Author Archives: rwsmith

Budget Cuts in the N.C. Coastal Management Program

January 30, 2014.  Caught between state and federal budget reductions, the state’s Division of Coastal Management (DCM) eliminated five positions effective  December 31, 2013 including the land use planning director and federal consistency coordinator.  DCM carries out the state’s Coastal Area Management Act (CAMA)  — a joint state-local program to reduce  property damage and injury from coastal hazards; protect public access to the state’s beaches and waterways;  and manage the impacts of  development on sensitive coastal resources.  With the support of Republican Governor Jame Holshouser, the N.C. General Assembly adopted CAMA in 1974 shortly after  Congress enacted the federal Coastal Zone Management Act  to encourage creation of state coastal resource protection programs.  Over the next several decades,  North Carolina became a national leader in coastal policy even as   the state’s  coastal counties experienced an explosion of development activity.

DCM was forced to eliminate these two positions and three others (the Assistant Director for Permitting and Enforcement,  an IT support position and a policy analyst)  after several years of state and federal budget reductions. Federal grant funding under the Coastal Zone Management Act had been flat for over a decade while salaries, benefits and indirect costs increased. The last federal funding cycle  reduced the state grant by 5.9%. At the same time, state appropriations  have dropped  35% since 2009 and permit receipts  fell by  approximately  30%  as the recession slowed development activity.

More on the impact of eliminating the land use planning and coastal consistency positions:

Land Use Planning Director. One  goal of the Coastal Area Management Act  was to plan coastal development with an eye toward conditions that make the coastal area uniquely hazardous and uniquely productive. To work, it had to be a joint state-local effort and CAMA made local land use planning a key part of the state’s coastal management program.  Budget  cuts in previous years  forced the elimination of a long-standing DCM grant program that provided  financial assistance to coastal cities and towns for land use planning.  Ongoing budget cuts have now made it necessary to eliminate the  CAMA land use planning director. The director supervised  DCM’s  planning efforts and worked directly with local government planners.    Supervisory responsibilities for the  planning program has  shifted to DCM’s policy director.

Federal Consistency Coordinator. The federal Coastal Zone Management Act requires federal  activities affecting  the coastal area to be consistent “to the maximum extent practicable” with the state’s approved coastal management  program.  (To be enforced through the CZMA consistency requirement, a state program must be approved  by the  Office of Coastal Resource Management in the National Oceanic and Atmospheric Administration.) The approved North Carolina coastal management program  includes development standards adopted under CAMA, but also includes local land use  policies, water quality standards, and other state laws and rules concerning coastal resources.   As a practical  matter, the federal consistency requirement  gives the state an opportunity to review and comment on proposed federal activities and federal permit decisions affecting the North Carolina coast.   In many cases, federal consistency review is the only  way  the state  can influence the federal action.

You can find a list of  the types of federal actions and permits DCM  reviews  here.    North Carolina has most often used  consistency review to request accommodation for state needs rather than to block a federal action entirely.  The state used consistency review  to press the U.S. Army Corps of Engineers to put sand from federal navigation dredging projects back on N.C. beaches rather than dumping the sand offshore.  In 1991,  the U.S. Secretary of Interior upheld a North Carolina consistency objection to a federal  permit that would have allowed  Mobil Oil  to deposit drilling waste from an exploratory well onto a commercially important fishing ground off the Atlantic coast. The CZMA consistency requirement also became one of the most important legal tools in North Carolina’s  unsuccessful effort to prevent Virginia from constructing  a pipeline to take water from Lake Gaston to  the City of Virginia Beach.

Loss of the federal consistency coordinator comes at a particularly bad time given the increased  activity around  coastal energy development.  Offshore oil and gas  development  most often occurs in federal waters that are beyond the state’s jurisdiction. (Under the Outer Continental Shelf Lands Act, state jurisdiction  only extends  3-miles from shore.)  Without  direct permitting or enforcement authority,  the  state’s only influence over offshore energy activities may be through  consistency review of federal lease and permit decisions.  Since those federal decisions can advantage or disadvantage the different Atlantic coast states, even supporters of offshore oil and gas development may need a way to advocate for North Carolina interests.  Consistency review  also gives the state an  opportunity to influence  federal leases and permits for  onshore and offshore wind energy facilities.

In both 2012 and 2013, the General Assembly  funded new positions in  DENR’s Division of Energy, Mineral and Land Resources to support work on energy development.   At the same time,  DCM budget cuts have resulted in the loss of a position critical to the state’s influence on offshore energy development activities.    As of January 1, 2014,  federal consistency review  will be divided between two DCM staff  who  review  CAMA major development permits. If activity around offshore energy development  continues to pick up,  the state will need to  reinvest in the federal consistency process to have a voice in how that development happens.

The Links between Coal Ash Disposal and Water Pollution

January 23, 2014. Burning coal  generates ash; depending on the  type of  coal,  the ash may contain iron, chromium,  manganese, lead, arsenic, boron and selenium.   At high levels of exposure, some  of those elements  cause  health problems  such as increased cancer risk and neurological damage.  At many coal-fired power plants, large open impoundments (or “ponds”) store coal ash in water; the ponds may also receive stormwater and process wastewater from the electric generating plant. Dry ash may be disposed of in a landfill, but can  also be  used in manufacturing cement or as additional fill material on construction sites.  Concern about the environmental impacts of  coal ash disposal prompted the U.S. Environmental Protection Agency (EPA) to  propose new federal rules  in 2000. EPA ultimately withdrew the proposed rules in the face of opposition from  electric generating companies, members of Congress and state governments. More than a decade later, regulation of coal ash disposal  remains at a stalemate — no new federal rules have been adopted and Congressional supporters of the electric generating companies have responded to a new EPA  rule proposal by attempting to remove EPA’s authority to regulate coal ash disposal altogether. In the meantime, data collected by EPA and events in North Carolina suggest real risks to surface water and groundwater supplies.

Coal ash in North Carolina.  Duke Energy Carolinas and Duke Energy Progress (related companies  resulting from the 2012 merger of Duke Energy and Progress Energy)  have a combined 33  wet coal ash ponds located at 14 electric generating stations  in North Carolina.  You can find a map showing the location of the N.C. ash ponds here.  The  ponds have been largely unregulated until very recently.  No state or federal standards applied to construction of the existing coal ash ponds. Unlike modern landfills, the ash ponds  are not lined to prevent contaminants from percolating into the groundwater below.   Although coal ash  can have some of the characteristics of hazardous waste,  EPA  has excluded  coal ash from federal hazardous waste regulations.

Before  2009, DENR’s water quality program exercised  very limited regulatory authority over coal ash ponds.  The Division of Water Quality (DWQ)  issued a federal Clean Water Act permit for any direct discharge from an ash pond to surface waters, but did not require stormwater controls or groundwater monitoring. State law exempted coal ash ponds and other utility impoundments from regulation under the  N.C. Dam Safety Act. The  state’s largely hands-off approach to coal ash ponds  began to change after a massive spill at the Tennessee Valley Authority (TVA) Kingston plant in 2008.   On December 22, 2008,  an  ash impoundment at the  Kingston plant breached and spilled an estimated  5. 4  million cubic yards of ash slurry. The spill flooded 15 homes, covered 300 acres and deposited over 3 million cubic yards of ash in the nearby Emory River, making it one of the largest industrial spills in American history. The cleanup cost $1.1 billion and  took over four years to complete.

In response to the TVA disaster, North Carolina legislators introduced several bills in 2009 to strengthen state regulation of coal ash disposal.  House Bill 1354    may have been  the most comprehensive; the bill  set standards for coal ash disposal,   required groundwater monitoring around  existing ash ponds, and prohibited construction of new wet ponds.  The bill ran into opposition from the major electric generating companies and never got out of committee. The only piece of coal ash legislation enacted in 2009,   Session Law 2009-390 , repealed  the N.C. Dam Safety Act  exemption for coal ash ponds and other utility impoundments.

