Monthly Archives: April 2015

What is the SEPA Problem?

April 30, 2015. In a late evening vote, the N.C. House voted yesterday to put significant limits on a 1971 state law requiring an environmental impact statement (EIS)  for projects that  involve expenditure of public funds or use of public lands. An earlier post on House Bill 795 provides some background on the State Environmental Policy Act (SEPA) and the first version of the bill.  The version approved by the House last night had been amended to lower the thresholds for requiring an EIS from those in the original  bill;  now, expenditures of $10 million in public funds or activities affecting 5 acres or more of public lands will require environmental review.  Another amendment to House Bill 795 excludes interbasin transfers (the movement of water from one river basin to another for water supply) from the new  SEPA thresholds. All IBT proposals will continue to require SEPA review, although other provisions in House Bill 795 mean the scope of review will be narrowed to just direct project impacts — excluding indirect impacts  and the combined effects of similar water withdrawals.

House Bill 795 has also been amended to require the Department of Environment and Natural Resources (DENR) to create a new environmental review process for water/wastewater infrastructure projects that fall below the new public expenditure threshold, but receive loans from the Drinking Water Revolving Loan Fund or the Clean Water Revolving Loan Fund.  In committee last week, House members heard from DENR  (apparently for the first time) that eliminating SEPA review could have the seriously unintended consequence of shifting those projects into a federal environmental review process. Federal monies provide much of the capital for the revolving loan funds and federal rules require funded projects to go through an environmental review equivalent to review under the National Environmental Policy Act (NEPA).  SEPA had provided N.C. projects with a streamlined alternative to NEPA review; now, DENR will  have to reinvent an environmental review process for projects that fall below the new SEPA thresholds.

The circle legislators traveled  to liberate revolving loan projects from SEPA  only to create a similar environmental review process to avoid the even worse fate of federal review reflects the amount of confusion surrounding House Bill 795.  Debate on the bill has  revealed so many misconceptions about SEPA and so little information about the effect of the law  that it isn’t clear what problem legislators are  trying to solve.

First, some misconceptions about the State Environmental Policy Act that seem to be affecting legislative debate:

SEPA requires environmental review every time someone turns a shovel on a state project (as one of the bill sponsors suggested.)  In reality, the law has  a number of exemptions and state agencies  can adopt rules exempting additional categories of projects that have minimal impacts.  DENR has an entire set of SEPA “minimum criteria” rules that  allow  many state and local projects with  minor impacts  to go ahead without SEPA review.  Projects that don’t qualify for an exemption can often do a brief  Environmental Assessment to show the project  has no significant environmental impacts, avoiding the time and cost of a full Environmental Impact Statement.

SEPA  review delays major highway projects.   Legislators debating  House Bill 795 often mentioned road projects.   The executive director of the N.C. Chamber of Commerce (which made SEPA reform its top legislative priority this session) wrote an op-ed using the long, tangled path to final approval of plans to replace the Bonner Bridge over Oregon Inlet as an example of a SEPA horror story.  The problem with that example — SEPA had nothing to do with environmental review of the Bonner Bridge replacement project. Like every major road project in the state  that needs federal permits or receives federal highway funds, the Bonner Bridge project required review under the National Environmental Policy Act. Severely limiting environmental review under SEPA may mean less review of small road projects funded entirely by state and local government; it will not change environmental review of major highway projects in the state.

Environmental permitting makes SEPA review unnecessary.   House Bill 795 supporters suggest the increase in environmental permitting programs  since adoption of SEPA makes the law less necessary.  Some permit reviews can take a broad look at environmental impacts,  making  a SEPA review unnecessary; that has been the basis for some exemptions already in the law. (Projects permitted under the state’s  Coastal Area Management Act do not require SEPA review.)  But many environmental  permits only  look at one kind of environmental impact and do not provide a comprehensive environmental review.

An air toxics permit review  leads to limits on emission of toxic air pollutants, but does not  evaluate  the facility’s broader environmental impacts — or even answer the basic question of whether it makes sense to put a facility emitting toxic air pollutants in a particular place. In debating House Bill 795, several legislators mentioned controversy over the proposed Titan Cement plant near Wilmington which raised exactly this issue. Citizens wanted the state to delay issuance of air quality permits for the Titan project  until an EIS had been completed. One concern was that even  highly controlled mercury emissions from the plant could be too much given the plant site’s close proximity to the Cape Fear River (which already has elevated mercury levels).

