Tag 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.

2019 Legislation: Environmental and Energy Laws

December 27, 2019. A  short list of environmental and energy law changes compared to recent years:

Fisheries.   As interest in  shellfish aquaculture has increased, so have concerns about the impact of the rapidly evolving aquaculture industry on water recreation and navigation.  Senate Bill 648   creates a new framework for management of aquaculture operations by allowing the Division of Marine Fisheries (DMF) to designate  “shellfish aquaculture enterprise areas” where water bottom and water column leases can be issued for shellfish aquaculture. Similar to water use zoning, the concept gives DMF the ability to direct shellfish operations toward areas already approved for the purpose instead of  simply responding to a lease application for any location of the applicant’s choosing.

The bill has some weaknesses. It doesn’t provide guidance on siting shellfish aquaculture enterprise areas.  The bill requires notice and a public hearing prior to designation of an aquaculture enterprise area, but relies on the limited notice requirements in existing statutes authorizing individual bottom and water column leases. Those existing public notice provisions in G.S. 113-202 (bottom leases)  and G.S. 113-202.1 (water column leases) only require notice by newspaper publication.  The statutes do not require direct notice to either the local government or to  owners of property along the affected shoreline.

Senate Bill 648 also creates a pilot project for shellfish aquaculture leasing in Pamlico Sound while imposing  moratoria on approval of new open-water shellfish aquaculture leases in  New Hanover County and Bogue Sound. At the same time, the bill makes it possible for DMF to approve operations to grow seed oysters and clams in marinas (which under existing shellfish rules have been closed to any type of shellfish propagation), which may relieve some pressure for new open water aquaculture leases.

Water Quality.  House Bill 812  (Nutrient Offset Amendments) provides more flexibility in projects to mitigate nutrient loading from wastewater dischargers. The amendments allow nutrient offsets for  permitted NPDES discharges to be provided EITHER  in the same hydrologic area (the current requirement) OR  at a location downstream of the discharge, but upstream of the water body subject to regulations to address excess nutrient loading. For stormwater and other nutrient sources, the law continues to require nutrient offsets in the same hydrologic area.

Section 3 of House Bill 206  (Various Transportation Changes)  requires the EMC to exempt a broader range of airport-associated development from the Neuse River riparian buffer rules. The Neuse buffer rules require vegetated buffers along streams in the Neuse River basin as a tool for reducing nutrient runoff  and excess nutrient loading to downstream estuaries. Since airport facilities also have to meet Federal Aviation Administration siting criteria,  current EMC rules exempt certain aviation-related facilities from buffer requirements and allow others to impact the buffer with mitigation.

Under the existing EMC rule,   “airport facilities” allowed to impact the buffer include structures directly related to aviation operations such as runways, terminals, maintenance buildings, administrative buildings, onsite airport parking, navigation markers,  and beacons.  The EMC rules do not exempt satellite facilities such as off-site parking or hotels, rental car facilities and other commercial development. H 206 directs the EMC to revise and broaden the definition of  “airport facility” in the rules to allow the riparian buffer exemption to apply to development of those airport-associated commercial facilities.

On-Site Wastewater.  Regulations on siting and design of on-site wastewater systems (such as septic systems) have both a public health and environmental protection purpose. The rules exist to prevent direct exposure to untreated wastewater and contamination of groundwater and nearby rivers, streams and lakes.  House Bill 268 (Amend On-Site Wastewater Laws) is a somewhat mis-titled bill that actually disapproves more than 40 rules concerning on-site wastewater systems  and reclaimed water systems amended by the Commission for Public Health in 2018. The bill may be one of the broadest exercises of the legislature’s power to disapprove agency rules since the legislature claimed that  authority under the State’s Administrative Procedure Act.

Legislative disapproval means the amended rules cannot go into effect;  prior versions of the rules remain in place in the meantime. The bill creates a task force to report back to the legislature in February 2020 on rules to replace those amended in 2018.  One purpose of the  task force (as set out in the bill ) is to make recommendations “to prevent the implementation of rules and ordinances and enforcement against the use of on-site wastewater treatment and dispersal systems in non-sewered areas of the State”.  

