A Proposal: Insure owners of wells near coal ash sites aren’t exposed to greater health risks as a result

April 18, 2016. An earlier post discussed the confusion over “do not drink” advisories issued — and later withdrawn —  for  a number of wells near coal ash sites.  There continues to be confusion among legislators, state agencies and the public about the correct response to high levels of hexavalent chromium (Cr-6) and vanadium in drinking water wells near coal ash impoundments. This post attempts to  clarify some misconceptions and offers a proposal.

First, a clarification about individual contaminant standards.  Some legislators understood presentations by the  Department of Environmental Quality (DEQ) and the Department of Health and Human Services (DHHS)  to mean that there are multiple, inconsistent standards for a contaminant. In fact,  the state uses one standard for each contaminant to determine health risk and require groundwater remediation. But as the earlier post explained, the standard may come from Safe Drinking Water Act standards  or state groundwater rules.  Drinking water standards address a narrow set of contaminants  likely to be found in public water systems; groundwater standards  cover a broader range of extremely hazardous substances that may become a health threat because of a specific pollution incident.

State groundwater rules list health-based concentration limits for many hazardous substances, but also recognize that a pollution incident may involve a contaminant that does not yet have a groundwater standard.  For those contaminants, the rules set the default standard at “non-detect” —  any detectable concentration of the contaminant would be a violation. But the rules also create a process for setting  an interim groundwater standard that would allow concentrations above detection levels based on an evaluation of health risk.  DHHS used that process  to develop the interim standards for vanadium and hexavalent chromium (CR-6) that  led to  “do not drink” advisories for  a number of wells near coal ash facilities.

Gaps in the changing state response.  DEQ and DHHS offered a two-part explanation for withdrawal of the “do not drink” letters. The two points and some additional context for each:

  1. Levels of vanadium and Cr-6 in the wells do not violate state or federal drinking water rules.  Since there is no drinking water standard for either vanadium or Cr-6, this is true as far as it goes.  But the lack of a drinking water standard does not imply safety.  State and federal agencies have never relied solely on drinking water standards to make decisions about mitigation of health risks at contaminated sites  because drinking water standards do not cover many extremely hazardous substances.  That is why the process for asking DHHS to set interim state groundwater standards  exists. The question should be whether concentrations of vanadium and Cr-6  in the wells represent a significant additional health risk that can be minimized by either providing an alternative water source or remediating the groundwater.
  2. A number of large N.C. public water systems also do not meet the DHHS interim standards for vanadium and Cr-6.  The implication has been that the well water is as safe as water supplied to customers of public water systems.  In recent weeks, media and public interest organizations have looked more closely at the levels of vanadium and Cr-6 in public water systems as compared to the wells near coal ash facilities.   Although some N.C. water systems exceed the DHHS interim standards for vanadium or hexavalent chromium, most  water systems appear to meet the DHHS standards. A WRAL news story includes a chart showing both maximum and average concentrations of Cr-6 in public water systems across the state here.  DHHS set the interim standard for Cr-6 at 0.07 parts per billion, representing a 1:1 million cancer risk over a lifetime. WRAL’s analysis found that only about one-third of N.C.’s public water systems have average concentrations of Cr-6 exceeding 0.07 ppb.  More importantly, those public water systems come much closer to meeting the  DHHS standard than a number of the tested wells. The public water systems with the highest average concentrations of Cr-6 had concentrations less than half that of some wells tested near Buck Steam Station.

A proposal:  Issuance of health advisories and steps to provide alternative water supply to well owners should be based on comparative health risk.

The discussion of health advisories issued to well owners around coal ash sites has become focused on whether  public water systems meet the DHHS recommended standards for vanadium and Cr-6.  That is the wrong question. Many (most) North Carolina water systems meet the DHHS standards;  those that do not still provide water that is safer than water in a number of the tested wells. Environmental remediation programs exist in part to reduce  health risks created by a pollution incident.  To the extent well owners will be exposed to greater health risk as a result of groundwater contamination, the additional risk should be eliminated or minimized to the extent possible.  The question is not whether all public water systems meet the DHHS standards. The question is whether groundwater pollution has exposed these well owners to greater health risk — and one way to answer that question is to compare contaminant levels in the well water to the nearest public water system. If the public water system provides water with lower contaminant concentrations that translate into lower additional cancer risk and less risk of acute toxicity, the well owner should be provided with advice on the higher risk of drinking the well water.  And any person responsible for the contamination should be required to provide an alternative water source.

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.

