated adjacent property” or condition issuance of a new permit on action to be taken by an existing permit holder with respect to an unaffiliated adjacent property.  It isn’t clear what real world situation the new provision addresses since the state stormwater program has never required a developer to install stormwater controls on adjacent property. The provision may be intended to prevent DEQ from requiring a new development project to adequately treat stormwater entering the development site from another property, but more background will be needed to understand the provision’s impact. (See: House Bill 600, Sec. 2)

Exempt private streets from post-construction stormwater requirements. The provision directs the  EMC to exclude linear transportation projects that are: 1.  part of a common plan of development;  and 2. not constructed by DOT or a municipality from the calculation of built-on area for purposes of stormwater management. As a practical matter, that means private subdivision streets would not be included in calculation of stormwater runoff from the development and as a result the stormwater system would not be sized or designed to manage the stormwater from those surfaces. (See: House Bill 600, Sec. 4).

Exempt airport construction borrow sites and staging areas from Neuse buffer certification requirements. State stormwater standards already provided special consideration for  airport facilities particularly with respect to mandatory stream buffers. The new provision redefines “airport facilities” to include borrow sites and staging areas for airport-related construction . Under the provision, construction of borrow sites and staging areas within a stream buffer will not require prior approval normally granted through issuance of a certification for the activity under 15A NCAC 2B.0611(b). The provision requires mitigation of the buffer impacts consistent with the Neuse buffer rules, but it is not clear how buffer impacts will be measured and mitigation calculated in the absence of DEQ certification.  (House Bill 600, Sec. 21).

Timelines for review of state stormwater permits. Amends G.S. 143-214.7 to add timelines for DEQ review of stormwater permit applications. DEQ staff must do a completeness review within 10 days of receiving the application. If the application is complete, a 70-day technical review period begins. The provision also sets out specific requirements and timelines for DEQ to request additional information once the technical review begins. The provision directs that permits should be issued for a term not to exceed 8 years. (See: House Bill 259, Sec. 12.12.)

WATER SUPPLY WATERSHEDS

 Water supply watershed redevelopment.  Amends G.S. 143-214.5(d3) to allow redevelopment of nonresidential properties to exceed water supply watershed density limits without providing stormwater treatment for any increased density (as compared to the previous land use). As amended, the law would allow redevelopment at increased density without stormwater treatment based on either the preexisting density or the increase in density. (See: House Bill 600, Sec. 1)

Density exception for two local government jurisdictions. The legislature created a new exception for Iredell County and the Town of Mooresville that would allow up to 20% (instead of 10%) of the water supply watershed outside WS I and the critical areas of WS II, III and IV to be developed at up to 70% impervious area. Creation of an exception to an environmental rule for two named local governments may be inconsistent with a provision in the N.C. Constitution prohibiting “local acts” related to public health.  In any case, the provision creates a special advantage for two named local governments that was not based on any evaluation of the impact on drinking water quality. (See: House Bill 600, Sec. 5)

WASTEWATER DISCHARGE 

Discharge of domestic wastewater to low and no flow streams. Amends G.S. 143-215.1 to add a  new subsection (c8) allowing discharge of domestic wastewater to low or no flow streams. “Domestic wastewater” generally refers to wastewater from plumbing fixtures in residences and other buildings; it includes human waste and wastewater from kitchens, baths and  laundry facilities. “Domestic wastewater” does not include wastewater from industrial processes.  G.S. 143-215.1 (c8)  will allow discharge of domestic wastewater that meets specific water quality standards set out in that subpart of the law. Those standards  are very tight with respect to conventional pollutants (such as fecal bacteria and nitrates), but the law does not address all potential pollutants.  For example, there are no standards for toxic pollutants and the law prohibits state permit writers from imposing additional conditions to address pollutants not addressed in the provision.  (See: House Bill 259,  Sec. 12.9)

WATER QUALITY CERTIFICATION 

Issuance of water quality certifications for dredging and energy projects. Under Section 401 of the Clean Water Act, an applicant for a federal permit must provide a certification from the state that the permitted project will be consistent with state water quality standards. The provision puts new restrictions on state issuance of Section 401 Water Quality Certifications for state-funded maintenance dredging projects  and projects involving distribution or transmission of energy or fuel (including natural gas, diesel, petroleum, or electricity):

  • DEQ must determine completeness of the Section 401 application within 30 days.
  • A decision to issue or deny the certification must be made within 60 days if no public    hearing is required or within 90 days if there is a hearing.
  • Conditions on the Section 401 certification are limited to those necessary to ensure that proposed discharges of pollutants will comply with state water quality requirements

STUDY WATER QUALITY STANDARDS.  

Narrative water quality standard.  Some background — State water quality rules set specific numerical water quality standards for many pollutants. But since new pollutants of concern emerge over time, the rules also include  a “narrative standard” for toxic pollutants that do not yet have a numerical standard in rules. The “narrative standard” provides specific technical guidance to permitting staff on how to calculate a numerical standard for the pollutant.  Most recently, DEQ has used the narrative standard rule, 15A NCAC 2B.0218,  to calculate a water quality standard for 1,4 dioxane which (as noted above) is a likely human carcinogen. The numerical value derived from the rule then becomes the reference point for limiting discharges of the pollutant to surface waters. The narrative standard provides a predictable, scientifically based method for setting a water quality standard for an emerging pollutant until a numerical standard can be incorporated into the rules — a process that can take several years.

A provision in the Regulatory Reform Act of 2023 requires the EMC to study  narrative water quality standards and report to the legislature by June 1, 2024. The study will include review of the methods for setting a water quality standard under the rule; narrative standards adopted by other states;  and U.S. EPA requirements for adoption of narrative standards. The EMC is to report its findings, including any recommendations for legislative action, to the Joint Legislative Commission on Governmental Operations. (House Bill 600, Sec. 8). The study likely responds to legal action by several local governments challenging use and enforcement of the narrative standard to limit discharges of 1,4 dioxane.

DREDGING MORATORIA

Restriction on dredging moratoria. The legislature amended G.S. 113-229 (the State Dredge and Fill Act) to add a new subsection limiting the ability of state agencies to suspend authorization for dredging in state waters to protect aquatic resources. Dredging moratoria are often seasonal, corresponding to fish spawning activity.  The new provision limits dredging moratoria unless the restriction on dredging activity is required under the Clean Water Act, Endangered Species Act, or other applicable federal law. (House Bill 600, Sec. 10.5)

DEQ’s  Division of Coastal Management issues the permits required under the State Dredge and Fill Act, but the permits also involve review by other environmental and natural resource agencies  including the state water quality program. Most dredging moratoria enforced in N.C. have been adopted under state law authority to protect fisheries habitat and particularly primary nursery areas. It is not clear whether all of the existing  state moratoria on dredging are required by federal laws and rules.

This is another instance of the General Assembly deciding that North Carolina has no need or interest in protecting state natural resources apart from meeting requirements of federal law.