SEPA also requires review of environmental impacts earlier in project planning — before the state or local government agency has entirely committed to a single site or project design.  That allows the possibility of changing direction based on information from the environmental review. By the time a permit application is submitted,  decisions about location and project design have already been made.

SEPA review slows economic development and job creation. The N.C. Chamber of Commerce made this argument in support of the bill, but never gave a real example.  First, it is important to remember that SEPA  does not apply to purely private development projects no matter how great the environmental impact. (You can take that as either a fine quality in the law or a serious flaw depending on your point of view.)  No manufacturing plant, shopping center, residential subdivision, or commercial development will — by itself — require review under SEPA.  Sometimes, state or local government economic  incentives for a project trigger SEPA review.  Most financial incentives (like  tax credits) don’t have that effect because the incentives don’t involve an actual public expenditure on the development project. The Titan Cement project involved a question about whether a particular type of state incentive package  triggered SEPA review. The kind of economic incentive that may lead to SEPA review more often involves  a local government agreement to provide dedicated infrastructure for the development project — such a sewer line or access road.

Given the brief consideration given the bill,  the number of misconceptions surrounding the existing law, and the failure to identify a specific problem to be solved,   the SEPA reforms in House Bill 795  seem  haphazard and unfocused. The bill isn’t likely to solve a problem if the problem  hasn’t  been identified. Legislators who assume House Bill 795 will speed highway and reservoir projects will be disappointed; those projects will still require federal NEPA review.  Arbitrarily drawing a new line  for SEPA review based on project cost will exempt some projects that have significant environmental impacts since cost and environmental impact are not the same thing.  At the moment,  there is a significant risk that House Bill 795 will make  SEPA  less useful in circumstances where  it is most needed without solving any particular problem for the bill supporters.

The bill now goes to the Senate.

Should N.C. Stop Enforcing Federal Air Quality Standards?

April 25, 2015. Since an earlier post briefly described Senate Bill 303 (Protect Safety/Wellbeing of N.C. Citizens), the bill has passéd the Senate in a form that could  put the state’s delegated Clean Air Act permitting and enforcement programs at risk. The bill  passed by the Senate:

♦  Requires a 3/5 vote to of the Environmental Management Commission (EMC) to adopt state rules consistent with federal New Source Performance Standards (NSPS); these  Clean Air Act standards apply to large, stationary sources of air pollutants such as power plants.

♦ Requires a 3/5 vote of the EMC  to adopt new federal hazardous air pollutant (HAP) standards as state rules. The hazardous air pollutant standards regulate emissions of  toxic air pollutants such as mercury and arsenic.

♦ Requires legislative review and approval of all state rules adopting federal air pollution standards.

♦ Prevents the state Division of Air Quality from enforcing existing NSPS and hazardous air pollutant standards after January 1, 2016 unless the EMC has readopted all of those standards under the new requirements for a 3/5 vote of approval and legislative review.

A story  by Gabe Rivin  in N.C. Health News reports that the Department of Environment and Natural Resources  (DENR) supports the bill and  quotes DENR Assistant Secretary Tom Reeder describing the bill as benign. According to the story,  a DENR spokesperson did express concern about the provision that could end state enforcement of existing federal air quality standards on January 1, 2016. (That provision was added to the bill in a floor amendment.)

Failure to adopt and enforce federal Clean Air Act standards could have  serious implications for the state’s delegated Clean Air Act permitting and enforcement authority.   North Carolina  currently has full delegation of authority from the U.S. Environmental Protection Agency (EPA) for Clean Air Act programs.  (All 50 states have taken on full or partial delegation under the Clean Air Act.)  Failure  to adopt a new federal standard may have a greater or lesser impact on the state’s delegated authority depending on the type of rule.  An end to all state enforcement of federal NSPS and hazardous air pollutant standards would presumably require EPA to withdraw the state’s delegated authority entirely.

