Category Archives: Air

Other 2023 N.C. Environmental Legislation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SOLID WASTE

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

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

GENERAL

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

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

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

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

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

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

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

The Reduction Goal. Session Law 2021-165 set a goal of reducing CO₂ emissions from EGUs 70% (from a 2005 baseline of 75,865,188 short tons) by 2030 and achieving carbon neutrality by 2050. Under the law, “carbon neutrality” means that for every ton of CO₂ emitted in the state by a regulated EGU an equivalent amount of CO₂ must be reduced, removed, prevented, or offset. The law limits offsets to 5%. The NCUC can extend the CO₂reduction timelines by two years — or longer if necessary to allow for completion of a new nuclear or wind energy facility essential to the carbon reduction plan.

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

A few other things to understand about S.L. 2021-165. First, the law is directed to the Utilities Commission rather than the electric utilities. It authorizes the Utilities Commission to take “all reasonable steps” to achieve the CO₂reduction goals and adopt a plan by December 31, 2022 to do so. The law does not directly mandate that the utilities meet the reduction goals; create penalties for a utility’s failure to meet the goals; or address how emissions levels will be monitored and reported to show whether the goals have been met. Instead, the law relies on the NCUCs existing authority to approve/disapprove utility-owned generation facilities and related authority to allow the utilities to recover the cost of facilities and operations through rates charged to customers.

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

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

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

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

An existing NCUC rule, R8-60-1, already required electric utilities to submit an integrated resource plan (IRP) to the Utilities Commission every two years. The IRP forecasts electric power demand over a 15 year period and describes how the utility will meet projected demand through a combination of electric generation; power purchase; demand-side management (such as programs to reduce peak use); and energy efficiency. The NCUC’s order basically repurposes the IRP as a vehicle for identifying the most cost-effective and reliable mix of energy sources to meet the CO₂reduction goals.

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

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

It is not clear how long the NCUC can continue to allow the carbon reduction plan to evolve, since Duke Energy will need to make investments in facilities and enter contractual agreements to bring new energy sources on line. The window for flexibility will close soon for financial and contractual commitments needed to meet the 2030 reduction goal. Realistically, the first carbon reduction IRP (2024) will need to result in a much firmer plan to achieve a 70% reduction in CO₂emissions to have any possibility of meeting the 2030 goal. The 2024 plan will also need to lay the foundation for meeting the goal of carbon neutrality by 2050.

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

Among the near term steps authorized in the NCUC order:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Federal Budget and North Carolina’s Environment

March 24, 2017. Last week, the Trump administration released the Trump Budget Blueprint which describes in very general terms the President’s budget proposals for federal agencies. The Blueprint just opens the debate on the 2018 federal budget. Congress will significantly influence the final budget and members from both parties have already expressed concern about some of Trump’s proposed budget cuts. Percentage-wise, the deepest cuts in the Trump Budget Blueprint affect the Environmental Protection Agency. As background for the coming federal budget debate, this blogpost looks at the potential impact of the Trump budget plan on key state environmental protection programs.

Based on preliminary reports, the North Carolina Chapter of the Sierra Club provided a guide to the potential impact of the Trump budget the day before actual release of the Budget Blueprint. (Full disclosure — I assisted in preparation of the Sierra Club report.) For each major state environmental protection program, the report shows the percentage of the program budget currently funded by federal grants and the impact of cuts identified in the Trump budget plan. The report also provides information on other DEQ activities supported by federal grants that may be eliminated under the Trump administration’s budget plan.

I want to focus on information in the Sierra Club report about impacts to Clean Air Act, Clean Water Act and Safe Drinking Water Act programs in North Carolina. EPA has delegated federal permitting and enforcement authority under those laws to the state’s Department of Environmental Quality (DEQ). EPA provides oversight to ensure the state programs meet federal requirements, but DEQ has responsibility for day to day implementation. DEQ issues Clean Water Act permits for wastewater discharges; Clean Air Act permits for air emissions and air pollution control equipment; and Safe Drinking Water Act permits for public water systems. DEQ also enforces water quality, air quality and drinking water standards. In return for the state taking on those federal permitting and enforcement responsibilities, EPA provides program implementation or “categorical” grants to partially offset the cost.

The Trump Budget Blueprint does not provide detail on many cuts, but specifically proposes a 45% reduction in the EPA categorical grants that support basic state Clean Water Act, Clean Air Act and Safe Drinking Water Act programs. The tables below put the proposed cut in the context of each delegated program’s budget. Some notes on the numbers:

♦ “Total Need” means the complete budget (from all funding sources) for the delegated Clean Air Act, Clean Water Act and Safe Drinking Water Act program.

♦ Both the “total need” and federal funding numbers come from the certified state budget for the 2016-2017 fiscal year.

♦ These numbers only cover the EPA categorical grants for the delegated federal permitting/enforcement programs. The numbers do not reflect separate federal grants for targeted research or pollution reduction projects like the Albemarle-Pamlico National Estuary Program. Some of those federal grants reportedly have been targeted for elimination in Trump administration budget plans.

