October 12, 2015.   The legislative session finally ended  in the wee hours of September 30 and changes to state  environmental laws continued to be in play until the very end.   Several of the provisions discussed below were enacted as part of  House Bill 765 (the Regulatory Reform Act of 2015) which has not yet been signed by the Governor. H 765 contains too many pieces to completely catalog here; some have been  very controversial.  The other bills referenced in the post have already become law.

Not a complete list, but some of the most significant changes affecting the environment:

“AG-GAG” LEGISLATION.   House Bill 405  allows an employer to take legal action against an employee who:  a.  takes photographs, makes recordings, or copies records; b. in a nonpublic area of the workplace; c.  without permission;  and d. uses those documents “against the interest of the employer”.   H 405 allows  the employer to sue the employee for monetary damages,  including legal fees and a $5,000 per day penalty. Animal welfare activists have characterized these kinds of  bills  as “ag-gag” legislation intended to prevent documentation of animal cruelty at agricultural operations.  House Bill 405,  however,  does not just affect agricultural workers or documentation of animal cruelty. The restrictions could also affect employee efforts to document ongoing environmental violations such as improper disposal of hazardous substances. See an earlier post for more on the implications of H 405. Note: Governor Pat McCrory vetoed H 405, but the General Assembly overrode the veto to allow the bill to become law.

FRACKING.  One of the final bills of the session, Senate Bill 119,  severely limits local regulation of  hydraulic fracturing (“fracking”) operations.  First, a little background. 2014 legislation prevented local governments from banning fracking altogether, but G.S. 113-415.1 allowed  cities and counties to continue to apply ordinances applicable  to all development in the jurisdiction — such as zoning and stormwater ordinances —  to fracking operations.  The state’s Mining and Energy Commission had authority to override a  local ordinance that had the effect of precluding natural gas exploration and development.

Senate Bill 119 rewrites the  2014 law to invalidate all local ordinances that directly regulate fracking, preempting ordinances that go beyond or conflict with state standards for hydraulic fracturing operations.  The bill also allows the oil and gas operator to challenge the application of  more general local ordinances (such as zoning and stormwater ordinances) to fracking operations.  These challenges go to the state  Oil and Gas Commission (which has replaced the Mining and Energy Commission in regulating oil and gas operations). The Commission will  decide “whether or to what extent to preempt the local ordinance to allow for the regulation of oil and gas exploration, development, and production activities”.  The  2015 amendments clearly  give the Oil and Gas Commission very broad power to preempt even general development ordinances. Preemption does not require a finding that the ordinance precludes natural gas exploration and development or conflicts with state standards.  As long as the natural gas operator has received  state/federal permits, the bill seems to direct the Commission to preempt application of general development ordinances to fracking operations if the Commission finds that fracking

…will not pose an unreasonable health or environmental risk to the surrounding locality and that the operator has taken or consented to take reasonable measures to avoid or manage foreseeable risks and to comply to the maximum feasible extent with applicable local ordinances.

STATE ENVIRONMENTAL POLICY ACT. For over 40 years, the State Environmental Policy Act  (SEPA) has required environmental review of  projects involving expenditure of public funds or use of public lands.   An earlier post provides some background on SEPA.   House Bill 795  limits  environmental  review under SEPA to projects that:  1.  involve expenditures of $10 million or more in public funds;  or 2. affect 10 acres or more of public lands and result in permanent changes to the landscape.  The  new thresholds mean many public projects with potentially significant impacts will be exempt from SEPA review. For projects that still require SEPA review,  House Bill 795 narrows  the scope of review to  direct project impacts — excluding indirect impacts  and the combined effects of  similar projects. The final version of the bill made some exceptions to these changes as applied to interbasin transfers (the movement of water from one river basin to another for water supply).   All interbasin transfer  proposals will continue to require SEPA review without regard to the amount of public money or public land  involved and the scope of review will include direct, indirect and cumulative impacts.

In an ironic twist, H 795  requires the Department of Environmental Quality (DEQ)  to create a  new environmental review process for water/wastewater infrastructure projects that receive loans from the Drinking Water Revolving Loan Fund or the Clean Water Revolving Loan Fund.  Federal rules  require  those projects to go through an environmental review equivalent to review under the National Environmental Policy Act.  Eliminating SEPA review  for smaller revolving loan projects had the  unintended  effect  of shifting the projects back into a lengthier federal environmental review process. In short, legislators liberated the projects from SEPA  only to create a SEPA-like environmental review process to avoid the still worse fate of federal review. The entire debate over H 795 indicated a  lot of  confusion about how SEPA works and the likely impact of the bill.  See another post for more on the misconceptions about SEPA that seemed to shape H 795.