Whatever the impact of Senate Bill 303 on state rulemaking, federal air quality standards will continue to apply to sources in North Carolina.   If the state refuses to enforce a federal standard, EPA will step in and do it.  Senate Bill 303 cannot free N.C. industries and utilities from compliance with federal air quality standards. On the other hand,  loss of state delegation under the Clean Air Act may disadvantage those industries and utilities in two ways: 1. permitting and enforcement matters would have to be resolved with EPA rather than a state agency;  and 2.  regulated sources may lose the benefit of  flexibility in permitting and enforcement allowed to states implementing federal requirements through a delegated program.

It isn’t clear who  Senate Bill 303 would  benefit. Assistant Secretary Reeder’s comments suggest the bill could help the department avoid new, burdensome Clean Air Act responsibilities. But the one example offered  —  a new NSPS standard for wood heaters — is entirely enforced by EPA through third-party certification of  manufacturers.  (Find EPA information on enforcement of the wood heater standard here.) Since EPA does not delegate enforcement of the wood heater rule to the states, there is no real danger the state would  be required to visit homes to inspect wood heaters.

The state already has the ability to decline new federal rule delegations and to give up existing delegations under the Clean Air Act.  It seems the kind of decision best made deliberately and after a clear-eyed assessment of the  consequences  — not as a side-effect of failure to adopt a rule by a supermajority.

Update: The original post has been updated to add a link to the EPA webpage on enforcement of the wood heater standard.

Correction: The post has been updated to correctly identify the publication in which Gabe Rivin’s story appeared — N.C. Health News.

2015 Environmental Bills — Part II

April 17, 2015. A continuation of the previous post. Not a complete list, but hopefully  most of the significant bills.

Amend Environmental Laws.  In the category of you just can’t have too many — there are actually three “Amend Environmental Laws” bills this session (so far).  As noted in the previous post, House Bill 157 (Amend Environmental Laws) has already been enacted into law and House Bill 593 (Amend Environmental Laws-2)  amends  laws allowing reimbursement for third-party damage claims as a result of leaking petroleum storage tanks. I missed House Bill 576 (Amend Environmental Laws-1); at the moment, the bill  amends  solid waste laws to allow  the white goods tax (currently used by local governments to manage discarded refrigerators and other large appliances) to also be used for programs to manage discarded electronic devices.    Amend Environmental Laws-1 may also pick up additional provisions as it moves through committee.

Contaminated Sites. House Bill 748 (Establish Contamination Source Removal/Disposal Bd) creates a new full-time  (salaried) board to take over DENR’s responsibility for cleanup of contamination at pre-1983 landfills and other contaminated sites. The “pre-1983 landfills” are unlined waste disposal  sites — in some cases,   simply  dumps –that stopped operating before 1983 to avoid having to comply with federal standards for waste disposal facilities.  Many have groundwater contamination.  A 2007  state law  gave DENR responsibility for assessing and remediating the sites. Many of the landfills had been operated by local governments, so the 2007 legislation freed local governments of the potential environmental liability in return for a state solid waste disposal tax to fund cleanup.  House Bill 748  expresses concern about the slow pace of remediation.  It will be interesting to get more of the back story on the bill.  The concern may be as much about unspent funds earmarked for the cleanup as it is about unremediated contamination;  a  pot of money always attracts attention.  Reality is that contaminated sites require a  lot of assessment work before actual cleanup can begin.  Most  state-funded remediation programs have had a slow start up before making significant outlays for remediation.

Also,  a note that  House Bill 639 (Risk-based Remediation Amends) proposes the same amendments to remediation laws that appear in the Senate regulatory reform bill. You can find a description of those provisions in an earlier post.

Fracking. House Bill 773 would strengthen  requirements for public disclosure of chemicals used in hydraulic fracturing fluid.

Riparian Buffers. House Bill 760 is the  House regulatory reform bill.  The environmental provisions include significant changes to state laws allowing use of riparian buffers to protect water quality. It isn’t clear exactly how broad the bill’s restrictions on local government buffer ordinances are intended to be.  The bill amends a law written to allow  state delegation of riparian buffer programs under the nutrient sensitive waters (NSW) rules to local government, but  some of the bill language could be interpreted to prohibit local adoption of riparian buffer ordinances for any other purpose:

Units of local government may impose restrictions upon the use of riparian areas as defined in 15A NCAC 02B.0202 only within river basins where riparian buffers are required by the State.