♦ The proposed federal funding cuts shown below are higher than those show for these same programs in the Sierra Club report because the final Trump Blueprint increased the percentage reduction over those reported earlier.

N.C. Clean Air Act Implementation

Total Need	Federal Grant	% Federally Funded	Proposed Federal Funding Cut
$4,854,105	$2,482,845	50%	– 45%

Clean Water Act Program Implementation

Total Need	Federal Grant	% Federally Funded	Proposed Federal Funding Cut
$14,160,554	$6,662,950	50%	-45%

Safe Drinking Water Act Program Implementation

Total Need	Federal Grant	% Federally Funded	Proposed Federal Funding Cut
$5,870,612	$3,316,895	50%	– 45%

In sum: EPA grants provide 50% of the funding for each of the major environmental permitting and enforcement programs delegated to the state under federal law. A 45% reduction in the federal grant would result in a cut of nearly 25% to each of those state programs. As discussed in an earlier post, many N.C. environmental protection programs have already experienced significant reductions in state funding since 2009-2010. The water quality program has been particularly hard hit.

Deep cuts to the federal grants would force the state to decide whether to make up the loss of federal funds with increased state appropriations from tax revenue or higher permit fees. The alternative would be to accept further erosion of those programs. The question may be particularly acute for the air quality program which is now entirely supported by the federal grant and permit fees.

You can find the entire Sierra Club report here .

NOTE: The original blog post has been revised to more accurately describe the release date for the Sierra Club guide and to note that information on percentage reductions to these particular programs changed (for the worse) after release of the Sierra Club report.

Pigs and The Civil Rights Act of 1964

March 7, 2017. In one of his earliest actions as North Carolina’s Secretary of Environmental Quality, Michael Regan sent a letter to the editor publicly responding to a U.S. Environmental Protection Agency (EPA) “letter of concern” about N.C. swine farms. EPA sent the letter as part of an ongoing investigation of a 2014 environmental justice complaint against the N.C. Department of Environmental Quality (DEQ) under Title VI of the Civil Rights Act of 1964. The complaint filed by Earth Justice, the Rural Empowerment Association for Community Help (REACH) and the Waterkeeper Alliance argued that a state permit for swine waste systems discriminates against African-Americans, Latinos and Native Americans by allowing members of those minority communities to be disproportionately harmed by air and water pollution associated with the swine waste.

An attempt at mediation of the complaint failed in 2016. The break down in negotiations led to a new allegation that DEQ violated federal rules against intimidating a person who has complained of discrimination. In 2016, EPA resumed active investigation of both complaints. (See this NC Policy Watch story for a helpful timeline of action on the complaint.) EPA’s January 12, 2017 letter of concern identifies gaps in the state’s environmental justice response and also recommends steps DEQ should take to resolve the complaint.

This is the first of two blog posts looking at the intersection of civil rights law and environmental protection programs. The first blog post will describe the legal basis for the environmental justice movement and some of the practical challenges of applying civil rights law to environmental permitting decisions. A later blog post will provide more detail on the Earth Justice/REACH/Waterkeeper Alliance complaint and EPA’s recommendations.

The Civil Rights Act of 1964 and the environment. Under Title VI of the Civil Rights Act of 1964, no person “can be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance” based on race, color or national origin. (See 42 U.S.C. § 2000d.) The anti-discrimination law applies to any state agency receiving federal grant funding, including DEQ programs to implement the Clean Air Act, Clean Water Act, Safe Drinking Water Act and other federal environmental laws.

Federal rules applying the Civil Rights Act to EPA-funded agencies (40 CFR Part 7) provide a little more detail, but focus on discrimination in employment, contracting and location of public infrastructure. Those nondiscrimination requirements mirror conditions on many other types of federal contracts and grants. The rules also require state programs to designate a person to receive discrimination complaints and to provide a grievance procedure.

Over time, a movement developed to give greater meaning to language in the Civil Rights Act guaranteeing the “benefits” of federally funded environmental protection programs without regard to race, color or national origin. The environmental justice movement grew out of concern that minority communities had been denied the benefits of environmental protection in several ways, including:

♦ Disproportionate siting of facilities associated with environmental risk (such as hazardous waste facilities) in minority and low income communities.

♦ Greater exposure of minority residents to high levels of pollution and environmental contamination.

♦ Weak enforcement of environmental standards in minority and low income communities.

Over the last thirty years, a number of studies have looked at the relationship between race, income and risk of exposure to environmental harm. The National Institute of Environmental Health Services has published a bibliography of studies related to environmental justice that can be found here .

Environmental permitting as a civil rights issue. Many histories of the environmental justice movement cite EPA’s permitting of a hazardous waste landfill in a majority African-American community in North Carolina as an early environmental justice flashpoint. See: EPA’s environmental justice timeline and the federal Department of Energy’s brief history of the environmental justice movement. The 1982 construction of the Warren County landfill, built for disposal of PCB-contaminated soil, highlighted a new civil rights question: Do permit decisions made under racially neutral environmental standards still result in a greater pollution burden on minority and low income communities?