To Drink or Not to Drink: A Change in Advice for Well Owners


March 17, 2016. In 2015,  the N.C. Division of Public Health (Department of Health and Human Services) sent letters advising the owners of  369  wells located near coal ash ponds not to drink their well water because of elevated levels of vanadium and chromium-6.  Last week, the Division of Public Health sent letters to those same well owners to withdraw the “do not drink” advisory.  Some questions and answers on the conflicting advice below.

What are vanadium and chromium-6 (Cr-6)? Both elements occur naturally in the environment and can be found in coal ash. Both may  be concentrated in the air or in groundwater as a result of industrial activities.  Inhalation of Cr-6 (or hexavalent chromium) has been associated with increased risk of lung cancer. In 2010,  the U.S. Environmental Protection Agency  began a new health study to determine whether ingestion of  Cr-6  in drinking water increases other types of cancer risk. The Erin Brokovitch story of hexavalent chromium contamination in the town of Hinkley, California raised public awareness of Cr-6 as a public health issue. In Hinkley, Pacific Gas & Electric  had used Cr-6 as an additive in cooling water for a natural gas compression station. The  Cr-6 percolated into groundwater from unlined ponds used to store the cooling water, contaminating the town’s drinking water supply. (Levels of Cr-6 in  Hinkley’s groundwater were exponentially higher than concentrations found  in North Carolina  wells.)

Are there drinking water standards for vanadium and  Cr-6? There is no federal drinking water standard for vanadium.   The U.S. Environmental Protection Agency has adopted a drinking water standard for total chromium of 100 parts per billion (ppb);  the standard covers combined concentrations of chromium-3 (a nutritional element found in plant material) and chromium-6.  Water systems required to meet federal Safe Drinking Water Act standards monitor  total chromium levels, but not necessarily  Cr-6. Nationally, only the State of California  has adopted a specific drinking water standard for Cr-6. In 2014, after  years of  study prompted by the Hinkley contamination,  California adopted a standard of 10 parts per billion for Cr-6 in drinking water — 1/10th the concentration allowed under the federal drinking water standard for total chromium.

How are  N.C. groundwater standards different from  federal drinking water standards?  In part,  the two sets of standards serve different purposes. Drinking water standards adopted by U.S. EPA under the Safe Drinking Water Act only apply to the treated water that public water systems  provide to their customers.  Under the law, “public water system” means any system providing water to 15 or  more connections or to 25 or more people whether the system is  operated by a local government or a for-profit water utility.  Federal drinking water standards do not apply to privately owned water supply wells serving individual homes or businesses.

N.C.’s  groundwater standards are used to identify unsafe levels of groundwater contamination;  set goals for groundwater remediation; and advise well owners on use of water from affected wells.  Most N.C. groundwater standards track the federal drinking water standard for the same contaminant, but in a few cases the state has adopted a more stringent groundwater standard or has adopted a groundwater standard for a contaminant that has no corresponding drinking water standard.  Leading up to the well testing around coal ash ponds, N.C. had no groundwater standard for vanadium and no specific standard for Cr-6. although the state had a groundwater standard of 10 ppb for total chromium (more stringent that the 100 ppb drinking water standard for total chromium.)

How does N.C. set groundwater standards?  The N.C. Environmental Management Commission has adopted state groundwater standards as rules. Since existing groundwater standards may not address every potential contaminant,  the rules also create a process for developing  a temporary  standard  — an Interim Maximum Allowable Concentration or “IMAC” —  to address an unregulated contaminant.  Epidemiologists in the N.C. Division of Public Health generally develop a recommended IMAC based on review of human health effects such as toxicity and increased cancer risk.

Why did the  Division of Public Health send “do not drink” letters in 2015 based on  vanadium and chromium-6?   Since no state groundwater standard or federal drinking water standards existed for vanadium and  Cr-6, DEQ  asked the Division of Public Health to develop interim groundwater standards (the IMACs described above)  to be used in assessing wells around the coal ash ponds. Division of Public Health calculated a standard of 0.07 ppb for Cr-6 and 0.3 ppb for vanadium.  In each case, the deciding factor was the concentration associated with an  incremental increase in cancer risk. The table below shows the IMAC standard compared to the federal Safe Drinking Water Act standard and the N.C. groundwater standard.

Contaminant Fed. Drinking Water Standard N.C. Groundwater Standard IMAC
Vandadium No standard No standard 0.3 ppb
C.hromium-6 None –Total Cr 100 ppb None – Total Cr 10 ppb 0.07 ppb

Why did Division of Public Health withdraw the “do not drink” letters?  None of the  well owners who received “do not drink” letters  based solely on the vanadium and Cr-6 IMAC standards have well water that would violate Safe Drinking Water Act standards for a public water system.  DEQ has reported that 70% of public water systems in the U.S. exceed the IMAC standards set by Division of Public Health, including several large public water systems in North Carolina. (The information, provided in a report to the legislature’s Environmental Review Commission,  did not indicate how many of those systems exceeded the IMAC standard for vanadium versus Cr-6. You can find the entire DEQ presentation to the Commission  here.)