Local riparian buffer ordinances  are sometimes adopted in response to other  state/federal water quality mandates  — such as Phase II stormwater permit conditions, water supply watershed regulations and endangered species management plans. So a local buffer ordinance may be needed to meet a water quality standard or  permit condition, but  not specifically required under state rules applicable to the entire river basin.  Assuming  the bill did not intend to prohibit use of riparian buffer ordinances to meet  other state and federal water quality mandates, it would be helpful to make that clear.

In  areas covered by the NSW buffer rules, the bill exempts residential lots platted before the buffer rules went into effect — even if the property could be developed for its intended purpose in compliance with the buffer requirement. (There are already exemptions and variances that cover previously platted lots that cannot be developed in full compliance with the buffer requirement.)  The buffer  rules are  part of  broader  water quality strategies designed to meet  federal Clean Water Act requirements. The Clean Water Act requires the state  to adopt a Total Maximum Daily Load (TMDL) –in effect, a cap —  for any pollutant causing impaired water quality. A number of state  water bodies, including the Neuse River and Falls Lake,  have impaired water quality due to excess nutrients  — particularly nitrogen and phosphorus.   The nutrient management rules provide the regulatory  underpinning  for  TMDLs that set nitrogen and phosphorus reduction targets for  those  rivers and lakes.    The rules include  riparian buffer requirements as a critical  tool in reducing the amount of nitrogen and phosphorus that runs off the land into surface waters. One question may be whether such a broad exemption from the buffer rules will allow the state to meet the federally-approved TMDLs.

The bill would also require that riparian buffers on shorelines bordered by coastal wetlands or marshland be measured from the waterward edge of the wetland. The term “coastal wetland” includes both wetlands that regularly flood on the tides and wetlands that flood on wind tides and seasonal high tides.  Under the provision, the “buffer” would often consist of wetlands with a frequent, direct  connection to coastal waters;  in some cases,  the buffer would effectively be in the water. The change would seem to defeat the purpose of having a buffer to allow polluted runoff to infiltrate through the soil rather than go directly into the water.

Stormwater. On the face of it,  House Bill 141 (Stormwater/Flood control) authorizes cities to use existing stormwater management programs to address flood risk by purchasing properties at high risk of flooding, elevating existing structures, and retrofitting  structures to reduce flood risk. The bill seems  intended to allow  cities in more populated counties to expand the purpose of existing stormwater programs to include flood management as well as water quality protection.  (The bill would limit the new authority to cities in a county with a population of 910,000 or greater and at least one city with a population of 500,000 or greater.)  One possible pitfall  — the bill could be interpreted as limiting the authority of other North Carolina towns and cities  to take similar actions through flood hazard mitigation projects.  For example, the small coastal town of Belhaven  has done a major flood hazard mitigation project  to elevate structures in areas repeatedly flooded due to hurricanes.   House Bill 141 may need to be clarified to avoid undermining cities and towns’  existing authority  to reduce flood hazards.

N.C. General Assembly: 2015 Environmental Bills

April 15, 2015.   The final bill introduction deadline  fell  yesterday for bills that don’t affect finance or appropriations,  so it is a good time  to look at the environmental bills  introduced and awaiting action. The General Assembly can also amend environmental laws  in the budget bill or by completely rewriting a bill on an entirely different subject, but with that warning in mind:

House Bill 795 SEPA Reform  would  greatly  limit the number of  projects requiring an  environmental impact statement (EIS) under the state’s Environmental Policy Act (SEPA).   Adopted in 1971, SEPA requires an  EIS  for projects that potentially have a significant environmental impact, need a state approval (such as a permit), and involve either the use of public funds or use of public lands.  Unlike its federal counterpart (the National Environmental Policy Act  or “NEPA”), the state law  has never applied to  privately funded development projects no matter how significant the environmental impact. To require an EIS under the state law, there must be public investment ( which could mean either state or local government funding) or use of public land.  Typical projects requiring an EIS in the past would be  a new wastewater treatment plant; a county landfill; a major development project on state-owned submerged lands; or activities on state parkland.

