Category Archives: Renewable Energy

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 CO2 reduction 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 CO2 reduction 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 CO2 reduction 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 CO2 emissions 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.

2016 Legislative Session in Review: Environmental Legislation

July 12, 2016. The 2016 General Assembly session resulted in changes to several environmental laws, but ended without final action on a major regulatory reform bill.  Among the more significant environmental provisions enacted outside the budget bill:

Coal Ash. House Bill 630 eliminated the Coal Ash Management Commission, giving the Department of Environmental Quality (DEQ) authority to make decisions about final closure of coal ash impoundments.  The bill also changed the criteria for prioritizing impoundment closures and required Duke Energy to provide a permanent alternative water supply to  well owners within 1/2 mile of a coal ash impoundments (unless separated from the impoundment by a river or lake) and to other well owners potentially affected by the migration of groundwater contamination from the impoundments. See an earlier post for more detail on H630  changes to the 2014 Coal Ash Management Act.

Commissions.  House Bill 630 responded to the Governor’s constitutional objections to three state regulatory commissions — the Coal Ash Management Commission, the Oil and Gas Commission, and the Mining Commission. The Governor successfully challenged  the laws creating  all three commissions as violating separation of powers; in part, the Governor objected to the legislature’s power to appoint a majority of each commission’s members.  A post on the N.C. Supreme Court decision can be found here.  The Governor vetoed an earlier bill (Senate Bill 71)  attempting to resolve the separation of powers issue by giving the Governor a majority of commission appointments.  The Governor’s position  on Senate Bill 71 suggested an ongoing objection to any  commission exercising executive powers unless the Governor had authority to appoint a majority of the members without legislative confirmation;  direct the actions of the commission;  and remove commissioners at will.

The Governor’s Office reportedly accepted H630 as a compromise. The  bill eliminates the Coal Ash Management Commission,  but retains the Oil and Gas Commission and the Mining Commission under conditions the Governor had previously objected to — legislative confirmation of appointees and the ability to remove commissioners only for cause. [Note: Although there have been indications that the Governor’s Office agreed to H630, the Governor has not yet signed the bill.]

Renewable Energy. Two provisions in Senate Bill 770 (N.C. Farm Act of 2016) amended laws related to renewable energy specifically to benefit agricultural sources, such as swine waste-to-energy projects. Sec. 10 of the bill extends the state’s renewable energy tax credit (25% of project costs)  to projects in service by January 1, 2020 (previously January 1, 2017) as long as the facility began construction by December 31, 2013.  The extension will likely benefit some swine waste-to-energy projects that have been in the works for several years, but are not yet generating electricity. Sec. 18 of the same bill gives  poultry and swine waste-to-energy projects priority over other renewable energy generation projects in connecting to electric utility delivery systems.

Sediment Pollution. Sec. 14 of Senate Bill 770 amends G.S. 113A-52.01 to add production of  “[m]ulch, ornamental plants, and other horticultural products”  to the list of agricultural activities exempt from the state’s Sedimentation Pollution Control Act (or “Sediment Act”). The Sediment Act otherwise requires activities disturbing an acre or more to maintain a stream buffer and use erosion barriers to keep sediment out of rivers, lakes and streams. The addition of ornamental plants will not raise many questions, but mulch is not an agricultural product similar to the others. Including mulch production in the Sediment Act exemption will raise two questions:

1. What kinds of operations will be covered by the mulch exemption?  Mulch operations include  large-scale municipal  waste disposal facilities that mulch yard waste and have no relationship to agriculture.

2. How will the mulch exemption affect Clean Water Act permitting? The exemption seems to go beyond the federal stormwater exemption for agriculture. That is important because most land-disturbing activities in N.C.  meet federal construction stormwater requirements by complying with the state Sediment Act.  If the Sediment Act exempts activities that don’t also fall under a Clean Water Act stormwater exemption, the activity may require  a separate federal stormwater permit.

What didn’t happen.   Several efforts to enact legislation significantly restricting wind energy development  failed, although Sen. Harry Brown has already indicated an intent to reintroduce a bill prohibiting erection of wind turbines in designated military air corridors in 2017. Proposals to repeal the ban on landfill disposal of electronics and to end the state’s electronics recycling program also failed.  Legislators apparently could not reach agreement on bills attempting to clarify the protocol for advising well owners on the heath effects of well contamination — an issue sparked by controversies over conflicting advice given to well owners near coal ash impoundments; those bills never got to a floor vote. The Senate received House Bill 593 (Amend Environmental Laws 2)  from the House and expanded the bill to include a number of additional  provisions on stormwater, beach nourishment, stream mitigation and other issues. The House did not concur in the Senate changes, leaving those proposals to die with adjournment.

Regulating Renewable Energy Away?

May 11, 2016.  North Carolina’s General Assembly has been engaged in an internal battle over state renewable energy policy since 2013. That year, Republican legislators first introduced a bill to repeal the state’s renewable energy portfolio standard; the REPS law requires electric utilities to gradually increase the amount of power generated from renewable sources such as wind, solar and waste combustion. (For more on the REPS issue, see earlier posts here and here.)  The 2013 REPS repeal bill failed; similar bills to repeal or significantly limit the REPS requirement have been introduced every year since without success. Opponents of renewable energy subsidies did succeed in eliminating a state tax credit for renewable energy projects effective December 31, 2015.