Although comprehensive state legislation on coal ash disposal failed,  DWQ increased efforts to use existing state laws to  reduce the water pollution risk and  began putting groundwater monitoring requirements in  Clean Water Act  permits for coal ash ponds in 2009-2010.  One of the factors  in  DWQ’s decision: troubling results from  voluntary groundwater monitoring carried out by Duke Energy and Progress Energy as part of an  industry-led program started in 2006.  DWQ also began  work on  stormwater requirements for  coal ash  disposal facilities.   In 2013,  several things happened  to shine a much brighter light on the coal ash ponds in North Carolina:

Clean Water Act citizens’ suits and  DENR enforcement action.  In early 2013,  the Southern Environmental Law Center (SELC) filed two  notices of intent to sue under the Clean Water Act  based on water pollution from coal ash ponds. (Under the Clean Water Act, a citizen  can sue to enforce the Act only  if the water quality permitting agency has failed to take effective enforcement action. The 60-day notice  gives the permitting agency  time to show that effective enforcement action has  been taken.)  One notice, filed on behalf of the N.C. Sierra Club, Western N.C. Alliance and the Waterkeeper Alliance,    concerned illegal discharges  into the French Broad River from ash impoundments at the Asheville Steam Electric Generating Plant operated by Duke Energy Progress.  The other notice, filed on behalf of the Catawba Waterkeeper Foundation, attributed contaminants in Mountain Island Lake  – a water supply for the City of Charlotte – to  seeps from coal ash ponds associated with the Riverbend Steam Station in Gaston County operated by Duke Energy Carolinas.

In response to the  two  SELC notices,  DENR filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress  in the spring of 2013 and immediately  began work on a consent order to resolve  the Asheville and Riverbend  violations.   The state enforcement action described  illegal discharges in the form of seeps through the impoundment walls at both facilities and groundwater standard violations near  the Asheville impoundments.  After taking  public comment on a draft consent agreement, DENR filed a revised consent agreement with the court in October 2013.  You can find a copy of the proposed consent agreement  here. The consent agreement would require the companies to pay civil penalties, increase groundwater monitoring  and eliminate unpermitted discharges  to  rivers and lakes. The consent agreement has not yet been approved by the court;   meanwhile, the pending state enforcement action keeps the threatened citizens suits on hold.

Drinking water well  contamination near  the  Asheville  coal ash pond.  In 2012,  the state water quality program   found  high levels of iron and manganese in one of five private drinking water wells located near the Asheville  plant.   When DENR retested the well  in 2013,  the results showed a level of contamination that made the water unsafe for use without filtration and  DENR  ordered  Duke Energy Progress to provide the homeowner with an alternative water supply and increase off-site groundwater monitoring around the  ash pond.   The contaminated drinking water well added another groundwater impact to those  identified in the DENR enforcement action filed earlier in the year.

Duke Energy’s agreement with Cape Fear Public Utility Authority. Last fall, Reporter Bruce Henderson  wrote  an  article  for the Raleigh News and Observer about an  unusual agreement between  Duke Energy Progress and Cape Fear Public Utility Authority.   Cape Fear Public Utility Authority has  two public water supply wells located within 2,000 feet of an impoundment holding coal ash from Duke’s Sutton Electric Generating Plant; one of the two wells supplies water to the Flemington community.  Under the agreement, Duke Energy Progress will pay up to $1.8 million  to extend a water line  to carry treated  Cape Fear River water to Flemington and the Authority will close the water supply well. The agreement is significant for two reasons:

1.  In entering into the agreement, Duke has implicitly acknowledged that  groundwater contamination from  the  coal ash pond  may  move offsite and contaminate  the public water supply wells.

2. The agreement requires  Cape Fear Public Utility Authority to close four existing water supply wells in a 17-square mile area bounded by the Cape Fear and Northeast Cape Fear rivers. The Authority also agrees  not to install new  public water supply wells  in the area.  As a result,  groundwater in the entire 17-square mile area will be off-limits for  public water  supply for the foreseeable future because of the potential for contamination from the coal ash pond. (The agreement does  not affect private water supply wells in the area, but those wells would presumably face the same risk of contamination.)

Total cost of the project has been estimated at $2.25 million and costs above the first $1.8 million will be shared between Duke Energy and  Cape Fear Public Utility Authority. You can find a copy of the agreement (as presented  at the October 2013 meeting of the Cape Fear Public Utility  Authority Board)  here.

National data on environmental harm caused by  coal ash disposal.  A 2007 EPA report   assessed 85 instances of  suspected damage  caused by disposal of coal  ash in  landfills or  in ponds.  In 67 cases,  EPA confirmed  either  “proven”  damage (direct health impacts or documented harm to fish, wildlife, or water quality) or “potential” damage (contamination exceeding  drinking water standards either  beneath or near the waste disposal site).  The 67 cases broke down into 24 proven damage cases and 43 potential damage cases.   In the remaining 18 cases, EPA could not confirm a link between  coal ash disposal and environmental or health risks.

In 2009, EPA  surveyed  electric generating companies  to get  more information specifically on wet ash impoundments and  asked the  companies to report  any known  spills or discharges  that had occurred over the previous ten years (not including groundwater releases).  The 240  companies responding to the survey reported  29  spills, breaches and  discharges.  There was little overlap between the incidents reported in the survey and those assessed in EPA’s 2007 report.  Some of the spills reported in the 2009 survey had occurred since the 2007 assessment; others had never been reported to EPA.

North Carolina in the national data.  Two  of the “proven” damage cases described in the 2007 EPA report involved older incidents at North Carolina facilities.   Permitted releases of  water from a coal ash impoundment  at the Roxboro Steam Electric Generating Plant made  fish in Hyco Lake unsafe to eat for a number of years because of high levels of selenium.  In 1990,  Carolina Power & Light shifted to a dry ash system at the Roxboro plant to meet tighter selenium discharge limits and the fish consumption advisory was lifted in 1994.  In the second “proven” damage case from North Carolina, selenium in  discharges from an impoundment at Duke Energy’s Belews Creek plant entirely eliminated 16 of  20 fish species originally found in Belews Lake, including all of the major sport fish.  Under state orders to reduce the selenium discharge,   Duke Energy changed its method of fly ash disposal in 1985 and the state lifted the  fish consumption advisory for Belews Lake  in 2000.  (Descriptions of the environmental damage at Hyco Lake and Belews Lake come from the 2007 EPA  Coal Combustion Waste Damage Assessment Report; the link is provided  above.)  Duke Energy’s Allen Steam  Generating Plant appears in the EPA list of potential damage cases. The Asheville and Riverbend releases  cited in  DENR’s 2013 enforcement action do not appear in either the 2007 EPA report or in the 2009 survey  responses submitted on behalf of Duke Energy and Progress Energy.

State and federal regulatory action?   In June of 2010, EPA published  a new draft rule on disposal of coal combustion residuals. The rule proposed  two alternative approaches to regulating coal ash disposal –1.  treat the ash as a “special waste” under federal hazardous waste rules, establishing specific standards for disposal; or 2. adopt standards for disposal of coal ash as solid waste (the same broad category that covers other, non-hazardous waste). EPA has not yet decided on  which path to take and in the meantime there have been several efforts to shut down the EPA rulemaking entirely.   In July of 2013, the U.S. House of Representatives approved H.R. 2218 (The Coal Residuals Reuse and Management Act of 2013)  which would prohibit EPA from adopting enforceable national standards  for  coal ash disposal and leave regulation to the states.  See the Library of Congress bill summary for more on H.R. 2218.  The U.S. Senate has not acted on the bill.