The political and legal battle over the Warren County landfill raised two interconnected issues common to many environmental justice controversies: 1. Was the decision to put the PCB landfill in a community with a largely minority population (greater than 60% African-American) influenced by race? The concern was not that state officials had an affirmative intent to harm African-Americans, but that the state rejected more suitable sites to put the landfill in a community where residents had little political power to resist. 2. Did the U.S. EPA permit for the landfill fail to provide adequate safeguards against environmental harm?

Immediately after construction of the Warren County landfill, two members of Congress asked the General Accounting Office (GAO) to look at the first question. The GAO study of hazardous waste landfills in eight southeastern states (including North Carolina) found in part :

There are four offsite hazardous waste landfills in [the] eight States. Blacks make up the majority of the population in three of the four communities where the landfills are located. At least 26 percent of the population in all four communities have income below the poverty level and most of this population is Black.

Early efforts to consider disproportionate impacts to minority communities in environmental permitting. An Executive Order and Memorandum on Environmental Justice issued by President Clinton in 1994 represents one of the first federal efforts to address environmental justice in permitting. The goal of the Executive Order and memo, which directly applied only to federal agencies, was to “prevent…minority communities and low-income communities from being subject to disproportionately high and adverse environmental effects”. The memo directed federal agencies to:

Include impacts to minority and low income communities as part of environmental review. Environmental impact statements prepared under the National Environmental Policy Act (NEPA) should evaluate the human health, economic and social effects on minority and low-income communities and require mitigation of significant impacts.
Reach out to the community. During the environmental review, the federal agency should consult with the community about potential effects and mitigation measures and make meetings, documents and notices easily accessible.
Consider air quality impacts of federal agency actions on minority and low-income communities. EPA should ensure that review of the air quality impacts of a proposed federal action includes consideration of the impact on minority and low-income communities.
Provide access to information. Federal agencies should provide minority and low income communities with access to public information on human health, environmental planning, regulatory requirements and enforcement standards.

In short, the executive order and memo focused on process — outreach, information, analysis of impacts and mitigation. It did not change any environmental permitting standards.

What does the Civil Rights Act of 1964 require of federally-funded state environmental permitting programs? EPA has struggled to provide clear guidance to the states on how to apply the Civil Rights Act of 1964 in state environmental permitting programs. A 2014 EPA plan, Considering Environmental Justice in Permitting , set out a roadmap for considering environmental justice in federal and state permitting. EPA’s implementation plan proposed several years of additional work with a goal of completing work on the guidance in 2017.

The challenges. Addressing environmental justice concerns in permitting has some basic challenges:

♦ Civil rights laws and environmental protection laws speak different languages. Civil rights law focuses on discrimination based on race, color or nationality; environmental laws and rules set permitting standards based on public health and ecological impacts without regard to community demographics. An environmental permitting standard may not always be effective, but on its face the standard applies the same way in wealthy subdivisions, poor neighborhoods, and low income communities.

♦ Permitting agencies rarely have the authority to decide where a proposed facility will be located. DEQ cannot decide that a swine farm or landfill or hazardous waste storage facility would best be located here rather than there. As the permitting agency, DEQ responds to a permit application that proposes a specific type of facility in a particular location. DEQ can deny the permit — but only if the project would violate environmental standards in state law or rules and those standards do not make community demographics a permitting criteria. Instead, the standards focus on environmental and public health impacts without regard to the nature of the community likely to be affected.

♦ Race-neutral factors like the availability of suitable land and land cost often drive the permit applicant’s site selection. Large acreage at low cost often correlates to rural land, low income communities and a greater impact on minority populations.

What permitting programs can do. State environmental permitting programs can use the kind of outreach described in the Clinton memo to actively bring minority residents into the permitting process. Many state environmental programs now also have permit criteria that include consideration of the cumulative impacts of proposed and existing facilities in the community. That allows the permitting agency to look beyond the individual impact of a proposed facility and prevent environmental harm caused by clustering multiple pollution sources in a minority or low income community.

Does the Civil Rights Act require more? The environmental justice complaint about N.C. swine farms and EPA’s letter of concern suggest the state’s obligations may go further. More about that in the next post.

Court Refuses to Stay EPA Rule Reducing Power Plant CO2 Emissions

January 24, 2016. An earlier post described the basic requirements of a new federal rule (the Clean Power Plan) requiring existing power plants to reduce carbon dioxide (CO2) emissions. Note: That post described the draft rule out for public comment in 2014; the final rule approved by the U.S. Environmental Protection Agency in August 2015 differed from the draft rule in some details — including the specific state CO2 reduction targets — but the basic requirements did not change.

North Carolina’s Department of Environmental Quality (formerly DENR) opposed the rule early on and in October of 2015 joined 23 other states in a lawsuit challenging the final rule. (More on the McCrory administration’s objections to the EPA rule here.) Both the states and several business/industry groups attacking the rule in separate lawsuits asked the federal court to issue a preliminary injunction (or “stay”) to prevent EPA from implementing the Clean Power Plan rule until the lawsuits are resolved.