The disapproval bill responded to concerns from homebuilders and realtors that the amended rules will make it more difficult to develop some areas using onsite wastewater systems. In part, the controversy seems to be a continuation of past conflicts over how easy (or hard) it should be to approve innovative onsite wastewater systems for use in areas that are not appropriate for a conventional septic tank system. 

Renewable Energy.  House Bill 329 (Renewable Energy Amendments) makes several relatively minor changes to energy laws.  Section 1 of the bill exempts electric vehicle charging stations from the definition of “public utility” as long as the owner simply resells electricity supplied by a regulated public utility. Otherwise, sale of  electricity by a charging station could lead to  regulation of the facilities by the N.C. Utilities Commission under laws applied to Duke Energy and other electricity providers.

Section 2 requires the Environmental Management Commission (EMC) to establish a new regulatory program “to govern (i) the management of end-of-life photovoltaic modules and energy storage system batteries and (ii) decommissioning of utility-scale solar projects and wind energy facilities” by January 1, 2022.  The bill lists a number of issues for the EMC to consider in developing rules, including whether system components have the characteristics of hazardous waste and preferred methods of end of life management (i.e., reuse, recycling, or disposal as solid waste).

Section 3  amends the law governing how the N.C. Utilities Commission  sets avoided cost rates for an electric utility’s purchase of power from a small power producer. The law, G.S. 62-156,  generally takes into consideration the electric utility’s need for additional capacity and the availability/reliability of energy provided by the small power producer.  The law already provides an alternative mechanism for determining capacity need with respect to energy purchased from swine and poultry operations with waste-to-energy systems by reference to G.S. 62-133.8. The 2019 amendment extends special treatment with respect to capacity need to certain small hydroelectric projects (those with total capacity less than or equal to 5 MW). In effect, the change appears to lock in the renewal of existing power purchase agreements between electric utilities and small hydropower producers that were in effect as of July 27, 2017.

Boards and Commissions.  Senate Bill 381  (Boards and Commissions) amended the appointment statutes for the Clean Water Management Trust Fund Board and for the Parks and Recreation Trust Fund Board to give the Governor a majority of appointments to those boards.  S 381 continues a series of  legislative acts necessary to comply with the 2016 N.C. Supreme Court decision in McCrory v. Berger.  In that decision, the court  held that the Governor must have the power to appoint a majority of the members of any board or commission that exercises executive authority. See an earlier post  for more about the court’s decision.

S 381 also amended the Clean Water Management Trust Fund statutes to expressly give the Fund authority to accept FEMA funds for hazard mitigation and to disperse funds for projects to reduce flood risk.

Vetoed Bills.  For the first time since 2011, the legislature lacked a veto-proof majority in both chambers.  As a result, a  number of bills containing provisions related to environmental protection remain in limbo because the legislature has not yet voted to override Governor Cooper’s veto. The legislature could attempt to override those vetoes in 2020. The content of the vetoed bills will be discussed in a separate post.

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.

The Fate of the Coal Ash Management Commission

March 19, 2016. An earlier post discussed the N.C. Supreme Court decision in McCrory v. Berger. In brief, the court ruled that laws giving the General Assembly  power to appoint a majority of the members of the Coal Ash Management Commission (CAMC) and two other state commissions violated the N.C. Constitution’s provisions on separation of powers.  (See the earlier post for more detail and a link to the court’s opinion.)   The decision means the Coal Ash Management Commission cannot take any further action until the General Assembly amends the CAMC’s  appointment statute  to be consistent with the court’s decision and new appointments are made.  The most likely solution would be to give the Governor power to appoint a majority of the members;  the law could be amended as early as April of this year when the legislature convenes again.

