Author Archives: rwsmith

The Disappearance of the Coastal Resources Commission

September 25, 2013.   Under the state’s Coastal Area Management Act (CAMA), the Coastal Resources Commission (CRC) has responsibility for developing standards needed to balance protection of highly productive  coastal resources, public trust rights, and  economic development.  But  the N.C. Coastal Federation’s Coastal Review Online  reports that  the CRC  has been effectively out of commission since the beginning of August. The question is why.

This year,  the General Assembly  changed the makeup of the  Coastal Resources Commission by  reducing the number of commissioners from 15 to 13;  revising  the categories for appointment; and  giving  legislative leadership the  power  to appoint 4 of the 13 members. (See Sec. 14.24  of Senate Bill 402.) To  make the changes  effective more quickly, the  bill  caused the terms of  all  Coastal Resources Commission members serving on January 1, 2013 to  expire on  July 31, 2013 with four exceptions. Those four seats, specifically identified in the bill, have terms expiring on June 30, 2014. The bill required  the Governor to appoint nine new CRC members by August 1, 2013 to replace the nine whose  terms would end on July 31, 2013.

The problem is that  new appointments have not been made and the CRC webpage now lists only four members  — the four whose terms extend until June 30, 2014.  Those four members alone  participated in a special called meeting of the commission  in August to make a decision  related to litigation over an earlier CRC  variance decision. The regular September  meeting of the CRC scheduled for this week has been canceled.

The reason for the sudden loss of two-thirds of the commissioners  is unclear.  Both the N.C. Constitution and state law  expressly say that state officials can and should serve  until their successor has been appointed or elected.

N.C. Constitution, Article VI, Sec. 10: “In the absence of any contrary provision, all officers in this State, whether appointed or elected, shall hold their positions until other appointments are made or, if the offices are elective, until their successors are chosen and qualified.”

N.C.G.S. § 128-7: “All officers shall continue in their respective offices until their successors are elected or appointed, and duly qualified.”

The term “officers” covers all elected and appointed state officials, including members of boards and commissions. The provisions exist to guarantee that essential government functions continue even as terms of office end.   N.C. judges  have applied  the provisions to find that decisions made by state officials  beyond the end of their appointed term are valid  and enforceable since  those officials legitimately continue in  office until a  successor takes over.

The CRC’s responsibilities go beyond  rule adoption. CAMA also gives the CRC power to grant variances from  coastal development  standards,  issue declaratory rulings (interpreting how  coastal development rules  apply to a particular project), and approve local land use plans in the coastal counties. Those decisions are often time sensitive and important to developers as well as local governments,  community groups and environmental organizations. Right now, the CRC cannot meet those obligations with a membership of four.   Four commissioners may not even  meet CRC quorum requirements unless the remaining nine members resigned or have been individually removed from office. (Neither seems to be the case.)  The remaining four commissioners also cannot represent the broad range of interests and expertise needed to make balanced decisions about protection of the state’s coastal resources.

The Direction of the State’s Water Quality Program

September 19, 2013.  Earlier posts talked about two unusual recent  decisions by the Department of Environment and Natural Resources (DENR) on Section 401 water quality certifications  under the Clean Water Act — one concerning  Cleveland County’s proposal to build a new dam on the First Broad River to create a reservoir and the other for federal relicensing of Alcoa’s existing hydroelectric power dams on the Yadkin River.  You can find the Cleveland County  post here and the Alcoa post here.  The question is what those two decisions  say about the current direction of the water quality program.

The  decision to waive the water quality certification for the proposed Cleveland County reservoir — the first deliberate waiver in the history of the N.C. water quality program — cited  a state rule requiring  a decision on a 401 application within 60 days. But  the Cleveland County application was not complete and DENR made no effort to go through the review process (which would have  required an environmental impact statement and a public notice).  As reported in the Charlotte Observer, Division of Water Resources Director Tom Reeder gave a different explanation of the waiver: “The state of North Carolina looked at all of this and said there’s really no value added to us getting involved in this whole thing. Cleveland County would have had to spend more money that would not go to any good purpose.”  The implication was that a state water quality review would add more time and cost when the U.S. Army Corps of Engineers (as the federal permitting agency) opposed the project — even though the state water quality review and the federal permit review usually go hand in hand and rely on the same environmental studies.

Where the Cleveland County project  proposed construction of a new dam;  Alcoa applied for a state water quality certification to cover continued operation of four existing dams on the Yadkin River that were built between 50 and 100 years ago to generate power for the now-closed Alcoa aluminum smelting plant. After nearly a year of review and a public hearing, DENR suddenly denied the Alcoa 401 Certification. The denial letter cited a state rule requiring the  applicant to have title to the project site, the permission of the property owner or the  ability to acquire the property by condemnation.  DENR relied on a lawsuit (filed the same day) claiming state public trust ownership of  the bed of the Yadkin River under the Alcoa dams to conclude that Alcoa  could not show title to the land  under the dams. According to the letter, the lack of either title or permission from the state would make it difficult to assure that Alcoa could meet water quality conditions on operation of the dams.

The earlier posts talked about a number of questions raised by the two decisions. There are also a few things to take away:

DENR has waived a 401 Certification without clearly explaining the reason for the waiver or how waiver decisions will be made in the future.   The decision letter suggests the waiver resulted from DENR’s inability to make a decision within 60 days, but the record shows no attempt to get the additional information needed to make the application complete, provide a public notice of the application or do a complete review.  The  Division of Water Resources director later suggested that  state review would have served no purpose given the Corps of Engineers’ objections to the project. Either reason could also easily apply to other 401 applications.

As to the first explanation,  DENR denied the Alcoa 401 application one month later  after nearly a year of review  with no suggestion that water quality rules required a waiver.  The second reason offered for the waiver (U.S. Army Corps of Engineers opposition) also applies to other projects. The Corps of Engineers often presses federal permit  applicants to look at other alternatives with fewer environmental impacts.   The Corps expressed similar skepticism about the City of Raleigh’s  proposal to build a reservoir on the Little River, but in that case DENR has continued to work with  Raleigh and the Corps of Engineers to look at alternatives and  address the Corps’ concerns.  The same has been true for other large commercial development projects.

DENR treated the Cleveland County reservoir project differently, but has not provided a consistent explanation of the decision or criteria for future 401 Certification waivers.

Denial of  a 401 Certification based on an unresolved claim of public trust ownership of the river bed under the project has implications well beyond Alcoa.   If there is a case to be made for public trust ownership of the upper reaches of the Yadkin River,  the same will be true for  many of the state’s inland rivers. The decision may have implications for  dam  sites proposed by Cleveland County and the City of Raleigh (on the First Broad River and the Little River respectively).

Title to the bed of the Yadkin River under the Alcoa dams  has not yet been determined by the courts, but DENR issues both Individual and general 401 Certifications for a wide range of projects  known to be on state-owned  public trust lands — including mining activities, utility and energy infrastructure, marinas, aquaculture operations, shoreline stabilization projects, water intakes, and dams.  The justification for denial of the Alcoa 401 Certification — that lack of ownership or permission from the state to apply  calls into question the applicant’s ability to comply with water quality conditions — would apply equally to those projects.

DENR has not explained what evidence of title will be required of applicants proposing to construct a project in navigable waters.    A deed to submerged lands may or may not be valid. See the earlier post on public trust doctrine for more explanation of public trust ownership and the way title to state-owned public trust lands can be transferred.   But the existence — or absence — of a state lawsuit claiming title under the public trust doctrine cannot be the deciding factor either.  Public trust ownership does not arise because of a state lawsuit; it is not negated by the absence of one.  Having made public trust ownership a factor in the issuance of 401 Certifications, DENR needs a clear and consistent approach to resolving questions of title to lands under coastal waters and navigable rivers; otherwise the outcomes will be arbitrary and subject to political influence.

The Alcoa denial letter suggests that Alcoa needs specific state permission to apply for a 401 Certification to continue operating the Yadkin hydropower dams, but does not indicate what form that permission must take. Some  activities on state-owned public trust lands have individual submerged lands leases from the State Property Office, but many do not. The state has often relied on environmental permits as the permission to develop on state-owned submerged lands.  It isn’t even clear whether a previous  lease to construct on state-owned public trust lands would be sufficient, since the state’s lawsuit claiming ownership of the Yadkin river admits that Alcoa had permission to build the four dams.

The precedent set by the Alcoa denial could apply to a number of  ongoing commercial activities in coastal waters and state rivers.  One of the (several) interesting things about the Alcoa decision is that it dealt with renewal of an operating license for dams built decades ago with state permission. The DENR denial letter suggests that the state must give express permission for the renewal of licenses and permits for ongoing operations on state-owned public trust lands — activities that could include aquaculture, marina operations, sand mining and other commercial activities. The criteria for granting or denying permission will be another question.