Wetlands

Limit state water quality protection of wetlands. A provision in Senate Bill 582 directs the EMC to define “wetlands” for purposes of state water quality regulations to include only wetlands within the federal permitting jurisdiction of U.S. EPA and the U.S. Army Corps of Engineers under the Clean Water Act. The effect of the provision is to limit all state water quality protections to wetlands with a surface connection to rivers, lakes and streams that are “waters of the U.S.”  The definition change affects state rules that set water quality standards limiting discharge of pollutants to wetlands as well as rules permitting placement of fill material in wetlands.

Limiting state wetlands protection to wetlands in federal Clean Water Act jurisdiction will exclude wetlands that have a groundwater rather than surface connection to  water bodies. It may also exclude wetlands separated from surface waters by a manmade structure and those with a seasonal rather than consistent surface connections. The full extent of the impact on state wetlands will depend on interpretation of the recent U.S. Supreme Court decision in Sackett v. U.S. EPA which significantly restricted federal wetlands jurisdiction. The N.C. Attorney General’s Office has advised the EMC and DEQ that the new state law provision has the effect of voiding state legislation enacted in 2015 that authorized state permitting requirements for basin wetlands and bogs. (See: Senate Bill 582, Sec. 15). Much more detail on the state wetlands provision can be found in earlier posts here and here.

Wetlands Protection Update

October 30, 2023.  An earlier post described the interaction of new state limits on wetlands protection and a U.S. Supreme Court decision reducing federal Clean Water Act (CWA) jurisdiction over streams and wetlands. (See State Law: Removing Wetlands from “Waters of the State”.) This post provides an update on federal implementation of the Sackett decision and new information on the impact of the wetlands provision in the N.C. Farm Act (Senate Bill 582/ Session Law 2023-63).

Federal Implementation of the decision in Sackett v. EPA. In  Sackett v. EPA, a plurality of four justices issued an opinion striking down rules adopted jointly by the U.S. EPA and the U.S. Army Corps of Engineers defining Clean Water Act jurisdiction over streams and wetlands. (The other five justices split between several dissenting opinions.)

In Sackett, the court held that “waters of the United States” — which defines the extent of Clean Water Act regulations —  only applies to surface waters useful for interstate commerce (my  shorthand description of the categories of waters listed more specifically below) and tributaries to those waters that are “relatively permanent, standing, or continuously flowing”. To be consistent with the Sackett decision, EPA has amended the CWA jurisdiction rule to limit federal jurisdiction over tributaries and wetlands. The Sackett standard appears to eliminate federal jurisdiction over ephemeral streams that flow only in response to precipitation.  Jurisdiction over  intermittent streams and other seasonal water bodies will likely require field interpretation of the Sackett criteria. Stay tuned for future litigation over those determinations. The restriction on CWA jurisdiction over tributaries has significant water quality implications.  Nationally, an estimated 59% of streams  would be classified as intermittent or ephemeral. The percentage is much higher (89%) in arid western states.  Most of those streams ultimately flow into permanent water bodies.

In Sackett, the U.S. Supreme Court  also interpreted the Clean Water Act  to apply only to wetlands that have a continuous surface connection to water bodies otherwise in federal jurisdiction. Under the decision,  wetlands must be physically  “indistinguishable” from those waters to be covered by federal CWA jurisdiction. (Slip opinion, Sackett v. EPA,  p. 27.)  The new federal rule makes several changes in response to this restriction on federal wetlands jurisdiction:

1. The “significant nexus” standard, which had extended federal jurisdiction to wetlands with a significant water quality relationship to jurisdictional waters  (such as a groundwater connection), has been removed from the rule.  

2. Wetlands located near jurisdictional surface waters, but physically separated by a manmade structure (such as a berm), will no longer be considered jurisdictional based on being “adjacent” to waters of the United States. 

3.  The reference to  ‘‘interstate wetlands’’ as a stand-alone category of jurisdictional wetlands has been removed.

Under the new federal jurisdiction rule  that went into effect on September 12, 2023, the Clean Water Act will apply only to:

      ♦  Waters used or capable of being  used in interstate or foreign commerce

      ♦  Tidal waters

      ♦ The territorial seas

      ♦ Interstate waters

      ♦ Impoundments of waters that are otherwise defined as waters of the United States (such as a reservoir created by damming a flowing river)

      ♦ Tributaries of the waters listed above as long as the tributaries are “relatively permanent, standing or continuously flowing”

      ♦ Wetlands that have a continuous surface connection to  waters that fall into one of the categories above. 

Filling jurisdictional waters or wetlands requires a federal permit under Section 404 of the CWA and  most litigation over the definition of “waters of the United States” has been driven by property owners/developers seeking to fill wetlands for construction.   But “waters of the United States” also  defines the scope of Clean Water Act restrictions on water pollution. It is not entirely clear how the loss of jurisdiction over wetlands and non-permanent tributaries will affect the NPDES permitting program. There is earlier case law holding that discharge of pollutants to a non-jurisdictional stream or to groundwater with a surface water connection requires an NPDES permit if those pollutants will reach jurisdictional waters.

Scope of North Carolina Legislation Limiting Wetlands Protection.

The Sackett decision actually emphasizes language  in the Clean Water Act  that notes “the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution”.  In limiting federal CWA jurisdiction, the court expressly deferred to broader state authority to protect waters and wetlands: “Regulation of land and water use lies at the core of traditional state authority”. (Slip opinion, Sackett v. EPA, p. 23). But just as the Sackett decision restricted federal water pollution authority in deference to the states, the N.C. General Assembly limited  state water quality protections for wetlands to those falling in federal Clean Water Act jurisdiction.

Senate Bill 582 became state law on June 27, 2023 over the Governor’s veto. Confusion over the intended effect of the wetlands provision led me, as Chair of the N.C. Environmental Management Commission, to ask the Department of Environmental Quality (DEQ) to advise the EMC on implications for state water quality rules.  In consultation with the Attorney General’s Office, DEQ confirmed that Session Law 2023-63 entirely eliminates state water quality protections for wetlands that fall outside federal regulatory jurisdiction, including  basin wetlands and bogs that had previously been covered by  a 2015 state wetlands permitting law. The DEQ memorandum  also confirmed that the new law affects enforcement of state water quality standards restricting discharge of pollutants to wetlands.

Session Law 2023-63 does not affect application of state water quality standards to surface waters  such as streams.  Existing state laws requiring permits for discharge of pollutants and placement of fill material will continue to apply to streams and other surface waters  in the state independent of CWA jurisdiction. The new federal jurisdiction rule will magnify the impact of Session Law 2023-63  on state wetlands, however. As noted above,  federal jurisdiction over tributaries will shrink under the Sackett criteria. Consistent with the Sackett decision,  the conforming EPA rule also removes CWA jurisdiction over wetlands adjacent to non-jurisdictional tributaries.  Under Session Law 2023-63,   those wetlands will  also lose state water quality protections.