Multiple news outlets have now reported that the McCrory administration has taken steps to effectively disband the Coal Ash Management Commission in advance of the April legislative session.  The Charlotte Observer’s Bruce Henderson reported that the Governor’s Office informed CAMC executive director  Natalie Birdwell  that the commission is “no longer a legal entity”.  The same Charlotte Observer article reports that the move by the Governor’s Office to shut down the commission’s work will dissolve contracts with independent experts retained by the commission to provide an outside review of  the Department of Environmental Quality’s (DEQ) proposed risk classification of coal ash ponds.

A few observations about the Governor’s decision to shut down the Coal Ash Management Commission:

The Governor’s action  wasn’t required by the decision in McCrory v. Berger.  The court did not find anything unconstitutional in the creation of a Coal Ash Management Commission to oversee decisions on closure of coal ash ponds and coal ash disposal.  The court  only held the method of appointing CAMC members  to be  unconstitutional.  The N.C. Supreme Court has found commission appointments statutes unconstitutional in the past and the solution has been to amend the statute to change the appointment scheme.  In 1982, the N.C. Supreme Court  ruled in Wallace v. Bone  that the General Assembly violated the N.C. Constitution’s separation of powers provisions by designating four seats on the N.C. Environmental Management Commission (EMC) for active members of the legislature.  In response, the General Assembly amended the EMC appointments statute to replace the legislators serving on the commission with citizens appointed by the General Assembly.  Nothing in the court’s decision suggested the EMC must be dissolved and that did not happen; nothing in the decision questioned the validity of past EMC actions.  The decision in McCrory v. Berger likewise  does not hold that actions already taken by the Coal Ash Management Commission — such as hiring staff and entering into contracts  for services —  are void or voidable.

Another separation of powers case still pending in  Wake County Superior Court challenges appointments to the Mining and Energy Commission  (MEC) and specifically asks the court to void the MEC’s past rulemaking actions.   But to date, no  court has ruled that the presence of unconstitutionally appointed members invalidates a commission’s  past acts. The MEC case directly  raises the issue for the first time and could lead to a decision affecting future separation of powers cases. In the meantime, the McCrory administration has chosen to go further than the decision in McCrory v. Berger  requires to  undo the existing organizational, staff and contractual arrangements supporting the Coal Ash Management Commission.  (It isn’t clear whether the McCrory administration’s position on the CAMC  would carry over to support for the plaintiffs seeking to invalidate the Mining and Energy Commission’s past rulemaking actions on similar grounds.)

The General Assembly’s next move may depend on continued legislative interest in providing oversight for DEQ’s coal ash decision making.  In 2014, the General Assembly created the Coal Ash Management Commission to provide independent oversight for DEQ decisions related to coal ash disposal and closure of existing coal ash ponds. At the time, legislators expressed concern about relying entirely on DEQ’s judgment because of controversy surrounding early McCrory administration decisions on coal ash enforcement and a pending federal investigation of relationships between state regulators and Duke Energy. The question is whether those concerns still exist and,  if so,  how the legislature will react to the Governor’s unilateral move to disable the commission. The General Assembly can resolve the separation of powers issue and revive the CAMC by simply changing the CAMC appointment provision to  allow the Governor to make a majority of the appointments.

By forcing the Coal Ash Management Commission to start over, the Governor’s action may make it impossible for the commission to meet its first critical deadline –risk classification of coal ash ponds. The Coal Ash Management Act gave the CAMC final authority to determine the appropriate risk classification of each coal ash pond; the risk classification will determine how quickly the ash pond must be closed and whether the coal ash must be excavated and disposed of in a lined landfill. Only coal ash ponds classified as Low Risk can be closed out by dewatering and capping the ash in place.  Under the law, the CAMC must make a final decision on risk classification of a coal ash pond within 60 days after DEQ sends the commission a proposed risk classification. If the commission does not act within 60 days, DEQ’s proposed risk classification becomes the final classification by default.

Timelines in the law will  require DEQ to submit proposed classifications for all of the coal ash ponds to the  Coal Ash Management Commission by mid-May.  Some proposed classifications may be ready sooner. Even if  new appointments to the CAMC can be made under an amended appointments statute by that time, the Governor’s action means the newly appointed commission will have to reassemble a staff, re-engage consultants and revive basic  operating systems to function.  Unless the General Assembly extends the time for the CAMC to review and act on proposed risk classifications,  the DEQ proposed classifications may become final by default before the commission can act.