On January 21, the federal Court of Appeals for the District of Columbia denied all requests to stay implementation of the Clean Power Plan rule. The court’s order did not discuss the basis for denial in detail; the court simply said the requests failed to meet the high standards for issuance of a preliminary injunction, citing the U.S. Supreme Court decision in Winter v. Natural Resources Defense Council (2008). First, the court must be persuaded that the plaintiff is ultimately likely to win the case. A court will not give a plaintiff the immediate advantage of a stay restricting the defendant’s actions if the plaintiff’s arguments are unlikely to win out in the end. Even if the court finds the plaintiff has a likelihood of winning the case, the court will not issue a stay unless the plaintiff also shows that:

— The plaintiff is likely to suffer irreparable harm if the court doesn’t issue a preliminary injunction. In this case, the plaintiffs had to convince the court that allowing EPA to move ahead with implementation of the Clean Power Plan rule would cause immediate harm to the plaintiffs and that harm could not be remedied by a later ruling in the plaintiffs’ favor.

— The balance of equities tips in the plaintiff’s favor. In very simplified terms, the plaintiffs had to show that a stay would do more good than harm.

— An injunction is in the public interest. The public interest standard can work in favor of either the plaintiff or the defendant depending on the case. In the Winter v. Natural Resources Defense Council case, the U.S. Supreme Court decided that a preliminary injunction was not in the public interest because it would have restricted a particular type of military training exercise.

Since the Court of Appeals for the D.C. Circuit did not provide specific reasons for refusing to stay the Clean Power Plan rule, it is impossible to know exactly which of those standards the plaintiffs failed to meet. The decision doesn’t necessarily mean the court thinks the state and business/industry plaintiffs have a weak case against the rule; failure to meet the other criteria could also lead to denial of a stay. It is probably safe to say, however, that the court did not believe the states or the business/industry plaintiffs will be harmed by allowing the Clean Power Plan rule to go into effect.

In asking for a stay, the states identified two kinds of harm — waste of state resources to comply with a federal rule that may be struck down by the courts and a much more nebulous harm to state sovereignty. On the question of potentially wasted state resources, EPA pointed out: 1. the federal rule gives states until 2018 to develop a state plan to meet the CO2 reduction targets; and 2. a state can also simply opt out and let EPA develop a CO2 reduction plan for its electric utilities. The first actual CO2 reduction target comes several years after approval of the state plans. The court seemed persuaded that the long planning and implementation timeline means states will not have to sink major, unrecoverable costs into Clean Power Plan compliance before the lawsuits are resolved.

It is hard to know what the court made of the somewhat novel argument that immediate implementation of the Clean Power Plan rule would irreparably harm state sovereignty. EPA pointed out that the Clean Power Plan rule gives states a lot of flexibility in developing plans to meet the CO2 emissions reduction targets. It is also difficult to argue the Clean Power Plan rule attacks state sovereignty without going to the next — much more radical step — of arguing that the federal government has no authority to regulate to protect air quality in the first place. In any case, if the federal court strikes down the Clean Power Plan rule as either unconstitutional or beyond EPA’s statutory authority that would seem to adequately remedy any hypothetical harm to state sovereignty.

The Court of Appeals agreed to expedite the Clean Power Plan lawsuits and set the case for hearing on June 2, 2016.

Practical effects — States will continue to face a 2018 deadline for submission of CO2 reduction plans. In one way, the impact on N.C. will be minimal because the state is already on a fast track to submit a plan to EPA in 2016. The catch, however, is that the plan proposed by N.C.’s Department of Environmental Quality relies entirely on tighter emissions limits for a small set of existing coal-fired power plants and will only result in a fraction of the CO2 reductions the federal rule requires. See another post for background on the McCrory administration’s intent to submit a plan that does not take credit for CO2 reductions associated with increased renewable energy generation and energy efficiency improvements already required under state law. The shortfall in CO2 reductions in the plan being prepared by DEQ will almost certainly result in EPA disapproval. Given the federal court’s denial of a stay, N.C.’s decision to deliberately fast track an unapprovable plan may mean the state will have to revisit the plan sooner rather than later.

Challenging Environmental Permits

November 17, 2015. The U.S. Environmental Protection Agency (EPA) recently warned the North Carolina Department of Environmental Quality (DEQ) about the possible consequences of inappropriately restricting citizen appeals of Clean Water Act (CWA) and Clean Air Act (CAA) permits. For news reports on EPA’s letter to DEQ Secretary Donald van der Vaart see the N.C. Coastal Review here and the Raleigh News & Observer here. The EPA letter of October 30, 2015 expressed concern about two recent cases in which an administrative law judge ruled in favor of DEQ without conducting a full hearing on the permit appeal. In each case, the judge concluded that conservation organizations challenging a state-issued permit failed to show the permit decision “substantially prejudiced” their rights — a threshold requirement under state law. EPA believes the decisions conflict with federal laws and rules that guarantee the right of citizens to appeal Clean Water Act and the Clean Air Act permits. EPA noted that the conflict could jeopardize North Carolina’s delegated authority to issue federal water quality and air quality permits. This post will focus on the permitting programs involved in the cases that caught EPA’s attention — Clean Air Act operating permits for large air pollutant sources (Title V permits) and Clean Water Act wastewater discharge permits (National Pollutant Discharge Elimination System or “NPDES” permits).