It is still unclear whether the General Assembly intended Senate Bill 582 to have such wide-ranging impact on state wetlands.  The Sackett decision certainly expanded the impact of  Senate Bill 582 beyond what would have been anticipated when the bill was filed. It is possible that Session Law 2023-63  will be modified as a result, but that seems unlikely to happen before adjournment of the 2023 legislative session.  Other nearby states, including Virginia, have already take steps to ensure that state waters and wetlands that now fall outside Clean Water Act jurisdiction will be protected by state water quality laws.

State Law: Removing Wetlands from “Waters of the State”

June 7, 2023 — In an unfortunate sequence of events, the U.S. Supreme Court has issued a decision significantly limiting  federal Clean Water Act regulation of wetlands  just as the N.C. General Assembly has been moving legislation to limit state water quality protection for wetlands.

First, some background. Historically, states had the primary responsibility for protecting state waters from pollution. But in 1972, Congress adopted the Clean Water Act and asserted federal jurisdiction over  “waters of the United States” to create a national water pollution control program.  The U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) share responsibility for implementing the Clean Water Act.  Jointly adopted EPA/Corps rules define “waters of the United States” and in doing so establish the scope of  federal jurisdiction to enforce Clean Water Act permitting requirements for both the discharge of pollutants to waters and depositing fill material in waters.

Legal warfare over the “waters of the U.S.” definition has now raged for decades — in large part because of the convergence of two factors: 1. The  EPA/Corps definition of  “waters of the U.S.”  included many wetlands; and 2.  Section 404 of the Clean Water Act prohibits placing fill material in  waters of the United States without a permit from the Corps. Given the definition of “waters of the U.S.”, Section 404 became a hurdle for development of some properties.

The Sackett Decision. After decades of lawsuits and several previous federal court decisions, the U.S. Supreme Court  issued an opinion two weeks ago that greatly limits federal  Clean Water Act jurisdiction over wetlands. The Supreme Court case, Sackett v. EPA, involved a Corps of Engineers enforcement action against an Idaho couple for  filling  wetlands without a Section 404 permit. The Corps determined that wetlands on the Sackett property  — which were adjacent to a ditch that drained to a stream that flowed into a large lake — were “waters of the U.S.” that could not be filled without a permit.

The Sacketts challenged the Corps enforcement action and the U.S. Supreme Court ruled against the Corps jurisdictional determination. All nine justices agreed that the Sackett property fell outside the scope of “waters of the U.S.”, but the justices splintered on the legal basis for ruling in the Sacketts’ favor. A number of justices concluded that the Sackett property fell outside federal jurisdiction even under current  EPA/Corps rules defining “waters of the U.S.” But a plurality of four justices issued an opinion striking down the current EPA/Corps jurisdiction rules entirely, finding the  rules to be inconsistent with the intent of the Clean Water Act. The four justices ruled that the Clean Water Act extends:

to only  those “wet-lands with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right,” so that they are “indistinguishable” from those waters.

Sackett v. EPA, 598 U.S. _____ (2023)  p. 27.

Under existing EPA/Corps rules, wetlands without a continuous surface connection to a body of water could still be “waters of the U.S.” as long as the wetland had  a significant “nexus” to surface waters — such as a hydrological connection through groundwater.  The sweeping decision by the four Supreme Court justices in Sackett means many of those wetlands will likely fall outside federal regulatory jurisdiction in the future.  Wetlands separated from surface water by an artificial barrier such as a road or berm may also fall out of federal regulatory jurisdiction.  The ruling has significant implications for North Carolina wetlands long assumed to be covered by the Clean Water Act — such as the pocosins (large freshwater swamps) in eastern North Carolina that may have only a groundwater connection to surface waters. 

Back home. Before the Supreme Court issued the Sackett decision,  the North Carolina Senate proposed legislation to limit state water quality regulation of wetlands to only those wetlands that fall under federal Clean Water Act jurisdiction.  Senate Bill 582 ( North Carolina Farm Act of 2023)  includes a provision that would prevent water quality rules  that apply to “waters of the state” from applying to wetlands that are not  “waters of the United States” regulated under the federal Clean Water Act:

SECTION 15.(c) Implementation. – Wetlands classified as waters of the State are restricted to waters of the United States as defined by 33 C.F.R. § 328.3 and 40 C.F.R. § 230.3. Wetlands do not include prior converted cropland as defined in the National Food Security Act Manual, Fifth Edition, which is hereby incorporated by reference, not including subsequent amendments and editions.

At the time Senate Bill 582 was introduced, the gap between federal wetlands jurisdiction and state wetlands jurisdiction was relatively small, but significant; the Sackett decision just made the gap much larger.

Senate Bill 582 has serious implications for  wetlands falling out of federal jurisdiction (and the waters to which they connect). For example, state law requires a permit before anyone can

Cause or permit any waste, directly or indirectly, to be discharged to or in any manner intermixed with the waters of the State in violation of the water quality standards applicable to the assigned classifications or in violation of any effluent standards or limitations established for any point source, unless allowed as a condition of any permit, special order or other appropriate instrument issued or entered into by the Commission under the provisions of this Article.

G.S. 143-215.1 (a)(6). Under the Senate bill, that requirement would not apply to wetlands that fall outside federal regulatory jurisdiction because they would no longer be considered  “waters of the state”.   The result could be that unprotected wetlands will become conduits for  water pollution to reach groundwater and surface water. Lack of any state or federal permit requirement may also  result in the  filling of  wetlands that provide flood control and filter stormwater.

The issue for North Carolina. 

The Supreme Court decision in Sackett only interpreted how  the Clean Water Act  defines the scope of  federal jurisdiction over wetlands. The court did not find that wetlands outside federal jurisdiction do not require environmental protection and in fact stressed the  role of states in protecting water quality.

The State of North Carolina — not Congress and not the U.S. Supreme Court — has the responsibility to protect North Carolina waters. In light of the Sackett decision, the state needs to decide whether and how to protect the water quality, ecological and flood control functions of wetlands that fall outside federal jurisdiction. The decision can’t be out-sourced to the federal government.

Cautionary notes. 

The Sackett decision means EPA and the Corps will have to develop new guidelines for determining federal jurisdiction consistent with the court’s ruling.  Past experience indicates that could take months; the Sackett rule will require guidance on interpretation and application to varying situations on the ground.  In the meantime, it appears the Corps of Engineers has put jurisdictional determinations under Section 404 of the Clean Water Act on hold which will likely slow some development projects.

Other federal and state laws will continue to apply to activities impacting wetlands even if Section 404 permit requirements don’t.   In the 1990s, a federal court struck down an EPA/Corps  rule requiring a Section 404 permit for any activity (such as mechanized ditching) that could result in the incidental fallback of fill material into waters or wetlands.   After the federal court  struck down the “incidental fallback” rule,  several North Carolina developers rushed to ditch and drain wetlands in the coastal area on the assumption that no Section 404 permit would be needed — only to find themselves on the wrong side of state Sedimentation Act enforcement actions.