After the ash ponds have been classified, the next major set of CAMC decisions under the Coal Ash Management Act  involve approval of final closure plans for each coal ash pond.  The closure plans determine whether coal ash will be excavated and removed from the site or capped in place and  includes approval of technical specifications for final disposal of coal ash. The closure plan may also involve approval of a beneficial reuse project as an alternative to landfill disposal. The law directs the CAMC to make the final decision on  approving a final closure plan based on a recommendation from DEQ.  The law again gives the CAMC a limited time to act on each recommended closure plan; if the commission does not act within the time allowed, DEQ’s recommended closure plan becomes final by default.

If the General Assembly does not intervene to protect the Coal Ash Management Commission’s ability to carry out its responsibilities, the practical result could be a significant change in the way the Coal Ash Management Act works. Delaying the commission’s ability to act in time to affect DEQ’s decisions on closure of coal ash ponds will have the practical effect of ceding all  decision-making back to DEQ.  The original concept of providing  independent oversight of those decisions through the Coal Ash Management Commission will be lost.

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

North Carolina and EPA’s Proposed Carbon Rule

September 30, 2014. On June 2, the U.S. Environmental Protection Agency  released  a draft rule to reduce  carbon dioxide (CO2)  emissions from power plants.  Gov. Pat McCrory’s administration has taken a number of opportunities  to  question the legal basis for the  rule. An earlier post described  a presentation by DENR Deputy Secretary Don van der Vaart  to the N.C.  Energy Policy Council soon after EPA  released the draft rule in June.  DENR actually began staking out a position in opposition to the proposed carbon rule even earlier. (See the DENR website for a number of agency policy documents related to the carbon rule.)  Each time, DENR focused on legal arguments — challenging EPA’s authority to regulate a power plant’s CO2  emissions under Section 111 of the Clean Air Act —  rather than the actual impact of the rule on the state and its electric utilities.

Evaluating the impact of the rule on an  individual state can  be challenging because the rule takes an innovative approach to reducing CO2. Instead of putting the burden and cost of CO2 reductions entirely on the power plants,  the rule tries to harness  other  trends in energy generation — increased  reliance on renewable energy;  adoption of  energy efficiency standards for buildings, appliances and equipment; and a shift in generation from coal-fired plants to natural gas units — to help lower CO2 emissions associated with power generation.  Many of those trends developed in response to other environmental concerns (stricter  air quality  standards for ozone and particulates) or economic incentives (the lower cost of natural gas). EPA’s proposed  carbon rule builds on those trends to also drive down CO2 emissions associated with power generation.

Steps  North Carolina has taken over the last 10-15 years to increase renewable energy  generation and energy efficiency seem to put  the state  in a favorable position to meet the CO2 reduction goal in the rule and come out the other side with competitive energy costs.  This post is intended to provide some  (very basic) background on how the rule works and to  identify the questions that need to be answered to understand what more the state may need to do to meet the CO2 reduction goal in the proposed rule.

BASICS OF THE CLEAN CARBON RULE

♦ The rule only addresses CO2 emissions associated with electric generating units (EGUs) that burn fossil fuels; the rule does not affect industrial sources of CO2.

♦ The rule sets a carbon reduction goal for each state in the form of a rate – pounds of carbon dioxide emitted per megawatt hour of electricity generated or CO2/MWh.

♦ Instead of setting a CO2 emission limit for each EGU, EPA proposed a statewide average CO2 emission rate – allowing the goal to be met in part by shifting electric generation from high to low emission units; increasing renewable energy and nuclear generation; and creating “savings” through energy efficiency measures.

♦ The rate is based on net generation (electricity delivered to the grid) rather than gross generation measured at the EGU. Net generation excludes energy used at the power plant to run fans, pumps, motors and pollution control devices.

♦ The rule sets a final goal for each state to meet in 2030 and interim goals for 2020-2029.