The troubling thing about the Cleveland County and Alcoa decisions is the reliance on rule interpretations that not only break with past practice, but are inconsistent with each other.  With respect to the waiver of a 401 Certification under the 60-day rule, DENR needs to reconcile the Cleveland County and Alcoa decisions. If opposition by the Corps of Engineers was the real reason for the Cleveland County waiver, DENR should explain the criteria for waiver in situation where the Corps has pressed an applicant for alternatives. DENR also needs to  provide  guidance to applicants proposing projects in coastal waters and inland rivers.  Otherwise,  applicants will have little assurance of a clear, consistent and predictable water quality review.

More on the Public Trust Doctrine

Several people responded to the  post about  denial of Alcoa’s 401 Certification  with questions or comments about public trust law and ownership of the bed of the Yadkin River.  Based on the comments, some additional explanation  of public trust law (and clarification of the earlier post)  may be helpful. Note: I did not intend to address the merits of the State’s claim to the bed of the Yadkin River under the Alcoa dams in the earlier post  and will not do that here — I don’t have all of the facts available to Alcoa and the state’s lawyers.

Both state and federal court decisions have recognized state ownership of lands under waters that are navigable for trade and commerce. The American colonies inherited English common law recognizing  the King’s ownership of lands under waters subject to the ebb and flow of the tides. After independence,  state courts quickly recognized that using the tides to identify navigable waters did not work well  in American where large, navigable rivers extended far inland. In Wilson v. Forbes, 13 N.C. 30  (1828),  North Carolina became one of the first states to recognize  public trust ownership of  lands under all commercially navigable rivers.  The case marked the beginning of North Carolina’s use of the “sea vessel” test for state public trust ownership.

By the late 19th century, the U.S. Supreme Court  joined  state courts  in recognizing public trust ownership of lands under  rivers that were not tidal but were “navigable in fact”.  The U.S. Supreme Court has said that waters are navigable in fact if they are  “used, or are susceptible of being used, in their ordinary condition, as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel on water.” (From an 1871 U.S.  Supreme Court decision in The Daniel Ball.)   Under both state  and federal court decisions,  lands under other rivers and streams can be privately owned but  there may be a public right of navigation.

A 2012 U.S. Supreme Court (PPL Montana, LLC v. Montana)  highlighted two limitations on finding  state ownership of a river bed under the “navigable in fact” test:

1. For the state to own the bed of a river, the river had to be navigable for commerce at the time of statehood.  Later improvements that make a river segment navigable do not  give   the state title to the river bed. (So admiralty jurisdiction may be broader than state public trust ownership.)

2. The navigability test  must be applied to each discrete  segment  of the river.  The state does not have public trust ownership of the river bed  in  river segments that were not navigable for commerce at the time of statehood  — even if most of the river would be considered “navigable in fact”.  So the need to portage for a significant distance around a natural feature, such as a fall,   may cause a segment of river to fail the test for state ownership of the river bed.

You can find the full U.S. Supreme Court decision in the Montana case  here. The case resulted from the State of Montana’s   claim of ownership to the bed of several rivers where a company, PPL Montana,  had operated hydroelectric power generation facilities for decades. The Montana Supreme Court ruled in the state’s favor, but the U.S. Supreme Court reversed the state court decision.  The U.S. Supreme Court directed the Montana court to reconsider the case  based on the two limitations mentioned above – for  purposes of state ownership, the river had to be navigable for commercial purposes  when Montana became a state  and  navigability  must  be determined for each discrete  stretch of river.

A few other points about public trust law:

For the most part,  public trust law has been developed by the states.  A number of the original 13 states extended public trust ownership to non-tidal commercially navigable rivers well before the U.S. Supreme Court addressed the issue.  Since then, the role of the U.S. Supreme Court has largely been to define the property interest in navigable waters that states joining the Union  after independence acquired at statehood.  Once public trust  ownership of  a river bed has been established under the “navigable in fact” standard,  state law takes over. The individual states  identify the uses allowed and protected on public trust lands. State law also governs the sale of  public trust lands.

Federal regulatory definitions of “navigable waters” do not determine state public trust ownership. The term  “navigable waters”   has also been used to describe federal regulatory jurisdiction under the Clean Water Act and  the Rivers and Harbors Act of 1899, but the regulatory definition of “navigable waters”  does not determine state ownership of the river bed. Many water bodies considered navigable waters under the Clean Water Act  do not meet the “navigable in fact”  test for public trust ownership. Public trust decisions  recognize two categories of navigable waters — 1.  those that were navigable for purposes of commerce at the time of independence (or statehood);  and 2. those that  were not.  Waters that were not commercially navigable at statehood, may be  commercially navigable now  because of later improvements. Or those waters may be navigable for more limited purposes (i.e., floatable by a canoe, but not by  larger vessels or navigable for only short distances because of obstructions).

The states own the beds of rivers that fall into the first category. The beds of rivers (or river segments) that fall into the second category can be privately owned. But Clean Water Act regulatory jurisdiction applies  to navigable waters in both categories and there may be waters in both categories that also fall  under admiralty jurisdiction. The simple rule to remember — public trust doctrine only gave the state ownership of lands under water bodies that were navigable for commerce in their natural condition at statehood.  (Simple to state, but open to some interpretation — and then there is the problem of applying the simple rule to the specific history and condition of each river.)

Having a deed to land under coastal waters or under a river does not necessarily  establish private ownership.  If  N.C. acquired  public trust ownership at independence (and that will be a question to be decided based on the “navigable in fact” test), only a colonial grant or  express authorization by the General Assembly   could   transfer title of those lands to a private property owner.

More than you ever wanted to know about the public trust doctrine…

The Uses of a Water Quality Certification: Alcoa

September 9, 2013.   On August 2, 2013, DENR’s Division of Water Resources denied a Section 401 water quality certification for the relicensing of Alcoa’s four hydroelectric dams on the Yadkin River.   (See an  earlier post  for background on  401 Certifications.) The denial letter did not cite any water quality basis for denying the 401 Certification. Instead, the letter  referred to a lawsuit filed the same day by the N.C. Department of Administration  that: 1.  claimed title to the bed of the Yadkin River under the Alcoa dams as public trust land;  and 2. asked the court to   recognized State ownership of the Alcoa dams  based on public trust ownership of the riverbed under the dams.  The significance of the Alcoa 401 Certification denial is that  many projects requiring 401 Certifications are located  in waters that may be covered by the public trust doctrine. The Alcoa  denial raises  some interesting questions about   issuance of  401 Certifications for  activities in rivers and streams in particular.   First, some history on Alcoa’s dams and  the public trust doctrine.

History.  Alcoa operates four dams on the Yadkin River to generate electricity.  Alcoa bought an  unfinished aluminum smelting plant in the town of Badin from a French company in 1915, completed the plant and began operation in 1917 powered by the newly constructed Narrows Dam on the Yadkin River.  As power demand increased, Alcoa  built three more hydroelectric dams on the Yadkin  —  at the Falls (1919),  High Rock (1927)  and Tuckertown (1962).   After Congress strengthened the federal role in permitting hydroelectric power projects,  Alcoa received  a 50-year federal  license to operate the dams (together  known as the “Yadkin Project”) in 1958.  In 2002, Alcoa  began the process of renewing the federal license.

For two years, a group  of North Carolina local governments, state agencies (including DENR), federal  agencies, lakefront homeowners associations, and environmental organizations met  to develop recommended license conditions for the Yadkin Project.  The   group  reached agreement on measures to protect water quality and habitat; provide public access; maintain lake levels and adequate  downstream flows; and create a drought management system for the area affected by the Yadkin Project.  The group submitted the proposed conditions to the Federal Energy Regulatory Commission (FERC) in 2007.  You can find a description of the 2007  relicensing settlement agreement  here.

Shortly after the settlement agreement had been signed,  Alcoa stopped all production at the Badin aluminum works and eliminated the last 30 jobs at the plant.  At its height, the Badin aluminum works employed about 1,000 people, but production had declined over a ten-year period.  As the demand for power at the Badin works lessened, Alcoa  started selling electricity from the Yadkin Project on the wholesale market.  Complete shutdown of the Badin plant set off a backlash. Stanly County, which  did  not sign the relicensing settlement agreement, demanded that Alcoa compensate the county for jobs lost  in the  shut down of the  Badin works and raised concerns about industrial contamination in the area of Alcoa’s Badin plant.  Stanly County  and others opposed to  renewal of Alcoa’s  FERC license  persuaded Gov. Beverly Perdue to intervene in the FERC relicensing and  request transfer of the  Alcoa  license to the State of North Carolina. FERC’s decision on relicensing of the Yadkin Project has now been on hold for several years waiting for the state to make a decision on issuance of a  401 Certification for operation of the dams.

In 2009, DENR   issued a  401 Certification for the Yadkin Project. The certification required   Alcoa to upgrade the hydroelectric generation facilities and make operational changes to improve downstream water quality and  restore flow to streams affected by operation of the dams.  DWQ revoked that  401 Certification in late 2010 after discovering that  information submitted by  Alcoa during the application review  may have been misleading.  After resolving DWQ’s  concerns, Alcoa reapplied for a 401 Certification last  year.   DWQ was  moving toward issuing a new 401 Certification  for the Alcoa dams — there was  a public hearing on a draft 401 Certification  in  May  — when DENR suddenly reversed direction and denied the 401 Certification on August 2, 2013 citing the McCrory administration lawsuit filed the same day. You can find documents related to Alcoa’s recent 401 application (including the denial letter and the complaint in the McCrory administration lawsuit) here.

