Category Archives: Energy

Environmental issues related to energy development and production, including hydraulic fracturing.

Halliburton, Fracking and the N.C. Public Records Act

May 3, 2013: The Raleigh News and Observer  reports today on Halliburton’s opposition to a draft North Carolina rule on disclosure of chemicals used in hydraulic fracturing. The Mining and Energy Commission’s Environmental Standards Committee had approved the draft rule for consideration by the full commission today. Commission chair, Jim Womack, told committee members yesterday that the rule would not be taken up by the commission as planned because of objections from Halliburton lawyers.

State law (G.S. 113-391)  specifically directs the  Mining and Energy Commission  to adopt rules for:

“Disclosure of chemicals and constituents used in oil and gas exploration, drilling, and production, including hydraulic fracturing fluids, to State regulatory agencies and to local government emergency response officials, and, with the exception of those items constituting trade secrets, as defined in G.S. 66‑152(3), and that are designated as confidential or as a trade secret under G.S. 132‑1.2, requirements for disclosure of those chemicals and constituents to the public.” G.S. 113-391(a)(5)(h).

You can find more here  on protection of  trade secret information under the  confidentiality provisions of the N.C. Public Records Act.

The draft rule approved by the MEC’s Environmental Standards Committee would have required oil and gas operations to disclose all chemicals used in hydraulic fracturing fluid to the Department of Environment and Natural Resources soon after fracturing the well.  Under the draft rule, information considered to be a “trade secret” under the state’s Public Records Acts would not be disclosed to the public. Based on the news story and other accounts of the committee meeting on Thursday, Halliburton objects to disclosure of trade secret information even to state regulatory staff except in response to actual environmental harm or a specific health concern.

An earlier post talked about the implications of only requiring  disclosure of trade secret information to  regulators after environmental damage or health effects have occurred.  There are at least two potential problems: 1.  in the aftermath of an emergency (such as a spill, leak or fire),  it would take more time to get information to state and local emergency responders;  and 2. groundwater contamination may not be discovered for years after an undetected  leak or spill occurs and lack of complete state records on the chemicals used to fracture wells  will  make it difficult to identify the contamination source.

The current controversy over the chemical disclosure rule raises several legal and policy questions for DENR and the Mining and Energy Commission:

●   Would a rule allowing the operator to withhold trade secret information from state regulators be consistent with G.S. 113-391? The law clearly protects trade secret information from disclosure to the public, but seems to intend disclosure to state regulators and in some circumstances to local emergency response agencies.

●   Is there reason to protect oil and gas industry trade secrets to a greater degree than trade secret information from other industries? Many state agencies receive trade secret information  and the Public Records Act allows that  information to be protected from public disclosure. The Public Records Act does not allow other industries to withhold information  needed by  state regulators on the grounds that the information is a trade secret.

● What is the right balance between the industry’s interest in holding information on hydraulic fracturing chemicals very close and the state’s need to understand and address risks to surface water, groundwater and public health?

● Can the state meet its responsibilities with something less than full disclosure of the chemicals used to fracture oil and gas wells?

Yesterday in the General Assembly

May 2, 2013: A brief update on  legislative action:

Renewable Energy. The House Public Utilities and Energy Committee  did not take  up  House Bill 298 again (although it appeared on the committee calendar), but the Senate Finance Committee approved a Senate bill to repeal the renewable energy portfolio standard (REPS). Senate Bill 365 would sunset the renewable energy standard in 2023, but immediately caps the renewable energy portfolio  standard  at 3% of retail sales — a standard that both Duke Energy and Progress Energy have already met. (The  2007 legislation creating the renewable energy portfolio standard  required Duke Energy and Progress Energy to meet  3% of retail sales with renewable energy or energy efficiency measures by 2012 and gradually increased the target to 12.5% of retail sales by 2021.)  Senate Bill 365 keeps  specific set-asides for energy generated by poultry and swine waste  although   renewable energy  from those  facilities  (which are not yet in operation) will not be needed to meet a  3% REPS requirement.   The Finance Committee vote to approve Senate Bill 365 became contentious as the committee chair ignored a member’s request for a show of hands  and  called  a very close voice vote for the ayes. The Senate bill now goes to the Senate Commerce Committee. The House bill remains in the House Public Utilities and Energy Committee and could be brought up for another vote at any time.