For state policy makers, the breadth of the Sackett decision means the provision in Senate Bill 582 limiting  state water quality protections for wetlands  will have consequences that were likely not intended when the bill was introduced.

Climate Choices Part II — Session Law 2021-165 (Carbon Reduction Plan)

January 22, 2023.  A 2021 North Carolina  law requires the N.C. Utilities Commission (NCUC) to “take all reasonable steps” to achieve a 70% reduction in carbon dioxide (CO2)  emissions from electric generating units (EGUs) by 2030 and achieve carbon neutrality for the utility generation system by 2050.   More below on the requirements of  Session Law 2021-165  (also referred to as House Bill 951) and NCUC action in response. The next post will look at the potential overlap of the S.L. 2021-165 carbon reduction plan with draft rules (described in the previous post) under consideration by the N.C. Environmental Management Commission.

The Reduction Goal.  Session Law 2021-165  set a goal of reducing CO2 emissions from EGUs 70%  (from a 2005 baseline of 75,865,188 short tons) by 2030 and achieving carbon neutrality by 2050. Under the law, “carbon neutrality” means that for every ton of CO2 emitted in the state by a regulated EGU an equivalent amount of CO2 must be reduced, removed, prevented, or offset. The law limits offsets to 5%. The NCUC can extend the CO2 reduction timelines by two years — or longer if necessary to allow for completion of a  new nuclear or wind energy facility essential to the carbon reduction plan.

The reduction goals apply to electric utilities that are: 1. regulated by the Utilities Commission;  and 2. served at least 150,000 North Carolina retail jurisdictional customers as of January 1, 2021. The law does not apply to EGUs operated by  local government utilities; electric membership co-ops; industrial facilities; or other institutions since the Utilities Commission doesn’t regulate those facilities.  As a result, the carbon reduction plan will only affect EGUs at power plants owned  by the two investor-owned utilities operating in North Carolina — Duke Energy Carolinas and Duke Energy Progress.  As a practical matter, however, those two utilities account for over 80% of the total CO2  emissions from electric power generation in the state.

A few other things to understand about S.L. 2021-165.  First, the law is directed to the Utilities Commission rather than the electric utilities.  It authorizes the Utilities Commission to take  “all reasonable steps” to achieve the CO2 reduction goals and adopt a plan by December 31, 2022 to do so. The law does not directly mandate that the utilities meet the reduction goals; create penalties for a utility’s  failure  to meet the goals; or address  how emissions levels will be monitored and reported to show  whether the goals have been met.  Instead, the law relies on the NCUCs  existing authority to approve/disapprove utility-owned generation facilities and related authority to allow the utilities to recover the cost of facilities and operations through rates charged to customers.  

In developing the plan, the law directs  the Utilities Commission to follow existing state law with respect to least-cost generation of power and maintain system reliability.  So the law requires a balancing of consumer costs/system reliability and reduction of greenhouse gas emissions. 

The law also requires “new generation facilities or other resources” selected by the Utilities Commission  as part of the plan  must be owned by the utility. There is an exception for solar; the law provides that 45% of new solar included in the reduction plan must be supplied by third parties through power purchase agreements. The Utilities Commission has interpreted the statute language to mean that power purchase agreements cannot be used to acquire other energy resources (such as wind energy) to meet the reduction goals even though that may be a lower cost alternative to new energy project development.

Carbon Reduction Plan. As a first step, the Utilities Commission required Duke Energy to submit a proposed carbon reduction plan in May 2022.  Instead of a single proposed plan,   Duke Energy submitted four alternative plans for the Utilities Commission to consider. All four plans proposed to phase-out all of the state’s remaining coal-fired power plants although   closure  dates varied. The plans differed in the mix of new energy sources (natural gas, solar, battery storage, nuclear and wind) to replace coal and the timelines for bringing those new sources on line. Duke Energy projected that only one of its four portfolios of energy resources  would meet the 70% interim reduction goal by 2030; others met the interim goal two to four years later.

NCUC Order. On December 30, 2022, the NCUC issued an order that put a number on the 70% reduction target for 2030 (22,759,556 short tons of CO2), but the Commission did not adopt any of the four plans proposed by Duke Energy to meet the reduction goals. The NCUC declined to endorse a specific energy portfolio capable of meeting the interim and final CO2 reduction goals at all. Instead, the Utilities Commission authorized Duke Energy to take a number of near-term actions in 2023-2024 and created a process for  reviewing the  electric generation portfolio every two years.

An existing NCUC rule, R8-60-1,  already required electric utilities to submit an integrated resource plan (IRP) to the Utilities Commission every two years. The IRP forecasts electric power demand over a 15 year period and  describes how the utility will meet projected demand through a combination of electric generation; power purchase; demand-side management (such as programs to reduce peak use); and energy efficiency. The NCUC’s order basically repurposes the  IRP as a vehicle for identifying the most cost-effective and reliable mix of energy sources to meet the CO2 reduction goals.

The NCUC order allows Duke Energy to take initial steps common to most of  Duke’s alternative energy portfolios in the next two years, but defers decisions about the energy mix needed beyond 2023-2024 to meet the reduction goals.  Actions authorized in the near term tend to be low risk (in terms of cost and reliability) and avoid commitments to more complex  long-term projects. The  order also directs Duke Energy to address a number of cost and feasibility questions in the first carbon reduction IRP.  For example, the NCUC has asked for information on the impact of federal subsidies and tax incentives  (such as those in the Inflation Reduction Act) that may reduce some renewable energy costs. The order also directs Duke Energy to further evaluate both onshore and offshore wind projects. The NCUC report notes questions about the practicality of developing an onshore wind project by 2029 and costs related to connecting both onshore and offshore wind projects. Duke Energy’s  first carbon reduction IRP will be due in September 2023 and the NCUC will take action on that IRP in 2024.

This incremental approach  gives the Utilities Commission more time to evaluate alternative  energy projects before committing to a plan, but also leaves a significant gap between actions allowed under the December 30, 2022 order and those needed to meet the CO2 reduction goals. For example, Duke Energy projects that 5,980- 7,930 MW  of additional solar will be needed to meet the emission reduction goals, but the December 31, 2022 order only authorizes Duke to procure an additional 2350 MW of solar over a two year period  (2023-2024). The order also defers authorization for any wind energy projects as part of the plan although all four Duke Energy plans included onshore wind resources and three of the four also relied on offshore wind generation.

It is not clear how long the NCUC can continue to allow the carbon reduction plan to evolve,  since  Duke Energy will need to make investments in facilities and enter contractual agreements to bring new energy sources on line. The window for flexibility will close soon for financial and contractual commitments needed to meet the 2030 reduction goal. Realistically,  the first carbon reduction IRP  (2024) will need to  result in a much firmer plan to achieve a 70% reduction in CO2 emissions to have any possibility of meeting the 2030 goal. The 2024  plan will also need to lay the foundation for meeting  the goal of carbon neutrality by 2050.