Public Trust Doctrine. Under ancient law brought to the American colonies from England,  lands under navigable waters are owned by the sovereign and held in trust for the public.  The “public trust doctrine” protects the right of  the public to use the  waters for navigation, fishing, and recreation.  After independence, the states acquired title to public trust lands previously held by the King. Since the state holds lands under navigable waters in trust for the use of the public,  the state rarely transfers ownership of  those lands  outright.  On the other hand, the state  allows many private activities on  state-owned public trust lands — both commercial and non-commercial. Most of the docks, piers, marinas, and fish houses in  coastal waters have been built on state-owned public trust lands.   You will  find  other commercial activities in  coastal waters, rivers and streams including  aquaculture operations,  mining,  commercial recreation facilities,  and  dams (used for various purposes).

The  McCrory administration lawsuit admits  that  Alcoa had state permission to build hydroelectric dams on the Yadkin River. In the late 18th and early 20th century,  the General Assembly allowed a number of companies to build hydroelectric dams and mill dams on state rivers by  special legislation.  It is not clear that the state claimed ownership of the bed of the Yadkin River at the time.  Some early laws authorizing construction of dams on the Yadkin  refer to construction on “non-navigable” sections of the  Yadkin River  and a number of  state court decisions  recognized private ownership  of the bed of the Yadkin River  at  specific locations.   In Rose v. Franklin, 216 N.C. 289, 4 S.E.2d 876 (N.C., 1939), the N.C. Supreme Court noted that the parties to a title dispute admitted that the Yadkin River was a non-navigable stream as it passed through the town of Elkin and found that the plaintiff owned to the center of the river.

Until the 1990s,  court decisions recognized state ownership of lands under: 1. tidal waters (like the waters of the Atlantic Ocean and the coastal bays and sounds); and 2.   other waters that were navigable by sea-going vessels. The second category covered rivers that were below the fall line and deep enough to  be navigated  by large boats.    The public trust cases  appeared to allow private ownership of  the beds of  other rivers and streams,  but recognized a public trust easement on those that could be navigated by  shallow-draft boats or used to float logs downstream.   Decisions like Rose v. Franklin  fit this understanding of the law.

A  1995 N.C. Supreme Court decision, Gwathmey v. State, 464 S.E.2d 674, 342 N.C. 287,   abandoned the use of tidal influence as a factor and stated a simple rule: the public trust doctrine applies to any water body that, in its natural condition, can be navigated by “useful vessels, including small craft used for pleasure”.   It isn’t clear whether  Gwathmey completely abandons the old distinction between waters navigable by sea-going vessels and those  floatable by canoe for purposes of state ownership of the bed. One  problem with the Gwathmey case is that it  involved tidal  waters and marsh where public trust ownership had historically been recognized. The court just substituted one grounds for public trust ownership (navigability) for another (tidal influence).  The decision never  addressed the  impact of the  new rule  on  inland rivers where state courts had  recognized  private ownership of the river bed.  The McCrory administration lawsuit claiming title to the Alcoa dams may require the court to explain how the Gwathmey decision  applies to  interior rivers and streams.

The 401 Certification Decision.  The letter denying the Alcoa 401 Certification offers only one grounds for the denial — the state’s claim of ownership of the Yadkin River bed and the Alcoa dams built there. Citing a water quality rule, 15A NCAC 02H.0502 (f),  the letter says that “signature on the [401] application ‘certifies that the applicant has title to the property, has been authorized by the owner to apply for certification or is a public entity and has the power of eminent domain’. The required ownership certification ensures that the applicant owns the project’s dams and powerhouses and is fully capable of implementing all protections of water quality that may be imposed as conditions in a 401 Certification.”

The  rule applies to  all 401 applicants, raising the question of what will  now be required of applicants proposing development in public trust waters or in rivers and streams where public trust ownership may be in question.   It  is not a standard that seems to have been applied before to projects  on rivers and streams– even in the very recent past.  Just one month earlier, DENR waived a 401 Certification for the proposed Cleveland County dam without requiring the county to  show ownership of the bed of the First Broad River or obtain state permission to apply for a federal Clean Water Act permit  to build a dam.  Beyond dam construction,   a  401 Certification may be required for other commercial activities like in-stream mining; aquaculture;  construction of recreation facilities;  and  water intake structures for industry or agriculture.  Having invoked the requirement for Alcoa’s hydroelectric dams, DENR will need to  explain how the requirement applies to other applicants and permit holders:

— Does the standard set in the Alcoa denial letter apply to all  projects  in navigable  waters that require a 401 Certification?  This is not a trick question;  the letter indicates that  ownership  or  some form of state permission  will be necessary to satisfy DENR that  the applicant  has  sufficient control over  a project  on public trust lands  to  meet water quality conditions on a 401 Certification.

— What  will an applicant have to do to show  private ownership of land under a river or stream? Deciding whether a river or stream is navigable can require a boat trip — literally.  Answering the question of public trust ownership  will be  further complicated by uncertainty about how  the Gwathmey decision  applies to  rivers (or parts of rivers)  that  had  never been considered navigable by sea-going vessels.  In the past, many of those riverbeds had been recognized as  private property subject to a public trust easement for  navigation.

— Without proof of private ownership of the river or stream bed, what  kind of  state permission will be needed?  In the 19th and early 20th century, the General Assembly  often authorized activities in rivers and streams by special legislation  — as it did for  construction of  hydroelectric dams on the Yadkin River.  The state issues leases and easements in public trust lands for some purposes, but  those   programs developed fairly late in the 20th century and have been used for the most part in coastal waters.  The easement criteria in G.S. 146-12  lend themselves more readily to piers and docks  than to more intensive uses such as mining or dam construction.

In something of a reverse of the Alcoa 401 denial,  the state has   often relied on environmental permits as the vehicle for approving  activities in public trust waters.  Under G.S. 146-12, issuance of a  Coastal Area Management Act (CAMA) permit for development in  coastal waters  also  gives  the applicant a state  easement.  (The State Property Office  has an opportunity to review those CAMA applications.)   Outside the coastal counties, it is hard to find consistent application of the easement requirement.  For projects that don’t require a CAMA permit,  there will likely be more uncertainty about  public trust ownership and a less well-trod  path to state approval if the state does own the submerged lands.

— What standards will be applied in granting or denying state permission for activities on public trust lands?  The McCrory administration lawsuit suggests an intent to tie Alcoa’s operation of the Yadkin dams to generate electricity for sale on the wholesale market to compensation for use of the public trust resources.  Outside of leases to mine on  submerged lands, state law has not generally taxed  revenue from commercial  use of public trust resources.

— What happens when Congress has given a federal agency authority  to permit an  activity in navigable waters?  Under the Federal Power Act, FERC  has the authority to license hydroelectric projects in navigable waters of the United States. The U.S. Army Corps of Engineers has authority to permit other types of structures in navigable waters under the  Rivers and Harbors Act of 1899 and  issues Clean Water Act permits to fill navigable waters.  The Section 401 Certification has generally served as the state approval for  federally permitted projects in navigable waters. I don’t know that  the state has previously required a separate easement or lease. I also don’t know whether the federal  agencies believe any other state approval is needed given  Congressional authority  to permit these activities in navigable waters.

Many questions. The answers will be interesting.

The Uses of a Water Quality Certification: Cleveland County Reservoir

September 3, 2013.  First a disclaimer: This post will be the first of  a series  on two recent decisions by the Department of Environment and Natural Resources (DENR)  on water quality certifications requested under  Section 401 of the Clean Water Act.   Both  decisions  have been appealed; these posts should not be taken as legal advice to  parties  in these or other cases.

This post explains  how  Section 401  of the Clean Water Act works  and describes DENR’s decision to waive the 401 Certification for a Cleveland County reservoir project. The next  post will cover DENR’s denial of a 401 Certification for Alcoa’s hydroelectric dams on the Yadkin River. The last  post in the series will  talk about the implications of the  Cleveland County and Alcoa decisions for  DENR’s water quality certification program.  Individually, the decisions are unprecedented; together, the decisions send a very confusing message about DENR’s implementation of Section 401 of the  Clean Water Act.

First, a little background on water quality certifications. Under Section 401 of the Clean Water Act, an applicant for a federal license or permit that involves any discharge to navigable waters   must  provide the federal  agency with a certification that the activity  will comply with the water quality standards of the state where the project will be built.  Examples of a “discharge” include piping  wastewater  to a stream or river;  putting fill material in the water to build a structure like a dam or bulkhead; and releasing water through a hydroelectric dam.  A number of  federal permits can trigger the need for a “401 Certification”; the most common may be permits under Section 404 of the Clean Water Act to  fill navigable waters;  permits issued under Section 10 of  the Rivers and Harbors Act of 1899  for structures in navigable waters; and Federal Energy Regulatory Commission (FERC) licenses  to build or operate  hydroelectric dams.