Regulatory Reform. Senate Bill 612 passed the Senate, but only after several floor amendments. The most significant amendment removed language that would have eliminated the Neuse River and Tar Pamlico River stream  buffer requirements.  The bill still requires state environmental agencies to repeal all state rules that are more stringent than federal rules on the same subject. The bill now goes to the House.

May Day at the General Assembly: Environmental Bills

May Day: An ancient celebration of spring.  “Mayday” : an international distress call. 

There will be lots of activity on significant environmental legislation today at the N.C. General Assembly:

Renewable Energy.  Rep. Mike Hager will attempt to revive House Bill 298 repealing the state’s renewable energy portfolio standard (REPS). Earlier posts on the REPS bill can be found here and here. The bill will be back in the House Public Utilities and Energy Committee at noon. A  motion to approve the bill failed in the same committee last week by a 5-vote margin, but the committee never voted to disapprove the bill.  A  story by John Murawski in today’s Raleigh  News and Observer suggests little change in the lineup for and against the bill. Conservative political organizations (including Americans for Prosperity) and anti-tax crusader Grover Norquist continue to push for repeal of the renewable energy standard as part of a national political strategy that has little to do with the costs and benefits of  repeal  in  North Carolina. Some key House lawmakers  still  oppose the bill because the renewable energy standard has brought new private investment and jobs to the state. A Senate version of the  REPS repeal bill  (Senate Bill 365) will get a first hearing in the Senate Finance Committee today. Rarely does an issue so clearly require a legislator to choose between the state’s interest and a position being promoted  by national political organizations.

Regulatory Reform. Senate Bill 612 (Regulatory Reform Act of 2013) will be up for a floor vote in the Senate this afternoon.  See an earlier post on bill language essentially repealing Neuse and Tar Pamlico River buffer requirements and a  more recent  post about  a provision requiring  environmental agencies to repeal state rules that are more stringent than federal regulations on the same subject. (Putting those two proposals in the same bill is interesting all by itself since the Neuse and Tar Pamlico buffer rules are critical parts of  federally required and federally approved state plans to reduce nutrient pollution in the two river systems. It appears that even a federal requirement may not be enough to save environmental rules in some cases.)

The idea  that  state environmental rules  can simply track federal regulations  really misreads  federal environmental law. Senate Bill 612  assumes that federal agencies have adopted environmental regulations that can be simply picked up and applied by the state and that isn’t the case. Federal regulations alone would not, in most cases, be enough to make for a functioning   environmental permitting program  — or one that actually responds to the state’s needs.   All federal environmental laws  assume — and in many cases require —  that individual states will tailor the  federal  program to  address conditions in the state. (Since you won’t find estuaries in Arizona, that state’s Clean Water Act program does not look like  North Carolina’s program.)  This misunderstanding of the relationship between federal law and state environmental  rules means the most likely outcome of the Senate Bill 612 repeal requirement  will be conflict and confusion. It is unclear why the Senate chose to use a sledge-hammer rather than focus regulatory reform efforts on issues actually raised by citizens in comments to the Joint Committee on Regulatory Reform or through the rule review process  created  in G.S. 150B-19.2.

Water System Management.  House Bill 488 (transferring the Asheville water system to the Buncombe County Metropolitan Sewer District)  has come out of a conference committee to resolve differences between House and Senate versions of the bill. See an earlier post for background on the Asheville controversy.   The Senate has approved the conference report; the conference report does not appear on today’s House calendar yet, but could be added. Note: The Buncombe County MSD  had a major sewer spill yesterday;  the details (such as cause and the total amount of raw sewage spilled to the French Broad River)  are not yet clear. The spill caused me to look at House Bill 488 again and it turns out that the bill does not condition transfer of the Asheville water system on the MSD’s compliance with environmental standards or on actual transfer of the water system’s operating permit to the MSD.