In the just-convened 2016 legislative session, opposition to renewable energy has taken a new form — a  bill to put significant regulatory constraints on development of renewable energy projects. Senate Bill 843 (Renewable Energy Property Protection) expands an existing wind energy permitting law to cover other types of renewable energy facilities and adds new permitting requirements and regulatory standards.  Key provisions in Senate Bill 843:

Scope.  The bill applies to most renewable energy facilities other than hydroelectric plants, including solar,  wind and  waste-to-energy combustion projects. The proposed permitting standards do not apply to solar panels installed on single-family homes or to  “biomass resources”.  Since the bill only excludes solar installations on  single-family homes, the new permitting standards presumably apply to solar panels installed on commercial and institutional buildings (such as schools and churches) as well as utility-scale solar projects. It isn’t clear what the exclusion for  “biomass resources” means;  the term could be applied to plant-based fuels as well as combustion of animal waste.

Additional steps in the permitting process. Those steps include: 1. a  pre-application meeting with state regulators at least 120 days before submission of the permit application; 2. submission of pre-application project information 45 days before the meeting; and 3. notice of the pre-application meeting to federal regulatory agencies (such as the U.S. Army Corps of Engineers) and to “any other party [DEQ] deems relevant”. The bill also expands an existing wind energy permitting requirement  for a “scoping” meeting 60 days before application to all renewable energy projects —  even though the new pre-application meeting  and the scoping meeting seem to involve the same participants and much of the same information. See G.S. 143-215.118.

Addition of new standards for denial of renewable energy permits. The existing law setting standards for issuing or denying wind energy projects would be amended to cover all renewable energy projects and to add  two new grounds for permit denial. The new permit denial standards:

♦ Operation of the facility would cause ambient noise levels to exceed 35 decibels at the property line.

♦ The applicant failed to meet new financial assurance requirements for decommissioning the facility.

See the existing text of  G.S. 143-215.120 for the existing permit denial standards.

Setback and buffer requirements for wind and other renewable energy facilities. All wind and other renewable energy facilities would have to be sited 1 1/2 miles from the property line of an adjacent property. For comparison,  some examples of property line setback requirements for other state-permitted facilities and activities are shown below.

Facility/Activity Property Line Setback
Oil and gas production (including wells and drilling waste storage)  0 ft
Major air pollutant sources  0 ft
Land application sites for septage  50 ft
Hazardous waste landfills  200 ft
Swine house or  swine waste lagoon  500 ft

A quick search did not turn up an existing  state-imposed property line setback of greater than  500 feet.

S 843 also requires wind and renewable energy facilities to be setback from all easements and rights of way for a state road or municipal street by a distance equal to 2 1/2 times the height of a wind turbine. Some wind turbines proposed in N.C. have a tower height of around 300 feet and total height (based on extension of one blade straight up)  of nearly 500 feet, resulting in a  road setback of 800-1250 feet.

New requirements for decommissioning a renewable energy facility, including financial assurance for decommissioning. The bill requires the owner/operator of a wind or renewable energy facility to remove all equipment and buildings and return the site to predevelopment conditions within one year after ceasing operation. The requirement seems to be unprecedented as applied to a utility or commercial development project.  To the extent existing laws include reclamation  or closure standards, the standards generally focus on eliminating specific safety hazards (appropriately closing abandoned wells); taking steps to prevent environmental degradation (capping closed landfills)  and restoring disturbed areas to provide stability and prevent erosion.  State permitting programs  do not normally require the owner/operator to return a site to pre-development conditions by removing buildings and equipment.

S 843  also makes the owner/operator responsible for “properly recycling each piece of equipment used in the facility”.  State law already prohibits landfill disposal of specific types of waste such as aluminum cans, scrap tires and computer equipment. (See G.S. 130A-310 for a complete list of materials banned from landfill disposal.)  S 843 appears to go much further and require recycling of all equipment used in a renewable energy facility.  The recycling requirement for renewable energy facilities looks particularly burdensome by comparison to a 2013 state law allowing  demolition debris from a decommissioned electric generation station to be buried on site. See G.S. 130A-301.3.

Strict liability for damages caused by construction, maintenance, operation, decommissioning, disassembly or demolition of a renewable energy facility. The bill would impose strict liability on the owner/operator of a renewable energy facility. “Strict liability” means the owner/operator  could be held liable for personal injury or property damage caused by the activity even if the damage was not the result of  intentional misconduct, negligence, or violation of any regulatory standard. Strict liability  can also deny the  owner/operator the benefit of some usual defenses against a damage claim — such as the defense that the injured person caused or contributed to their own injury. Usually,  strict liability is reserved for inherently dangerous activities where it provides an incentive for extra caution on the part of the person engaged  in the activity.  Very few  N.C. laws create strict liability for personal injury or property damage;  one applies to   owners of dangerous dogs and another makes parents responsible for damage caused by their minor child.   A few laws create a sort of limited strict liability.  For example, state law generally assumes a  hydraulic fracturing operation  will be liable for contamination of a water supply located within 5,000 feet of a natural gas well. But in that case, the presumption of liability only applies to one type of injury  occurring in a very specific  set of circumstances  — not to all injury or damage caused by a  fracking operation.

Taken together, the provisions in Senate Bill 843 treat renewable energy facilities as a serious threat to public safety and the environment.

N.C. Environmental Legislation 2015: The Budget

October 9, 2015. Now that the General Assembly has adjourned, a look at legislative actions affecting the environment. First, the state budget for 2015-2017.

Among the most significant impacts:

♦  REORGANIZATION.   The Clean Water Management Trust Fund and the Natural Heritage Program — originally intended to protect and restore water quality and identify important natural areas — have been separated from the environmental protection programs in the Department of Environment and Natural Resources (DENR). The budget transfers the CWMTF, Natural Heritage Program, Museum of Natural Sciences, state park system, N.C. Aquariums and N.C. Zoo from DENR to a newly organized Department of Natural and Cultural Resources. The move combines conservation  and ecological education programs with state historic sites and cultural resources. The new department appears to be organized around management of the programs as public attractions rather than as research and education partners to state environmental protection programs.  As a result of the reorganization, DENR becomes the Department of Environmental Quality (DEQ).