♦  CO2 reduction goals differ from state to state. In calculating the goals, EPA considered the existing mix of electric generation facilities in each state (nuclear, coal, natural gas) and each state’s potential for  increased renewable energy generation and growth in energy efficiency savings.

HOW EPA CALCULATED STATE REDUCTION GOALS (THIS IS REALLY IMPORTANT)

State goals are not based on simply requiring  fossil-fuel burning power plants to reduce their CO2 emissions per megawatt hour from 2012 levels.  Although  EPA used the EGU’s 2012 reported emissions of CO2 as one factor in calculating  the goals, it is not quite correct to describe 2012 as the “base year” for reductions.   The state goals represent something different — reductions in EGU emissions combined with a shift in electric generation capacity to cleaner sources (such as renewable energy and nuclear power) and increases in energy efficiency. More about the rate calculation below.

To set the state CO2 emission rate goals, the EPA rule adjusted the  2012 calculation of CO2/MWh in two ways:

1. EPA reduced the net CO2 emissions  reported by regulated EGUs in 2012 (the numerator in the CO2/MWh equation) by assuming those units can achieve a 6% improvement in heat efficiency. In states where there are both coal-fired plants and natural gas plants, EPA adjusted the numerator again if any natural gas plant in the state operated at less than 70% utilization. Assuming  every natural gas plant could operate at 70% utilization, EPA shifted a corresponding amount of electricity generation from  coal-fired plants to the underused natural gas plants and and adjusted the pounds of CO2 emitted to reflect the natural gas plants’ lower CO2 emissions rate.

So the numerator in the goal represents pounds of CO2 emitted by  the state’s existing power plants after each individual plant has become more heat efficient and after power generation across the entire system has been  reallocated  to better utilize low-emission natural gas units. Both adjustments reduce the amount of CO2 generated by the EGUs  below the amount actually reported  in 2012.

2. EPA then adjusts the denominator in the CO2/MWh equation to spread the pounds of CO2 generated  by the EGUs across the megawatt hours generated by all electric generating sources in the state and megawatt hours of electric generation saved through energy efficiency measures. The denominator becomes:  total megawatt hours generated by the EGUs + new renewable energy generating capacity + new or preserved nuclear generation capacity + an estimate of annual avoided power generation associated with demand-side energy efficiency.  (“Preserved” nuclear power refers to  an existing nuclear plant operating beyond a previously announced closure date.)

The final 2030 CO2 emissions goal as a rate =

Net CO2 emissions for regulated EGUs – 6% heat efficiency*
Total net MWh (EGUs + renewable energy + new/preserved nuclear + avoided generation)

* In some cases there has also been an adjustment for under-utilized natural gas plants.

Although the rule does not propose CO2 reductions from any baseline year, EPA has estimated the rule will result in a 30% reduction in CO2 emissions as compared to 2005.

THE NORTH CAROLINA CO2 REDUCTION GOAL

The proposed  2030 goal for North Carolina is  992 lbs CO2/ MWh. By comparison, North Carolina’s electric generating units reported 2012  emissions  of  1647 lbs CO2/ MWh. (Source: Congressional Research Service report.) The EPA rule would require North Carolina to reduce CO2 emissions from:

1647 lbs of CO2 per megawatt hour  of electricity generated by fossil fuel EGUs

to

992 lbs of CO2 per megawatt hour of electricity generated by fossil fuel EGUs + estimated new renewable energy generation+ new or preserved nuclear capacity+ electricity generation avoided by energy efficiency measures

The Clean Power Plan goal does not require  North Carolina power plants to reduce CO2 emissions by 40%.  The rule requires the state’s  electric generation  system  as a whole to  meet demand for electric power at a 40% lower rate of CO2 emissions.

MEETING THE GOAL

The draft EPA  rule  requires  states to  use four “building blocks” to comply; the building blocks correspond to the factors EPA used to calculate each state’s  CO2 reduction goal:

1. Increased heat efficiency at EGUs —  EPA has  assumed each EGU can achieve  6% improvement in heat efficiency.

2. Increased “dispatch” of power generation from higher emission coal-fired units to lower emission Natural Gas Combined Cycle (NGCC) plants —   EPA has assumed every NGCC  unit can be operated at 70% utilization.