Renewable Energy Repeal Fails Committee Vote

April 25, 2013

House Bill 298, the bill to repeal the state’s renewable energy portfolio standard (REPS), failed to win approval in the House Public Utilities and Energy Committee yesterday. (See an earlier post for  background on North Carolina’s  renewable energy standard and House Bill 298.)

Although the bill had the backing of conservative political organizations,   the Republican-controlled House of Representatives never seemed particularly enthusiastic.  The bill won approval of the House Commerce and Job Creation Committee two weeks ago by only a one vote margin even after the bill sponsor  revised the bill  to  wind  the REPS program down more slowly.

When the bill reached the Public Utilities and Energy Committee, it  had been modified again to push complete repeal of the renewable energy standard out three more years –from 2018  to 2021. A friendly amendment in committee made two additional changes to soften the  impact of repeal on renewable energy companies that  invested in North Carolina in reliance on the REPS requirement.  The amendment  removed language allowing electric utilities to use power generated by large hydroelectric projects  to meet the REPS standard (returning to language in 2007 legislation creating the  REPS requirement). The change was made to prevent large existing hydropower plants operated by Duke Energy and Progress Energy  from crowding out new renewable energy sources even before the REPS repeal date. The amendment also  extended the time allowed for  electric utilities to recover costs associated with  renewable energy contracts. Americans for Prosperity again spoke in support of the bill and  submitted a letter of support signed by  a number of other conservative political organizations.

In spite of those efforts, the motion to approve the bill failed by a vote of 13-18 in a committee dominated by Republican legislators.  Republicans voting against the bill included members of the House  leadership —  Republican Conference Chair Ruth Samuelson and  Rules Committee Chair Tim Moore.

The bill failed for a very practical reason — the REPS requirement has brought private investment and jobs to North Carolina at a minimal cost to consumers.  “Riders” on electric bills allow the utilities to recover any additional cost of using renewable energy; the riders have never approached  caps included  in the 2007 REPS legislation. The cost of solar energy in particular has fallen by nearly half as solar companies expanded operations in North Carolina in response to REPS incentives and those costs continue to fall.  (Duke Energy’s residential  customers now pay 21 cents per month to cover the additional cost of  solar energy.  In a rate case filed with the N.C. Utilities Commission  earlier this year, Duke proposes to take the residential  REPS rider to -1 cent. Although Duke Energy has proposed rate increases, those increases are  associated with the cost of conventional energy generation.)

At the same time, private  investment in response to the renewable energy standard brought jobs to the state. See  a 2013 report  by Research Triangle Institute/ LaCapra Associates,   The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina,  for more on the economic impact of the  N.C.  REPS requirement and state renewable energy tax incentives. A  September 2012 clean energy jobs census by the N.C. Sustainable Energy Coalition  identified  over  15,000 jobs associated with clean energy companies.

Conservative political organizations like Americans for Prosperity have made  renewable energy standards a  target for repeal nationwide.  Given extremely low consumer cost and increased private  investment and job creation,  there was little in  the N.C.  REPS experience that could be used  as an argument for repeal.  Supporters of House Bill 298  increasingly had to rely on an ideological argument against energy subsidies in general.  That position has a significant weakness — conventional energy sources  (such as coal, natural gas, and nuclear power) also benefit from subsidies, but conservative  opposition  seems to focus only on subsidies for renewable energy.   Bill supporters  also cited  stories of high cost and renewable energy business failures in other states and countries.

Approving House Bill 298 would have required legislators to ignore  real economic benefits to the state  in favor of an ideological argument against renewable energy subsidies. A majority of committee members chose  reality.

N.C. Renewable Energy Update

April 10, 2013:  A little more detail on the new version of House Bill 298. (For some reason, it took a week for the version  approved  in committee last Wednesday to be posted on the General Assembly website).

Instead of  immediately repealing   the entire   2007 renewable energy portfolio standard (REPS)  requirement, the bill would cap the amount of electric generation  to be met by renewable energy sources at 6%  of 2014  retail sales and sunset the REPS requirement  in 2018. The 2007 legislation (Senate Bill 3) required the electric utilities to generate 6% of 2014 retail sales  using renewable energy sources by 2015 and then increased the REPS goal to 10% of retail sales by 2018 and 12.5% of retail sales from  2021 on. SB 298 cuts the renewable energy goal in half and the 2018 sunset means that  the electric utilities could abandon even the 6% renewable energy target after 2018.