LOCAL ENVIRONMENTAL ORDINANCES.   The legislature also  took aim at local environmental ordinances. Section 2 of  House Bill 44 includes a somewhat opaque provision barring local governments from enforcing “voluntary” state environmental rules. The words “voluntary” and “rule”  do not generally exist in the same space;  a rule, by definition is not voluntary.  The provision  may really be intended to stop local implementation of stormwater ordinances adopted to comply with the  Jordan Lake water quality rules.  Section 2  applies not just to local implementation of  the elusive  “voluntary” state rule, but also to implementation of state rules that have been repealed; rules that have been adopted, but are not yet in effect; or rules that are “temporarily or permanently held in abeyance”. The Jordan Lake rules fall into the last category as a result of earlier legislation delaying state implementation of the rules.

The new provision affects both issuance of new development permits and enforcement of conditions on permits that have already been issued. Barring enforcement of conditions on  previously issued permits  has implications for both developers and local governments.  The questions that immediately come to mind (using the Jordan Lake stormwater requirements as an example): Can development already permitted under the Jordan Lake stormwater standards  move ahead without meeting any stormwater requirements?  or Will the development require a modified permit to reflect  stormwater standards that might have applied prior to local adoption of the Jordan Lake stormwater ordinances?

Section 13 of House Bill 44 limits local government authority to adopt riparian buffer requirements.  The bill defines “riparian buffer”  to mean any setback from surface waters —  which could include a setback imposed for flood control.  But much of the provision has been written to refer specifically to  riparian buffers for the protection of water quality.   Under the bill, a local government cannot adopt and enforce a riparian buffer ordinance for water quality protection  that  goes beyond requirements of state or federal law (or the conditions of a state or federal permit) unless the Environmental Management Commission approves the ordinance.

The bill also requires riparian buffers affecting  residential lots  to be shown on the subdivision plat. And an unusual provision addresses development projects that meet riparian buffer requirements by designating buffers as common area or open space:

When riparian  buffers are placed outside of lots in portions of a subdivision that are designated as common areas or open space and neither the State nor its subdivisions holds any property interest in that riparian buffer area, the local government shall attribute to each lot abutting the riparian buffer area a proportionate share [of the buffer area] ….for purposes of development-related regulatory requirements based on property size, including, but not limited to, residential density and nonresidential intensity calculations and yields, tree conservation purposes, open space or conservation area requirements, setbacks, perimeter buffers, and lot area requirements.

ENVIRONMENTAL AUDIT PRIVILEGE/SELF-DISCLOSURE IMMUNITY.  Two of the most important changes to state environmental law can be found in House Bill 765  (the Regulatory Reform Act of 2015). The bill creates a new privilege for information a company gathers on its own environmental violations, preventing use of the information in a civil case. (The privilege does not apply in a criminal prosecution.)   The bill also grants immunity from civil penalties and fines for environmental violations voluntarily disclosed to state regulators.  Supporters of the bill believe these protections will encourage companies to conduct environmental audits to identify and correct environmental violations more quickly.

The bill excludes certain types of information from the audit privilege (such as data required to be reported under state and federal law). Although the  bill  creates some exceptions to the audit privilege, most of the exceptions require state regulators to show the violator deceptively withheld information or failed to correct violations in a timely way — which may be difficult without access to the audit information itself. H 765 protects environmental audit information from use  in both civil penalty cases and in actions to compel cleanup of environmental contamination.

Although less clear, the  bill may also shield environmental audit information from a private plaintiff seeking compensation for personal injury or property damage caused by an environmental violation.   The section of the bill creating the audit privilege says flatly that the audit information “is privileged and, therefore, immune from discovery and is not admissible as evidence in civil or administrative proceedings”. That section of the bill does not limit the privilege to  environmental enforcement cases brought by the state.  On the other hand, the section of the bill  on  revocation of the audit privilege has been written only to allow the “enforcement agency” to ask a court to revoke the audit privilege.  The bill needs to be clarified in one direction or the other — either the privilege applies only to state enforcement actions or it applies to other civil actions and the opportunity to ask for revocation of the privilege  should  be broader.