3. Increased generation of electricity from renewable sources and new or preserved nuclear generation.  EPA has estimated the  potential for growth in renewable energy generation and new or preserved nuclear generation individually for each state.

4. Energy efficiency measures to lower demand,  measured by  megawatt hours of generation avoided. EPA set a  goal of increasing demand-side efficiency by 1.5% annually.

The individual building block goals set out for each state are not requirements. EPA  used  these assumptions and estimates  to calculate  each state’s  CO2 reduction goal, but  the rule allows a state to weight the  building blocks differently in  its  compliance plan.  For example,  difficulty meeting EPA’s expectations  for demand-side energy efficiency can be offset  by increasing renewable energy generation (or vice-versa).

RELYING ON EXISTING PROGRAMS

Media reports have  reflected a lot of confusion about the impact of the proposed rule on states like North Carolina that have already taken significant steps to increase renewable energy and energy efficiency.   The proposed federal rule actually stresses  reliance on programs already in place and gives the states  credit for expanded renewable energy generation or growth in energy efficiency as a result of  existing programs.

In talking about the final state emission rate goals,  the rule notes that  “EPA is also proposing that measures taken by a state or its sources after the date of this proposal, or programs already in place, and which result in CO2 emission reductions at affected EGUs during the 2020-2030 period, would apply toward achievement of the state’s CO2 goal.” 

The rule makes a similar statement about renewable energy generation:  “We note that with the exception of hydropower, the renewable energy generation levels represent total amounts of renewable energy generation, rather than incremental amounts above a particular baseline level. As a result, this RE generation can be supplied by any RE capacity regardless of its date of installation.”

Table 6 in the proposed rule  shows North Carolina’s 2012 renewable energy generation as 2% and a proposed final 2030 goal for North Carolina of  10%.  The  N.C. Utilities Commission has reported that North Carolina electric utilities met the first state Renewable Energy Portfolio Standard (REPS) goal of  3% of retail electricity sales in 2012. The final goal under the existing state law will be 10% of retail sales for electric membership corporations/ municipal systems  (by 2018) and 12.5% of retail sales for the electric public utilities (by 2021).  Under the EPA rule, the state will get credit for any new or expanded renewable energy generation in 2014 or later as a result of the existing state REPS requirement.

Since the state REPS goal requires electric utilities to continue to increase renewable energy generation and energy efficiency through 2021,  the increases realized between 2014 and 2021 will also move North Carolina toward the federal goal. To know whether the proposed carbon rule will require the state to do more on renewable energy, the state will need a gap analysis.  The analysis will have to separate  renewable energy generation from energy efficiency savings; the two have been combined in the state REPS goal, but are calculated separately under the federal rule.

The federal rule sets a goal of having every state achieve a 1.5% annual incremental savings based on  demand-side energy efficiency measures.  EPA assumes that states already realizing  a 1.5% in annual incremental savings  will continue  and  maintain that rate through 2029 — giving states that engaged in energy efficiency measures early full credit for the incremental energy savings achieved through existing programs. To understand how close North Carolina may already be to meeting the  carbon rule’s  energy efficiency goal, the state will need to calculate the incremental annual  demand side savings that can be attributed to the state REPS goal and  add incremental savings associated with other energy efficiency programs (such as energy efficiency standards incorporated in the State Building Code).

THE QUESTION

The big  question to be answered is this: How far will North Carolina’s existing renewable energy and energy efficiency programs go toward closing the gap between 1647 lbs CO2/MWh generated by EGUs that burn fossil fuels  and 992 lbs CO2/ MWh generated by power plants+ renewable energy + new/preserved nuclear + generation avoided by energy efficiency?

It appears the remaining gap may be small, giving  North Carolina  an advantage over states that haven’t adopted policies supporting renewable energy generation and energy efficiency.   If so, the advantage will be economic as well as environmental by holding down increases in state energy costs.