Other changes:

●   The amount of the REPS requirement that could be met with energy efficiency measures would immediately increase from 25% to 50%

●   Existing hydropower facilities could be used to meet the REPS goal. Since both Duke Energy and Progress Energy generate a significant amount of electricity from hydropower facilities, the change may allow existing hydropower to crowd out new renewable energy sources.

● Removes the set-aside for solar energy. (HB 298 repeals a Senate Bill 3 provision requiring the electric utiltiies to supply  at least two-tenths of one percent of the electric power sold to retail customers from 2018 on through a combination of new solar electric facilities and new metered solar thermal energy facilities.) The bill keeps the Senate Bill 3 set-asides for energy generated by swine and poultry waste – although those  set-asides  would sunset in 2018 with the REPS requirement.

● Requires any contract between an electric utility and a renewable energy company to end by December 31, 2018 for purposes of cost-recovery.

Although the bill looks less like immediate repeal of the REPS requirement, the effect would be the same.  New renewable energy sources could be crowded out by existing hydropower and energy efficiency even before the REPS requirement ended in 2018.  Swine and poultry waste would continue to have a set-aside through 2018 — but uncertainty beyond 2018 would make construction of waste-to-energy facilities a very risky business. In the end, the bill would completely undermine the Senate Bill 3 goal of encouraging development of new renewable sources of energy in the state as a source of energy security and job creation.

Odds and Ends on Energy

April 6, 2013

Wind Energy

Offshore: Last fall, the federal Bureau of Ocean Energy Management (BOEM) finished  a  renewable energy lease plan for the waters of the Atlantic Ocean off the  North Carolina coast. BOEM  asked companies interested in  developing  wind energy in the designated lease areas to submit a proposal by March 7, 2013. Five companies sent in wind energy development proposals (Virginia Electric and Power Company, EDF Renewable Energy, Fisherman’s Energy LLC, Green Sail Energy LLC, and Outer Banks Ocean Energy LLC.) Find complete information on the proposals  here .  The BOEM website provides more information  on the   renewable energy lease plan  for  waters off the North Carolina coast.

Onshore (and near shore): Bills have been introduced in the N.C.  General Assembly  to create a state permitting process for wind energy facilities. Senate Bill 491  (= H 484)  creates a new state permit to be issued by  the Department of Environment and Natural Resources (DENR).   The permit review would look at both environmental impacts and  impacts on military operations.  Last year, two land-based wind  projects proposed for sites near the North Carolina coast (one in  Beaufort County and  the other in Pasquotank and Perquimans  counties)  raised concern at Seymour Johnson Air Force Base near Goldsboro.  (There are more onshore wind energy projects  proposed for  the coastal counties, but  not as far along in the planning/site approval process.)

The  military has two concerns about the siting of wind turbines:  radar interference caused by  movement of the blades  and  risk of  collision between low-flying military aircraft and wind turbines that may be more than  500 feet tall. North Carolina’s  coastal counties have a large amount of  military special use airspace, including training routes  that have “floors” as low as 200 feet.  Wind energy development could be a real  economic boost to  interior and largely rural areas of the coastal counties. The trick will be to make wind energy development compatible with military operations that  contribute significantly to the broader state economy and have an important role in national defense. The Department of Defense has a clearinghouse for review of development projects that may affect military operations.   The new state wind permit would provide a  way to consider military concerns in state decision-making.

Note: State jurisdiction only extends three miles from shore in the Atlantic Ocean, so most offshore wind projects  only require  federal permits.  North Carolina can influence federal permitting and lease decisions  for   offshore energy development  (whether wind turbines or oil and gas production) through the state’s coastal management program.