In North Carolina, the Regulatory Reform  Act of 2013 ( Session Law 2013-413) included a provision limiting DENR’s  authority to require steps to contain groundwater contamination at a  permitted waste disposal facility  — including coal ash impoundments.  For more detail, see the  section on groundwater in an earlier post on 2013  water quality legislation.

So.   It seems clear that large, unlined coal ash impoundments present  some  risk to groundwater,  surface water  and  fish. Recent  events suggest that the risk may be greater than previously known. There was little or no groundwater monitoring around coal ash ponds  before 2006 and  no state oversight of  groundwater monitoring until 2009-2010.  It is simply a fact that groundwater contamination is much more likely to be found if someone is actually looking for it.  The same is true for discharges to rivers and lakes through the walls of coal ash impoundments. The  Riverbend and Asheville  enforcement cases  only happened after citizens documented  unpermitted discharges and gave notice of intent to sue under the Clean Water Act.  It is not clear that the state’s water quality program had found the illegal discharges identified in the consent order or has the resources to do adequate inspections of these large  impoundments.  (The Asheville impoundments alone total 91 acres.) So as new information suggests the need for  frequent, careful inspection of coal ash ponds and quick, effective response to groundwater contamination, state budget and environmental policies are moving in the direction of making both  more difficult.

Environmental Policy in N.C.: Looking back at 2013 and forward to 2014

Some of the most significant environmental policy developments of 2013:

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

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

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

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

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

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

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

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

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

What to look for in 2014:

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

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

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

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

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

Regulatory Reform and the Environment III: The Future

December 4, 2013. Two earlier posts  looked at  the history of regulatory reform in North Carolina and regulatory reform’s  focus on environmental rules.  The current General Assembly has continued  to work on regulatory reform in general and  limiting environmental rules in particular.  Regulatory reform legislation adopted by the N.C. General Assembly since 2011  reflects two basic  ideas: 1. Some number of agency rules are simply unnecessary and should be repealed;  and 2.  If  a federal  environmental standard exists, state and local environmental rules should not go beyond the federal requirement except in extraordinary circumstances. More about the  assumptions behind  recent regulatory reform efforts below.

Assumption: State agencies have unnecessary and overly burdensome rules that should be repealed. There will always be a need to review, update and in some cases repeal outdated rules, but it is not clear that rooting out “unnecessary” rules can  do much to turn down the political heat over regulations. It isn’t for lack of trying. In October 2010, Governor Beverly Perdue issued an executive order on regulatory reform.   Executive Order 70    invited citizens to identify overly burdensome and unnecessary rules and  directed state agencies to  do  an internal review to identify unnecessary and outdated rules.   In 2011, the General Assembly’s  Regulatory Reform Committee   invited the public to identify “outdated,  unnecessary, unduly burdensome, or vague rules…that are an impediment to private sector job creation”  in a series of public meetings. The  legislature also amended the state’s Administrative Procedures Act in 2011 to put the rules review process created under Executive Order 70 into  law.  G.S. 150B-19.2 

The earlier post on the history of regulatory reform describes the somewhat underwhelming results of both efforts to root out unnecessary and overly burdensome rules.  Although state agencies identified several hundred unnecessary rules  through the internal review required under Executive Order 70 , most of those rules related to programs that no longer existed or had been superceded by new standards.  Since the rules were no longer being enforced, repeal  did nothing to ease complaints about regulatory burden. On the other hand, rules identified by citizens as unnecessary or unduly burdensome often turned out to be required  by  state or federal law or the result of a significant  policy  debate and unlikely candidates for  a politically painless  repeal.

The  Regulatory Reform Act of 2013 (Session Law 2013-413 ) takes  a  new  approach,  requiring state agencies to review and readopt all existing rules every ten years.  If a rule is not reviewed   on the schedule set by the state’s Rules Review Commission, the rule automatically expires. (Rules needed to carry out a delegated federal program  will not automatically expire,  but  still have to be reviewed and readopted.)   Continuing its preoccupation with environmental rules, the General Assembly directed the  Rules Review Commission to schedule state water quality standards and wetland rules for the first round of review in 2014.  Ten-year review and readoption  may one day settle into a manageable  routine,  but several potential pitfalls  lie ahead:

— Given N.C.’s lengthy rulemaking process,  a 10-year  readoption  schedule could lead to constant churning and little certainty for either regulators or the public.  Nothing in Session Law 2013-413 shortens the process for readoption of an existing rule, so the agency would need to go through all of the usual rule adoption steps: public notice, fiscal analysis, review by the Rules Review Commission, and  possible legislative disapproval.  The Falls Lake nutrient rules took about five years from beginning to effective date and the rules include some requirements that phase-in even later.  Streamlining the process for readoption and starting the ten-year review period at full implementation of a rule (rather than adoption)  could reduce the churning.

— Review and readoption of rules will be even  more disruptive if it is used to constantly revisit policy decisions rather than simply identify outdated, unnecessary rules. The fact that the General Assembly targeted water quality and wetland rules for the first round of review and readoption suggests  a policy agenda.  Public statements by the director of  the state’s water quality programs,  Tom Reeder,   indicate that  the Department of Environment and Natural Resources has already put  stream buffer and  wetland rules  — repeatedly targeted by development interests — in the spotlight for the first round of water quality rule review.

— Complex sets of rules have to be reviewed together. Stream buffer rules, for example,  have  generally been adopted as part of  a larger plan to solve a specific water quality problem. Federal law requires the state to  reduce  pollution causing impaired water quality  (like the nutrient problems in Falls Lake and Jordan Lake), but federal rules do not dictate  the solution.    North Carolina ‘s longstanding  policy has been to create  a solution that shares the burden of pollution reduction among all of the major pollution sources (wastewater treatment plants, industrial dischargers, agricultural runoff and development activity).  In most cases, the final rules also represent a long negotiation process.  Using rule review  to respond to one  interest group could shift  more of the regulatory burden and cost  of pollution reduction to others.  A piecemeal approach to regulatory reform carries the risk of making complex environmental protection programs less effective and less equitable, but no less politically charged.

— The interrelationship of rules has practical implications.  According to Tom Reeder, the legislative  mandate  to review surface water standards and wetland rules in 2013 also  draws in two additional sets of rules.   Mr. Reeder expects the 2014 water quality rule review  to  involve  395 rules.

— Rule review comes without any additional staff resources. The massive water quality rule review will create a new workload for a water quality staff still shrinking under budget cuts and reorganization decisions. Mr. Reeder has already suggested that  rule review may further delay  revisions to state water quality standards  needed to  comply with federal  Clean Water Act requirements.

Assumption: State and local environmental standards should not go beyond federal standards except in extraordinary circumstances.

The Regulatory Reform Act of 2011     ( Session Law 2011-398 )  prohibited  state environmental  agencies — and only environmental agencies — from adopting  a more restrictive standard than a corresponding federal rule.   The  law has exceptions  for  rules to address a “serious and unforeseen threat to public health, safety or welfare” and rules required by state law, federal law, state budget policy or a court order. The same legislation directed all state agencies to provide the General Assembly’s Joint Select Regulatory Reform Committee  with a list of existing rules and indicate for each rule whether the rule was mandated by federal law and whether the  rule was more stringent than an analogous federal regulation. (The session law defined analogous to mean that a federal rule regulated the same conduct or activity.)