House Bill 795 proposes to  limit SEPA review  to projects involving $20 million or more in public funding or land-disturbing activity affecting 20 acres or more of public land.   It is difficult to know what percentage of projects required to do an EIS in the past would avoid  SEPA review under the amended law, but it is reasonable to assume that many public  projects fall below the $20 million threshold. Controversial proposals for use of state parks and tidelands could also avoid SEPA review because — whatever the other impacts of the project —  an EIS would only be required for land-disturbing activity that permanently alters the landscape and affects 20 acres or more. For projects that exceed the new size and funding thresholds, House Bill 795 provides additional  SEPA exemptions  for projects receiving  certain types of state approvals. Some of the approvals listed in the bill, such as a certificate of convenience and necessity for a  public utility infrastructure project,  do not  involve  any environmental review.  (That particular exemption also doesn’t seem to serve a purpose;   the “public utilities” that need a certificate of convenience and necessity are by definition not owned or operated by a governmental  entity and  don’t involve public funds.)

For projects that would still require an EIS under the amended law, the bill also limits the scope of the EIS.  Under the bill,  the EIS would only describe direct project impacts — eliminating consideration of indirect and cumulative impacts.

Projects  exempted from the EIS requirement would still need  any necessary environmental permits, but permit reviews tend to be more narrow than an EIS. The EIS looks beyond one set of permitting standards to evaluate the environmental impacts of the project as a whole — which can include consideration of noise, traffic, endangered species, historic sites, and effects on minority and low income communities as well as natural resource impacts. Projects that require a federal permit could still trigger NEPA review; what the state may lose is an opportunity for the same comprehensive review and public input on projects that do not require a federal permit —  which may include some landfill projects and inter-basin transfers.

THE OMNIBUS BILLS (AMEND ENVIRONMENTAL LAWS AND REGULATORY REFORM)

In every recent legislative session, the General Assembly has enacted an Amend Environmental Laws bill  and a Regulatory Reform bill. Both bills become vehicles  for multiple changes to environmental laws. See an earlier post for a description of Senate Bill 453, the Regulatory Reform Act of 2015.

At the moment, House Bill 593 (Amend Environmental Laws-2) only  contains provisions amending  state law on reimbursement of third-party damage claims by the state’s petroleum underground storage tank (UST)  trust funds.  (The UST trust funds can reimburse UST owners for up to $1,000,000 in third-party claims for property damage or personal injury resulting from a petroleum release.)  The amendments require the UST owner to provide specific documentation of the third party damage claim; add definitions of “third party”, “bodily injury” and “property damage”;  and provide more  direction on how to calculate  compensation for  property damage.

It is the  nature of  both the Regulatory Reform and Amend Environmental Laws bill to pick up baggage as the session goes along.  Expect new versions of each bill  as the bills move through committee.

Note: This bill is Amend Environmental Laws-2 because  House Bill 157 (Amend Environmental Laws) has already been enacted into law as Session Law 2015-1. H 157 generally made uncontroversial and technical changes to solid waste laws, the Coal Ash Management Act and other environmental laws. The one provision in H 157 that  created some controversy amended a state law requiring the Environmental Management Commission to adopt air toxics rules for hydraulic fracturing sites.The bill replaced the requirement with language authorizing the EMC to adopt  air toxics  standards for fracking sites  if necessary to protect public health, safety, welfare and the environment.

AIR QUALITY

Senate Bill 303  Protect Safety/Wellbeing of N.C. Citizens  prohibits state enforcement of any federal standards for wood heaters used for home heating.  The bill  is interesting as an example of  state legislation intended to nullify  a federal standard.  In February, EPA adopted updated performance standards for wood heaters. Federal air quality rules have included standards for wood heaters since 1988; the new rule updates the standards to reflect changes in technology and to  regulate  wood-burning boilers and wood-burning furnaces as well as wood stoves.   The  revised  standards only apply to newly manufactured wood heaters, phase in over several years and do not affect fireplaces (at all) or wood heaters already in use.  An EPA fact sheet provides an overview of the rule.  Generally, N.C.’s delegated authority to implement Clean Air Act programs  requires the state  to adopt and enforce federal new source performance standards, but EPA has not delegated enforcement of the wood heater rule to the states.