One important thing to know about a 401 Certification: the state water quality  review does not simply duplicate the federal  permitting process.  The federal  permit decision often focuses on one part of the  project and may or may not include consideration of water quality impacts.  Under Section 401 of the Clean Water Act,   the state is charged to look at all of the  activity’s   water quality impacts — including impacts beyond the scope of the federal permit — in deciding whether  the activity will meet water quality standards.  The U.S. Supreme Court  confirmed  the broad scope of a state  401 Certification  in  PUD #1 of Jefferson County v. Washington State Dept. of Environmental Quality, 114 S.Ct. 1900, 128 L.Ed.2d 716 (1994).    The state rarely stamps a 401 application “approved” as submitted. More often, the  state’s 401 Certification identifies operating conditions and mitigation measures needed to prevent  a water quality violation. The federal permit then incorporates  the state’s water quality conditions and mitigation requirements.

Cleveland County Reservoir.   Cleveland County has been  trying to get a  Section 404 permit from the U.S. Army Corps of Engineers to  dam the First Broad River and create a reservoir since at least 2005.  To  issue a  Section 404 permit,   the Corps of Engineers has to find that there is no less environmentally damaging alternative that can  meet the project’s intended purpose. Cleveland County has  argued that the reservoir project is necessary to supply drinking water for the county, but the  Corps of Engineers has not been persuaded that a reservoir is the least environmentally damaging alternative.  There appear to be other drinking water sources available to Cleveland County —  including the purchase of water from existing water systems with excess supply.

The Corps expressed  concerns about the Cleveland County reservoir project from the beginning, but entered into an agreement with the county describing how a  federal permit application would be processed.  An early step would have to be preparation of an Environmental Impact  Statement (EIS) in consultation with the Corps of Engineers to satisfy  the National Environmental Policy Act (NEPA).  Since 2005,  little progress has been made on the federal permit application and EIS, but in late April Cleveland County sent DENR’s Division of Water Quality an application for a 401 Certification for the reservoir project.

Soon after receiving the Cleveland County  application on May 2, DENR’s water quality  staff  concluded that the application was incomplete; among other things, the application  did not identify mitigation  for stream and wetland impacts.  The state also has an  environmental  law  similar to NEPA.   The state Environmental Policy Act (SEPA)  requires an  EIS before  a state agency approves a project involving: 1. expenditure of public money or use of public land; and 2. the potential for significant impacts on the environment.  See N.C.G.S. 113A-4.  Although the Cleveland County reservoir project met all of the SEPA triggers,  the county did not submit an EIS with the permit application –another reason to find the application incomplete.  (Usually,  the state and federal reviews  are  coordinated so a single  EIS can be used for both. )

Although water quality staff  decided that the Cleveland County application was incomplete,  DENR  did not notify  Cleveland County of deficiencies in the application. On the other hand, DENR    did not  acknowledge the application as complete and  publish  notice of the application as required under federal law. After the  early  exchange  of emails among DENR staff about the incomplete application,  radio silence (at least in terms of email communication) for several weeks. Then, on  July 2, 2013 the new  director of DENR’s reorganized water programs, Tom Reeder,  sent a letter  to Cleveland County  waiving the requirement for a 401 Certification on the reservoir project. The letter gave one reason: under state rules, DENR  must act on an application for a  401 Certification within 60 days or the certification is waived. (See 15A NCAC 02H.0507.

You can find  DENR documents on the Cleveland County reservoir project, including the waiver letter,   here. (Be prepared to try  the link more than once; the connection sometimes sends an error message.)

Several things about DENR’s decision on the Cleveland County 401 Certification:

—  DENR has always interpreted the  60-day time period in state rules as  starting when DENR receives a complete application for the 401 Certification and in this case it seems clear that the Cleveland County application was not complete.

— The Clean Water Act  only assumes the 401 Certification has been waived if the state fails to act within  one year after receiving a 401 application.

— Starting the review time based on an incomplete application is inconsistent with DENR’s past interpretation of the rule and inconsistent with DENR’s  application of the rule to other projects currently under review.

— Given the inconsistency with past interpretation, current practice  and the absence of any effort to put the Cleveland County application through a normal 401 Certification review,  DENR seems to have made a deliberate decision to waive the state’s 401 authority for this particular project. The waiver did not happen by operation of  either state or federal law.

—  A deliberate waiver of a 401 Certification appears to have  no precedent in the N.C. water quality program and means the state has  forfeited the opportunity to influence permit conditions and  mitigation requirements for the Cleveland County reservoir project to protect water quality.

—  Other applicants will  question the  criteria for  a state waiver of the 401 Certification.  (The City of Raleigh, which has also proposed a controversial reservoir project, has already asked for a copy of the Cleveland County waiver letter.) Unfortunately, the waiver letter raises more questions than it answers, since it cites the 60-day rule to waive the 401 Certification for an incomplete application.

On August 21, 2013, Southern Environmental Law Center (SELC) sent a letter asking the U.S. Environmental Protection Agency  to designate the  area  of the First Broad River in Cleveland County proposed for reservoir construction as unsuitable under Section 404(c) of the Clean Water Act. Since then, SELC has filed an appeal of the state’s waiver of the 401 Certification on behalf of American Rivers.

Coastal Policy: Messages from Hurricane Sandy

August 27, 2013.  Just in time for the most active hurricane months, a look at Hurricane Sandy recovery:

Rebuilding.   New Jersey   will use  $250 million in federal Sandy disaster relief funds to buy out as many as 1,000 homes in communities like those along the South River and Raritan Bay that have flooded with increasing frequency.  The program aims to buyout entire streets and blocks of buildings in  high risk areas.  This is not a new use of federal disaster relief  funds;  similar buyout programs have been used to remove structures from floodplains in other parts of the U.S. after repeated flood events.

The story on the beaches is different. Both New York and New Jersey opted for quick rebuilding in the beach communities.  Shoreline changes  may have made  reconstruction physically impossible on some beach properties,  but otherwise the  two states decided  to allow beach communities to rebuild basically as they were before the storm. The emphasis on  quick reconstruction overwhelmed any discussion of policy changes  that might lessen damage in future storms.    Even with the push to rebuild, residents of N.Y. and N.J. beach communities have experienced  delays for all of the usual reasons: the need to  cleanup and  restore  basic  public infrastructure;  a wait for insurance payouts;  the need  for additional financing when insurance payouts  fell short; the slow realization that some houses still upright after  Sandy will have to be bulldozed  because of extensive  water damage; and the additional cost of elevating homes to meet federal flood insurance standards.

More on new federal  flood insurance maps and the cost of elevating structures;  beach nourishment projects; and  conflicts over reconstruction (and expansion) of seawalls on the New York and New Jersey oceanfront  below.

Revised FEMA Flood Maps.  The Federal Emergency Management Agency (FEMA) started the 3-5 year process of updating flood insurance rate maps (FIRMs) for  eastern seaboard states before Hurricane Sandy. The maps, which designate high hazard flood zones for purposes of the federal flood insurance program,  had last been updated in the 1980s. A lot has changed since then;  the United States Geological Survey estimates that sea level rise  along the New Jersey coast has risen between 6 and 9 inches  in the last 50  years and stormwater runoff from increased development also contributes to higher flood risk.  FEMA planned to finalize  updated  flood maps for New Jersey and New York in the second half of 2013,   but  issued “advisory” maps in December of 2012 to help property owners make rebuilding decisions after Sandy.

As expected, the new FEMA maps had  larger flood hazard areas, including larger  V-zones; these are areas likely to flood as a result of wave action (“V”  stands for velocity)  where structures require higher and more expensive elevation.   Federal flood insurance standards require structures located in certain high hazard flood zones, such as  V-zones and A-zones (the designation for many coastal areas just landward of the V-zones)   to be elevated above base flood elevation or  pay much higher federal flood insurance premiums. New structures and those  more than 50% damaged must be elevated above the new base flood elevation to  be insured  at all. Elevation can add tens of thousands of dollars in cost; the amount depends on the required height and method used to raise the house.

Shortly before Sandy,  Congress amended  federal flood insurance laws to make the program more financially stable. The Biggert-Waters Flood Insurance Reform Act of 2012 directed FEMA to make flood insurance rates  reflect flood risk and phase out  insurance subsidies for  homes built before the first federal flood insurance  rate maps were adopted in 1975. You can find more information on 2012 changes to the federal flood insurance program here.  The prospect of higher flood insurance rates, elevation of additional homes (including homes predating the flood insurance program) and a major east coast hurricane created a perfect storm of confusion and anxiety.