The gap between the IMAC standards and Safe Drinking Water Act standards meant that well  owners were being advised not to drink water that meets current drinking water standards and could lawfully be provided to customers of a  public water system.   As a practical matter, that also  means the well owners may not have access to an alternative water supply of any better quality  since  the nearest public water system also may not meet the IMAC standards.

None of this  means the analysis done by the Division of Public Health in developing the IMACs was wrong. Environmental and public health standards change with additional knowledge; the fact that the U.S. Environmental Protection has undertaken a new health study of Cr-6 in particular suggests some question about the adequacy of the  federal drinking water standard based solely on total chromium.  The standards adopted by EPA and the states also sometimes involve compromise between the most protective health-based standard and the practicalities (and cost) of meeting that standard.

Making Sense of a Coal Ash Penalty

March 8, 2016.   The  civil penalty for  groundwater violations around Duke Energy’s Sutton Plant in New Hanover County has taken several unprecedented  twists and turns.  This post looks at the  $25 million civil penalty for groundwater contamination at the Sutton Plant that became a $7 million civil penalty for groundwater violations at all 14 coal ash sites in the state and then a $7 million civil penalty just for the Sutton violations.

Groundwater Enforcement 101.   The Department of Environmental Quality (DEQ) can order remediation of groundwater contamination and assess civil penalties for violation of the state’s  health-based groundwater standards.  Some contaminants (like arsenic) occur naturally; if natural  “background” levels of the contaminant exceed the state standard, the background level becomes the standard. State rules allow for some exceedence of  groundwater standards within the footprint of a waste disposal facility, but set a “compliance boundary” around the facility where the  standards must be met.  Coal ash ponds permitted before 1983 must meet groundwater standards within 500 feet of the ash pond; those  permitted later have a  250-foot compliance boundary.

To assess a civil penalty for coal ash contamination,  DEQ  must show: 1. Contaminants in the groundwater exceed the state standard (which may require determining background levels if the contaminant occurs naturally); 2. Exceedences occur at or beyond the compliance boundary; and 3. Coal ash  caused or contributed to the contamination. State law caps the maximum penalty for a single groundwater violation  at  $25,000.  In setting the specific penalty amount within the cap, DEQ considers a number of penalty factors including the extent of environmental harm;  whether the violation was intentional; and any compliance costs the violator may have avoided.  Since  DEQ can assess daily penalties for continuing violations, the total civil penalty may exceed $25,000  if a violation continues over a period of time.

Now a Little Coal Ash History. The state originally permitted  coal ash ponds as wastewater treatment systems. The ponds receive, treat and discharge  process wastewater and sometimes stormwater.  A coal ash pond functions like  the  settling basins used  in other wastewater treatment systems; the coal ash settles out of the  wastewater slurry,  reducing pollutants in the top layer of pond water.  The utility then discharges wastewater  from the top of the pond to a river, stream or lake under a  Clean Water Act Permit —  the  National Pollutant Discharge Elimination System (or “NPDES”)  permit.  NPDES permits  protect surface water from pollution; since groundwater was never the focus, the  permits  historically required very limited groundwater monitoring around coal ash ponds.

In response to pressure for national coal ash disposal standards,  companies operating coal-fired power plants began a program of voluntary groundwater monitoring in 2006 and provided results to the state.   (As a voluntary program, the power companies alone decided what contaminants to monitor for and where to put monitoring wells.) By  2009,  state water quality officials had become so concerned about the utilities’ groundwater data  that the Division of Water Quality  (DWQ) moved  to put stronger  groundwater monitoring conditions on NPDES permits for coal ash ponds as the permits came up for renewal.  The new permit conditions made monitoring for specific contaminants mandatory and required  DWQ approval of the monitoring plan so monitoring wells would be appropriately placed to identify violations at the compliance boundary.

As DWQ began adding monitoring conditions to permits,  the senior manager in DWQ’s groundwater protection program issued a  memo  explaining how the program would take enforcement actions based on the new groundwater monitoring data. The memo applied to any facility that had operated for a long period of time before being required to do groundwater monitoring.  It  implicitly recognizes that imposing groundwater monitoring conditions  after many years of facility operation may result in immediate detection of groundwater exceedences — giving the operator little opportunity to prevent  a violation. The memo did not completely foreclose  the possibility of a civil penalty for groundwater violations at these facilities, but indicated that  DWQ  may not issue a Notice of Violation (the first step to a penalty) as long as the operator responded to state requests for assessment and clean up of any contamination.