RESOURCES

Text of the Clean Carbon Rule (from the June 18, 2014 Federal Register notice)

Congressional Research Service Report: State CO2 Emission Rate Goals in EPA’s Proposed Rule for Existing Power Plants, Jonathan Ramseur, Specialist in Environmental Policy, July 21, 2014.

2013 NC Utilities Commission Annual Report Regarding Renewable Energy and Energy Efficiency Portfolio Standard in North Carolina

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.

Cross-over Scorecard

May 29, 2013:

Now that the  May 16 cross-over deadline has come and gone, it is time to look at the bills that  survived and the bills left on the battlefield. (Under House and Senate rules, most bills  had to pass at least one chamber and “cross over” to the other by May 16  to remain eligible for consideration in the 2013-14 legislative session. There are exceptions for  revenue bills, appropriation bills, redistricting bills and constitutional amendments.) I am going to focus on some of the most significant environmental bills; you can find a complete list of bills that survived cross-over here.

The Bills Left Behind

The two environmental bills that  received the most attention earlier in the session,  but failed to reach a floor vote  were  House Bill 298 and its Senate  counterpart (Senate Bill 365). With the support of a number of conservative political organizations — including Americans for Prosperity — the bills proposed to repeal the state’s renewable energy portfolio standard (REPS).  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  support for renewable energy) played out in both the House and the Senate committees.  In the end, neither bill got all of the committee approvals needed to get to  a floor vote.

Some  other environmental bills that failed to make cross-over:

Senate Bill 679  would have halted reductions in groundwater withdrawals from two depleted aquifers in the Central Coastal Plain, maintaining withdrawals at current levels. In  the 15 Central Coastal Plain counties,  state rules have required large water users to gradually reduce withdrawals from  the  Upper Cape Fear and  Black Creek aquifers by as much as 75% to allow the aquifers to recover. The bill proposed to  cap  the required reductions in water withdrawals at 25% unless groundwater in the aquifers  dropped below 2012 levels.

House Bill 770  would have suspended enforcement of  state and local  water quality rules for the Falls Lake watershed rules for two years and required a study of alternatives to the nutrient rules.

House Bill 983  proposed to  designate red drum, spotted sea trout and striped  bass as coastal game fish. The  game fish bill has become a flashpoint in an ongoing  tug of war between recreational fishermen (who want the game fish designation as a way to prevent over-fishing of the species through use of commercial nets and trawls) and  commercial fishermen (who don’t).

Technically, all of the  bills above are dead for the 2013-2014 legislative session. BUT there are ways around the cross-over rule.  One way to revive a dead legislative proposal is to put the  language into another  bill  — one that is still eligible for adoption.  One reason to read bills very carefully in the last few weeks of a legislative session.

Bills that Made the Cross-Over Deadline

Among the environmental bills still eligible for adoption:

House Bill 74 creates a complicated process for review of existing state rules — potentially leading to automatic repeal of environmental rules that are not readopted on a schedule set by the state’s Rules Review Commission. An earlier post talks about  House Bill 74 and  its Senate counterpart (Senate Bill 32). The Senate bill never got to the Senate floor for a vote.

House Bill 94 (Amend Environmental Laws 2013) has a number of relatively minor changes to environmental laws. Many, but not all,  of the changes were recommended by the Department of Environment and Natural Resources. One change to note —  the bill again extends the deadline for  some underground petroleum storage tanks located near water supply wells or high quality surface waters to have secondary containment.  Since 2001, secondary containment has been required for new tanks installed  within 500 feet of a public water supply well or within 100 feet of a private well.  Secondary containment is also required for tanks located within 500 feet of shellfish waters and other water bodies with exceptional water quality. For tanks installed between 1991 and 2001, House Bill 94 would extend the deadline for providing secondary containment  to 2020.

House Bill 300  gives coastal cities clear authority to deal with nuisance situations on the beach. (Similar language appears in Senate Bill 151.) An earlier post  describes the court case that prompted the legislation.