House Bill 169  Limit Motor Vehicle Inspections  eliminates motor vehicle emissions inspections in six counties  (Burke, Granville, Haywood, Rutherford, Surry and Wilkes). Forty-eight of N.C.’s 100 counties require annual emissions inspections as part of the state’s plan to meet the  federal ozone standard under the Clean Air Act. Recently, the Department of Environment and Natural Resources (DENR) issued a  report concluding that emissions inspections could be eliminated in as many as 28-31 counties without  violating either the current ozone standard or the stricter ozone standard EPA  will  finalize by the end of the year. Given the DENR report, expect the number of counties  the bill removes from the emission inspection program to increase.  Since the emissions inspection program has been used to meet a federal air quality standard, any change by the General Assembly must have EPA approval.

House Bill 172 Fracking – Protecting the Public requires the Environmental Management Commission to adopt rules establishing best management practices and  leak detection and repair standards to  minimize air emissions from natural gas operations. The bill approaches the related problems of wasted natural gas and  air pollution by focusing on  ways  to minimize unintended releases resulting from leaky equipment or inefficient practices during exploration, development, production, processing and compression of the natural gas.

House Bill 571 Implementation of Carbon Dioxide Regulations requires DENR  to begin work on a plan to comply with new federal regulations reducing carbon dioxide (CO2) emissions from power plants. EPA’s Clean Power Plan rule sets a CO2 reduction goal for each state, but states have flexibility in the mix of power plant emission reductions, renewable energy generation, and energy efficiency measures used to meet the goal.  Find  more background on the federal rule here. Each state  must  submit a plan for meeting its   CO2 reduction goal by June 2016, although EPA can extend the deadline if the plan needs legislative approval or relies on a multi-state strategy.  DENR does not appear to have any effort underway to develop a plan. Instead, DENR has both  questioned the legal basis for the federal rule and urged EPA to delay implementation until lawsuits  challenging the rule  have been resolved. House Bill 571 appears to be intended to push DENR to begin  work  on a CO2 reduction plan and do it in a way that provides for  input from both stakeholders and the public.

COAL ASH

House Bill 448 Extend Coal Ash Structural Fill Moratorium  The Coal Ash Management Act of 2014 put new, stricter standards in place for large projects using coal ash as structural fill .  ( “Large” means > 8,000 tons per acre or > 80,000 tons total).   But the law made few change to existing standards for smaller structural fill projects. Instead, the 2014 bill put a moratorium on permitting smaller structural fill projects  until August 1, 2015 to allow time for DENR and the Environmental Management Commission to study the standards for those projects.  The law required a report back  to the General Assembly by January 15, 2015.  The EMC discussed an interim report in  January,  but the interim  report didn’t address the adequacy of existing structural fill standards for small projects. The interim report indicated that a final report would be released in April; it doesn’t appear that a final report has been issued yet.  In the absence of a report on the adequacy of the existing structural fill standards and recommendations, House Bill 448 would extend the moratorium on permitting smaller projects until August 1, 2016.

COASTAL ISSUES

House Bill 151 Property Insurance Ratemaking Reform is not strictly speaking an environmental bill, but deals with use of models projecting catastrophic losses as a result of a hurricane or other natural disaster in setting property insurance rates. The bill would continue to allow use of models, but would require the results of more than one model to support a property insurance rate change.  The bill is interesting given the longstanding tension between the economic benefits of coastal development and the externalized costs of building in natural hazard areas.

House Bill 302 Strengthen Oyster Industry  requires the Division of Marine Fisheries to study the state’s shellfish lease and franchise programs and make recommendations for changes necessary to increase shellfish  aquaculture on the North Carolina coast. The bill also expands on existing law requiring DMF to plan and construct  oyster sanctuaries in the  Albemarle and Pamlico Sounds; sets new civil penalties for interference with oyster cultivation; and makes other changes designed to increase oyster production. State funding for creation of oyster habitat has seen a steep decline in recent years; some additional resources will likely be needed to make the oyster sanctuary program a reality.

House Bill 346 Counties/Public Trust Areas extends to counties the  authority to enforce local ordinances in public trust areas and particularly on the state’s ocean beaches.  Municipalities already have this authority.