Delegation of Clean Air Act and Clean Water Act permitting. EPA has authority to issue both Title V permits and NPDES permits, but Congress also allowed EPA to delegate permitting authority to a state with an approved permitting program. All 50 states have approved Title V permitting programs; 46 of the 50 states have approved NPDES permitting programs. N.C. has long had delegated permitting authority for both programs. Delegation gives the state some flexibility in program implementation and allows permit applicants to interact with state rather than federal staff on permitting and enforcement issues.

Requirements for approval of a delegated program. The CAA, CWA and rules adopted by EPA set standards for state program approval. Basically, the standards require a state program to include requirements and protections consistent with federal law. After initial approval, the state must continue to meet those standards; otherwise, EPA can withdraw program approval and take over permitting in the state. EPA’s October 30, 2015 letter concerned the requirement for state programs to provide opportunity for judicial review of permit decisions.

The federal rule on NPDES program approval, 40 CFR 123.30, requires the state to provide an opportunity for judicial review of final permit decisions comparable to review available in federal court for a federal NPDES permit decision. The rule goes on to say:

A State will not meet this standard if it narrowly restricts the class of persons who may challenge the approval or denial of permits (for example, if only the permittee can obtain judicial review, if persons must demonstrate injury to a pecuniary interest in order to obtain judicial review, or if persons must have a property interest in close proximity to a discharge or surface waters in order to obtain judicial review.)

A similar requirement applies to Title V permitting programs delegated to states under the Clean Air Act. Under 40 CFR 70.4 (b)(3)(x), a state Title V program must:

Provide an opportunity for judicial review in State court of the final permit action by the applicant, any person who participated in the public participation process provided pursuant to § 70.7(h) of this part, and any other person who could obtain judicial review of such actions under State laws.

Note that “any person who participated in the public participation process” could mean literally anyone who commented during the public notice and comment period before issuance of the permit.

The North Carolina cases that attracted EPA’s attention. The EPA letter mentioned two recent N.C. permit appeals —

♦ N.C. Coastal Federation, et al v. N.C. DENR, Division of Air Quality and Carolinas Cement Company LLC (appeal of the air quality permit issued to Carolinas Cement Company for a cement plant near Wilmington known as the Titan plant). In a series of three appeals, four conservation organizations challenged the initial air quality permit for the Titan plant issued in 2012 and two sets of permit modifications approved in 2013. State law allows any “person aggrieved” by a permit decision to file a petition for a hearing; the petition for hearing must include “facts tending to establish that the agency …. has deprived the petitioner of property, has ordered the petitioner to pay a fine or civil penalty, or has otherwise substantially prejudiced the petitioner’s rights”. (G.S. 150B-23). In effect, the law requires a petitioner to identify some harm.

The petitions for hearing noted that members of the four conservation organizations live, work, boat and fish in the area around the Titan plant site and argued that air emissions and mercury deposition from the plant would affect their quality of life, health and recreational activities. In each of the three cases, the administrative law judge agreed the petitioners were “persons aggrieved” by the permit decision but nevertheless ruled that petitioners failed to show the permit decision substantially prejudiced their rights. The most recent decision also concluded that the two earlier administrative decisions settled the question of petitioners’ failure to show substantial prejudice so the issue would not be reconsidered in the context of the last permit modification. The decision has been appealed to the N.C. Court of Appeals.

♦ Pamlico-Tar River Foundation and N.C. Coastal Federation v. N.C. DENR, Division of Water Resources and Martin Marietta Materials Inc. (appeal of an NPDES permit to discharge wastewater from a Martin Marietta quarry to Blounts Creek). The two organizations appealing the permit submitted affidavits that the wastewater discharge would interfere with members’ use and enjoyment of the waters of Blounts Creek for fishing and recreation; hamper education and environmental restoration efforts undertaken by the organizations; and affect the economic interests of two organization members operating water-related businesses on Blount’s Creek. The administrative law judge’s decision dismissed the permit appeal on the grounds that the petitioners were not “persons aggrieved” by the permit decision and had failed to show substantial prejudice to their rights. A Beaufort County superior court judge overruled this decision and sent the permit appeal back to the administrative law judge.

EPA clearly believes the restrictive decisions on standing in these cases conflict with the very broad right to judicial review of permitting decisions under the Clean Water Act and Clean Air Act. A DEQ statement in response to media questions about the October 30 letter characterized the EPA concerns as a misunderstanding of state law. In each case, the judges’ rulings had come at the request of DEQ.