House Bill 628  would prohibit new state building projects from seeking a Leadership in Energy and Environmental Design (LEED)  certification as environmentally sustainable and energy efficient under standards set by the U.S. Green Building Council.  (LEED certification is entirely voluntary; the Green Building Council does not have any regulatory authority.) An earlier post explains the North Carolina forest products industry concern about the Green Building Council’s  LEED sustainability standard for wood.

House Bill 938  deals with wetlands and stream mitigation. The bill  legislatively sets the mitigation value for isolated wetlands at 1/3 the value of  wetlands  adjacent to surface waters. The bill also establishes the mitigation value of intermittent streams at 1/3 the functional value of a perennial stream. The changes would reduce the amount of mitigation required by the state for development projects that impact isolated wetlands and intermittent streams.

House Bill 1011  is the new bill that changes appointments to a number of state boards and commissions, including the Environmental Management Commission (EMC)  and the Coastal Resources Commission (CRC). The bill is a  House replacement for Senate Bill 10 — the original board and commission reorganization bill — which crashed and burned when the House refused to adopt a negotiated compromise between  House and Senate versions of the bill. Note:  Senate Bill 402 (the budget bill)   has similar  EMC and CRC appointment language.

Senate Bill 76 makes a number of changes to the Mining and Energy Commission, the state Energy Policy Council and laws on  oil and natural gas production. One of the most significant changes would allow certain types of wastewater from hydraulic fracturing to be injected into deep wells for disposal. State law has not allowed underground injection of any type of wastewater since the 1970s. See an earlier post for more background on  underground injection of waste.

Senate Bill 112 ( Amend Environmental Laws 2013). The Senate bill  contains some things not found in the House version including a  section allowing  material from land clearing and right of way maintenance to be taken off site and burned without an air quality permit.The current law requires a permit for open burning  off-site unless the material is taken to a permitted air curtain burner.

Senate Bill 151 makes changes to fisheries laws and, like House Bill 300,  clarifies local government authority in public trust areas. The bill also makes significant changes to the law allowing construction of terminal groins to stabilize inlets at the North Carolina coast. After prohibiting permanent erosion control structures for nearly 40 years, the General Assembly amended state law in 2011 to allow construction of terminal groins at inlets. The 2011 legislation only allowed  construction of four terminal groins as a pilot project. Senate Bill 151 removes the limit on the number of terminal groins permitted even though no groins have been  built yet — and no new information on groin impacts provided by  the pilot project. The bill repeals language allowing the use of a terminal groin only if  the shoreline cannot be stabilized in other ways. The bill also weakens protection of nearby property owners;  the  bond  required for  groin construction would no longer  cover property damage.

Senate Bill 341 makes changes to the interbasin transfer law that requires state approval to move  water from one river basin to another. (Transfer of 2 million gallons per day or more requires a certificate from the state’s Environmental Management Commission.) For the most part, the bill simplifies the  approval process for:  modification of an existing interbasin transfer;   new interbasin transfers to provide water to offset reductions in groundwater withdrawals in the Central Coastal Plain Capacity Use Area; and  new interbasin transfers in certain coastal counties.

Senate Bill 515  would repeal state water quality rules that require reductions in the  discharge of  nitrogen and phosphorus to Jordan Lake and its tributaries and set up a legislative study  to identify alternative ways to protect water quality in the reservoir.  This post provided background on Jordan Lake’s  pollution problems and the history of the rules that Senate Bill 515 would repeal.

Senate Bill 612 (Regulatory Reform Act of 2013) would generally  require state environmental programs to repeal or change environmental standards that go beyond requirements of a federal rule on the same subject.   See this earlier post  for more detail on what the change or repeal requirement could mean. Note:  A section of Senate Bill 612 repealing the Neuse River  and Tar-Pamlico River stream buffer rules was removed from  the bill  before Senate adoption.

Senate Bill 638, among a number of other things, would eliminate the need for a water quality permit to fill or discharge waste to a  wetland that is not considered “waters of the United States” under the Clean Water Act. See an earlier post  for more background.

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.