In short,  the December 30, 2022 NCUC order does not deliver the step by step plan to meet the reduction goals set in S.L, 2021-165  many in the public (and perhaps the legislature) expected. It effectively defers approval of a plan to meet even the interim goal until the 2024 IRP at the earliest. The order takes a conservative approach to acquisition of additional solar generation, authorizing only the amount of solar generation proposed for 2023-2024 out of concern about the cost of connecting more solar more quickly.  It  also withholds authorization for  onshore and offshore wind projects pending additional information on cost; per Duke Energy’s proposed plans, wind projects will be necessary to achieve the 70% reduction goal by 2030-2032.

Among the  near term steps authorized in the NCUC order:

♦  Pursuit of closure plans for existing coal-fired units.  Although timing varied,  all four Duke Energy carbon reduction plans assumed closure of all existing coal fired units by  2036.

♦ Planning for additional natural gas generation (combined cycle units and combustion turbines) to offset lost coal-fired generation. All four Duke Energy carbon plans proposed to add natural gas generation for an extended period of time. The approach has been controversial since natural gas also produces CO2 emissions although at lower levels than coal combustion.  The Utilities Commission accepted Duke Energy’s justification for increased natural gas generation, but requires the first carbon plan IRP to model the cost and assumptions for natural gas units proposed to operate beyond 2050. Any new natural gas generating units will require individual NCUC approval before construction and the order directs Duke Energy to address natural gas availability in those project proposals.

♦ Pursue extension of federal licenses for existing nuclear power plants serving North Carolina.

♦ Target procurement of 2,350 MW of new solar during the 2023-2024 period.

♦ Begin initial development and procurement activities for 1,000 MW of standalone battery storage and 600 MW of Solar Plus Storage.

♦ Meet with onshore wind stakeholders; explore the potential for a successful request for proposals to develop an onshore wind project;  and consider onshore wind as an additional source in the first carbon reduction IRP if that is supported by modeling.

♦ Take the preliminary steps identified in Duke Energy’s 2022 proposed carbon plan toward development of small modular and advance nuclear reactors.

♦ Further study offshore wind energy leases off the North Carolina coast and report back to the NCUC on the feasibility of including an offshore wind generation project in the  carbon reduction plan. Duke Energy had proposed to acquire a wind lease in the Carolina Long Bay lease area (Cape Fear) currently held by Duke Energy Renewables. The NCUC declined to authorize transfer of the lease, citing questions about the cost of bringing power onshore and creating interconnections with the transmission system. The scope of the study is to include all three areas off the N.C. coast where the federal Bureau of Ocean Energy Management has approved wind energy leases.

♦ Model a higher rate of energy efficiency as part of the total carbon reduction plan. Duke Energy’s proposed plans assumed energy efficiency improvements at 1% of “eligible” retail sales. A number of commenters pointed out that  “eligible” retail sales leaves out wholesale customers and retail industrial customers that opt out of the EE program.  The NCUC order directs Duke Energy to model both a 1.5% improvement in energy efficiency among eligible retail customers and explore programs to extend energy efficiency improvements among wholesale customers.

The entire Utilities Commission report can be found here.  The report is organized around findings of fact and the basis for those findings (by topic) followed by the order listing near-term actions authorized by the Commission at pages 130-135.

Consumer impacts. It is important to understand the influence of the Utilities Commission Public Staff on any carbon reduction plan. The Public Staff  (entirely independent of the NCUC staff)   exists specifically to represent consumers in matters before the NCUC  — particularly with respect to utility rates. As a consumer advocate, the Public Staff  focuses on cost and reliability of service.  One of the challenges of a major transition from fossil fuel to clean energy can be the tension between cost/reliability in the near term versus the long-term benefits of a carbon neutral electrical system.  In developing its report and December 30, 2022 order, the Utilities Commission was very responsive to cost concerns expressed by the Public Staff. Many of the NCUC requests for additional cost information and modeling in the first carbon reduction IRP reflect issues raised by the Public Staff in review of Duke Energy’s proposed plans. The push/pull between competing goals will be something to watch.

Climate Choices Part I — N.C. and the Regional Greenhouse Gas Initiative

January 4, 2023.  By coincidence rather than design,  two different approaches to reducing greenhouse gas emissions from the electric power sector have been under discussion by North Carolina agencies since 2021. This post will describe draft rules being considered by the N.C. Environmental Management Commission (EMC) in response to a petition for rulemaking submitted by Clean Air Carolina and the N.C. Coastal Federation.  The rulemaking petition asked the EMC to adopt rules requiring units serving electric generators of 25 MW or greater to participate in a market-based program to reduce CO2 emissions.

A later post will cover the North Carolina Utilities Commission (NCUC)  Carbon Reduction Plan.  The two approaches share goals of reducing greenhouse gas emissions 70% by 2030 (from a 2005 baseline) and achieving carbon neutrality by 2050.  The approaches differ in the generating units affected (although there is overlap) and the mechanism relied on to achieve the reductions.

The  Proposed  EMC Rules: The draft rules being considered by the EMC would set the stage for North Carolina to join 11 other states in a  market-based program — the Regional Greenhouse Gas Initiative (RGGI) — to reduce carbon dioxide (CO2)  emissions from electric generators.   RGGI relies on a market concept similar to the “cap and trade” program EPA used to incentivize reductions in sulfur dioxide (SO2) emissions contributing to acid rain.

Background on RGGI.  Seven northeastern states created RGGI in 2005. Over time, RGGI has expanded to include eleven east coast states:  Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia.

RGGI uses cost to drive down CO2 emissions from electric generating units (EGUs) by requiring each EGU to buy an “allowance”  for each short ton of carbon dioxide it emits annually. In the RGGI context, an “EGU”  means a unit generating electricity for distribution to customers —  an electric utility. Each participating RGGI state sets an annual emission budget that caps CO2 emissions from those EGUs; the combined state CO2 budgets become a regional budget for the RGGI states.  The CO2 emissions budget gradually declines over time; currently, RGGI has a goal of reducing CO2 emissions by 30% (from a 2020 baseline) by 2030.

RGGI conducts quarterly auctions of available allowances (the number based on the CO2 emissions budget and other factors).  EGUs can also purchase allowances directly from other emission sources.   The net proceeds of the RGGI allowance auction (minus an administrative fee)  go back to the participating state governments in proportion to the  state’s share of the total RGGI  emissions budget. RGGI characterizes itself as a “cap and invest” program  because many of the participating states direct their auction revenue to support renewable energy; energy efficiency; measures to mitigate climate impacts; and assistance to low-income households.

Note:  This is a very simple overview  of the way RGGI operates. The RGGI program includes complex provisions on the conduct of auctions; calculation of emissions; emissions record-keeping and reporting; and measures to prevent allowance prices from going either too high or too low. More detailed information can be found through the RGGI website homepage.