The North Carolina Response to EPA’s Clean Power Plan Rule

July 26, 2015. In one way, the proposed U.S. Environmental Protection Agency (EPA) rule to limit carbon dioxide (CO2) emissions from power plants — expected to be final in August — looks like a typical air quality rule. The Clean Power Plan rule sets state by state reduction goals for a pollutant (CO2) from a particular set of of sources (electric generating facilities). But the rule takes an unusual and innovative approach to meeting those goals. The rule identifies four components (or “building blocks” in EPA rule-speak ) of a plan to reduce CO2 emissions associated with power generation : 1. reducing power plant CO2 emissions (the traditional Clean Air Act approach); 2. energy efficiency measures; 3. increased electric generation from renewable energy sources; and 4. transition of electric generation facilities from coal to natural gas. In effect, the rule aims to lower CO2 emissions per kilowatt hour used and allows the states to take credit for CO2 emissions avoided through increased energy efficiency and by shifting electric generation to energy sources with low or no CO2 emissions.

The proposed EPA rule requires each state to submit a plan for meeting its CO2 reduction target by June 30, 2016. The state plan can rely on any or all of the four “building blocks” in the EPA rule; it can also include measures that fall outside those categories as long as the plan achieves the CO2 reduction target for regulated electric generation facilities. If a state fails to develop a plan, EPA can create a federal plan for the state. An earlier post provides more detail on the proposed federal rule.

The McCrory administration has opposed the Clean Power Plan rule in written comments and in testimony before Congressional committees. In part, the administration has argued that the Clean Air Act does not authorize EPA to issue a rule that relies on measures — such as energy efficiency and increased reliance on renewable energy — that go beyond limiting pollutant emissions from regulated power plants. Last week, the practical implications of that position became more clear when DENR Secretary Donald van der Vaart told a Senate committee that the McCrory administration intends to resist the flexibility offered under the federal rule and submit a CO2 reduction plan based entirely on requiring additional CO2 emission reductions at power plants.

The Secretary’s comments came as a state Senate committee debated House Bill 571, which requires DENR to develop a state CO2 reduction plan with the participation of the public and the electric utilities. DENR did not support House Bill 571, but the bill passed the House with a bipartisan majority and the support of the state’s major electric utilities and environmental organizations. Last Wednesday, the Senate Agriculture and Environment Committee took up a substitute draft of H 571 that would prohibit DENR from taking any action or expending any state resources on development of a CO2 reduction plan until all legal challenges to the federal rule had been resolved or until July 1, 2016 (whichever came later). Asked to comment on the proposed substitute bill, Secretary van der Vaart indicated that DENR would prefer to submit a CO2 reduction plan by June 30, 2016 as required under the federal rule — but a plan based entirely on reducing power plant emissions.

Based on the Secretary’s statement, the McCrory administration response to the Clean Power Plan rule puts the state in a strange place:

♦ DENR has argued for an interpretation of the Clean Air Act that would force the federal rule to be more rigid and offer the state less flexibility to meet CO2 reduction targets. (A number of environmental law experts disagree with this narrow interpretation of EPA authority; the issue will likely have to be settled in court.)

♦ Based on this narrow interpretation of EPA authority, DENR intends to develop a state CO2 reduction plan that relies entirely on further reducing CO2 emissions from power plants even though existing state policies have North Carolina on a path to achieve much (if not all) of the necessary reductions through increased renewable energy generation, greater energy efficiency, and transition of power plants from coal to natural gas. Although DENR has not provided an analysis of the state’s ability to meet the state’s CO2 reduction target based on those existing policies, others have. You can find one (an analysis by the Natural Resources Defense Council) here.

♦ Relying entirely on lowering power plant emissions could make meeting the CO2 reduction target more difficult and more costly for electric utilities and consumers. Again, DENR has not provided a comparative analysis of the cost of relying entirely on power plant pollution controls versus a comprehensive CO2 plan that takes credit for energy efficiency measures, renewable energy generation and transitioning power plants from coal to natural gas.

Most states have started planning to meet the CO2 reduction targets. Even in coal-producing states where political opposition to the EPA rule tends to be highest, state air quality agencies have begun sketching out CO2 reduction scenarios in case the rule survives the expected legal challenges. Only one state — Oklahoma — has prohibited its environmental agency from developing a plan. A recent Washington Post story reported that even coal-dominated states like Kentucky seem confident of meeting the CO2 reduction target thanks in part to recent investments in renewable energy generation. It isn’t clear that any state other than North Carolina has decided to develop a plan based solely on CO2 reductions at coal-fired power plants.

Which leaves something of a public policy mystery. A state with significant advantages in renewable energy, energy efficiency and already on the road to transitioning power plants from coal to natural gas seems to have settled on a policy that throws those advantages away. Instead of working with electric utilities, consumers and environmental organizations to develop the most cost-effective CO2 reduction plan for the state, DENR intends to unilaterally develop a plan based entirely on reducing power plant emissions. It isn’t clear why or what that policy choice could cost the state.

Note: The Senate committee approved the substitute draft of House Bill 571 on Wednesday, but offered to continue talking to DENR about the content of the bill. The bill was pulled off the Senate calendar last Thursday; when the bill reappears on the Senate calendar, there may be amendments as a result of the ongoing discussions.