Study Links Underground Disposal of Wastewater and 2011 Oklahoma Earthquake

This  New York Times article provides a good overview of a recent study (published in the journal Geology) concluding that underground disposal of wastewater from oil production caused a 2011 Oklahoma earthquake that measured 5.7 on the Richter scale, destroyed a number of homes and injured two people. The Oklahoma Geological Survey reached a different conclusion.

Could Fracking and Renewable Energy Make a Happy  Marriage?

Kevin Drum,  writing  for Mother Jones, has an interesting blogpost on  fracking and renewable energy.

Renewable Energy: Predictions (and Politics) Meet Reality

April 4, 2013

Yesterday in the North Carolina  General Assembly, the House Committee on Commerce and Job Development took up  House Bill 298. (For background on the bill, see an earlier  post  about the proposed repeal of North Carolina’s renewable energy portfolio standard.)   Rep. Mike Hager presented a slightly revised bill, but repeal of the 2007 renewable energy portfolio standard (REPS)  remains at the center of the legislation. The committee approved the bill on a very close vote (11-10);  two Republican committee members voted  with Democratic committee members to oppose the bill.

Discussion in committee set up an interesting conflict between the reality of North Carolina’s REPS experience and the politics of renewable energy.  Those supporting repeal of the REPS requirement   cite both  ideological reasons  (opposition to  energy subsidies in general and subsidies for renewable energy in particular) and fear that the higher costs of renewable energy will hurt consumers and damage  the   economy.  The problem for bill supporters is that the state has had five years of experience with the REPS requirement and none of the predicted economic  horrors have materialized.  Instead, bill opponents can point to  real economic benefits  in jobs created and  private investment attracted to the state –- at minimal cost to consumers.

Of the fifteen (by my count)  members of the public who  commented on the bill in committee, only three supported repeal of the renewable energy portfolio standard. All three represented conservative political organizations — two  speakers from Americans for Prosperity and  another   from the Civitas Institute.  One argument for repeal laid the responsibility for increased electricity rates at the feet of the renewable energy standard.  In reality, REPS costs have been  low and and continue to decline.  For a residential Duke Energy customer, the  fee (or “rider”)  to cover the additional cost of  meeting the REPS requirement  is now 21 cents per month and  falling.   Although Duke Energy has filed a proposed rate increase  with the N.C. Utilities Commission, the justification for the increase has been recovery of capital costs associated with conventional power generation facilities and improvements to transmission infrastructure  — not  the cost of renewable energy.

Dallas Woodhouse, state director of Americans for Prosperity,  and Brian Balfour from the Civitas Institute also argued that the  higher  cost of renewable energy hurts the state’s economy and leads to job loss.   Their  argument  seems to be rooted in a 2009  report on the  projected  economic impact of  North Carolina’s renewable energy portfolio standard  that was put out by  the John Locke Foundation and the Beacon Hill Institute (BHI)  at Suffolk University. The  Locke/BHI Report looked at two different scenarios and even under the more favorable of the two predicted  that:

“… North Carolina will lose 3,592 jobs, investment will decrease by $43.20 million and real disposable income will fall by $56.80 million by 2021. As a result, the state economic output measured in real state Gross Domestic Product (GDP) will be $140.35 million lower than without the mandate.”

That prediction was made  early in implementation of the state  REPS requirement and the 2013 reality looks very different.    The actual impact of North Carolina’s support for green energy:  $1.4 billion in new green energy investment, more than 15,000 jobs in green energy as of September 2012  and an increase of $1.7 billion in the state’s overall economic output.  (My  earlier post has  links to both a 2013  Research Triangle Institute/La Capra report on the economic impact of the state’s green energy policies and a green energy jobs census conducted by the N.C. Sustainable Energy Association.)

Why were the predictions in the  Locke/BHI Report so wrong?  The costs of meeting the REPS requirement have turned out to be much lower than  the report projected.  The Locke/BHI Report assumed that the electric utilities would need to go  to the maximum cost recovery  rider  allowed under the 2007 REPS legislation (Senate Bill 3).  The report also evaluated a second, even more pessimistic, scenario that assumed actual renewable energy costs would exceed the fee caps.  As it turns out, the  REPS  riders are nowhere near the  statutory caps and  the riders continue to drop from year to year.  Senate Bill 3 capped the  REPS cost recovery rider for residential customers at $1 per month for 2012; the  current  Duke  Energy  rider for residential customers is  21 cents per month. In March, Duke filed an  application with the N.C.  Utilities Commission to set the residential REPS rider for 2013-2014 at  -1 cent, which would result in a  rebate to residential customers.  Costs to  non-residential customers have also come in   below the Senate Bill 3 caps and will continue to fall under the riders proposed by Duke Energy for 2013-2014.