An earlier post (originally written about a 2013  Senate  bill)  provides examples of state environmental rules that go beyond  the  corresponding  federal rule.  (The examples come from the 2011 DENR report to the Select Regulatory Reform Committee.)  The post also notes some of the  difficulties in  limiting state environmental rules to  federal standards.  At the most basic level, it turns out to be harder than legislators may think to even figure out whether a state rule is “more stringent” than a corresponding federal rule. It is rarely as easy as comparing two numerical standards; in many cases, federal rules set a framework and goals in the expectation that the state will fill in the detail.  Another  problem is that  federal environmental  statutes and rules set a floor rather than a ceiling on environmental protection — a floor based on national priorities  rather than state needs.   Finally, federal rules rarely   include all of the administrative pieces needed for  a complete environmental protection program. Since the states actually carry out most of these programs, Congress and EPA  left the states a good bit of  flexibility  in setting up permitting and enforcement programs.

Having put limits on new  state environmental rules in 2011, the 2013 General Assembly took on local environmental ordinances.  Session Law 2013-413 puts a one year moratorium on adoption of new local environmental ordinances regulating issues addressed by state or federal environmental rules. An earlier post goes into more detail about the temporary  limit on local environmental ordinances. The one-year moratorium actually represents a compromise to allow time for the legislature’s Environmental Review Commission to look at the appropriate scope of local government authority to adopt environmental standards. The N.C. Senate had proposed to permanently restrict adoption of local environmental ordinances.

Even the one-year moratorium may be a problem for local government.  A number of cities and counties operate environmental infrastructure (like water and wastewater treatment systems) under state-issued permits that require the local government to put  environmental protection measures in place by ordinance.

Behind all of this lies a genuine concern about the layering of federal, state and local requirements. Citizen comments  clearly indicate confusion about where environmental standards come from and how different requirements  fit together.  In spite of everyone’s best efforts, the overlay of federal  rules, state rules  and local ordinances don’t always fit together perfectly.  Conflicts  get  resolved, but the property owner caught up in an unintended consequence of overlapping standards will be understandably frustrated in the meantime.

Which is all to say that there are good reasons to look at the intersection of federal, state and local environmental standards. It is just not as easy as waiving away everything other than the standard adopted by the highest level of government.

Regulatory Reform and the Environment II: Targeting Environmental Rules

November 21, 2013.   In North Carolina,  “regulatory reform” has had a strong focus on environmental rules for  nearly twenty years. An earlier post sketched a very broad history of regulatory reform in N.C. starting with the creation of the Rules Review Commission in 1986. But from 1977 into the early 1980s,  the General Assembly  actually had an Administrative Rules Review Committee made up of legislators. The committee tracked the number of rules adopted by state agencies and reviewed rules for statutory authority. I was able to find committee reports from 1979-1983. (After that, the online  trail went cold.)  The reports list all of the rules the committee objected to for lack of statutory authority and how those objections were resolved. Environmental rules didn’t  receive  much   attention from the committee; some of the most common objections concerned rules assessing fees not authorized by law; state agencies creating criminal penalties by rule;  and professional licensing  boards overstepping their authority.

Environmental rules may have had a lower profile simply because of  the times. Congress  had just adopted the major federal environmental protection laws  in the early to mid-1970s —  the Clean Air Act  in 1970, the Clean Water Act  in 1972, the  Safe Drinking Water Act in 1974 and the Resource Conservation and Recovery Act (regulating hazardous waste)  in 1976.  In the 1970s and early 1980s,  state environmental agencies were  adopting rules  needed to run delegated permitting programs under those federal laws: water quality  and air quality standards; drinking water regulations;  hazardous waste permitting rules;  and regulations for petroleum underground storage tanks. Environmental rulemaking may not have been without controversy, but  there was also significant support for environmental programs and for the most part  the General Assembly seemed to let the  regulatory agencies  handle the controversies.

That started to change as water quality rules in particular began to have a greater impact on development activity. The first generation of  environmental permitting rules largely affected local government and  industry.  In the water quality program, local government wastewater treatment plants  and industries directly discharging wastewater to a stream  needed a Clean Water Act permit.    A developer only needed an environmental permit if the project involved filling wetlands or a segment of stream.  As  the state  began to grapple with the impact of development activity on  coastal resources and water quality in the late 1980s, environmental  permitting came to have a much greater effect on developers and private property owners.

By 1984, the state’s Coastal Resources Commission had adopted the first standards for development on the state’s ocean and inlet beaches. Those rules included oceanfront setbacks and restrictions on use of seawalls and jetties to protect oceanfront structures from erosion.  In the late 1980s, the state’s water quality program  began  work on  rules to address high bacteria levels in coastal shellfish waters.  Those  rules included the first state stormwater management requirements for new development projects.  Since then, a  series of water quality initiatives have used stormwater  standards, density limits and  riparian buffers to reduce the impact of polluted runoff from developed areas. A combination of density limits, buffers and stormwater controls became part of the basic water supply watershed program designed to prevent pollution of drinking water supplies. Those same tools became part of the comprehensive water quality strategies to reduce nutrient over-enrichment in the Tar-Pamlico River, Neuse River,  Falls Lake and Jordan Lake.  In the nutrient  strategies,  development standards represented one part of a much larger set of pollution reduction measures  that also  included  tighter controls on wastewater discharges and  best management practices to limit agricultural runoff.

Legislative  Disapproval of  Environmental Rules.  Legislative action on regulatory issues can  take other forms, but tracking disapproval bills gives a fair indication of where legislative attention has been  focused. For the first few years after the General Assembly amended the Administrative Procedure Act to allow for legislative disapproval of rules, virtually all of the disapproval bills concerned environmental rules.  The first disapproval bills introduced in the General Assembly (in 1998) targeted the Neuse River stream buffer rules and the Tar-Pamlico nutrient  rules (which also included buffer and stormwater requirements).   Based on a  search of the General Assembly bill database, legislators introduced bills to disapprove at least 41 state agency rules between 1998 and 2012.   Sixteen of the disapproval  bills  targeted environmental protection rules;  in some cases, a single bill  covered multiple rules. Another four bills proposed to disapprove Wildlife Resource Commission regulations. All of the other regulatory programs in state government (public health, worker safety, building code, occupational licensing boards, food safety, insurance regulation, etc.)  accounted for just another 16 disapproval bills during the same period. (See Legislative Disapproval Bills for a complete  list of the disapproval bills that I  found.)

Of the 16  bills to disapprove environmental  rules, ten concerned water quality rules.  The list  includes the Neuse River  buffer rules, the Tar-Pamlico River nutrient rules, coastal stormwater rules, rules classifying streams as trout waters or Outstanding Resource Waters,  water quality standards for municipal storm sewer systems,  and the Falls Lake and Jordan Lake nutrient management strategies. That list of water quality rules includes  the most debated (and negotiated) environmental rules adopted in the last 15 years, addressing some of the state’s most complicated water quality  problems. One common thread  is that all of those regulations  use development standards as one tool to address a water quality problem. The other common (and related) factor is that all encountered opposition from realtors,  developers, and owners of waterfront property.

Amending the APA to make environmental rulemaking more difficult. There has also been an effort to make environmental rulemaking more difficult by putting limits or requirements on environmental rules that don’t apply to other kinds of regulations. In 2005, the General Assembly  amended G.S. 150B-21.4 ( fiscal notes on rules) to require a special fiscal analysis of environmental rules — and only environmental rules — affecting state highway projects. The change responded in part to expansion of   stormwater  requirements,  which affected state highway projects as well as conventional building projects.