The RGGI rulemaking petition. N.C. General Statute 150B-20 allows anyone to petition a state agency to adopt or amend a rule. In January 2021, Clean Air Carolina and the N.C. Coastal Federation filed a  rulemaking petition requesting the EMC to adopt draft rules (included in the petition)  creating the regulatory framework necessary for North Carolina participation in RGGI.

In July 2021, the EMC voted to approve the rulemaking petition. Approval of the  rulemaking petition just means that the EMC has agreed to begin the rulemaking process based on draft rules submitted by the petitioners; it does not commit the EMC to adopt the rules.  The EMC is still in the first stage of the  rule-making process, which requires preparation of a regulatory impact analysis describing the rule’s effects,  including the potential fiscal impact on state government, local government, and others affected by the rule. Once the fiscal analysis has been completed and approved by the Office of State Budget and Management, the  draft rule and the regulatory impact analysis will be released to the public for review and comment.

At this stage of the rulemaking process, the EMC cannot change the draft rule as proposed by the petitioners.  Once the public comment period has closed, the EMC can take one of three actions: 1. adopt the petitioners’ rule draft; 2. adopt the rule with changes to address questions or concerns raised in public comment or EMC discussion; or 3. decline to adopt the rule in any form.

Comparison of the Proposed N.C. Rules to Existing RGGI States. The draft rules submitted to the EMC by Clean Air Carolina and N.C. Coastal Federation use the basic structure of the RGGI program — a state CO2 emissions budget that declines over time and a requirement that each regulated generating unit must purchase an allowance for each short ton of CO2 that it emits. The draft rules differ from those adopted by other RGGI states in some key ways:

♦ The rules apply to a broader set of CO2 emission sources. In the other RGGI states, only electric generating units (EGUs)  associated with electric utilities are required to hold allowances for CO2 emissions.  The proposed N.C. rules would also apply to generating units  of 25 MW or greater that are operated by industries or institutions to generate electricity for their own use. As a result, the N.C. rules refer to “CO2 budget units” rather than EGUs. Under the draft N.C. rules, EGUs are a subset of “CO2 budget units”.

♦ The rules apply to emissions from additional types of fuel. The proposed N.C. rules would apply to CO2 emissions associated with biomass or biofuels as well as fossil fuels.

♦  No North Carolina state agency would directly participate in the RGGI auction process.  Unlike other RGGI states, North Carolina would not allocate the state’s CO2  allowances to the RGGI auction directly. Instead,  the state would develop a state CO2 budget;  create “conditional” allowances based on the budget; and assign those allowances — at no cost — to the regulated generating units in N.C.  The draft rule requires those units to consign their allowances to  RGGI and purchase the allowances back through the RGGI auction before they can be used to comply with the rule.

♦ Net proceeds of the RGGI auction would go back to the CO2 budget units  instead of becoming state revenue.  In other participating RGGI states,  a designated state agency receives the net auction revenues and directs the use of those funds consistent with state law. The draft N.C. rules have the net auction revenues return to the regulated generating units. As a result,  no N.C. state agency would have any direct involvement in the RGGI auction process at either the beginning (consignment of allowances to the auction) or end (receipt of revenues from the auction).

The draft N.C. rules include a provision allowing  CO2 budget units to  use auction proceeds “for public benefit, strategic energy, or other purposes approved by the [N.C. Utilities] Commission”.  Note that a number of the CO2 budget units covered by the draft N.C. rule are not EGUs regulated by the N.C. Utilities Commission;  municipal and co-op systems fall outside the NCUC’s jurisdiction. The Division of Air Quality has determined that the draft N.C. rule would also cover a small number of generating units  operated by an institution or industry to generate power solely for its own use.  In any case, the draft rule language  seems to be sufficiently broad to allow most generating units to use auction revenue just as they use revenue from rates or other sources.  Units that fall under the NCUC jurisdiction would continue to be subject to that commission’s usual oversight with respect to rates and plans to meet electricity demand. 

Since the fiscal analysis of the N.C. rule hasn’t been completed, there is not yet an estimate of the amount of revenue likely to return to the electric generating units covered by the N.C. rule. But the revenues returning to existing RGGI states (reported on the RGGI website ) have been substantial. For example, the state of New York’s revenue  has ranged from  $300,000,000  to $500,000,000 for each 3-year RGGI auction cycle.

♦ The draft rules propose a steeper reduction in CO2 emissions than that required by current RGGI states. The draft N.C. rules require a 70% reduction by 2030 (from a 2005 baseline) and carbon neutrality by 2050. The existing RGGI program has  a goal of 30% reduction in CO2 emissions by 2030, although the participating RGGI states have decided to review the goal given progress to date. The difference would mean a  steeper reduction curve  for N.C. sources compared to those in states currently participating in RGGI.

Next Steps. Before the EMC makes any decision about adoption of the proposed rules, the draft rules will be published for public review and comment along with the regulatory impact/fiscal analysis. The Division of Air Quality originally anticipated that the fiscal analysis would be complete in November 2022, allowing the EMC to receive public comments in early 2023 and make a rulemaking decision in May 2023.   Final approval of the fiscal analysis has been delayed, however,  to allow more time for review by the Office of State Budget and Management. The delay means the EMC may not be able to take any action on the proposed rules until later in the summer of 2023.

U.S. Supreme Court v. EPA Climate Rule

July 12, 2022 — On June 30, the U.S. Supreme Court issued a decision striking down an Obama era  rule regulating carbon dioxide (CO2) emissions from existing power plants. The decision in West Virginia v. EPA held the Obama administration’s Clean Power Plan Rule exceeded EPA’s  authority under the Clean Air Act.  The decision is important for what it did and what it didn’t do.

Three key takeaways from the court’s decision:

  1. The Court did not rule that EPA lacks authority to regulate greenhouse gas emissions from power plants or other sources. Section 111 of the Clean Air Act authorizes EPA to address air pollution from both new and existing sources if the pollutant endangers public health or welfare. A 2007  Supreme Court decision (Massachusetts v. EPA)  held that CO2 and other greenhouse gasses meet the definition of an air pollutant under the Clean Air Act.  In 2009,  EPA made a finding that six greenhouse gasses endanger public health and welfare because of their contribution to climate change. The West Virginia v. EPA decision does not undermine either the Massachusetts v. EPA decision or EPA’s 2009 endangerment finding.
  2. The West Virginia v. EPA decision held that the method EPA chose to set CO2 emission limits for existing power plants in the Clean Power Plan Rule exceeded EPA authority under Section 111(d) of the Clean Air Act.
  3. In finding that EPA exceeded its authority, the Court relied on the “major questions doctrine”.  The Court indicated that clear Congressional authorization will be required when the breadth of  an agency action has such “economic and political significance” that it raises questions about Congressional intent to grant such broad power.  That part of the decision will affect future EPA actions beyond those addressing greenhouse gas emissions and  has implications for all federal agencies.

Background on the Clean Power Plan Rule and the basis for the Court’s decisions below.