Whatever the merits of the move for facilities like the Museum of Natural Science and N.C. Zoo,  the Clean Water Management Trust Fund and Natural Heritage Program do not  fit the new department’s basic organizing principle. Unlike the “attractions”,  the  CWMTF and Natural Heritage Program provide no public facilities and exist primarily to protect  water quality and identify important natural resources.

The General Assembly created the Clean Water Management Trust Fund (CWMTF) in 1996 to fund projects to prevent water pollution and to restore water bodies already impaired  by pollution.   CWMTF’s  non-regulatory approach complemented water quality rules  protecting state waters.  Originally,   CWMTF grants funded acquisition of riparian buffers to reduce polluted runoff into streams and rivers and  extension of sewer lines where failing  septic  systems threatened surface water quality.  In moving CWMTF, the 2015 budget severs its connection with other state efforts to restore and protect water quality.  The move follows 2014  legislation diluting the original CWMTF  focus on  water quality protection by authorizing use of the Trust Fund for acquisition of historic sites and buffers around military bases.

The  Natural Heritage Program researches, classifies and inventories the state’s natural resources, including endangered and rare plant and animal species. Information collected by the program can be used to document the conservation value of property and to assess the environmental impacts of projects requiring state and federal environmental permits.  The program has a much closer working relationship to the environmental  protection programs that remain in DENR than to public attractions like the N.C.  Zoo and Aquariums. (Note: The 2013 state budget eliminated the Natural Heritage Trust Fund which had been a source of funding for conservation of important natural areas;   the CWMTF  has become the funding source for those projects as well.)

♦  LANDFILL PERMITTING. The budget changes landfill permitting, allowing issuance of a single “life of site” permit to cover construction and operation of a landfill that may have a 30-year lifespan.  State rules had previously  required review and approval of the entire landfill site before construction, but also required each 5 or 10-year phase of the landfill to have a construction and operation permit.  Moving to a “life of site” permit  reduces the number of permit reviews for each landfill operation, changing the permit fee schedule and cutting funding for the state’s solid waste management program by 20%.  The change also reduces state oversight of landfill operations.  Landfill construction will continue to be done in phases for economic and practical reasons,  but the “life of site permit” eliminates state compliance review for each new  phase of the landfill.   The change also seems to eliminate the possibility of imposing additional permit conditions for construction or operation of later landfill phases in response to  technological developments  or new knowledge  of  risks to groundwater and other natural resources. The  budget provision does not set minimum inspection requirements in place of the 5 and 10-year phased permit reviews.

The bill also creates a legislative study of local government authority over solid waste collection and disposal, including ordinances on solid waste collection;  fees for waste management services; and potential for privatization.  The study suggests the General Assembly may focus next on reducing local solid waste regulation.  That will be a somewhat different discussion, since solid waste disposal has long been a local government responsibility so  local fees and ordinances have a direct connection to city/county collection and disposal services.

♦  LEAKING PETROLEUM UNDERGROUND STORAGE TANKS. The budget eliminates a state fund for cleanup of petroleum contamination from small  petroleum underground storage tanks (USTs) such as home heating oil tanks.   The Noncommercial UST Trust Fund has assisted property owners with the cost of soil and groundwater remediation caused by leaks from farm, home and small commercial USTs.  The budget allocates additional money to the Noncommercial UST Trust Fund to cover pending claims, but  limits use of the Fund to  cleanup costs associated with leaks reported to DENR by October 1, 2015.  All claims for reimbursement of those costs must be filed by July 1, 2016.

The budget provision also prohibits DENR from requiring removal of petroleum-contaminated soils at noncommercial UST sites that have been classified as low risk.  The  problem —  risk classifications  have been based on groundwater impacts;  a low-risk classification does not mean that contaminated soils on the property pose no health hazard. Current UST  rules require remediation of contaminated soils to levels safe for the intended land use (residential versus nonresidential) without regard to the overall risk classification of the site.  Soil remediation standards have been based on the potential health risks associated with exposure to petroleum-contaminated soil. Adverse health effects may include increased cancer risk since petroleum products contain a number of carcinogens. The budget provision may allow petroleum-contaminated soils to remain on residential properties at levels putting children at particular risk of adverse health effects.

♦ JORDAN LAKE WATER QUALITY RULES. The budget allocates another $1.5 million (from the Clean Water Management Trust Fund) to continue the 2013 pilot project to test use of aerators to improve water quality in the Jordan Lake system. The budget also has a special provision further delaying implementation of the Jordan Lake water quality rules for  another 3 years or one year beyond completion of the pilot project (whichever is later). The rules had been developed by the state’s Environmental Management Commission to address poor water quality  caused by  excess nutrients reaching the lake in wastewater discharges or in  runoff from agricultural lands and developed areas. See an earlier post  here on the  2013 legislation creating the pilot project.

♦ COASTAL EROSION CONTROL.   A special provision in the budget also changes state rules on use of sandbag seawalls and terminal groins in response to coastal erosion.  State coastal management rules have only allowed use of  temporary sandbag seawalls to protect a building facing an imminent threat from erosion. The same rules prohibit construction of the seawall more than 20 feet seaward of the threatened building. (These sandbag seawalls are substantial structures built on the beach in response to oceanfront erosion; the rules do not apply to sandbags used to prevent water from entering a building during a flood event.) The budget bill allows an oceanfront property owner to install a sandbag seawall to align with an existing sandbag structure on adjacent property without showing an imminent erosion threat to any building on their own property.  Since the bill allows construction to align with the adjacent sandbag seawall, the new seawall  may  also be more than 20 feet seaward of any  building. The irony here — a property owner may want to install a sandbag seawall in these circumstances  out of concern that the adjacent sandbag seawall may itself cause increased shoreline erosion.