Update: The original post has been revised to make it clear that state CO2 reduction plans can also rely on measures other than those covered by the four “building blocks” identified in the EPA rule.

Regulatory Reform 2015: A New NC Senate Proposal

July 13, 2015. Before leaving for the Fourth of July holiday, the N.C. Senate turned a minor House bill into a vehicle for major changes to environmental rules. The Senate had already proposed changes to environmental standards in a regulatory reform bill (Senate Bill 453) that has not yet passed the Senate; in individual Senate environmental bills; and in the Senate budget bill. The House has not yet voted on many of the earlier Senate proposals. The Senate version of House Bill 765 may be the most aggressive regulatory reform legislation to date — putting constraints on air quality rules; creating new immunity from environmental enforcement actions; reducing air quality monitoring; changing laws on remediation of contaminated property; and proposing outright repeal of the state’s electronics recycling law. In response to DENR concerns, the Senate delayed some proposed changes to stormwater and environmental permitting requirements to allow for study. Reportedly, the floor amendments adopted by the Senate eliminated DENR objections to the remainder of the bill which continues to have far-reaching implications for state environmental policy:

Sec. 1.4 allows a state agency to automatically recover attorneys fees from a person who unsuccessfully challenges a state action on environmental grounds. A citizen or organization challenging a state construction project or an environmental permitting decision could be at significant financial risk — a risk that would not be shared by citizens challenging state actions for other reasons.

Sec. 4.2 repeals the state law requiring computer and television manufacturers to pay fees that support local electronics recycling programs. It isn’t clear that all of the city and county electronics recycling programs could survive the loss of state recycling fee revenue. State law would continue to prohibit disposal of discarded televisions and computers in landfills; the question is whether there would continue to be electronics recycling programs in all 100 counties.

Sec. 4.7 makes changes to state laws allowing risk-based remediation of environmental contamination. A risk-based remediation allows the person responsible for the contamination (the “responsible party”) to do a partial cleanup of groundwater and soil contamination by relying on land-use controls to limit future exposure to contaminated soils or groundwater remaining on the site. The biggest changes:

1. Sites where contamination has already migrated onto adjacent properties would become eligible for a risk-based cleanup. Existing law does not allow a risk-based cleanup if contamination has migrated off the property where it originated because of the additional complication of managing exposure on property the responsible party does not control. The Senate provision allows a responsible party to do a risk-based cleanup on adjacent property with the property owner’s permission. The provision does not require land use controls on the adjacent property to prevent future exposure to remaining contamination — normally a necessary condition of a risk-based cleanup. Existing remediation standards may allow DENR to disapprove a risk-based cleanup unless the entire area has appropriate land use controls, but the new Senate provision on risk-based cleanup of adjacent property is silent on the issue.

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

Sec. 4.9 changes a state law providing incentives for redevelopment of contaminated property (or “brownfields”). The state Brownfields Redevelopment Act uses the term “prospective developer” to describe a person eligible for liability protection and economic incentives under the law. The term excludes anyone who caused or contributed to the contamination. The Senate proposes to redefine the term to cover a “bona fide prospective purchaser”, a “contiguous landowner” and an “innocent landowner” as defined in the federal Small Business Liability Relief and Brownfields Redevelopment Act (amending the Comprehensive Environmental Response, Compensation and Liability Act or “CERCLA”). In CERCLA, the terms describe categories of landowners who have acquired property contaminated by hazardous substances, but have no legal liability for the contamination. Generally, the definitions cover landowners who acquired the property after the contamination occurred and have no relationship to a person (or company) responsible for the contamination.

All of the federal definitions referenced in the Senate provision concern liability for “hazardous substance” contamination as defined in CERCLA. CERCLA defines “hazardous substance” to include a specific list of compounds and unlisted substances with similar characteristics. The definition also excludes some substances — most notably petroleum and natural gas products — with similar health and environmental risk. (Other federal laws address contamination caused by petroleum spills and leaks.)

In redefining “prospective developer” based on CERCLA terms, the Senate provision also eliminates language in the existing definition that excludes a person who caused or contributed to contamination on the site. The question is whether those changes, in combination, could give a property owner responsible for contamination unrelated to a CERCLA “hazardous substance” liability protection and other benefits under the state Brownfields law. That result would be inconsistent with the original intent of the Brownfields Redevelopment Act and undermine the state’s ability to require cleanup of environmental contamination.

Sec. 4.14 would allow private engineers to self-permit onsite wastewater systems (such as septic systems), eliminating the need for a local health department permit. (The provision does not affect wastewater systems that discharge to the land surface or to rivers, lakes and streams; those systems require permits from DENR.) The property owner’s engineer would have to give the local health department a notice of intent to construct the wastewater system and a final post-construction report, but the engineer would be completely responsible for design and installation. The provision also allows the engineer to use wastewater system technology that has not been approved by the State “at the engineer’s discretion”.