CONTAMINATED SITES

Senate Bill 301 DOT/Purchase of Contaminated Land would exempt the N.C. Department of Transportation from a law enacted in 2013 that  effectively prohibited state agencies from purchasing property with environmental contamination.  As noted in a earlier post about the 2013 law,  the General Assembly may not have realized the far-reaching effects.   Environmental contamination is widespread and state policies allowing polluters to do limited, “risk-based” remediation of groundwater contamination mean the contamination will persist well into the future. The 2013 law exempted the UNC system campuses from the restriction; NCDOT has asked for the same exemption — presumably because the law makes acquisition of property for highway construction more difficult.

INFRASTRUCTURE

Senate Bill 397 Open and Fair Competition Water and Wastewater would prevent a state or local government from “preferring” one type of piping material  for use in a  water, sewer or stormwater infrastructure project receiving state funds.  I don’t know the story behind the bill,  but usually legislation attempting to  change a state agency’s policy about  use of a particular product or system has been introduced in response to complaints by  a  vendor.

RENEWABLE ENERGY

The General Assembly’s internal debate over renewable energy development continues. In 2013,  the Republican majority in the General Assembly split over attempts to repeal both the Renewable Energy Portfolio Standard (REPS) and the state’s tax credit for investment in renewable energy projects. In the end, a bipartisan majority declined to repeal the incentives for renewable energy development — in large part, because renewable energy had become one of the bright spots in the state’s economic recovery. See an earlier post on the end of the 2013 fight over the REPS.

This session, one focus is on the scheduled sunset of the renewable energy tax credit on January 1, 2016. There are bills in both the House and the Senate to extend the tax credit;  House Bill 454  extends the tax credit until January 1, 2021 and Senate Bill 329 extends the tax credit to January 1, 2020.  Opponents of the tax credit have introduced a bill, Senate Bill 372, that essentially retains the existing January 1, 2016 sunset,  but provides a “safe harbor” for investors who have made substantial outlays on projects not  in service  by the sunset date. Those taxpayers would have an additional year  (until January 1, 2017) to claim the tax credit.

UPDATE:  House Bill 681 would sunset the REPS requirement early, ending in 2018  with a  standard requiring  6% of retail sales of electricity to be generated from renewable sources. The current law requires that  electric public utilities generate 12.5% of retail sales from renewable energy source by 2021 and thereafter.

Fighting for Control of Environmental Policy

April 8, 2015.   In  North Carolina, most  environmental regulations  are adopted by commissions; the  members serve on a voluntary basis and receive only travel expenses and a minimal  per diem. Serving on a commission is like jury duty — for four years and with homework.   Of the major environmental commissions, the  Environmental Management Commission (EMC) adopts air quality, water quality, solid waste and hazardous waste regulations;  the  Coastal Resources Commission regulates coastal development;  and the Mining and Energy Commission regulates mining and onshore energy exploration and development.  The Department of Environment and Natural Resources (DENR)  provides staff support to the commissions,  but the commissions act independently  in adopting environmental rules.  DENR itself has very limited rulemaking authority.

The Governor and  legislative leaders  are currently battling for control of the commissions.  For  decades,  laws creating boards and commissions either gave the Governor exclusive  power to appoint the members  or gave  the Governor a majority of appointments and divided remaining appointments between the state House and Senate.  Since  2010,  the General Assembly has moved to increase legislative influence over the  commissions.  In the last three years, several laws creating new commissions have given the legislature a majority of the appointments.    Reflecting both legislative interest and emerging issues,  the new environment commissions have responsibilities at the crossroads of environmental regulation and energy development.

In 2012, the General Assembly created the Mining and Energy Commission to develop hydraulic fracturing rules. The commission  has eight legislative appointees, three ex officio members (who serve by virtue of holding a specific position — such as the chair of  N.C. State University’s Minerals Research Laboratory Advisory Committee) and only four  Governor’s appointees.  In 2014, the General Assembly continued the practice in creating  the Coal Ash Management Commission to address coal ash contamination;  an Oil and Gas Commission to regulate onshore and offshore energy production;  and a newly constituted Mining Commission.    All three of the new commissions are dominated by legislative appointees.