In 2009, several House and Senate bills proposed to put a moratorium on  rulemaking by the state’s Environmental Management Commission (the citizen commission  that adopts air quality and water quality rules).  House Bill 1335 actually passed the House and received a favorable report from a Senate committee before being pulled off the Senate floor without a vote.  But the 2011 Regulatory Reform Act, Session Law 2011-398, picked up the effort to restrain environmental rulemaking  and put new  limits on environmental rules that do not apply to other state rules.   G.S. 150B-19.3 prevents a state environmental agency from adopting a rule that is more stringent than a corresponding  federal environmental rule except in very limited circumstances.  As a practical matter,  the new law  will  be much more difficult to apply than legislators may have expected. Many federal environmental rules  provide  a framework for regulation rather than comprehensive standards and permitting procedures, making the “more stringent than” comparison difficult to impossible — although it should provide fertile ground for argument.  More about the policy implications of handcuffing state environmental regulations to federal rules in  a future  post.

The focus on environmental regulations continued in the  2013 Regulatory Reform Act, Session Law 2013-413.  The  most recent  legislation requires review of existing rules every ten years causes rules to automatically expire if the review does not occur. Although the review requirement  applies  to all state regulatory programs, the legislation specifically directs the  Rules Review Commission to schedule existing state water quality and wetland rules for the first round of review in 2014. The legislation also puts a one-year moratorium  on adoption of local government ordinances that address environmental issues  covered  by state and federal environmental rules. During that year,  the legislature’s Environmental Review Commission will study local government authority to adopt environmental ordinances. Like the 2011 limitation on state environmental rules, the moratorium on local ordinances almost certainly has some unintended consequences. More about that in a future  post as well.

Why has regulatory reform come to focus so heavily on water quality rules?   In one way, water quality rules seem  to be an odd focus for so much regulatory reform activity since federal requirements drive so many of the rules.  But while  federal law requires the state to  reduce  pollution causing impaired water quality  (like the nutrient problems in the Tar Pamlico River, Neuse River, Falls Lake and Jordan Lake), federal rules do not dictate the remedy.  The legislative disapproval bills have targeted the remedy —  a comprehensive strategy that reduces direct discharges of the pollutant (from wastewater treatment plants and industrial dischargers) and indirect runoff from agriculture and developed areas.

In these instances, things happening under the banner of “regulatory reform” are not so much about eliminating unnecessary and burdensome regulations. It is really about how the state will  solve complicated environmental problems and whether  the burden of pollution reduction will be shared by all of the sources contributing to the problem.  Since  2013  legislation also delayed further implementation of the Jordan Lake rules to  convene a  legislative study committee on Jordan Lake water quality (see Session Law 2013-395), the current General Assembly will have  a chance to  struggle with  those questions.

Regulatory Reform and the Environment I: A Brief History

November 8, 2013.

In 2013, the N.C. General Assembly adopted another round of “regulatory reform” legislation.   Session Law 2013-413 ( House Bill 74 , Regulatory Reform Act of 2013)  comes in the  third decade of regulatory reform activity in North Carolina.  One thing has been clear from the beginning — regulatory reform  has a strong focus on  environmental standards.   Regulatory reform  as a reaction against environmental  rules  has become so  clear  that it is worth looking at the reasons as well as the result.

Later posts will talk about the reason for the focus on environmental standards and new limitations on  state and local environmental standards. But first, a brief history of regulatory reform in N.C. (seen through the lens of environmental rules) to understand  the starting point for those reforms.

 Legislative Control Over Rulemaking.  The history of modern regulatory reform in North Carolina probably begins around 1986 when the General Assembly took the first steps toward exercising more legislative control over rulemaking.  State agencies  can only adopt rules if the  legislature grants that authority, but then the tension begins —  state agencies that adopt rules work for the governor and not for the legislature.  Although laws adopted by the General Assembly grant rulemaking authority and set the boundaries around rule adoption, the legislature  does not  directly control what happens from there.

In 1986, the General Assembly took the first step toward exercising more control over rules by creating the state’s  Rules Review Commission (RRC).   The 10- member commission, appointed by legislative leaders,  reviews all new state  rules — from water quality standards to nursing home  regulations. New rules (or amendments of existing rules) cannot go into effect until approved by the  commission under four standards:

1.   Is there statutory authority for the rule? (Does state law  give the agency that adopted the rule the  power to adopt that kind of rule?)

2.   Is the rule clear and unambiguous?

3.   Is the rule necessary?

4.  Did the state agency  meet all of the rulemaking requirements set out in  the  N.C.  Administrative Procedures Act ( such as publishing notice of the  draft  rule; allowing public comment;  and providing a fiscal analysis if the rule  imposes significant costs).

The Rules Review Commission has had a significant impact on rule writing — pushing agencies to make rule language more clear, explain terms, and  eliminate  conflicts  within rules.  But perhaps to the surprise of the General Assembly, the RRC has found very few rules that exceed agency rulemaking  authority.   Early on, the RRC also decided not to second-guess the necessity of an agency  rule given the special expertise needed to make that judgment — expertise most often found in the citizen commissions and state agency staff  given authority to adopt the rule.

In 1995, the General Assembly  took another step to  increase legislative control over the rulemaking process. (Perhaps because creation of the Rules Review Commission did not stop agencies from adopting rules that created political pain for legislators.)  Session Law 1995-507  delayed all new rules  and rule amendments from going into effect until the 31st day of the next legislative session that started at least 25 days after  Rules Review Commission  approval of the rule. The idea was to allow time for legislators to file a bill to disapprove the rule. If a legislator filed a disapproval bill within the first 30 days of session, the rule remained in limbo until either the General Assembly took action on the bill or the legislative session ended.    Since that approach  delayed many uncontroversial rules  — including rules benefiting the people being regulated —  the General Assembly  modified the law in 2003 to only  delay a rule for legislative review if  the Rules Review Commission received at least 10 letters of objection to the rule.

There are no criteria for legislative disapproval of a rule beyond the need to get enough votes  to pass both  houses of the General Assembly and survive a veto.

Considering the Cost of Rules. Also in 1995, the General Assembly began to require state agencies to provide a fiscal analysis of any rule with a substantial economic impact. At the time, “substantial economic impact” meant  $5 million in costs per year to comply with the rule.  (The  dollar figure represents a statewide total of  the cost to every person, business or institution required to comply with the rule.) Since then, fiscal analysis requirements have become more demanding; the threshold for a fiscal analysis is now $1 million. State agencies also have to look specifically at the fiscal impact of new rules on local government. Environmental agencies must  do an additional  analysis of the cost that new environmental rules add to state highway projects.

Agency Reform of the Rulemaking Process. On a different track, state environmental agencies began to experiment with a different kind of rulemaking  reform.  Solutions to  complex  environmental problems can affect  local governments, developers, agriculture, property owners,  communities  and industry.   In the 1990s,  North Carolina’s  environmental programs began to ask for more input on rule development from these and other interested parties very early in the rulemaking process. The state’s Administrative Procedures Act only requires a state agency to put a draft rule out for public review and comment after the rule has been  written.   But over the last 15-20  years, DENR environmental programs have increasingly used advisory groups representing  business, industry, agriculture, local government and environmental organizations  to  actually develop draft rules.

Every controversial set of  water quality rules  adopted in recent years (municipal stormwater rules;  the Jordan Lake and Falls Lake nutrient rules; coastal stormwater rules) has been  the product of “stakeholder” groups that influenced the development of the  rules from first draft through final adoption. Since many of these rules  require a balancing of the burdens and benefits of pollution reduction among many different parties,  the water quality program in particular  moved toward something that in practice looked very much like negotiated rulemaking.

Legislative regulatory reform efforts have never acknowledged the agency-driven change in rulemaking and in some ways work against it.  Ironically,  some negotiated  rules have become   the focus of legislative disapproval bills. One reason may be that  stakeholder negotiations  can  even  out the influence of participants who  otherwise do not have equal political power.   That sometimes means that  more powerful interests do not feel bound by the result and  try to use political influence to alter the outcome in  the legislature.  (Few disapproval bills have resulted in legislative repeal of a rule, but a number of major environmental regulations have been modified by legislation.)