The larger V-zones shown on the advisory maps  generated a Stop FEMA Now movement  by property owners  concerned about  the cost of elevating their homes  and  higher flood insurance rates.   New Jersey Gov. Chris Christie urged beach communities to take advantage of the FIRM revision process  to provide  FEMA with information to  support  smaller  flood hazard zones. By June of 2013,  FEMA had  modified draft  maps for the New Jersey shoreline. Although the June maps still expand flood hazard areas, FEMA reduced the size of   many of the V-zones  shown on earlier advisory maps. FEMA expects to finalize maps and new flood insurance rates  in 2014. In the meantime, the uncertainty about flood hazard designations and elevation requirements caused some homeowners to delay rebuilding.

Note:   The  1980’s-era flood insurance rate maps for N.C. have already been updated thanks to a cooperative effort between the state and FEMA.  In 1999, North Carolina  experienced  the problem of out-of-date flood hazard maps when  Hurricane Floyd caused devastating and unexpected  flooding along coastal rivers and streams. In response, the N.C. General Assembly  created and funded  the N.C. Floodplain Mapping Program. The new state program took on  the technical work needed to update the FIRMs for N.C. under a cooperative agreement with FEMA    By 2008, the first phase of map updates (covering the six coastal river basins)  had been completed and adopted for use in the federal flood insurance program.  As in  N.J.,   more recent N.C. data  confirmed the practical experience of Hurricane Floyd —  because of sea level rise and increased stormwater runoff, larger areas are vulnerable to significant flooding.

Beach Nourishment. In New Jersey,  Hurricane  Sandy  response  means  major beach nourishment and dune construction projects to rebuild eroded beaches. Communities that   had nourished beaches before Sandy clearly fared  better than those  that did not.  Although Sandy  eroded  the   nourished  beaches,  the protective  dunes took the brunt of the storm rather than the oceanfront development behind the dune line.  New Jersey has proposed to rebuild  protective dunes that  existed before Sandy and extend dune construction to additional communities.     The challenges: money,  easements and sand (in shorter supply than many people assume).

Money

Dr. Stewart Farrell and colleagues in the Coastal Research Center at  Stockton College of New Jersey estimate  that between 1985 and 2008 New Jersey beaches received  80 million cubic yards of sand  at a cost of  $800 million (not adjusted for inflation).  The larger beach  nourishment projects  were built by the U.S. Army Corps of Engineers  under a cost-sharing formula with the state. Under the  current  cost sharing formula, federal funds pay   65%  of the cost  for  an authorized federal  “hurricane protection” project to  nourish a beach and build protective dunes; the remainder of the cost is  shared by state and local government.   This year, Congress allocated $5.4 billion to the Corps of Engineers for Hurricane Sandy response.  See  “The Beach Builders” by John Seabrook in the July 22, 2013 issue of The New Yorker magazine for the past and present of beach nourishment on the New Jersey shoreline.

Not surprisingly, the high cost of beach nourishment  periodically causes both Presidents and members of Congress to question the wisdom of investing federal money in projects designed to erode away.  Both Presidents Clinton and George W. Bush attempted to either eliminate or scale back federal funding for beach nourishment.  Pressure to protect valuable real estate, expensive homes and tourism revenue won out.

Easements

The landward edge of a  beach nourishment/dune construction project has to be anchored above the mean high water line — which most often means on private property. For federally funded projects, the U.S. Army Corps of Engineers requires an easement for construction from each private property owner affected and puts the responsibility for acquiring the easements on the local government.  Beach towns ( even before Sandy) have sometimes met resistance from  property owners for a variety of reasons —  most often, fear that the easement will  allow public use of their property.  New Jersey’s goal is to  build continuous lines of protective dunes in  Ocean County, Cape May and Atlantic County beach communities.  Easement acquisition has been slow; according to a recent local news story  only half of  the easements needed for the N.J. beach projects have been granted by oceanfront property owners.   (Gov. Christie has made his feelings about that  known.)

Although a local government can use the power of eminent domain to condemn  easements for beach nourishment,   an eminent domain case  related to  an earlier   dune construction   project in  the Borough of Harvey Cedars, N.J. cast a shadow over post-Sandy easement acquisition until very recently.    Harvey and Phyllis Karan opposed construction of the 22-foot storm protection dune in  Harvey Cedars because  it would block the   view from the first floor of their oceanfront house.  The Karans refused to grant an easement for the project and after the Borough acquired an easement on the Karan property by eminent domain in early 2009, the issue of compensation for the easement ended up in court.  The Borough offered the Karans a small amount ($300) to compensate for the impact on their  view; the Karans’ lawsuit asked for $500,000, arguing that construction of the dune (which was completed in 2010) reduced the value of their $1.9 million house by 25%.

When the compensation case went to trial, the judge did not allow the jury to consider any benefit to the Karans from construction of the 22-foot dune. The jury awarded the Karans $375,000 in compensation.  Hurricane Sandy came through while the  Borough’s appeal was pending in the N.J. Supreme Court  —  eroding the dune, but leaving the Karan home largely undamaged.  Hurricane Sandy may well have affected the outcome of the  case by so dramatically supporting the Borough’s argument that the dune project benefited the Karan property.  In July, the New Jersey Supreme Court issued a decision in  Borough of Harvey Cedars v. Karan, 425 N.J. Super. 155 (App. Div. 2012), rev’d and rem’d, ___ N.J. ___ (2013),  reversing the condemnation award   and sending the case back down for a new trial, saying in part:

“The trial court’s charge required the jury to disregard even quantifiable storm-protection benefits resulting from the public project that increased the fair market value of the Karans’ property… [T]he quantifiable decrease in the value of their property — loss of view — should have been set off by any quantifiable increase in its value — storm-protection benefits. The Karans are entitled to just compensation, a reasonable calculation of any decrease in the fair market value of their property after the taking. They are not entitled to more, and certainly not a windfall at the public’s expense.”

You can find the  entire opinion  here.

N. J. officials clearly hope that the Karan decision will persuade more oceanfront property owners to grant easements for the shore protection projects rather than hold out for large compensation awards.

Seawalls, Revetments and Groins (Oh my!).  Duke University geologist Orrin Pilkey  has often used the New Jersey shoreline as the  living illustration of  the damaging effects of seawalls, revetments and groins on ocean beaches– loss of the recreational beach,  obstruction of public access, and increased erosion on  nearby properties.  Pilkey  made “New Jerseyization” the description of  a choice to sacrifice the beach to use of engineered structures to protect buildings. (You can find a good introduction to the  different types of erosion control structures on  the Surfrider Foundation’s   Beachapedia website. The Surfrider Foundation has opinions on the subject, but the descriptions and illustrations are straightforward and factual. )

Both New York and  New Jersey  have permitted construction of oceanfront erosion control structures to protect public and private property.  Based on the rules currently in place, New York seems to have fewer restrictions.  On paper  (sometime practical application looks different), New York coastal policies appear to tilt in favor of permitting an erosion control structure unless it would affect particularly sensitive natural resources such as wetlands.     Unlike New Jersey,  New York does not require an applicant for a  seawall permit to first show that other approaches will not work.  New Jersey rules seem to reflect greater skepticism about use of erosion control structures on the ocean beach.  In terms of publicly funded beach protection projects, New Jersey  has  focused on beach nourishment as the preferred public response to  post-Sandy shoreline erosion.

Both states have  dealt with post-Sandy controversies related to oceanfront seawalls.  Before Hurricane Sandy, Ocean City (N.J.) had a seawall made up of boulders 18 feet high. After the hurricane, Ocean City rebuilt and extended the seawall   to the boundary with the adjacent town of Matoloking.  Matoloking, which lost about 150 feet of beach in Hurricane Sandy,  sees the extended seawall as a threat to the beach nourishment and dune construction project in Matoloking –potentially  increasing erosion of the protective  dunes Matoloking hopes to build.

In Southhampton N.Y., billionaire hedge fund managers built sheet steel and rock barriers oceanward of their homes under permits  to replace or repair structures that existed before Hurricane Sandy.  Fast track permits issued by the N.Y. Department of Environmental Protection allowed the property owners to  build structures larger than those that existed before Sandy, but without notice to neighbors or the local government. A New York Times  story described one of the new structures as being built with boulders the size of Volkswagons.   Surprised  local officials have expressed  concern about the impact of these large structures on the beach, as waves reflect off the structures and increase beach erosion.

Although the tide seems to have  turned  against use of seawalls, groins and revetments on the oceanfront in recent years, past decisions to permit  those kinds of  structures still echo through the Sandy recovery.

Legislative Wrap-Up V: Miscellaneous

August 14, 2013. Bits and pieces of environmental legislation (air quality, coastal development, sedimentation, renewable fuels tax credit). Many of the provisions discussed below were adopted as part of House Bill 74 (Regulatory Reform Act of 2013), which the Governor has not yet signed into law. The Governor has until August 25th to sign or veto  a bill adopted at the end of the legislative session; if the Governor takes no action, the bill becomes law without his signature.