The budget bill also increases the number of terminal groin structures that can be permitted at the state’s ocean inlets from four to six and identifies New River Inlet for location of two of the additional structures. See an earlier post  for more on earlier legislation allowing construction of terminal groins as a pilot project. Note: No terminal groins have been completed under the original pilot program, so the state does not yet have any data on the actual impacts of these structures.

♦ RENEWABLE ENERGY TAX CREDIT.  The budget bill allows the state’s 35% tax credit for renewable energy projects to sunset on December 31, 2015. A separate bill provides a “safe harbor” for renewable energy projects already substantially underway by that date. Those projects may qualify for a one-year extension of the tax credit. See Senate Bill 372 for more on conditions that apply to the safe harbor extension.

N.C. General Assembly: 2015 Environmental Bills

April 15, 2015.   The final bill introduction deadline  fell  yesterday for bills that don’t affect finance or appropriations,  so it is a good time  to look at the environmental bills  introduced and awaiting action. The General Assembly can also amend environmental laws  in the budget bill or by completely rewriting a bill on an entirely different subject, but with that warning in mind:

House Bill 795 SEPA Reform  would  greatly  limit the number of  projects requiring an  environmental impact statement (EIS) under the state’s Environmental Policy Act (SEPA).   Adopted in 1971, SEPA requires an  EIS  for projects that potentially have a significant environmental impact, need a state approval (such as a permit), and involve either the use of public funds or use of public lands.  Unlike its federal counterpart (the National Environmental Policy Act  or “NEPA”), the state law  has never applied to  privately funded development projects no matter how significant the environmental impact. To require an EIS under the state law, there must be public investment ( which could mean either state or local government funding) or use of public land.  Typical projects requiring an EIS in the past would be  a new wastewater treatment plant; a county landfill; a major development project on state-owned submerged lands; or activities on state parkland.

House Bill 795 proposes to  limit SEPA review  to projects involving $20 million or more in public funding or land-disturbing activity affecting 20 acres or more of public land.   It is difficult to know what percentage of projects required to do an EIS in the past would avoid  SEPA review under the amended law, but it is reasonable to assume that many public  projects fall below the $20 million threshold. Controversial proposals for use of state parks and tidelands could also avoid SEPA review because — whatever the other impacts of the project —  an EIS would only be required for land-disturbing activity that permanently alters the landscape and affects 20 acres or more. For projects that exceed the new size and funding thresholds, House Bill 795 provides additional  SEPA exemptions  for projects receiving  certain types of state approvals. Some of the approvals listed in the bill, such as a certificate of convenience and necessity for a  public utility infrastructure project,  do not  involve  any environmental review.  (That particular exemption also doesn’t seem to serve a purpose;   the “public utilities” that need a certificate of convenience and necessity are by definition not owned or operated by a governmental  entity and  don’t involve public funds.)

For projects that would still require an EIS under the amended law, the bill also limits the scope of the EIS.  Under the bill,  the EIS would only describe direct project impacts — eliminating consideration of indirect and cumulative impacts.

Projects  exempted from the EIS requirement would still need  any necessary environmental permits, but permit reviews tend to be more narrow than an EIS. The EIS looks beyond one set of permitting standards to evaluate the environmental impacts of the project as a whole — which can include consideration of noise, traffic, endangered species, historic sites, and effects on minority and low income communities as well as natural resource impacts. Projects that require a federal permit could still trigger NEPA review; what the state may lose is an opportunity for the same comprehensive review and public input on projects that do not require a federal permit —  which may include some landfill projects and inter-basin transfers.

THE OMNIBUS BILLS (AMEND ENVIRONMENTAL LAWS AND REGULATORY REFORM)

In every recent legislative session, the General Assembly has enacted an Amend Environmental Laws bill  and a Regulatory Reform bill. Both bills become vehicles  for multiple changes to environmental laws. See an earlier post for a description of Senate Bill 453, the Regulatory Reform Act of 2015.

At the moment, House Bill 593 (Amend Environmental Laws-2) only  contains provisions amending  state law on reimbursement of third-party damage claims by the state’s petroleum underground storage tank (UST)  trust funds.  (The UST trust funds can reimburse UST owners for up to $1,000,000 in third-party claims for property damage or personal injury resulting from a petroleum release.)  The amendments require the UST owner to provide specific documentation of the third party damage claim; add definitions of “third party”, “bodily injury” and “property damage”;  and provide more  direction on how to calculate  compensation for  property damage.

It is the  nature of  both the Regulatory Reform and Amend Environmental Laws bill to pick up baggage as the session goes along.  Expect new versions of each bill  as the bills move through committee.

Note: This bill is Amend Environmental Laws-2 because  House Bill 157 (Amend Environmental Laws) has already been enacted into law as Session Law 2015-1. H 157 generally made uncontroversial and technical changes to solid waste laws, the Coal Ash Management Act and other environmental laws. The one provision in H 157 that  created some controversy amended a state law requiring the Environmental Management Commission to adopt air toxics rules for hydraulic fracturing sites.The bill replaced the requirement with language authorizing the EMC to adopt  air toxics  standards for fracking sites  if necessary to protect public health, safety, welfare and the environment.

AIR QUALITY

Senate Bill 303  Protect Safety/Wellbeing of N.C. Citizens  prohibits state enforcement of any federal standards for wood heaters used for home heating.  The bill  is interesting as an example of  state legislation intended to nullify  a federal standard.  In February, EPA adopted updated performance standards for wood heaters. Federal air quality rules have included standards for wood heaters since 1988; the new rule updates the standards to reflect changes in technology and to  regulate  wood-burning boilers and wood-burning furnaces as well as wood stoves.   The  revised  standards only apply to newly manufactured wood heaters, phase in over several years and do not affect fireplaces (at all) or wood heaters already in use.  An EPA fact sheet provides an overview of the rule.  Generally, N.C.’s delegated authority to implement Clean Air Act programs  requires the state  to adopt and enforce federal new source performance standards, but EPA has not delegated enforcement of the wood heater rule to the states.