The Search for Burdensome and Unnecessary Rules.  Late in 2010, Governor Beverly Perdue issued Executive Order 70 on rulemaking.  The executive order set out  rulemaking principles, but also  created a process for identifying  burdensome and unnecessary rules. Under Executive Order 70, the Office of State Budget and Management (OSBM) set up a website to  allow any citizen to identify a rule for change or repeal.  OSBM sent comments that seemed to have merit to the appropriate state agency for response.

In 2011, the new Republican majority in the General Assembly created a joint legislative committee on regulatory reform. The  Regulatory Reform Committee set out to receive input on “outdated,  unnecessary, unduly burdensome, or vague rules and rulemaking procedures that are an impediment to private sector job creation”  in a series of public meetings across the state.

In the end, efforts  to  find and eliminate  unnecessarily burdensome rules probably had less impact than expected for a number of reasons:

—  Comments often concerned  individual pieces of more comprehensive regulatory programs and pulling one thread would unravel a larger fabric.  For example, a number of comments have suggested eliminating or limiting  stormwater and stream buffer  rules  in  the   Neuse River basin, the Tar-Pamlico River basin and the  Jordan Lake watershed where  excess nutrients (nitrogen and phosphorus)  have  caused algal blooms and fish kills.  Since buffers and  stormwater controls reduce  nutrient run off from  developed areas, those rules became part of  larger water quality strategies  to meet  EPA-approved nutrient reduction targets required under the Clean Water Act.  The comprehensive nutrient strategies also put tighter controls on wastewater treatment plants and required agricultural operations to take steps to reduce agricultural runoff.   Eliminating stormwater and buffer requirements  won’t  make the nutrient reduction targets go away. It  just means that the pollution reductions from developed areas would have to be  made up by additional reductions from other nutrient sources  — potentially increasing the cost to agriculture, industry and municipal wastewater systems.

None of this means that existing  rules are sacred and cannot be changed. It does mean that looking  at a rule in isolation carries the  risk of  relieving one  person’s pain  at the cost of creating a greater hardship to someone else.

— Some rule comments had to do with program implementation  (such as overlapping agency authority and inconsistent rule interpretation) rather than  the content of rules.

—   Many comments  turned out to be about federal requirements, state laws and local government ordinances rather than state agency rules.  The layering of federal, state and local requirements clearly creates confusion and some degree of frustration among the public.  But as it turns out, a complaint about a state rule may not be about a state rule at all.

—  In the Regulatory Reform Committee’s public  meetings, comments supporting environmental standards often  matched or even outnumbered complaints about environmental rules. Legislators also heard comments on a  number of perhaps unexpected issues.  (Legalization of marijuana comes to mind.)

You can find copies of the annual  Executive Order  70 reports prepared by the Office of State Budget and Management here. The reports include a brief summary of  each public comment that merited further review. The legislative Regulatory Reform Committee never  released  a complete record of public comments received by the committee and never produced a formal report.

Recap. Going into the regulatory reforms of 2011- 2013, the rulemaking landscape in North Carolina looked something like this:

—  For almost 30 years,  the  legislatively appointed Rules Review Commission has had the ability to stop state agency rules that exceed the  authority actually granted by the General Assembly.

— Since 1995 , the General Assembly has had the power to disapprove an agency   rule for any reason (or for no reason at all).

—  Fiscal analysis required for proposed rules has increased, although the resources available to do fiscal and economic analysis have not.

— Environmental programs have unofficially reformed the rulemaking process, creating something  that closely resembles negotiated rulemaking on  large, complex environmental problems.   But  negotiated rulemaking  doesn’t fit legislative assumptions about what rules are and how rulemaking  decisions are made, so some  regulatory reform efforts  undermine  those efforts.

NEXT: The regulatory reform movement’s focus on environmental standards and the most recent turn in regulatory reform .

The N.C. Coastal Resources Commission, Sea Level Rise and the Military

October 24, 2013. Governor McCrory has made appointments to  the Coastal Resources Commission (CRC).  Six  new appointees  join four existing CRC members whose terms end June 30, 2014 and one legislative appointee, leaving two legislative appointments still to be made to fill  out the 13-member commission. The press release  on the Governor’s appointments can be found here. A complete list of  current members and contact information  can be found here.

The State of Sea Level Rise Policy in North Carolina.  The new Coastal Resources Commission will  be walking into an ongoing debate over whether — and how —  the state should plan for sea level rise.  You can find an introduction to sea level rise  here.  In March 2010, the  CRC’s  Science Panel on Coastal Hazards  released  a  report on sea level rise on the North Carolina coast.  The Science Panel  reviewed data from several studies of sea level in North Carolina and found that the rate of sea level rise on the North Carolina coast  increased  significantly in  the 20th century.  The Science Panel’s N.C. Sea Level Rise Assessment Report  concluded that the data pointed to a likely  1 meter (39 inch) increase in sea level by 2100.  The 39-inch  projection  represented the middle of three sea level rise  scenarios considered by the Science Panel and would be  consistent with simply continuing the recent relationship between temperature increase and relative sea level rise in North Carolina.  The Science Panel issued a brief  addendum  in April 2012 responding to questions about the methods used in the  2010 report.

For comparison: A number of studies have found that the rate of sea level rise along the North Carolina coast  remained at a fairly consistent  4 inches per century for  hundreds of years before turning upward  in the 20th century. Over the last fifteen years,  sea level on the North Carolina coast  has risen an average of 0.12 inches per year —  or  a rate of  over 12 inches per century.

The Coastal Resources Commission began debating adoption of a  sea level rise policy soon after receiving the Science Panel report.  As developed in a series of public meetings,  the draft policy focused on use of the Science Panel’s sea level rise projection as a planning benchmark. One planning consideration will be location and maintenance of  public infrastructure such as water and sewer lines, water supplies, roads and bridges. Even  an increase of twelve  inches per century can be significant  in coastal areas where  low land elevation, wave action and increased shoreline erosion magnify the flood impact of rising water levels.  (In the next section, you will find a link to  a  National Oceanic and Atmospheric Administration  sea level riser viewer that allows you to see the  land area flooded at different increases in sea level.) The draft policy  did not  propose  any new regulation of private development.

Both the Science Panel report and CRC discussion of a draft sea level rise policy generated opposition  from  coastal  developers, realtors and some local government officials. That opposition led to legislation,  Session Law 2012-202, barring any state agency other than the Coastal Resources Commission from adopting a rate of sea level rise for regulatory purposes and preventing the CRC from taking any regulatory action  before July 1, 2016.  In the meantime, S.L. 2012-202 directed the Science Panel to provide an update of the 2010 report on sea level rise by March 1,  2015.

In response to concerns about  the Science Panel’s  projection,  the CRC removed references to any specific rate of  sea level rise from the draft policy.  In August 2012, the CRC voted  to send the  policy out for public comment as a proposed rule.  The policy then got caught up in a debate  over the appropriateness of  going through rulemaking on a policy that had no regulatory impact.  At the end of  the Perdue administration, the sea level rise policy  remained in rulemaking  limbo. One question for the newly appointed Coastal Resources Commission will be whether  to  revive discussion of planning for sea level rise on the North Carolina coast.