In place of health department enforcement of on-site wastewater standards, the bill puts the burden on the property owner to sue the engineer or soil scientist if the wastewater system fails. The risk to the property owner is that problems may develop several years after installation, leading to an expensive fight over the cause of the failure — bad engineering; inappropriate siting; improper installation; or lack of maintenance. Treating a failed wastewater system as a problem strictly between the engineer or soil scientist and property owner also overlooks the possible impact on other property owners and the public. A septic system located too close to a water supply well may contaminate the well; a failing wastewater system can contribute pollutants to already stressed streams and lakes. Although the bill requires the engineer to give notice of the proposed construction to the local health department, it isn’t clear that the provision allows the health department to prevent installation of an engineer-approved system however poorly designed or improperly sited.

Sec.4.15 changes state review of applications for innovative or experimental onsite wastewater systems. For the most part, the bill seems to replace state approval of experimental waste treatment systems with reliance on national certification of the technology.

Sec. 4.18 reduces state protection of isolated wetlands by limiting the application of state water quality permitting rules to basin wetlands and bogs — excluding other isolated wetlands from environmental protection. DENR has identified seven other categories of isolated wetlands: Coastal Isolated Wetlands, Seep, Hardwood Flat, Non-Riverine Swamp Forest, Pocosin, Pine Savanna, and Pine Flats. Note: “isolated wetlands” are wetlands that do not have any connection to surface waters that fall under federal Clean Water Act jurisdiction.

Sec. 4.19 allows more development to be considered “low density” under coastal stormwater rules, raising the low density limit from 12% built-upon area to 24% built-upon area. The significance of the change is that low density projects do not require engineered stormwater controls. The bill also eliminates one trigger for compliance with coastal stormwater rules — the addition of 10,000 square feet or more of built-upon area as part of a non-residential development. The Senate provision would trigger coastal stormwater standards for both residential and non-residential projects based on the need for a sedimentation plan (required for disturbance of one acre or more) or a Coastal Area Management Act permit. Before adoption, the Senate amended the effective date for Sec. 4.19 in response to DENR concerns about the coastal stormwater changes. The provision would go into effect on July 1 2016 to allow for study in the interim.

Sec. 4.24 requires repeal of the state’s heavy duty vehicle idling rules. The rule, 15A NCAC 2D.1010, limits excessive idling of heavy duty vehicles as another way to reduce the impact of vehicle emissions on air quality.

Sec. 4.25 requires the state Division of Air Quality to remove air quality monitors that are not specifically required by the U.S. Environmental Protection Agency. The provision would significantly reduce the number of air quality monitors used to assess air quality and demonstrate compliance with federal ambient air quality standards.

Sec. 4.30 deals with mitigation of stream impacts permitted under Sec. 404 of the Clean Water Act. Under Sec. 404, many projects involving deposition of fill material in surface waters require a federal permit. In most states, the U.S. Army Corps of Engineers issues the 404 permits. The Clean Water Act requires an applicant for a 404 permit to provide the Corps with a certification (under Sec. 401 of the Act) that the project will be consistent with state water quality standards. The Senate provision affects state issuance of the 401 Certification in two ways. First, it prevents DENR from using the 401 Certification to put stream mitigation conditions on a project impacting less than 300 feet of stream without making specific findings — even if the mitigation requirement simply matches mitigation required under the federal 404 permit. The provision also limits state requirements for stream mitigation to a 1:1 ratio of stream impact to mitigation provided; in some cases, that will result in less mitigation than the Corps will require for the 404 permit. Since the permit applicant will have to meet federal mitigation conditions in any case, the reason for these new restrictions on parallel state mitigation conditions isn’t clear.

Sec. 4.31 completely eliminates state mitigation requirements for isolated streams (that is, streams that fall outside federal Clean Water Act permitting jurisdiction).

Sec. 4.37 makes changes to riparian buffer rules. The provision requires the buffer on an intermittent stream to be measured from the center of the stream rather than normal high water level. The most significant change allows unlimited development in a riparian buffer as long as the project complies with state stormwater requirements. The change appears as an amendment to a stormwater statute and does not directly refer to riparian buffer rules adopted by the Environmental Management Commission. Other bills that propose changes to riparian buffer requirements specifically list the rules affected — such as the Neuse River and Jordan Lake rules. Since this provision makes no reference to the riparian buffer rules, it may be intended to apply only to buffers required under the state’s minimum stormwater standards and local stormwater ordinances. It isn’t clear.

The bill also includes several provisions that appeared earlier in other Senate bills. Sec. 4.1 makes another run at putting environmental audit/self-disclosure immunity into state law. The Senate had included those same provisions in Senate Bill 453; see an earlier post for more detail. Sec. 4.3 and Sec. 4.4 repeat limitations on state adoption and enforcement of federal air quality standards already approved by the Senate in Senate Bill 303; see previous posts here and here.

The extensive Senate changes to House Bill 765 mean the bill now goes back to the House for a vote on concurrence. If the House refuses to accept all of the Senate changes, the bill goes to a conference committee. The General Assembly will be back in session this week, but it isn’t clear what priority the House will give H 765.

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

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

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

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

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

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

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

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

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

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

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

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

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

SmithEnvironment Blog

Environmental Law and Policy from a North Carolina Point of View