Appeals of  Air Quality and Water Quality Permits

House Bill 74 (Regulatory Reform Act of 2013) includes two separate provisions that shorten the time for a third party  to appeal an air quality or water quality permit from 60 days to 30 days. (See Section 29 and Section 53.) The time for an applicant to appeal a permit decision has always been 30 days, but a third party (such as  a neighbor, local government or community organization) fell under the  60-day appeal period set in the state’s Administrative Procedures Act . The challenge for third parties is that the appeal period begins to run when the applicant gets notice of the permit decision — not when the third party receives notice.

Air Quality

Local Transportation Mitigation Ordinances.  House Bill 74 ( Regulatory Reform Act)  prohibits local governments from  using a fine or penalty to enforce  certain types of ordinances to reduce the air quality impacts of commuting by car. Section 10.1(a) of the bill adds a new statute section, G.S. 160A-204  (entitled Transportation impact mItigation ordinances prohibited):

“No city may enact or enforce an ordinance, rule, or regulation that  requires an employer to   assume financial, legal, or other responsibility for of the impact of his or her employees’ commute or transportation to or from the employer’s workplace , which may result in the employer being subject to a fine, fee, or other monetary, legal, or negative consequences.”

Section 10.1(b) adds a new G.S. 153A-145.1 that applies the same prohibition to counties.  A  Durham  ordinance requiring large employers to have a plan to reduce commuter miles traveled by employees may be an example of the kind of ordinance the legislation would  affect. The Durham ordinance allows the employer to choose a number of different approaches to reduce commuting by car, including: work-at-home policies; incentives for car-pooling; creation of company van pools; and shower facilities for employees who bike to work.

There was little discussion of the provision as House Bill 74 moved toward adoption,  but the same language appeared in a different House bill titled  Local carbon footprint ordinances (House Bill 677). The  title suggests that lawmakers  linked transportation mitigation ordinances to climate change policy.  In reality, these ordinances mostly have to do with reducing ozone pollution to  meet federal air quality standards.  As much as 70% of the ozone pollution in urban areas comes from motor vehicle emissions and reducing vehicle miles traveled is one way to keep motor vehicle emissions down.  The Durham ordinance talks specifically about the need to reduce nitrogen oxide emissions that contribute to high ozone levels.  Many of the state’s urban areas will be hard-pressed to meet tighter federal air quality standards for ozone while continuing to grow. Failing to meet the ozone standard (“nonconformity” in Clean Air Act language) has significant economic consequences, including loss of federal highway funds and inability to permit new industrial development.  The language in House Bill 74 does not  eliminate the authority for these kinds of  ordinances,  but it  will  make the ordinances difficult to enforce and possibly reduce their effectiveness as a tool to maintain ozone  conformity  in the state’s major metropolitan areas.

Repeal of Heavy Duty Diesel Rules for 2008 and Later Vehicles. Section 25 of House Bill 74 directs the Environmental Management Commission to repeal rule 15A NCAC 02D.1009 (Model Year 2008 and Subsequent Model Year Heavy Duty  Vehicle Requirements) by December 1, 2013. The rule was adopted  by the Environmental Management Commission in 2004 and required model year 2008 and later heavy-duty diesel vehicles to meet California emissions standards. The U.S. Environmental Protection Agency has allowed California to adopt more strict motor vehicle emissions standards than those in federal rules and a number of states have adopted California standards by reference. The EMC adopted the California heavy duty diesel standard because lawsuits delayed the federal standard for several years.  With a final  federal standard  for heavy duty diesel engines in place,  the state rule has become unnecessary. (The final  federal  standard turned out to be  nearly identical to the California standard that the EMC adopted by reference in 2004.)

Open Burning.  Section 28 of House Bill 74 makes a significant change to rules for open burning. Until now, open burning for land-clearing or right of way maintenance has only been allowed on the site being cleared unless the debris was taken to be burned in an air curtain burner,  (Air curtain burners or “fireboxes” provide better control of  smoke and particulate pollution than open burning of woody debris.) The new provision allows land-clearing debris to be transported off-site for open burning and allows that burn site to be used  up to  four times a year. The bill  requires an off-premises open burn to maintain the same setback distance from occupied structures as an  on-site open burn — 500 feet.  The impact on  nearby residents and building occupants may be different, however, if  the off-premises open burn site is used  more often.  The bill also exempts these off-site open burning locations from requirements that would otherwise apply to waste disposal site for land-clearing debris.

Air Quality Permit Terms. Section 29 of House Bill 74 sets the permit term for  most state-issued air quality permits  at eight years.   The term for  an air quality permit issued under Title V of the Clean Air Act  continues to be no more than  five years as required by federal law.

Coastal Development

Ocean and Inlet Erosion Control.  For over thirty years, state coastal policies  generally barred use of hard erosion control structures (like seawalls, jetties and groins) on ocean and inlet shorelines.  In  2011, Session Law 2011-387  made the first significant change in that policy by authorizing  DENR to permit  a limited number of   “terminal groins” under strict conditions.  A terminal groin is an erosion control structure built perpendicular to the shoreline and at the end of a section of beach. Terminal groins are sometimes used to stabilize an inlet shoreline. This year, Senate Bill 151  made several changes to the 2011 law. One of the most significant is a change in the definition of  ”terminal groin” to include projects that involve installation of “one or more” groin structures  or a single groin with  ”a number of smaller supporting structures”.

Although Senate Bill 151 keeps the 2011 limit on the total number of terminal groin projects permitted coast-wide (four), the new definition of “terminal groin” no longer matches the definition used by the U.S. Army Corps of Engineers. Expanding the term to include multiple groins as part of a single project means the law potentially authorizes projects well beyond the scope of a “terminal groin”. Senate Bill 151 also makes it easier  to get a terminal groin  permit by eliminating the need for the applicant to show that: 1.  the project is necessary to protect imminently threatened structures;  and 2. other shoreline stabilization measures  would not be successful. More background on the terminal groin issue and S.L. 2011-387 can be found here.

Local Authority in Public Trust Areas. Another section of Senate Bill 151 clarifies  local government authority to address nuisance conditions on the beach and prevent (or remove) obstructions in public trust areas of the beach. The clarification became necessary because of  a N.C. Court of Appeals decision in Town of Nags Head v. Cherry  that held only the state can take action to  remove a structure on the public trust beach. See an earlier post for background on the Nags Head case.

Notice of CAMA Minor Development Permits.  Section 30 of House Bill 74 eliminates the requirement for newspaper notice of Coastal Area Management Act (CAMA) minor development permits. Notice will still be provided to any person or organization requesting notice of permit applications and by posting a notice at the site of the proposed development. Note: Under CAMA, “minor development”   can still be a significant  construction project.   CAMA  defines “major development”  to include any project that  requires another state or federal approval; occupies an  area of more than 20 acres; involves drilling for or excavating natural resources; or  occupies a structure(s) with a footprint of 60,000 square feet or more. All other development projects are considered “minor development”. As a practical matter, most projects that disturb an acre or  more will be “major development” because of the need for a sedimentation plan approval.

Note: As of  now, Senate Bill 151 has not been signed by the Governor and so has not yet become law.

Sedimentation Act

Local Sediment Programs. The Sedimentation Pollution Control Act  allows  DENR to delegate enforcement of the law to approved local sedimentation programs and many cities and counties have local programs. Section 33 of House Bill 74 resolves a recent question about  the role of the state’s Office of Administrative Hearings (OAH) in appeal of a civil  penalty assessed by a local program for violation of the Sedimentation Act. The bill makes it clear that those appeals  will be decided by the local government  under  the appeal process set out in the local sedimentation program ordinance. Appeals will not go to the Office of Administrative Hearings.

Tax Credit for Renewable Fuel Processing Facilities

House Bill 112 (Modifications to 2013 Appropriations Act)  extends  the tax credit available for facilities built to process renewable fuel. The sunset date for the renewable fuel processing tax credit, G.S. 105-229.16D,  had already been extended several times. Last year, the General Assembly extended the tax credit to facilities in service by January 1, 2014.  Section 11.2 of  House Bill 112 extends the tax credit to facilities in service by January 1, 2017 as along as the developer  signs a letter of commitment with the N.C. Secretary of Commerce by September 1, 2013 and begins construction by December 31, 2013.

Legislative Wrap-Up IV: Water and Wastewater Infrastructure

August 10, 2013. Appropriations, reorganization of infrastructure funding agencies and a bit of micromanagement.

INFRASTRUCTURE FUNDING

State Grants.  The General Assembly appropriated a small amount for grant programs that fund  water and wastewater projects. The figures in the chart below reflect the total appropriation for each agency  minus funds used for staff and operating costs.  Only the Department of Environment and Natural Resources (DENR) grant funds are restricted to water and wastewater projects; the Commerce and Clean Water Management Trust Fund (CWMTF) grant funds  can be  used for other purposes as well.  (More detail  on the scope of those grant programs below.)  The   N.C. Rural Economic Development Center, which has been the  largest source of water and wastewater infrastructure grants, received no new appropriations.