House Bill 169  Limit Motor Vehicle Inspections  eliminates motor vehicle emissions inspections in six counties  (Burke, Granville, Haywood, Rutherford, Surry and Wilkes). Forty-eight of N.C.’s 100 counties require annual emissions inspections as part of the state’s plan to meet the  federal ozone standard under the Clean Air Act. Recently, the Department of Environment and Natural Resources (DENR) issued a  report concluding that emissions inspections could be eliminated in as many as 28-31 counties without  violating either the current ozone standard or the stricter ozone standard EPA  will  finalize by the end of the year. Given the DENR report, expect the number of counties  the bill removes from the emission inspection program to increase.  Since the emissions inspection program has been used to meet a federal air quality standard, any change by the General Assembly must have EPA approval.

House Bill 172 Fracking – Protecting the Public requires the Environmental Management Commission to adopt rules establishing best management practices and  leak detection and repair standards to  minimize air emissions from natural gas operations. The bill approaches the related problems of wasted natural gas and  air pollution by focusing on  ways  to minimize unintended releases resulting from leaky equipment or inefficient practices during exploration, development, production, processing and compression of the natural gas.

House Bill 571 Implementation of Carbon Dioxide Regulations requires DENR  to begin work on a plan to comply with new federal regulations reducing carbon dioxide (CO2) emissions from power plants. EPA’s Clean Power Plan rule sets a CO2 reduction goal for each state, but states have flexibility in the mix of power plant emission reductions, renewable energy generation, and energy efficiency measures used to meet the goal.  Find  more background on the federal rule here. Each state  must  submit a plan for meeting its   CO2 reduction goal by June 2016, although EPA can extend the deadline if the plan needs legislative approval or relies on a multi-state strategy.  DENR does not appear to have any effort underway to develop a plan. Instead, DENR has both  questioned the legal basis for the federal rule and urged EPA to delay implementation until lawsuits  challenging the rule  have been resolved. House Bill 571 appears to be intended to push DENR to begin  work  on a CO2 reduction plan and do it in a way that provides for  input from both stakeholders and the public.

COAL ASH

House Bill 448 Extend Coal Ash Structural Fill Moratorium  The Coal Ash Management Act of 2014 put new, stricter standards in place for large projects using coal ash as structural fill .  ( “Large” means > 8,000 tons per acre or > 80,000 tons total).   But the law made few change to existing standards for smaller structural fill projects. Instead, the 2014 bill put a moratorium on permitting smaller structural fill projects  until August 1, 2015 to allow time for DENR and the Environmental Management Commission to study the standards for those projects.  The law required a report back  to the General Assembly by January 15, 2015.  The EMC discussed an interim report in  January,  but the interim  report didn’t address the adequacy of existing structural fill standards for small projects. The interim report indicated that a final report would be released in April; it doesn’t appear that a final report has been issued yet.  In the absence of a report on the adequacy of the existing structural fill standards and recommendations, House Bill 448 would extend the moratorium on permitting smaller projects until August 1, 2016.

COASTAL ISSUES

House Bill 151 Property Insurance Ratemaking Reform is not strictly speaking an environmental bill, but deals with use of models projecting catastrophic losses as a result of a hurricane or other natural disaster in setting property insurance rates. The bill would continue to allow use of models, but would require the results of more than one model to support a property insurance rate change.  The bill is interesting given the longstanding tension between the economic benefits of coastal development and the externalized costs of building in natural hazard areas.

House Bill 302 Strengthen Oyster Industry  requires the Division of Marine Fisheries to study the state’s shellfish lease and franchise programs and make recommendations for changes necessary to increase shellfish  aquaculture on the North Carolina coast. The bill also expands on existing law requiring DMF to plan and construct  oyster sanctuaries in the  Albemarle and Pamlico Sounds; sets new civil penalties for interference with oyster cultivation; and makes other changes designed to increase oyster production. State funding for creation of oyster habitat has seen a steep decline in recent years; some additional resources will likely be needed to make the oyster sanctuary program a reality.

House Bill 346 Counties/Public Trust Areas extends to counties the  authority to enforce local ordinances in public trust areas and particularly on the state’s ocean beaches.  Municipalities already have this authority.

CONTAMINATED SITES

Senate Bill 301 DOT/Purchase of Contaminated Land would exempt the N.C. Department of Transportation from a law enacted in 2013 that  effectively prohibited state agencies from purchasing property with environmental contamination.  As noted in a earlier post about the 2013 law,  the General Assembly may not have realized the far-reaching effects.   Environmental contamination is widespread and state policies allowing polluters to do limited, “risk-based” remediation of groundwater contamination mean the contamination will persist well into the future. The 2013 law exempted the UNC system campuses from the restriction; NCDOT has asked for the same exemption — presumably because the law makes acquisition of property for highway construction more difficult.

INFRASTRUCTURE

Senate Bill 397 Open and Fair Competition Water and Wastewater would prevent a state or local government from “preferring” one type of piping material  for use in a  water, sewer or stormwater infrastructure project receiving state funds.  I don’t know the story behind the bill,  but usually legislation attempting to  change a state agency’s policy about  use of a particular product or system has been introduced in response to complaints by  a  vendor.