Late last year, Republican Governor Pat McCrory  filed suit to challenge the constitutionality of provisions in the Coal Ash Management Act of 2014  (creating the Coal Ash Management Commission) and the Energy Modernization Act of 2014  (creating  the  Oil and Gas Commission and Mining Commission). Two former governors, Republican Jim Martin and Democrat Jim Hunt, joined as plaintiffs. In part, the case challenged the  legislature’s authority to appoint a majority of the members serving on executive branch commissions as an unconstitutional  violation of separation of powers. The  lawsuit also raised some lesser separation of powers issues that I won’t go into here.

On March 16, 2015,  a special three-judge panel of Superior Court judges ruled in the governors’ favor in a far-reaching decision that has implications for all of the  commissions involved in environmental policy.   A copy of the court’s order in McCrory v. Berger can be found  here.  Several things to note about the decision:

1. Although the  lawsuit challenged the constitutionality of legislators appointing a majority of the members of a commission with administrative responsibilities, the decision goes further and concludes that it is unconstitutional for the General Assembly to appoint any members of a  commission that exercises “executive” authority.

2. The decision has broader implications than even the judges recognized.   First,  the judges assumed that the Governor appointed all  EMC  members until 2013;  in reality,   the legislature had  appointed at least one-third of the EMC members for decades.  The judges also mistakenly concluded that authority to regulate energy development and mining had rested entirely in the Governor’s appointees to the old Mining Commission and DENR officials  until 2014.   In fact, a 2012 law gave most regulatory authority over onshore energy development and mining to a Mining and Energy Commission also composed largely of legislative appointees.  Those errors caused the judges to mistakenly conclude  that appointees of the Governor  controlled implementation of laws  governing coal ash disposal, energy exploration and development,  and mining until very recently.

The judges’ misunderstanding of the  reality  before  2013-2014 suggests  they may not have fully appreciated the impact of their decision. The practice of making legislative  appointments to the environment commissions has been  longstanding and well-entrenched. Calling into question the constitutionality of commissions with legislative appointees has implications far beyond three commissions too recently created to have taken any significant action.  Which leads to the next problem–

3. The judges did not discuss how the ruling might affect the validity of actions taken by an unconstitutionally appointed commission.  Of the three commissions directly at issue in  the case, two (the Oil and Gas Commission and the new Mining Commission)  do not officially come into being until July 1 2015.  The Coal Ash Management Commission began meeting in  2014, but has not taken any action beyond submitting preliminary reports to the General Assembly.  But a number of other commissions with legislative appointees have made significant regulatory decisions for years.

In January,  Southern Environmental Law Center filed a  lawsuit on behalf of the Haw River Assembly and an individual Lee County property owner separately  challenging  the constitutionality of the Mining and Energy Commission on separation of powers grounds. The lawsuit  explicitly asked  the court to void hydraulic fracturing rules adopted by the MEC based on the constitutional violation. That case is still pending. The EMC, which has had legislatively appointed members for decades,  has been responsible for the entire body of state air quality and water quality rules.

One note– When the N.C. Supreme Court decided in Wallace v. Bone (1982) that the N.C. Constitution did not allow sitting legislators to also  serve  on the Environmental Management Commission, the court did not void EMC actions in which legislative members had participated.  There is probably an inverse relationship between the number of past actions potentially affected and the likelihood that a court will void past actions based on a separation of powers violation.

4. The most immediate impact of the ruling may be on implementation of the Coal Ash Management Act. The General Assembly gave the Coal Ash Management Commission the power to make critical decisions about closure of coal ash impoundments. Under the law, the commission –rather than DENR — will make final decisions prioritizing  coal ash impoundments for closure and approving closure plans. Those decisions will affect both the pace of closure and the environmental impacts. Because of the  ruling in McCrory v. Berger, the Coal Ash Management Commission canceled a planned meeting for March and finds itself in  limbo.

The next critical point in implementation of the Coal Ash Management Act  will come in early 2016 when the Coal Ash Management Commission should  receive DENR’s recommendations on prioritizing coal ash impoundments for closure.   Timelines in the law anticipate a final decision by the commission within 60 days after receiving the DENR recommendations. It isn’t clear that the legal issues  surrounding the commission will be resolved by then. One immediate question  will be  how to keep moving forward on implementation of the Coal Ash Management Act  until those issues have been settled.

Next steps — Legislative leaders have appealed the decision in McCrory v. Berger to  the N.C. Court of Appeals.