Grant Appropriations (in millions)
Agency 2013-2014 2014-2015
DENR $3.5  $5
Commerce $10.8 $12.3
 CWMTF $ 9.2 $12.4
Rural Center 0 0

 

The Rural Center.  During the legislative session, debate over the future of the N.C. Rural Economic Development Center  overshadowed discussion of  state infrastructure needs.  In 1987, the  N.C. General Assembly created the Rural Center as a nonprofit corporation to support economic development and infrastructure projects in rural areas.  The Rural Center’s economic development grant program sometimes funded water or sewer infrastructure to support a particular economic development project, but a separate program – the Clean Water Partners – existed specifically to help rural areas fund water and wastewater projects. For the last ten years, the Rural Center has been the largest  source of water and wastewater grants to local governments. (The drinking water and wastewater revolving loan funds managed by DENR continue to be the largest source of public funding  overall, but poorer rural communities cannot always afford to take on even low interest debt.)

The Governor’s budget proposed to significantly cut the Rural Center budget (from $16.5 million to $6 million) and the Senate’s proposed budget appropriated no funds to the Rural Center. The House continued to support funding the Rural Center until the State Auditor released an audit report critical of the salary and benefits package for  Rural Center director Billy Ray Hall and questioning the adequacy of grant oversight.  Coming at a key point in budget negotiations, the audit report appeared to tip the balance;  the final budget provided no appropriations to the Rural Center. The Rural Center continues to hold some funds from previous years as well as funds already committed to projects in progress.  Release of funds had been frozen following the release of the audit report,  but the McCrory administration has been reviewing Rural Center grant decisions and  last week Secretary of Commerce Sharon Decker announced that $17.5 million in new, previously approved Rural Center grants will be released to grant recipients.  Oversight of outstanding Rural Center grants will be transferred  to a new Rural Economic Development Division in the Department of Commerce.

New or Modified  Infrastructure Grant Programs. In place of funding for the Rural Center, the General Assembly created two new infrastructure grant programs — a DENR grant program for water and wastewater infrastructure and a rural economic development grant program in the Department of Commerce.  The General Assembly also created a  Water Infrastructure Authority in DENR and a Rural Infrastructure Authority in Commerce to make decisions about grant awards. The provisions creating the two new authorities and setting the criteria for grant awards can be found in the final budget bill, Senate Bill 402.

A few things to note about the appropriations shown in the chart above:

▪ The DENR grant program, which is the smallest of the three, can only be used for water and wastewater infrastructure grants.

▪ The Dept. of Commerce  rural economic development  funds can be used for a number of different types of economic development projects; there is no specific set-aside for water and wastewater infrastructure. The budget provision that goes along with the appropriation also refers to both loans and grants without specifying how the funds will be divided between loans and grants.

▪ The Clean Water Management Trust Fund  appropriation represents the total  amount  available for  CWMTF grant awards.  In the past, most CWMTF grants went to stream/wetland restoration, stormwater management and riparian buffer protection; a small percentage of grants went to wastewater projects needed to address a specific water quality problem.   The new state budget consolidates CWMTF and the Natural Heritage Trust Fund which means that an even larger variety of projects  (including acquisition of buffers around military bases) will be competing for the limited funds.

Note: By comparison to the small amount of funding provided in the current budget , the N.C. Rural Economic Development Center and the Clean Water Management Trust Fund combined to issue  approximately $160 million in grants to rural and economically distressed communities for water and sewer infrastructure in 2008.   Because of the recession and state budget shortfalls, the amount of funding dropped in recent years; In 2011-2012, budget cuts had reduced the amount of water and wastewater grants awarded by the two programs to just over $20 million total.  Since appropriations to CWMTF and to the new Rural Economic Development Division in Commerce do not  set aside a specific amount for water and wastewater infrastructure, it is difficult to know how much will be available in the 2013-2015 budget cycle. Only the very small amount appropriated to the new DENR grant program ($3.5 million in 2013-14 and $5 million in 2014-15) is assured of going to water and wastewater infrastructure grants.

WATER SYSTEMS

Asheville:  The General Assembly approved  House Bill 488, which   transfers the City of Asheville  water system to the Metropolitan Sewerage District of Buncombe County (MSD).   The City of Asheville immediately  got a temporary restraining order to stop the transfer while  it challenges the legislation in court.

The Asheville water system conflict raises a number of interesting legal issues.  Article II, Section 24 of the  N.C. Constitution prohibits the General Assembly from adopting  legislation relating to “health, sanitation or the abatement of nuisances”  that applies to only one  local jurisdiction. Since water system operation probably fall into  all three categories, the Constitution seems on its face  to prohibit  the  General Assembly from reaching down to make decisions related to an individual water system. Legislators frequently try to draft around the  restrictions on “local” legislation by using language that appears to be  general, but in fact only describes a single city or county.  You will not find any mention of the City of Asheville or the  Metropolitan Sewerage District of Buncombe County  in House Bill 488  – the bill avoids naming the parties by using a   description of the areas affected that happens to only apply to one city and one sewerage district in the state.  The City of Asheville lawsuit argues that the description is so specific to Asheville that the bill violates the N.C. Constitution.

The other interesting question is whether the constitution limits the General Assembly’s power to transfer ownership of city-owned property.  A 1913 N.C. Supreme Court decision, Asbury v. Town of Albemarle, suggests that operation of a water system is a proprietary rather than a governmental function.   A proprietary function is something  that can  be done by a private entity and doesn’t require the exercise of powers unique to government.  Operating a water system   would be considered a propriety function because water systems can be operated by private entities, including investor-owned water utilities.  The Asbury decision says that legislation affecting a town’s proprietary functions falls under the same constitutional limitations that apply to legislation affecting the operations of a private corporation.   Although the General Assembly has broad power to control a city or county’s governmental  functions, the court concluded that it cannot  “at its will, take away the private property of a [municipal] corporation or change the uses of its private funds acquired under the public faith.”

The question is how North Carolina courts will apply the Asbury case today and to a somewhat different fact situation. The case is still cited as good law, but a lot has happened since 1913.

Durham:  Senate Bill 315 requires the City of Durham to annex and extend water service to the site of a  proposed development in southern Durham County  that is now beyond the city limits. Efforts to legislatively force extension of water lines to the proposed 751 South development began in 2012 (see  Senate Bill 382). Durham had refused the developer’s  request for water service in part because of   the high cost of extending a water line to the project and providing other municipal services.  Senate Bill 382 popped up in the last few days of the 2012 legislative session and failed to make it through. This session,  Senate Bill 315 made a few additional concessions to the City of Durham by allowing the City to delay providing other municipal services (such as police and fire protection) to the area for ten years following the annexation.

Note: The original post has been updated to make it clear that the Department of Commerce appropriation for rural infrastructure may be awarded as either loans or grants.

Reorganization and Review of N.C. Water Programs

August 7, 2013. An earlier post talked about reported plans for reorganization of water programs in the Department of Environment and Natural Resources and legislation directing DENR to combine the Division of Water Resources and the Division of Water Quality.  Since then,  DENR’s plans have become public and the General Assembly  adopted budget provisions related to the reorganization. On  August 1, 2013,  Secretary John Skvarla announced that all of the stormwater programs in the Division of Water Quality would move to the Division of Mineral, Energy and Land Resources effective that same day and the remaining water quality programs would become part of a reorganized Division of Water Resources. You can find the press release here.

Stormwater. Transfer of the stormwater programs significantly  changes the responsibilities of the Division of Mineral, Energy and Land Resources.  The Division of Water Quality  managed a number of different state and federal stormwater programs, including: a state coastal stormwater  program  designed to protect shellfish waters from bacterial contamination;  stormwater control requirements associated with the Neuse River, Tar-Pamlico River, Falls Lake and Jordan Lake nutrient strategies;  federal  stormwater programs (delegated to the state by EPA)  that issue permits for municipal and industrial stormwater discharges and for  stormwater generated by active construction sites. The Division of Energy, Mineral and Land Resources (DEMLR)  has no stormwater experience other than a supporting role in  construction stormwater  permitting   (through the DEMLR sedimentation program)  and no experience managing  federal  Clean Water Act programs. Taking on a much broader range of stormwater programs and responsibility for delegated federal programs could make for a steep learning curve.

Transfer of the stormwater programs to DEMLR separates NPDES stormwater permitting from NPDES permitting for wastewater discharges.  (National Pollutant Discharge Elimination System — or “NPDES”– permits are the federal  Clean Water Act permits required for discharge of pollutants to surface waters.)  The move also separates programs that  work together to reduce pollution loading to water bodies — like Falls Lake and the Neuse River estuary — that have become impaired by  pollutants coming from both point sources and nonpoint sources.

One  footnote on the stormwater move — legislation  that directs DENR to combine programs in the Division of Water Quality and the Division of Water Resources  assumes that  stormwater programs will remain in the reorganized Division of Water Resources.  The section of House Bill 74 (Regulatory Reform Act) that directs DENR to  reorganize the water programs also makes changes in a number of water quality laws to reflect the reorganization and substitutes  “Division of Water Resources” for “Division of Water Quality”   in state stormwater laws. I am guessing that reflects a lapse in communication rather than a conflict between DENR and the General Assembly – but in the short term, several state laws seem to  identify the Division of Water Resources as the stormwater permitting agency.