RENEWABLE ENERGY

The General Assembly’s internal debate over renewable energy development continues. In 2013,  the Republican majority in the General Assembly split over attempts to repeal both the Renewable Energy Portfolio Standard (REPS) and the state’s tax credit for investment in renewable energy projects. In the end, a bipartisan majority declined to repeal the incentives for renewable energy development — in large part, because renewable energy had become one of the bright spots in the state’s economic recovery. See an earlier post on the end of the 2013 fight over the REPS.

This session, one focus is on the scheduled sunset of the renewable energy tax credit on January 1, 2016. There are bills in both the House and the Senate to extend the tax credit;  House Bill 454  extends the tax credit until January 1, 2021 and Senate Bill 329 extends the tax credit to January 1, 2020.  Opponents of the tax credit have introduced a bill, Senate Bill 372, that essentially retains the existing January 1, 2016 sunset,  but provides a “safe harbor” for investors who have made substantial outlays on projects not  in service  by the sunset date. Those taxpayers would have an additional year  (until January 1, 2017) to claim the tax credit.

UPDATE:  House Bill 681 would sunset the REPS requirement early, ending in 2018  with a  standard requiring  6% of retail sales of electricity to be generated from renewable sources. The current law requires that  electric public utilities generate 12.5% of retail sales from renewable energy source by 2021 and thereafter.

Beyond Coal Ash – Other Environmental Bills

For those of you making scorecards and tracking sheets for  2014 legislation, a list of other bills on energy and the environment filed  so far; some  bills have already  been  introduced in both chambers:

Environment. The first six bills listed below   were recommended by the House/Senate Environmental Review Commission (ERC).    The last, House Bill 1105,  came out of a House/Senate legislative study commission on land development.

House Bill 1081 (Senate Bill 765)  addresses several  concerns about  state and local permit review of engineering plans.  An engineer submitting an innovative design proposal to a state or local permitting agency will have the opportunity to elevate the  permit review to a supervising engineer.  The bill also allows the permitting agency to charge the applicant for a third-party engineering review if the agency does not have a staff engineer qualified to review the innovative design.  The bill makes other less significant changes. The bill requires  permit reviewers to clearly distinguish necessary design changes  from suggested changes and  cite the law or rule that makes a design change necessary for permit  approval. The bill also directs permitting agencies to review working job titles for permit reviewers  to insure only PEs have “engineer” job titles. For more on the history of these proposals, see an earlier post.

House Bill 1057 (Senate Bill 757)  requires the Department of Environment and Natural Resources (DENR) to study several  issues related to transfer of water from one river basin to another  or “interbasin transfer” (IBT):  1.  Whether  temporary and emergency interbasin transfers, including transfers to relieve water shortages caused by drought, should be regulated differently  than long-term interbasin transfers; 2. Whether interbasin transfers between river sub-basins should be regulated differently  than interbasin transfers between major river basins. and 3. Whether there are types of interbasin transfers that should be exempt from state approval or  other regulatory requirements.

Interbasin transfers  usually  involve piping water from a drinking water source in one river basin to  a water system in another, although some large water systems cross river basin boundaries  and need an IBT just to serve  system customers. An  IBT  of  2 million gallons per day or more requires a certificate of approval from the Environmental Management Commission (EMC). Rather than using the boundaries of the  17 major state river basins,  the  IBT law requires  a certificate for any transfer among  38 sub-basins.  Over the last seven years, a series of legislative changes have made the IBT approval process increasingly difficult.   The House and Senate IBT bills signal an interest in reexamining some of the restrictions.

House Bill 1058 (Senate Bill 756) directs the General Assembly’s Program Evaluation Division (PED) to study: 1.  the benefits of combining water and sewer systems into larger, regional entities; 2. potential incentives for systems to merge; and 3. the possibility of  allowing one system to apply for grants  on behalf of  a less efficient  system  based on a commitment to purchase, interconnect  or enter into a joint management agreement with the less efficient system. The idea of encouraging merger of  small water systems and wastewater  systems into larger, more efficient utilities  has popped up in just about every legislative session for a decade or more.  The biggest obstacles tend to be local resistance and the financial burdens  associated with the takeover of  a small, inefficient system often badly in need of capital investment.  The last of the three PED study issues (allowing one system to apply for grants on behalf of a system targeted for takeover) may be focused on removing the financial disincentives.

Senate Bill 737 (Amend Isolated Wetlands Regulation). “Isolated wetlands”  fall outside the federal Clean Water Act permitting program for wetland impacts because the wetlands do not have a connection to navigable waters.  (Congress adopted the Clean Water Act  under its  authority to regulate interstate commerce and  limited federal regulatory jurisdiction to navigable waters used in interstate commerce.)   In response to pressure from realtors and developers to eliminate state  protection of isolated wetlands,  S737  allows additional  impacts  to isolated wetlands without  prior state permit review.  State water quality rules  now allow  development impacts  to  isolated wetlands below specific thresholds to be “deemed permitted”.  S737 raises those thresholds from 1/10th of an acre to 1/3 of an acre west of Interstate 95 and from 1/3 of an acre to 1 acre east of Interstate 95.  (I-95 has long been used as the  dividing line between the wetter eastern counties and drier piedmont/western counties.)  DENR has expressed concern that raising the  threshold to 1 acre east of I-95 will effectively eliminate review of projects impacting isolated wetlands in the eastern part of the state. S737 also reduces the amount of mitigation required for isolated wetland impacts (from a 2:1 ratio to 1:1) and eliminates the  practice of giving more mitigation credit for creation or restoration of wetlands  than  for preservation of existing wetlands.