The twelve members of the public who spoke against House Bill 298 in committee represented renewable energy companies  with significant investments in North Carolina; large swine producers  investing in waste-to-energy projects as an innovative  way to dispose  of swine waste;   the Warren County economic development director who pointed to the benefits that solar energy development  has brought to an economically struggling  rural county; and a wind energy developer interested in the North Carolina coast.

Based on the committee discussion yesterday, House Bill 298 has the potential to cause serious heartburn for conservative legislators who are being forced to choose  between a real bright spot in the state’s economy and policy positions advocated by conservative political organizations. The bill still has three more committees to get through in the House; the next stop will be the Environment Committee.

Fracking Chemicals: The Most Secret of Trade Secrets

April 2, 2013

An earlier post talked about the N.C. Public Records Act and protection of trade secrets. Drilling companies and their suppliers sometimes want to withhold the  identity of a chemical used in hydraulic fracturing as a “trade secret”  to avoid sharing commercially valuable information with competitors. The N.C. Public Records Act generally gives the public a right to information gathered by  a state agency in doing the public’s business, but makes an exception for certain types of personal  data  and for information that is legitimately a  trade secret.

Last week, the Mining and Energy Commission’s (MEC) Environmental Standards Committee approved a draft rule requiring  disclosure of chemicals used in hydraulic fracturing. The  draft rule allows a drilling operator to withhold from the public the identity of a fracking chemical that the operator or  supplier designates as a trade secret.   In  the  required  disclosure  to  the public,  the drilling operator would identify a trade secret  chemical  by its chemical  “family”.   More specific information could be  requested by  a health professional or  by emergency   response personnel if necessary to diagnose and  treat a health condition  or to respond to  an emergency.

The rule draft  presented at the start of the  meeting  also  allowed  a drilling operator  to withhold  trade secret  information  from regulatory staff in the Department of Environment and Natural Resources (DENR).    The trade secret information would only have been provided to DENR if  requested  by the department in response to a spill or health concern.  Entirely relying on disclosure  after an environmental emergency or health impact  raises at least two concerns.  In a real-time emergency — such as a major spill or fire —  it may be difficult to  get information from the drilling operator or  supplier quickly enough. For longer term problems (such as groundwater contamination),  the length of time between completion of the well and discovery of the problem may make it difficult to get accurate information at all.

The committee amended the trade secret protection  language  to require the operator to provide  the  trade secret information  to DENR  at roughly the same time the operator  claims the trade secret protection and discloses other  information to the public.   (All disclosure — to DENR and to the public —  would still happen after completion of the hydraulic fracturing operation.) The new language also requires the operator to provide the justification for trade secret designation.

The rule approved by the committee  limits the ability of the public to challenge a decision to  keep information about a fracking chemical  confidential — directly conflicting with the N.C. Public Records Act.  The Public Records Act allows “any person” to request records from a public agency and to take legal action  challenging an agency decision to withhold  the information. That includes the right  to challenge the appropriateness of a decision to keep information confidential under the trade secret exception. Under the  draft MEC rule, a decision to  keep   the identity of a fracking chemical confidential  could only be challenged by  a person who owns or rents  land where  a wellhead is located; the owner of  land adjacent to  a wellhead site; any other person who has “a legal interest in real property”; or a state agency having an interest that may be adversely affected by a chemical used in the fracturing fluid.

Under the draft rule, some  people  who  have a right  under the Public Records Act  to challenge  the withholding of  requested information  would not be allowed to challenge a decision to withhold information about  a fracking chemical.  Renters  would  be unable to challenge the withholding of information about chemicals used in nearby drilling operations.  Depending on how the rule is interpreted, it may also  affect the ability of  nonprofit organizations, news media, and local governments to challenge the appropriateness of  treating a fracking chemical as a trade secret.