Other Water Quality Programs.  Remaining Division of Water Quality (DWQ) programs will move into the reorganized Division of Water Resources (DWR) under director Tom Reeder. The state budget  attached a $2 million budget reduction to the water program reorganization.  Using the reorganization to cut programs and people has risks. After four years of budget cuts, it will be difficult to reduce the combined water programs by another 12.4%  without hurting critical functions. In reality,  there has been little overlap in the activities of the two divisions; DWQ had responsibility for water pollution programs and DWR focused on water supply  — quantity rather than quality. It is not clear that the additional budget reduction will leave the state with effective water quality and water supply programs.  DENR will also need to be sure program  cuts don’t threaten its  ability  to meet federal requirements for delegated permitting authority under the Clean Water Act and Safe Drinking Water Act.   Those  requirements go beyond simply having people to issue permits. In addition to  meeting regulatory and planning standards set in federal law,  the federal grant agreements  link to specific performance measures for  state permitting and compliance activities. The earlier post on reorganization proposals talked about some of the  program requirements linked to delegation of Clean Water Act permitting.

A July  video  message from Division of Water Resources director, Tom Reeder,  to  staff in the Water Resources and Water Quality divisions provides some insight into  next steps for the water  programs.  New information about the reorganization was limited, although Reeder said the new organization of around 700 employees would have fewer managers (and no deputy director).  After briefly talking about the reorganization, Reeder described plans for a review of water programs and rules that will begin right away and be completed by the end of December. The purpose of the review goes beyond identifying duplication of programs in the newly combined divisions. Reeder describes it as an effort to eliminate rules and programs that  are overly burdensome or  ineffective.

In the  video, Reeder  specifically mentions riparian buffer rules as a program area needing review. It isn’t clear whether  that means minor adjustments or wholesale revision of the buffer rules, but  the  buffer rules are a good example of  one potential pitfall in  the review process — some rules are part of larger water quality strategies and  the burdens and benefits need to be looked at in that context. Buffer rules put an additional burden on real estate developers and property owners, but  using  buffers  as part of a broader  nutrient reduction strategy can   lower  the  cost  to  other nutrient sources  (including municipal wastewater treatment plants and agricultural operations).  Continuing to balance the burden among point and nonpoint sources will be particularly important where buffer rules rules account for some of the  load reduction required to meet an  EPA-approved Total Maximum Daily Load for impaired waters.

The Division of Water Resources has formed an outside involvement committee to help with the review of water programs and rules. You can find the Reeder video on YouTube. Discussion of the reorganization and review of water rules begins around the 7-minute mark.

Legislative Wrap-Up III: Solid Waste, Hazardous Waste and UST

August 5, 2013. Highlights of legislation on solid waste, hazardous waste and petroleum underground storage tanks.

CONTAMINATED SITES

STATE PURCHASE OF CONTAMINATED PROPERTY: One section of house Bill 74 (Regulatory Reform Act)  prohibits state agencies and the community colleges from buying property with contamination without first getting permission from the Governor and Council of State.  (The Council of State is made up of the elected heads of state departments, such the Attorney General, Commissioner of Agriculture, Insurance Commissioner, State Treasurer, etc.). To receive permission, the agency would have to show that state General Fund appropriations would not be used for the purchase. An earlier post, written when similar language first appeared in another bill, talks about the implications. The difference from the earlier version — the final provision does not apply to the UNC system campuses.

BROWNFIELDS:  The state’s Brownfields program provides tax benefits and environmental liability protection to a developer who is willing to clean up and redevelop a contaminated site.  (The person responsible for causing the contamination cannot benefit from the Brownfields program.) Redevelopment is done under an agreement with DENR’s Division of Waste Management that identifies the intended new use of the site and spells out what the developer needs to do to make the site safe for that intended use.  The General Assembly made two changes to the Brownfields program:

— Until now, a site with petroleum contamination from a leaking underground storage tank was not eligible for a Brownfields agreement.  House Bill 789 removes that restriction; a site that could otherwise quality for a Brownfields agreement will not be made ineligible because of a petroleum release.  UST sites had been excluded from the Brownfields program largely because of concern that tax incentives would be inappropriate for sites where the cleanup of contamination is already subsidized by taxpayers through the Commercial UST Trust Fund. The restriction had the unintended result of complicating efforts to redevelop large industrial sites where a UST release may have been just one of several sources of contamination.

— A provision in House Bill 74  exempts local governments from a minimum acreage requirement  (25 acres) for a local government Brownfields project if the developer already has a Brownfields agreement approved by DENR.

SOLID WASTE

FEES FOR LANDFILL PERMITS: House Bill 135 adjusts the fee schedule for landfill permits to match the options for five or ten year permits approved by the legislature in 2012.

ON-SITE DISPOSAL OF DEMOLITION DEBRIS: House Bill 706 (Preserve Landfill Space) allows for on-site disposal of demolition debris from manufacturing facilities and decommissioned electric generating stations. The bill exempts disposal of these materials from landfill standards and allows the debris to be buried on site under environmental standards set in the bill. Hazardous waste in the debris must still be disposed of under standards set in state and federal hazardous waste rules.

LANDFILL PERMITTING STANDARDS: Senate Bill 328 (Solid Waste Reform Act of 2013), which proposed to change many of the landfill permitting standards adopted by the General Assembly in 2007,  never got to a vote in the House.  Some of the less controversial pieces of Senate Bill 328  were adopted as part of  House Bill 74 (Regulatory Reform Act) just before the end of the legislative session. The changes adopted as part of  House Bill 74 include:

● Elimination of the requirement for a buffer between a landfill and state gamelands designated or acquired by the Wildlife Resources Commission after July 1 2013.  For gamelands designated before that date, the buffer will continue to be 1 mile  although  an exception was created for one proposed  construction and demolition debris landfill. That landfill will only be required to have a 500 foot buffer from a gameland designated before July 1, 2013. Based on the description in the bill, Jones County apparently will be the site of the C & D landfill that will benefit from the exception.  The bill does not change the buffers required between a landfill and a  National Wildlife Refuge (5 miles) or  state park (2 miles).  Note: The Jones County exception had been enacted as a separate bill (Senate Bill 24)  early in the session. The language was later added to House Bill 74 with the other solid waste permitting changes and modified to make it consistent with the final language in House Bill 74 on gameland buffers.

● Replacement of the 2007 requirement for annual cleaning of leachate collection lines with a requirement for video inspection of the lines every five years and cleaning as needed.

● A change to a long-standing rule requiring that vehicles used to haul solid waste must be leak-proof.  Under the bill, DENR must immediately begin to apply a different standard – that the vehicle be “designed and maintained to be leak-resistant according to industry standards”.  The Commission for Public Health is directed to amend the 1988 rule to reflect the change.

● A change in the definition of “leachate” to exclude liquid that adheres to the tires of vehicles leaving a landfill or solid waste transfer station.

CRITERIA FOR ASSESSING SOLID WASTE PENALTIES:  Sec. 49 of House Bill 74 sets more specific criteria for assessing civil penalties for violation of solid waste laws and rules. The criteria used are very similar to  criteria used in the water quality and air quality statutes.

LOCAL SOLID WASTE PLANS: House Bill 321 eliminates the requirement for each local government to have a 10-year solid waste management plan.  State law will continue to require annual reporting by each local government on the amount of solid waste generated and disposed of;   participation in recycling programs; programs for disaster debris, white goods disposal, scrap tires disposal; and other information on solid waste management.  A controversial provision that would have intervened in a  legal dispute between Union County and the operator of a C & D landfill in the county was removed before final adoption. (Background on the dispute can be found here.)

LOCAL SOLID WASTE FEES: House Bill 74 also amends the statutes that allow cities and counties to charge fees for solid waste disposal. The new language allows a local government to charge a surcharge for solid waste received from another local government jurisdiction. Unlike the fees charged to residents for waste disposal, revenue from the surcharge does not have to used for landfill operations; the surcharge can be used for any purpose or activity  the local government has authority to fund.

PETROLEUM UNDERGROUND STORAGE TANKS

The bill changes state law to require owners of  noncommercial underground petroleum storage tanks to pay a deductible of $1,000 and a 10% co-payment for environmental cleanup  if the tank leaks. The bill caps the total contribution required from the tank owner at $2,000 for the combined deductible and co-payment.  Until now, the state’s Noncommercial Underground Storage Tank Trust Fund paid the full amount of cleaning up soil and groundwater contamination from a noncommercial tank and the tank owner only paid for removal of the leaking tank. (“Noncommercial” tanks include home heating oil tanks and farm or residential motor fuel storage tanks that hold less than 1,100  gallons.)

Note on House Bill 74:  Many of the changes in law described here appear in House Bill 74. The Governor has not yet signed the bill and expressed  concern about some parts of the bill — including the solid waste provisions — in a press conference at the end of the legislative session. The Governor has until August 25 to sign H 74, veto the bill,  or allow it to become law without his signature.