Overlapping the Science Panel’s work,  in 2009 the N.C.  Division of Emergency Management (DEM) began a Sea Level Rise Impact Study  under a  $5 million grant from the National Oceanic and Atmospheric Administration (NOAA).  The  DEM study was designed to look at the impact of different sea level rise scenarios on  natural  resources  and the built environment.  In 2012, the DEM study also met opposition. Political pressure  reportedly  caused DEM to back away from using the Science Panel’s projection (a  39-inch  elevation in sea level  by 2100)  as the worst case scenario in the Impact Study.  (See a May 2012  story by Charlotte Observer reporter Bruce Henderson.)  I have not been able to confirm the range of sea level rise scenarios to be included in the final Sea Level Rise Impact Study.  DEM had  planned  to complete the study by the summer of 2013, but  has not yet released a report. You can find the DEM webpage for the study here.

New Information on Sea Level Rise.  While North Carolina’s sea level rise planning efforts  have stalled, other scientific and planning organizations  continue  to collect sea level rise data, project sea level rise impacts and  develop plans to adapt to rising sea levels.

A  NOAA website showing the potential effect of sea level rise now includes the North Carolina coast.  Maps developed by NOAA’s  Coastal Science Center show  areas  inundated as sea level rises. You can find the sea level rise viewer  at http://www.csc.noaa.gov/slr/viewer/.  To see a visualization of sea level rise on the North Carolina coast, choose North Carolina under the “zoom in”  function on the right-hand side of the webpage.  Once the  aerial photo of the state appears, use the sea level bar on the left-hand side of the webpage to select a  sea level. The bar ranges from current sea level up to 6 feet above  current levels.  With each increase in sea level, the map  shows the land  area  flooded by the encroaching waters of the Atlantic Ocean and coastal sounds.

The most recent report of the International Panel on Global Climate Change, issued in September,  estimates global mean sea level will rise between10 and 32 inches by the end of the century. Those numbers represent an increase over mean sea level rise projections included in the 2007 IPGCC report.   Yale Environment 360, a  publication of the Yale School of Forestry and Environmental Studies, just published a helpful summary of the new  IPGCC report  on sea level rise here. Sea level does not rise at the same rate on all coastal shorelines, however,  and the N.C. Science Panel report explains why  relative  sea level rise on the North Carolina coast will likely be higher than the global mean sea level.

Coastal Military Bases and Planning for Sea Level Rise.  North Carolina has  a number of    military installations  in the coastal area.  In 2010, the Department of Defense (DOD) Quadrennial Defense Review for the first time identified global climate change as a national security concern because of the potential impact on U.S. military installations around the world.  DOD had begun to focus on  the impact of sea level rise on coastal military bases even earlier out of concern that  changes associated with sea level rise (more rapid coastal erosion, rising water tables and salt water intrusion in aquifers)  have the potential to impact  military infrastructure and training facilities.  A 2008  National Intelligence Council assessment concluded that 30 U.S. military installations were at risk of damage from rising sea level.

Some DOD sea level rise assessments have looked specifically at  N.C. military installations. A  2009  sea level rise risk assessment for  DOD  modeled shoreline changes at coastal installations in N.C.  in response to different rates of sea level rise. The consultant’s report  used the Air Force Dare County Bombing Range as an example of the results — between 58% and 100% of the land area of the bombing range could be lost to shoreline changes in response to projected rates of sea level rise. DOD’s environmental research arm, the Strategic Environmental Research and Development Program (SERDP), has several  projects underway to evaluate the impact of climate change and sea level rise on  U.S. military installations.   One SERDP project involves  N.C’s Camp Lejuene Marine Corps Base in Onslow County. You can find a description of the SERDP projects here.

Going in Different Directions?  Setting aside debate about the cause, the U.S. Department of Defense has chosen to assess the vulnerability of coastal military installations to sea level rise and actively plan for those impacts.  The practicality of managing  sea level rise at existing military installations  may  become a factor in future Base Realignment and Closure (BRAC) decisions.  The military’s  response to sea level rise  could have significant implications for North Carolina since seven of the state’s eight military installations are located at the coast.  (Fort Bragg is the one exception.)  But as DOD moves to understand and  plan for  sea level rise, N.C.’s political leadership has turned away from sea level rise planning.  Given the large economic footprint of the state’s military installations (see a 2013 report for the N.C. Department of Commerce), state leaders have increased efforts to support  the military presence in the state.   Right now, those efforts don’t  include cooperative planning  for  sea level rise, but that may become important.

Delayed Discussion of Fracking Chemical Disclosure Rule

October 18, 2013.  According to  staff in the Department of Environment and Natural Resources,  the October 25, 2013 meeting of the Protection of Trade Secrets and Proprietary Information Study Group has been cancelled. The study group will next meet in November.

As mentioned in an earlier post,  the study group has been working to resolve the  controversy   over  a draft Mining and Energy Commission (MEC) rule on disclosure of chemicals used in hydraulic fracturing fluid.  Last spring, the  MEC’s Environmental Standards Committee approved a draft rule requiring  drilling operators to disclose all  chemicals used in hydraulic fracturing fluid  to DENR, but  limiting  the amount of information  provided to the public on  trade secret chemicals. The controversy arose  because  oil and gas industry representatives objected to routine disclosure of   trade secret  information  even to state regulators. The industry preferred alternative language  allowing  the drilling operator to  withhold specific information on trade secret chemicals  unless DENR needed the information to respond to a   threat to the environment or public health.

You can find more about  the controversy over the disclosure rule and existing state law on protection of  trade secret information here and here.

N.C. Fracking Disclosure Rule: Update

October 8, 2013. The state’s Mining and Energy Commission (MEC) has still not  moved  forward with a  rule requiring disclosure of chemicals used in hydraulic fracturing fluid, although the commission’s  Environmental Standards Committee approved a draft rule in the spring. The  draft rule  requires a drilling  company to  give  the Department of Environment and Natural Resources (DENR)  specific information identifying  all chemicals used  to hydraulically fracture a natural gas well. The draft rule also requires public disclosure of  fracking chemicals,  but allows information about any chemical legitimately designated as a trade secret to be kept confidential and identified to the public only by  chemical “family”.   (The draft rule allows more specific information to be  requested by  a health professional or  by emergency   response personnel  to diagnose and  treat a health condition  or  respond to  an emergency.)

A recap of the controversy around the draft rule. Following committee approval of the draft rule, the Mining and Energy Commission delayed consideration of the rule because of oil and gas industry opposition.  Industry representatives objected to  including trade secret chemicals in  the disclosure to DENR staff. The industry  preferred an earlier rule draft that allowed  drilling companies to withhold information on trade secret chemicals  from state regulators as well as the public unless DENR needed the information to respond to environmental damage or a specific health concern. See an earlier post for more on the MEC decision to delay consideration of the disclosure rule. The important thing to remember — the conflict over the draft rule has to do with providing complete information on hydraulic fracturing chemicals to state environmental regulators.  Every  draft of the chemical disclosure rule has allowed drilling companies to withhold  trade secret information from the public.

The oil and gas industry’s  objection to routine disclosure of trade secret chemicals to DENR staff comes in part out of concern about  the department’s ability to keep the information confidential. The  N.C.  Public Records Act  generally requires state agencies to provide agency records to any citizen on request;  information submitted to DENR by a drilling company would be considered a “public record” under the law.    The Public Records Act, however,  has  existing  provisions to protect the confidentiality of trade secrets and  other DENR programs have successfully used  those provisions  to withhold trade secret information  from the public.  You can find an earlier post about  the N.C. Public Records Act protection for trade secrets  here.