The self-disclosure immunity provisions in H 765  grant immunity from civil penalties and fines based on voluntary disclosure of the violation.  The bill sets conditions that must be met to make a self-disclosure “voluntary”.  The final version of the bill also put limits on  how often a person (or company) can claim self-disclosure  immunity — no more than once every two years; twice in a five-year period; and three times in a ten-year period.  The bill never defines “civil penalties and fines”, leaving some questions about the breadth of the immunity being granted.  For example, the bill is silent on whether “civil penalties and fines” includes natural resource damages. (An example would be  fish kill damages assessed as a result of a wastewater spill.)

For a more detailed comparison to past DENR and present U.S. Environmental Protection Agency enforcement policies on self-disclosed violations, see an earlier post.  Note: EPA has long opposed statutory audit privilege out of concern that  withholding information from regulators will  hamper effective environmental enforcement.

RISK-BASED REMEDIATION. House Bill 765 also makes changes to state laws allowing the person responsible for environmental  contamination (the “responsible party”) to do a partial cleanup of  groundwater and soil contamination by relying on land-use controls to limit future exposure to contamination that remains on the site.  The biggest changes:

♦  Sites where contamination has migrated onto adjacent properties would become eligible for risk-based cleanup.  Existing law requires  contamination that has migrated off the property where it originated to be remediated to “unrestricted use standards”  — meaning  levels safe for any possible land use without reliance on land use controls to prevent exposure to contamination.  That effectively means remediation of contaminated groundwater to meet  state groundwater standards. Risk-based cleanup of contamination on adjacent properties had not been allowed because of the additional complications of managing exposure to those contaminants on property the responsible party does not control. H 765  makes  a risk-based cleanup on adjacent property possible with the property owner’s permission. The cleanup would have to meet the same remediation standards applied to the  source site  with an additional stipulation that the remediation plan cannot cause contaminant levels on the adjacent property to actually increase.

♦ The bill removes statute language that had limited risk-based remediation to contaminated sites reported to DENR  before the risk-based remediation law went into effect in 2011, allowing   lower-cost, risk-based remediation as an option for future pollution events.

♦ H 765 adds new categories to an existing statutory list of sites excluded from these particular  risk-based remediation provisions.  The new exclusions cover coal ash disposal sites and animal waste management systems.

♦ The bill creates a separate risk-based remediation program for above-ground petroleum storage tanks (ASTs). The AST program closely follows  the model of the basic risk-based remediation statute, but imposes lower fees on the person responsible for cleanup.

♦ Broad changes to riparian buffer rules.  Proposals to significantly roll back riparian buffer requirements for nutrient sensitive waters fell away in negotiations between the House and Senate.  Instead, House Bill 44 requires a study of the buffer rules, including ways to reduce regulatory burden on owners of property platted before their adoption.  The legislature did enact a few limited changes to buffer requirements.  House Bill  44 directs the Environmental Management Commission  to allow case-by-case modification of the requirement to maintain woody vegetation in riparian buffers  if the landowner shows that  alternative measures will provide equal or greater water quality protection. House Bill 765  alters  state stormwater rules to  (among other things)  allow more intensive development in riparian buffers along shellfish waters, outstanding resource waters and high quality waters if stormwater  from the development is collected, treated and discharged through the vegetated buffer. The provision doesn’t put any upper limit on the amount of impervious surface allowed in the area previously known as a buffer, so it isn’t clear how much vegetated buffer will remain to discharge the stormwater through.

♦ Repeal of state fees supporting electronics recycling programs. The repeal proposed by the Senate turned into a legislative study of electronics recycling.

♦  Repeal or significant  rollback  of the state’s Renewable Energy Portfolio standard.  Efforts to freeze the REPS standard at 6% of retail sales failed. (Although not before popping up in multiple bills.)

♦  LImits on the state Environmental Management Commission’s authority to adopt federal air quality standards. The proposal could have put North Carolina’s delegated Clean Air Act program at risk. In the end, the General Assembly settled for a provision prohibiting the state air quality program from enforcing federal standards for wood heaters. The provision doesn’t have any real effect since  EPA has never delegated enforcement of the  standard for wood heaters to the states.

The  next session of the N.C. General Assembly convenes on April 25, 2016.