An amendment to remove this  language from the rule and simply  follow  the Public Records Act  was voted down in committee.  Some committee members acknowledged the inconsistency with the Public Records Act, but indicated an intent to ask the General Assembly to change the law.  Two  things to note about the committee action:

On  several  issues, members of the Mining and Energy Commission have  discussed the possibility of adopting a rule that  conflicts with  existing state  law on the assumption that the commission can persuade the General Assembly to  conform the law to the rule.    The chemical disclosure rule is the first MEC rule to receive committee approval and may be the test of how these conflicts will be resolved.   This would not be the first controversy over consistency of a  rule with  state law, but  usually  the argument comes out of  differing  interpretations of the law.  I can’t think of another example of an agency proposing a rule knowing that it is inconsistent with  existing  law.

To make the Public Records Act consistent with the proposed  MEC  rule,  the General Assembly would need to change the Public Records Act to  either: 1.  limit challenges to all  trade secret claims;  or 2.  give  hydraulic fracturing  special treatment, making it more difficult to challenge  those particular  trade secret claims .  It isn’t clear  how much interest legislators will have in  a fight over public records law in order to provide special treatment for the oil and gas industry.

From here, the draft chemical disclosure rule goes to the Rules Committee of the Mining and Energy Commission  and then to the full commission for discussion.

NOTE: The original post has been revised to  make it clear that the draft rule  as amended on March 25  requires that trade secret information be provided to DENR staff  at the same time the operator discloses  nonconfidential information to the public.

Should N.C. Abandon the Renewable Energy Portfolio Standard?

Some members of the  N.C.  House of Representatives have proposed to do just that.   House Bill 298  (the Affordable and Reliable Energy Act)  would repeal  2007  legislation developed  — with support from the state’s major electric utilities — to increase  use of renewable energy sources and energy efficiency measures to meet demand.  Abandoning the renewable energy portfolio standard (REPS) would also mean walking away from the state’s  commitment to renewable energy and energy efficiency as a source of investment and  job creation.

In 2007, North Carolina became the first state in the southeast to adopt a renewable energy portfolio standard.  Session Law 2007-397   (or “Senate Bill 3”) set a two-tiered goal for use of clean energy to meet electric power demand. By the end of calendar year 2018, municipal utilities and electric membership corporations must use a combination of renewable energy sources and energy efficiency measures  to meet 10% of retail sales.  The  two major investor-owned electric utilities, Duke Energy and Progress Energy,  have a slightly higher REPS  goal of 12.5%  by 2021.  Greater use of  clean  energy sources reduces air pollution and greenhouse gas emissions, but Senate Bill 3 also identified renewable energy development as a way to improve the state’s energy security and generate private investment.

According to the most recent N.C. Utilities Commission report on implementation of Senate Bill 3, the electric utilities  have met the first  REPS milestone  ( 3% of 2011 retail sales). Aside from the environmental benefits, the REPS requirement  also appears to have met the goal of encouraging clean energy investment in the state.   A recently released  RTI International/La Capra  Associates study,   The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina, found that North Carolina’s clean energy incentives (including tax credits, investment in energy efficiency and the REPS requirement) spurred $1.4 billion in project investment statewide between 2007 and 2012.   Investments in clean energy took a sharp upward turn in 2011-2012 as the first Senate Bill 3  milestone approached. Even after accounting for the  “cost” of state renewable energy tax credits,  the report found a net economic benefit to the state. A census conducted by the N.C. Sustainable Energy Association identified 15,200 full-time equivalent employees in clean energy jobs as of September, 2012.

The primary sponsor of House Bill 298, Rep. Mike Hager (R- Burke,Rutherford), has said that the renewable energy/energy efficiency standard should be repealed in the interest of lowering electricity rates for customers. There is a small add-on fee (a “rider”) that the electric utilities can use to recover the costs of meeting the REPS goal. Senate Bill 3  put caps on the riders, but also required the N.C. Utilities Commission to approve the actual amount as reasonable and necessary to cover the electric utility’s cost.   Senate Bill 3 capped the REPS  rider for residential customers at $1 per month;   the approved riders are now 42 cents per month for Progress Energy’s residential customers and 21 cents per month for Duke Energy’s residential customers. The riders have never reached the maximum of $1 per month and the actual  amounts  have come down from year to year.