Legislative intervention.  During the legislative session, the N.C. Senate  moved  to resolve the chemical disclosure issue in favor of the oil and gas industry position. A Senate  committee  approved language allowing  drilling companies to withhold information on a trade secret chemical  used in hydraulic fracturing fluid from DENR  unless  the Secretary of Environment and Natural Resources requested the information to “respond to a situation that endangers public health or the environment”.  Senators  added the language to House Bill 94 (Amend Environmental Laws), which had already passed the House and was moving through the Senate.  In response to a backlash from both the public and the Mining and Energy Commission itself, the Senate amended the bill to allow DENR staff to review — but not receive — information on trade secret chemicals used in hydraulic fracturing. You can find earlier posts on the two different Senate proposals here and here.  In the end, House Bill 94  died and the General Assembly did not adopt any legislation on disclosure of hydraulic fracturing chemicals.

Back at the Mining and Energy Commission.  When the MEC delayed consideration of the draft chemical disclosure rule, the  commission created a new  Protection of Trade Secrets and Proprietary Information Study Group to look into the issues around disclosure of trade secret information to DENR.  Legislative activity overtook the study group’s work for awhile, but failure of the Senate legislation  puts the issue back in the hands of the MEC without any particular legislative direction.  The MEC will need to resolve on its own the tension between the oil and gas  industry’s desire to withhold trade secret information from environmental regulators and DENR’s need  for information that may be critical to understanding the environmental impacts of hydraulic fracturing. The next meeting of the study group has been scheduled for October 25, 2013 following the MEC meeting.

Mineral Rights May Include Authority to Build Waste Disposal Pits On Site

September 30, 2013.  The federal appeals court for the Fourth Circuit  issued a decision on September 4, 2013 concluding that West Virginia common law gives  the owner of mineral rights authority  to build pits for disposal of drilling waste without  permission from the  property owner.  The decision in  Whiteman v. Chesapeake Appalachia, L.L.C., 2013 U.S. App. LEXIS 18359, 43 ELR 20205, 2013 WL 4734969 (4th Cir. W. Va. 2013), may have implications  beyond West Virginia since the Fourth Circuit Court of Appeals also decides cases from North Carolina and other mid-Atlantic states.

The Facts. Chesapeake Appalachia,  L.L.C. owns the  mineral rights under 101 acres of farmland owned by the Whitemans.  Ownership of the property comes through two deeds.  When Mr. Ellis O. Miller  sold the  property that is now the Whiteman farm,  each deed  retained  “the oil and gas within and underlying the above-described parcels as well as all of the coal not heretofore conveyed, and all other minerals within and underlying the above described property, with the necessary rights and privileges appertaining thereto.”  The deeds did not mention retaining any uses of the surface property.  Chesapeake Appalachia  ultimately acquired the mineral rights  retained by  Mr. Miller.

Chesapeake has three natural gas wells on  10 acres of the Whiteman property.  When Chesapeake applied for  state drilling permits, the company  indicated that drilling waste (including drill water, flow back, and formation cuttings) would be disposed of by land application.  After drilling on the Whiteman property, Chesapeake   put  the drill cuttings into open pits located near the wellheads. At the end of the drilling process, Chesapeake removed the plastic liners from the waste pits, mixed the drilling waste with clean dirt and compacted and covered the pits.

The Whiteman Lawsuit.  The Whitemans sued  to force Chesapeake to remove the waste pits, arguing that Chesapeake’s  ownership of the mineral rights did not give the company authority to put waste disposal pits on the property.   Although the Whitemans admitted that the pits had not caused a significant financial hardship, the family  had  concerns about possible future liability associated with the waste.  The lawsuit originally included a number of  claims under West Virginia common law; the only claim that survived to reach the Fourth Circuit Court of Appeals  alleged that Chesapeake trespassed by building the waste pits without the Whitemans’ permission.

The Legal Issue.  Common law trespass means entering  another person’s property without lawful authority. Leaving a structure  (such as a waste pit) on the property without lawful authority would be considered a continuing trespass. Under West Virginia common law, the owner of mineral rights only enters the  property unlawfully if,  under a  “reasonable necessity” standard, the mineral  owner  goes beyond the mineral rights that have been granted and intrudes on the rights of the surface owner.  So the Fourth Circuit Court of Appeals described the legal issue  in the Whiteman case  as:  “whether Chesapeake’s permanent disposal of drill waste upon the Whitemans’ surface property is “reasonably necessary” for the extraction of minerals.” If creation of the waste disposal pits was reasonably necessary for extraction of the natural gas, Chesapeake did not need the  Whitemans’ permission.

The Decision. The Whitemans argued that building a waste pit  on site was not reasonably necessary to extract  natural   gas because Chesapeake had other waste disposal alternatives.  The  Fourth Circuit admits that Chesapeake could have used a  “closed loop” waste system and offsite disposal of the solid waste instead of open pit disposal. (A closed loop system keeps all liquid drilling waste in pipes or tanks to avoid contact with the ground.)   Although the technique was relatively new when the Whiteman wells were drilled in 2007 and 2009,  Chesapeake had begun using closed loop  systems  in Texas and Oklahoma as early as 2004-2005.  But the  Fourth Circuit  concluded that open pit waste disposal could still be “reasonably necessary” to extract natural gas on the Whiteman property for two reasons: 1.  open pit waste disposal  was  the most common waste disposal technique used in West Virginia at the time Chesapeake drilled the Whiteman wells;  and 2.  state environmental standards allowed use of open pit disposal.  (This part of the court’s analysis led to the kind of statement only a lawyer could love —  “reasonably necessary” does not mean “necessary”.) As a result, the court concluded that Chesapeake’s ownership of  the mineral rights gave the company  authority to dispose of drilling waste on the Whiteman property even though the original reservation of  mineral rights made no mention of that use of the surface property.

The Whiteman decision has to be troubling for surface owners.  Many  cases have  recognized that ownership of mineral rights includes authority to access the property to extract the minerals (by putting in roads, for example).  The Whiteman decision suggests that ownership of mineral rights also gives a drilling company authority  to use the surface property for any number of  auxiliary processes associated with oil and gas extraction. Such an expansive interpretation of mineral rights  virtually eliminates the surface owner’s power to negotiate with the drilling company over  surface impacts.

Another concern is that the  Fourth Circuit  decision relied on  common use of  open waste pits in West Virginia  and  consistency with state environmental standards  to  recognize a  right to  build waste pits  without the surface owner’s  permission. The court does not make a particularly strong case for allowing a drilling operator to impose a use on the surface owner simply because the practice is common and has not yet been prohibited by the state. Given the pressures on  environmental programs — particularly in states that rely on revenue from oil and gas–  state acquiescence  in a practice should not be sufficient  reason to force it on the  surface owner.

Implications for North Carolina. North Carolina common law on trespass  is very similar to West Virginia  law, but North Carolina has  few  court decisions on the scope of mineral rights. (With no oil, gas and coal mining to speak of, there have been  few controversies between surface owners and the owners of mineral estates.)  But in 2012, the North Carolina General Assembly  provided some additional protection to surface owners by statute. G.S. 113-423.1  requires an oil or gas operator  to accommodate the surface owner by minimizing intrusion  on  and damage to the surface.  That  means “selecting alternative locations for wells, roads, pipelines, or production facilities, or employing alternative means of operation that prevent, reduce, or mitigate the impacts of the oil and gas operations on the surface, where such alternatives are technologically sound, economically practicable, and reasonably available to the operator.”

But the  N.C. law goes on to say that it should not be interpreted  to “prevent an operator from entering upon and using that amount of the surface as is reasonable and necessary to explore for, develop, and produce oil and gas…” [Emphasis added].  We now know what the Fourth Circuit Court of Appeals believes “reasonably necessary” means in the context of a drilling operator’s construction of a waste disposal pit on a West Virginia drilling site. The question is  whether  the first half of the new North Carolina law  –requiring  minimization of  surface impacts — may lead to a different decision about what  will  be considered  “reasonable and necessary” here.