The  Clean Power Plan Rule.  Under Section 111 of the Clean Air Act,  EPA has authority to regulate proposed new sources of a pollutant that “may reasonably be anticipated to endanger public health or welfare”. Section 111 requires EPA to set the emission limit for the pollutant based on  the “best system  of emissions reduction” after taking into consideration cost, other health and environmental impacts and energy needs. In 2015,  EPA  proposed CO2 emission limits for new power plants based on a combination of the use of high efficiency processes and carbon capture technology.

The  West Virginia v. EPA decision did not affect EPA’s CO2 emission limit for new power plants.  But when EPA has set a standard for new sources of a pollutant, Section 111(d)  allows EPA to direct states to set performance standards for existing sources in the same category.   Given the practical difficulty and potential cost of retrofitting existing sources, Section 111(d) allows flexibility in setting  those performance standards.  EPA’s practice  has been to develop guidelines for state performance standards under Section 111(d) based on the “best system of emissions reduction”,  but taking into consideration the cost and energy impacts specific to existing sources.

EPA’s  Clean Power Plan Rule  set out guidelines for state adoption of CO2 performance standards for existing power plants. EPA based the CO2 emission limit on a combination of three CO2 reduction measures: 1.Heat rate improvements that would cause coal-powered plants to burn coal more efficiently; 2. A shift in power generation from coal to natural gas-fired plants; and 3. Additional shifting of energy generation from coal or natural gas to renewable sources such as solar and wind energy. In taking that approach, EPA acknowledged that  heat rate improvements at individual coal-fired plants would have very limited benefit, making a shift in energy generation necessary to achieve significant reductions in CO2 emissions.

EPA concluded that electric utilities could reasonably reduce reliance on coal generation from 38% of total power generation to 27% by 2030 and calculated a CO2 emission limit for existing power plants based on that assumed level of generation shifting from coal to natural gas and renewable energy.

The “Major Question”.  The U.S. Supreme Court decision in West Virginia v. EPA focused on EPA’s use of generation shifting as a basis for setting CO2 emission limits for existing power plants. The Court noted EPA’s past practice of  setting emission limits based on pollution reduction technologies or operating conditions that could be implemented at an individual plant. The Court held that EPA’s novel approach to setting a CO2  emission limit and the potential economic impact on  the entire power generation system required specific Congressional authority:

Precedent teaches that there are “extraordinary cases” in which the “history and the breadth of the authority that [the agency] has asserted,” and the “economic and political significance” of that assertion, provide a “reason to hesitate before concluding that Congress” meant to confer such authority. [Citations omitted.] Under this body of law, known as the major questions doctrine… the agency must point to “clear congressional authorization” for the authority it claims.

Given the absence of express Congressional authority to use generation shifting to limit CO2 emissions, the Court held EPA had exceeded its authority in adopting the Clean Power Plan Rule.

The Court admits that the major questions doctrine overrides normal rules of statutory interpretation. In other words, the Court can use the doctrine to find no authority for an agency regulation even if the normal rules of statutory interpretation may support the agency action.  In West Virginia v. EPA, the Court leaned heavily on the novelty of using generation shifting to reduce pollution and projections that forcing a shift from coal to natural gas and renewable sources could raise energy costs. The Court didn’t exactly find that Congress failed to authorize generation shifting as a system of pollution reduction. Instead, the Court  talks about “doubting”  or being “skeptical” that Congress intended to authorize EPA to require generation shifting given the possible cost and impact on the power system.

The Dissent. The three dissenting justices, in an opinion written by Justice Kagan, noted that Section 111 directs EPA to select a system of pollution reduction rather than a pollution control technology. The dissenters noted that EPA has used cap and trade programs  — which allow an individual facility to purchase pollution reduction credits from another source  instead of implementing control technology — as part of a system for reducing emission of other pollutants.

The dissenting justices argued that Section 111(d) gave EPA  authority to include a shift in power generation as part of a system of reducing CO2 emissions from power plants. The dissent also questioned the majority’s leap to a new and broad application of the  “major questions” doctrine instead of applying the normal rules of statutory construction.

Questions about the Major Questions Doctrine.   The decision in West Virginia v. EPA  states (and uses) the  “major questions” doctrine more broadly than previous cases. The breadth could be problematic  given the lack of guidance in the decision on how to apply what appears to be a very subjective standard.  Based almost entirely on the fact that the generation-shifting in the Clean Power Plan Rule represented a new  approach to pollution reduction, the Court

[doubted]  that “Congress  . . . intended to delegate . . . decision[s] of such economic and political significance,” i.e., how much coal-based generation there should be over the coming decades, to any administrative agency.

The “economic and political significance” of an agency’s exercise of authority could be very much in the eye of the beholder. In 1964, Justice Potter Stewart attempted to explain how the Supreme Court distinguished Constitutionally protected free speech from unlawful obscenity by saying “I shall not today attempt further to define the kinds of material I understand to be embraced [by the terms pornography or obscenity]…[b]ut I know it when I see it…” The major questions doctrine may be similar.  The West Virginia v. EPA decision doesn’t indicate what criteria for economic and political significance the Court will use to decide whether the doctrine applies.  Apparently, the Court will know economic and political significance when it sees it.

Effect on State Greenhouse Gas Policies. The West Virginia v. EPA decision doesn’t have any effect on state authority to regulate greenhouse gas emissions. State environmental agencies operate under authority granted by state law rather than federal law. The Clean Power Plan Rule never went into effect as a result of  lawsuits challenging the rule and the Trump administration’s later effort to repeal it. So at present no federal rule compels the state to act, but  nothing prevents the state from acting on its own.

Update: The title of this post has changed.

Pipelines

June 4, 2021. The NC. Senate voted yesterday to disapprove the nomination of Dionne Delli-Gatti as Secretary of the Department of Environmental Quality (DEQ). Republican Senators  continued to tie the disapproval to dissatisfaction with Delli-Gatti’s earlier responses to questions about Cooper administration policy on natural gas in general and the Mountain Valley Pipeline Southgate project in particular.  Senators cited recent disruption of gasoline supplies due to a cyber attack on Colonial Pipeline to highlight the risk to natural gas supplies similarly reliant on a single major pipeline. Senators leading the opposition to confirmation placed the responsibility for addressing the risk  posed by lack of redundancy in pipeline infrastructure on Sec. Delli-Gatti and characterized her answers to questions about natural gas policy as “disqualifying”.

Some background on the natural gas issues  raised by Senators in opposition to Secretary
Delli-Gatti —

DEQ and pipeline approvals.  An energy company makes the initial decision to construct new infrastructure  based on evaluation of demand and economic return. Private sector energy companies haven’t planned new projects around creating redundancy in major energy infrastructure. It also isn’t clear how easy it would be under existing state and federal energy laws to get approval of a project based solely on creating redundancy in the system.  Those approvals now require justification based on additional demand, replacement of existing capacity, and compliance with environmental standards. The approvals also take consumer cost into consideration.