The RTI/ La Capra study concluded that North Carolina’s clean energy incentives (including the REPS requirement) will  have little impact on rate-payers — and may be a net benefit in the long term. The benefit largely comes from reduced costs as a result of energy efficiency measures; energy efficiency gains  translate into new energy generation costs that can be avoided or delayed.

This will be an interesting bill to watch. Skepticism about renewable energy and energy efficiency seems to have become an article of faith  among some conservatives — which may account for the fact that the bill has 27 sponsors in the House. But the bill also has been given four House  committee referrals; the long path through the House likely reflects some counter-pressure on the jobs  and investment side.

One other note about House Bill 298 — it is difficult to know exactly what to make of this, but the bill changes the  definition of “renewable energy resource” to exclude wind energy and include peat and fossil fuels.

 

Postcards From the Coast: Offshore Drilling

March 6, 2013

First,  a postcard from Raleigh to the coast — While fracking has used up most of the oxygen in recent  discussions of  state energy policy, offshore energy development has  taken on new political life.   The sections of Senate Bill 76 dealing with shale gas production have gotten more attention, but the bill also revives  legislative proposals on offshore  energy  development that did not survive  the 2011-2012 session. These sections of the bill apply to all kinds of offshore energy generation (including ocean  wind  turbines), but the bill clearly intends to  signal support for  offshore oil and gas drilling.

In Section 7, Senate Bill 76 proposes a way to divide up state revenue received from  offshore energy  production.   Whatever the merits of the Senate plan  — and it seems designed to promise money for every good thing possible —  it is not certain that the state will ever receive revenue from offshore  energy  production.   The United States has had no experience with  offshore wind turbines and the economics of ocean wind energy make it  an unlikely revenue  source.  Most oil and gas drilling sites are in federal  waters outside the limits of state jurisdiction;  all revenue from drilling in federal waters goes to the  United States  treasury unless Congress authorizes  revenue sharing with the   states.   Gulf Coast states benefit from a federal formula for sharing revenue from production in the Gulf of Mexico and something similar would be needed to allow  Atlantic coast states to receive revenue from production along the eastern seaboard.  Assuming Congress allows revenue sharing for Atlantic coast oil and gas production, the benefit to North Carolina  will depend on where  drilling  occurs and how  the revenue sharing formula works.

Note: The U.S. Department of Interior is not currently issuing offshore oil and gas leases in Atlantic coast waters.  Under the department’s  5- year lease plan, no Atlantic coast leases will be offered until 2018 at the earliest.

The bill also encourages the Governor to negotiate an interstate offshore energy compact with the governors of Virginia and South Carolina. As described in the bill, the purpose of the compact would largely be to lobby for earlier issuance of  oil and gas leases  off  the  east coast of the United States; revenue sharing for Atlantic coast states; and quicker permitting of offshore oil and gas activities.

Although Senate Bill 76 has not yet become law, Governor McCrory has already checked off two  items on the bill’s to-do list. Governor McCrory   joined the governors of South Carolina and Virginia in sending a letter to the President’s nominee for Secretary of the Interior, Sally Jewell,   urging her to  open east coast waters for oil and gas drilling  sooner.  A February 14 press release  issued by Gov. McCrory’s office includes excerpts from the letter and a link to the full text of the letter.

The following week, Governor McCrory joined the governors of Alaska, Louisiana, Texas, Virginia, Mississippi, Alabama, and South Carolina   as a new member of the Outer Continental Shelf Governor’s coalition.  The coalition advocates for more offshore leasing, quicker permitting of offshore oil and gas operations, and revenue sharing for all states with offshore energy production.

Senate Bill 76 has passed the Senate; the bill will go through three House committees (Commerce, Environment and Finance) before reaching the House floor.