Senate Bill 738 (Clarify Gravel Under Stormwater Laws). In 2013, the N.C. Homebuilder’s Association successfully lobbied for legislation directing  the state stormwater  program to  treat gravel areas as “pervious” (meaning the surface allows water to percolate through to the soil beneath) and exclude  them  from the calculation of built-upon area on a development site.  The amount of built-upon area determines the level of stormwater control required for the project, so excluding gravel areas from the calculation  potentially  reduces stormwater costs.  The 2013  provision  (included in  Session Law 2013-413)  also directed the ERC to study “how partially impervious surfaces are treated in the calculation of built-upon area under [the stormwater] programs”.    Ironically, the ERC study found: 1.  no consensus on  the definition of  “gravel”; and 2. evidence that permeability is a function of several factors, including the nature of the substrate and method of installation as well as the surface material itself.  Instead of further weakening stormwater control requirements,   the  ERC bill recommends repeal of the 2013  provision declaring  gravel areas to be pervious and  funds a study of the permeability of different surface materials to be done by the North Carolina State University Department of Biological and Agricultural Engineering.

Senate Bill 734  (Authority to Adopt Certain Ordinances).  The  Regulatory Reform Act of 2013 (Session Law 2013-413)  put  a one-year moratorium on local environmental  ordinances and directed the ERC  to study  local authority to adopt environmental ordinances. The  moratorium/study  provision represented a compromise  between the House and the Senate after the Senate  passed  a bill (Senate Bill 112) putting significant restrictions on local environmental ordinances.

An ERC working group looked at the issue  of local authority through the lens of actual conflict between local ordinances and state or federal environmental  rules.  The legislators identified only one  conflict — local ordinances on use of fertilizers regulated by the N.C. Department of Agriculture and Consumer Services.  Based on the working group recommendation, the ERC  proposed  a limited bill addressing state  versus  local authority to regulate fertilizer use. The bill also  directs  DENR and the Department of Agriculture to  report back in  November 2014  and again one year later on any  local ordinances that  “impinge on or interfere with” state rules.  Supporters of S112   almost certainly want something more.  It seems clear the intent of S112 was to prevent  local government from imposing  additional environmental requirements on developers  and not simply  to avoid conflict with state rules.

House Bill 1105  amends the section of the  state Sedimentation Pollution Control Act that allows DENR to delegate  authority to a local sedimentation program. The amendment transfers responsibility for enforcement of previously approved erosion and sedimentation control plans from DENR to the local government when DENR approves a local program.

Energy

House Bill 1055   would appropriate a total of  $5 million to North Carolina State University and UNC-Charlotte  for research on renewable energy, energy storage, and coal ash reuse.  The bill sponsor,  Rep. Mike Hager,  spent much of the 2013 session   in an unsuccessful effort  to repeal  the state’s renewable energy portfolio standard (REPS).  (You can find the first of several  posts on the 2013 REPS repeal bill here.)  Some of the 2013 combatants  have already signaled an intent to  continue the battle for  repeal  of the REPS standard.    That  very fresh legislative history makes  Rep. Hager’s  proposal to  fund research on renewable energy  somewhat surprising.

Senate Bill 786, (The Energy Modernization Act).  The bill proposes so  many changes to state law on  oil and  gas exploration and development that it merits a separate  post. (To follow.)

Legislative Wrap-Up V: Miscellaneous

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

Appeals of  Air Quality and Water Quality Permits

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

Air Quality

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

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

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

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

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

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

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

Coastal Development

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

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

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

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

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

Sedimentation Act

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

Tax Credit for Renewable Fuel Processing Facilities

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

Legislative Wrap-Up II: Energy

August 2, 2013: Highlights of energy legislation.

Shale Gas/Hydraulic Fracturing. This is one area where the big news may be the legislative proposals that failed. The Senate adopted two controversial  shale gas provisions, but neither passed the House. Legislation adopted in 2012 effectively put a moratorium on hydraulic fracturing  by prohibiting issuance of permits until  the Mining and Energy Commission adopted rules and the  General Assembly acted to specifically allow permitting.  The N.C. Senate had always wanted to set a specific date for permitting to begin and tried again this year in Senate Bill 76 (the Domestic Energy Jobs Act). The version of the bill that came out of the Senate repealed the 2012   language  and authorized the Department of Environment and Natural Resources to begin issuing permits for hydraulic fracturing on March 1,  2015 without any further legislative action.  The House had concerns about the change. After back and forth on alternative language and  intensive lobbying in the  last  days of the legislative session, the final bill kept the permitting moratorium in place.

The other controversial Senate proposal  had to do with disclosure of information on chemicals used in hydraulic fracturing fluid. The Senate  intervened on behalf of the oil and gas industry when energy giant Halliburton expressed concern about a chemical disclosure rule drafted by the Mining and Energy Commission. The commission’s draft rule requires drilling companies to disclose all chemicals used in hydraulic fracturing fluid to the Department of Environment and Natural Resources, but allows DENR to keep any trade secret information confidential. You can find more about the chemical disclosure rule and trade secret protection in this post.   In an effort to make the rule more acceptable to the oil and gas industry, the Senate adopted language directing the Mining and Energy Commission to revise the rule to allow  drilling operators to withhold information on trade secret chemicals unless DENR needed the information to respond to environmental damage or a specific health problem.  In the face of significant opposition,   the Senate  modified the language to allow   state regulators  to review information on trade secret chemicals at the same time the drilling company  disclosed  other chemicals used in the fracturing fluid. The revised language did not allow DENR  to actually receive  information on trade secret chemicals — the department could only review  information  that remained  in the drilling company’s possession.  In the final  days of the legislative session, the  bill containing the Senate  language died and the restriction on chemical disclosure died with it.  Failure of the legislation allows the Mining and Energy Commission  to move ahead with the original draft rule on chemical disclosure.

The final version of Senate Bill 76 signed by the Governor included a number of  less controversial changes related to shale gas and hydraulic fracturing:

– Rules adopted by the Mining and Energy Commission are exempted from the  requirement for a fiscal analysis. State law  generally  requires every proposed rule that has an economic impact of $1 million or more (based on the total impact on everyone affected by the rule)  to be accompanied by a  fiscal analysis.