New natural gas pipelines require a certificate of convenience and necessity from the Federal Energy Regulatory Commission (FERC) to  confirm a legitimate energy need for the project. FERC also regulates interstate pipeline projects for transportation safety purposes. As the lead federal agency,  FERC takes responsibility for environmental review of the projects — including preparation of the Environmental Impact Statement (EIS) and coordination with other federal permitting agencies. Pipeline construction often requires a  Clean Water Act Sec. 404 permit (for deposition of fill material in rivers, streams and other waters) from the U.S. Army Corps of Engineers.

DEQ has no role in planning new pipelines or in  FERC decisions about the necessity of a proposed pipeline.  DEQ’s ability to affect energy infrastructure projects largely  comes from its authority to  implement state laws protecting water quality and air quality. Unless other state permits are required, DEQ participates in environmental review of  a pipeline project in two ways: 1. DEQ  agencies comment on the draft federal  EIS;  and 2. the Division of Water Resources may be requested to issue a state water quality certification for the project.  Under Sec. 401 of the Clean Water Act, an  applicant for a Sec. 404 permit must provide  a certification that the entire project as constructed and operated will meet state water quality standards. The state certification is not a permit, but  the Clean Water Act prohibits the Corps of Engineers from issuing a Sec. 404 permit  if the state has denied the  water quality certification. Since pipeline projects often traverse multiple states,  a pipeline project would require similar certifications from each state in the path of the pipeline.

DEQ has reviewed two pipeline projects in recent years; both had been proposed by electric utilities to supply natural gas to power plants.  Duke Energy and Dominion Energy jointly proposed construction of the Atlantic Coast Pipeline (ACP) to transport natural gas from West Virginia into  Virginia and  Eastern North Carolina to supply Dominion and Duke Energy power plants.

Dominion Energy proposed the Mountain Valley Pipeline Southgate project to extend transmission pipeline from the proposed Mountain Valley Mainline in Virginia into Piedmont North Carolina. The Mountain Valley Mainline would be a major new pipeline (not yet constructed)  to  transport natural gas from shale formations in West Virginia and Pennsylvania to Virginia. The MVP Southgate project included 40 miles of pipeline through Rockingham County and  Alamance County, ending southeast of Graham, North Carolina.

Cooper Administration  Actions on the Atlantic Coast Pipeline and the MVP Southgate Project

DEQ’s Division of Water Resources issued a water quality certification for the ACP project on January 26, 2018.  The same day, Governor Cooper announced  a separate agreement between the state, Dominion Energy and Duke Energy to  create a $57.6 million mitigation fund to be used at the Governor’s discretion to mitigate project impacts beyond the scope of those addressed by environmental permits. Under the agreement,  the funds could also be used to assist  Eastern North Carolina industries that could not otherwise afford to tap onto the pipeline. The mitigation fund, which was controversial (and redirected by the General Assembly to benefit schools in the counties affected  by pipeline construction), never came into existence because of the later decision by Duke and Dominion to cancel the ACP project.

On August 11, 2020, DEQ’s Division of Water Resources denied the water quality certification and a Jordan Lake riparian buffer authorization for the MVP Southgate project because of uncertainty about the project’s viability.  Mountain Valley Pipeline LLC had indicated an intent to begin construction of the MVP Southgate project before legal obstacles to the MVP Mainline had been resolved, creating the possibility of water quality impacts in North Carolina without assurance the pipeline would ever operate. The DEQ letter denying the water quality certification noted that:

…several federal permits necessary for the construction of the MVP Mainline project have been suspended or are pending, with some in litigation. In addition, the Federal Energy Regulatory Commission has issued a stop-work order on the currently incomplete MVP Mainline project. The uncertainty of the MVP Mainline project’s completion presents a critical risk to the achievability of the fundamental purpose of MVP Southgate.

Mountain Valley Pipeline LLC appealed denial of the water quality certification. The 4th Circuit Court of Appeals upheld DEQ’s  authority to deny the certification based on uncertainty that the documented water quality impacts of construction would ever be justified by energy benefits. But the court directed the state to provide more explanation of  the decision to deny certification rather than condition certification  on approval of the MVP Mainline project. On April 29, 2021 (two days after Secretary Delli-Gatti’s confirmation hearing), the Division of Water Resources issued a letter further explaining the denial decision as required by the court. 

The April 2021 letter quoted from the original DWR hearing officer’s report on the MVP Southgate project:

In the absence of the MVP Mainline pipeline’s completion in Virginia, the MVP Southgate project has no independent utility. In essence, it would be a pipeline from nowhere to nowhere incapable of carrying any natural gas, and certainly not able to fulfill its basic project purpose, while having no practical alternative. As such, prior to incurring any impacts to North Carolina natural resources, and to ensure that the maximum avoidance and minimization of impacts to North Carolina water and buffer resources occurs, a level of certainty regarding the completion of the MVP Mainline pipeline is required.

Outcomes. The Atlantic Coast Pipeline received necessary state and federal approvals,  but  Duke Energy and Dominion Energy announced the cancellation of the project in July 2020 due to cost increases, project delays, and increased uncertainty about the outcome of legal challenges to federal permits for the project.  The companies pointed particularly to a federal court decision from another state calling  into question the Corps of Engineers’ approach to permitting similar projects under Sec. 404 of the Clean Water Act. 

As noted above, DEQ’s Division of Water Resources provided additional explanation for denying the water quality certification for the MVP Southgate project as required by the 4th Circuit Court of Appeals. Mountain Valley Pipeline LLC can reapply for a water quality certification if/when legal barriers to construction of the Mountain Valley Mainline project have been removed.

Open Questions.  What is the Cooper administration policy on natural gas? Based on DEQ’s actions on the two pipeline projects reviewed since 2017, there is no policy against new natural gas infrastructure. Cooper’s DEQ approved the water quality certification for the Atlantic Coast Pipeline and denied the certification for the Mountain Valley Southgate project based on conditions peculiar to that project. Every indication is that DEQ has evaluated individual projects on their merits under existing state environmental laws and rules.

Two other issues arose in the confirmation debate: 1. The  possible need for redundancy in energy infrastructure to reduce risk of system failure; and 2. The challenges of meeting near-term energy needs during a period of transition from nearly total  dependance  on fossil fuels to greater reliance on renewable energy sources.

Pipeline companies clearly need to reduce risk of service interruption. Creating redundant pipeline infrastructure , however, would be extremely expensive — costs that would be passed on to consumers — and likely unnecessary to reduce most types of  risk. Avoiding loss of pipeline service  due to a cyber attack is best addressed by better cyber security rather than creating more  pipeline infrastructure served by the same unsecured computer system.

There is also a legitimate question about how to meet current energy demand during a transition from fossil fuels to more renewable resources.  That will require a delicate dance of demand, supply and reliability; cooperation between public utilities and state/federal agencies; outreach to communities  concerned about local impacts; and environmental organizations looking toward a different energy future. DEQ approved the Atlantic Coast Pipeline; community resistance and legal challenges by environmental organizations caused Duke Energy and Dominion Energy to abandon the project.