–  Minor changes in the makeup of the MIning and Energy Commission.

– Three new studies to look at:  1. creation of a coordinated permitting process that will allow issuance of a single environmental permit for all oil and gas exploration and production activities; 2. the appropriate level of severance tax for oil and gas resources; and 3. implementation of  the 2012 registration requirement for people involved in  purchase or lease of property for oil and gas exploration and development.

– Technical amendments to an existing law allowing the state to limit the total amount of oil and gas produced in the state (G.S. 113-394).

–  New criteria for setting the amount of  the reclamation bond required for oil and gas activities and a process for either the drilling company or the property owner to appeal the bond amount.

LEED Certification.  House Bill 628 (Protect/Promote Locally Sourced Building Materials) was signed into law after a major rewrite in the Senate.  The  original House bill would have prohibited state building projects from seeking Leadership in Energy and Environmental Design (LEED) certification under U.S. Green Building Council standards because few North Carolina forestry operations meet standards necessary to earn LEED credit for sustainable wood products. You can find more explanation of the controversy over sustainable forest practices and the LEED standard here.  The Senate rewrote the bill to allow construction of state projects under “green” building standards that  give credit for use of local building materials — which LEED standards do.   The  final bill also calls  for study of the energy efficiency standards for state buildings that were adopted in 2007.

Renewable Energy.  Legislation to repeal the state’s Renewable Energy Portolio Standard  died.   With the support of a number of conservative political organizations — including Americans for Prosperity — House Bill 298 and Senate Bill 365 (both titled the Affordable and Reliable Energy Act)  proposed to repeal the 2007 state law requiring major electric utilities to generate an increasing percentage of power from renewable energy sources.  An earlier post talked about the politics of the renewable energy standard and  the practical problem the bill presented for Republican  legislators. The tension between the practical (jobs) and the political (conservative opposition to  subsidies for renewable energy) played out in both the House and the Senate.  In the end, neither bill got all of the committee approvals needed to get to  a floor vote.

The General Assembly adopted legislation setting up a permitting program for  wind energy projects (House Bill 484). The bill largely responds to concerns about the potential impact of wind turbines on military training  activities in the coastal area. Two onshore coastal wind projects already proposed for the coastal area had generated questions about interference with radar and risk to pilots flying low-level military training routes.  Aside from establishing environmental criteria for permitting wind turbines, the bill requires DENR to provide notice of  the permit application to commanders at  nearby military installations and to the Federal Aviation Administration. The bill makes interference with military operations a basis for denying  a wind energy permit.

The final budget for 2013-2015  eliminated state funding for the N.C. Biofuels Center. The General Assembly created the Biofuels Center in 2007 to  encourage  biofuels production in N.C. using  non-food crops.  The Biofuels Center set a goal of replacing 10% of the state’s imported petroleum with homegrown biofuels. To develop biofuels production, the Biofuels Center made grants to support biofuels research and to develop pilot  projects.  Late in July, the N.C. Biofuels Center board decided that it would not be practical to continue operations without state funding; the  Center will  close by the end of October and unused grant money will be returned to the state.

Offshore Energy.  Senate Bill 76 also addressed offshore energy production. One section of the  bill creates a plan for allocating revenue from offshore energy production off the N.C. coast. The first $250 million in royalties to the state would go into an Offshore Emergency Fund to be used for emergency response and cleanup in case of an offshore oil or gas spill. Any royalties to the state beyond the first $250 million would go largely to the General Fund (75%); the remaining 25% would be divided among the Highway Trust fund (5%), the Community College System (5% for programs to train students in fields related to energy development), DENR (5% for coastal projects), the UNC system (5% for energy-related research and development); State Ports Authority (3% for ports infrastructure associated with energy production); and Department of Commerce (2% to recruit energy-related industries to the state).

Note: Offshore oil and gas production would almost certainly occur in federal waters beyond the three-mile limit of state jurisdiction. North Carolina will not receive any royalties from offshore production in federal waters unless Congress specifically authorizes revenue-sharing with the state.

The bill also encourages  the Governor to negotiate a regional energy compact with the states of Virginia and South Carolina to develop a regional strategy for offshore energy production in the three-state region. The General Assembly directs Governor McCrory to work with his counterparts in those states to encourage the U.S. Department of Interior to amend the national 2012-2017 Five Year Leasing Plan to include leasing for oil and gas exploration and development in waters of the Atlantic Ocean off the VA-NC-SC coast.

Energy Policy Act.  Senate Bill 76  makes significant changes to the state’s Energy Policy Act (the Act begins at G.S. 113B-1). The changes  generally run in the direction of  reducing  the emphasis on energy efficiency and renewable energy and increasing  the emphasis on job creation.   The amended Energy Policy Act has more to say about expanding development of all energy sources – including natural gas and nuclear power — and much less about energy conservation.  The bill changes the makeup of the Energy Policy Council (an advisory board created to guide state energy policy) along the same lines:

– The seat on the Council for a person  with experience in alternative fuels or biofuels becomes a seat for a representative of  an investor-owned natural gas utility.

–  The seat designated for a person  with experience in energy efficient building design or construction  becomes a seat for  an energy economist.

–  The seat on the Council for a person with experience in renewable energy becomes a seat for an industrial energy consumer.

The General Assembly also consolidated state energy programs in the Department of Environment and Natural Resources. The budget bill moves the State Energy Office (which has largely carried out federally funded energy efficiency programs) from the Department of Commerce to DENR. Senate Bill 76  moves the Energy Policy Council, which had also been under the Department of Commerce,   to DENR. The Council will be  staffed by the Division of Mineral, Energy and Land Resources.

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.