The Sutton Plant Civil Penalty. The Sutton Plant’s wastewater system, consisting of two coal ash ponds built in 1971 and 1984, has had an NPDES  permit since 1977.    For most  of the system’s history,  the  permit only required monitoring for a  limited number of  groundwater quality parameters —  groundwater level, pH, Arsenic, Iron, Total Dissolved Solids, Chlorides and Selenium.   When DWQ renewed the Sutton Plant’s NPDES permit in 2011,  the new permit required monitoring of  additional contaminants (including boron, thallium, and manganese) under a state-approved monitoring plan designed to detect exceedences at the compliance boundary.  In March 2015,  DEQ assessed a record $25 million civil penalty for groundwater violations around the Sutton Plant. The civil penalty  covered a number of different groundwater standard violations over varying periods of time. The earliest violations identified in the assessment  document  dated back to 2009 (for boron) and 2010 (for thallium).    Most of the violations  (for iron, arsenic, selenium, manganese and total dissolved solids)  dated from 2012 or 2013. To reach the  $25 million assessment, DEQ  assessed either $1,000 or $5,000  per day (from initial detection to the assessment date) for each contaminant that exceeded state groundwater standards.

A Big — and Short-Lived — Settlement. Duke Energy  appealed the penalty and several months later  DEQ agreed to a settlement reducing the civil penalty to $7 million.  The most notable thing about the September 2015 settlement agreement was not the penalty reduction, but the fact that the settlement would have resolved all groundwater violations (known or discovered in the future) around all 14 Duke Energy coal ash impoundment sites in the state.  Southern Environmental Law Center (SELC),  on behalf of several environmental organizations, challenged the settlement agreement in court. SELC’s appeal did not contest  the penalty reduction for the Sutton violations, but argued  Administrative Law Judge Phil Berger, Jr. had no authority to approve a settlement agreement affecting issues beyond the Sutton civil penalty.  SELC particularly complained that the settlement agreement affected other coal ash enforcement cases without notice to the parties in those cases — including organizations represented by SELC.  Those enforcement cases dealt with specific actions required of Duke Energy to  address groundwater contamination around coal ash ponds at multiple sites.

Key provisions in the September 2015  DEQ-Duke Energy   settlement agreement

♦ Duke Energy agreed to pay a civil penalty  of $7 million and accelerate groundwater remediation at the Sutton, Asheville, Belews Creek and H.F. Lee plants. The settlement agreement did not set a timeline for the accelerated remediation.

♦ DEQ agreed to dismiss groundwater enforcement cases already pending in superior court related to the Sutton Plant and the Asheville Steam Station. See the SELC appeal of the settlement agreement for more on the relationship between the settlement agreement and pending enforcement cases.

♦ DEQ agreed not to issue Notices of Violation,  notices requiring assessment or remediation, civil penalty assessments or to  take any other enforcement actions against Duke Energy based on groundwater conditions “at any of the Duke Energy Sites” as long as Duke Energy complied  with requirements of the Coal Ash Management Act related to groundwater assessment, remediation and closure of the coal ash basins. Under the agreement, the “Duke Energy Sites” included all 14 coal ash sites across the state.

♦ DEQ agreed not to change groundwater monitoring conditions in existing or future NPDES permits for the coal ash ponds unless required by  court order;  a federal or state law; a rule; or in response to an immediate threat to public health.  Under the agreement, an “immediate threat to public health” had to involve something more than violation of a  health-based groundwater standard.  In effect, the settlement prevented DEQ from using its permitting authority to requiring monitoring for additional contaminants.

♦ DEQ agreed not to use groundwater monitoring data collected under either the NPDES permit conditions or under provisions in the Coal Ash Management Act for any purpose other than classification and closure of the coal ash ponds. In other words, DEQ agreed not to use groundwater monitoring data for enforcement purposes.

Reversing Direction.  In February, Superior Court Judge Paul Ridgeway held a hearing  on SELC’s objections to the Sutton settlement agreement.  Persuaded that the settlement agreement  affected the other enforcement  cases already before him,  Judge Ridgeway indicated an intent to take jurisdiction over the settlement agreement unless Judge Berger  narrowed the scope of his order in the Sutton civil penalty case.   Charlotte Business Journal has  reported  that Judge Berger later issued a revised order at the request of DEQ and Duke Energy.   According to the article, the settlement agreement between Duke Energy and DEQ did not change, but the  order  approving the settlement has been expressly limited to the Sutton civil penalty case.  (I have not been able to find the  revised order  on either the Office of Administrative Hearings  or DEQ website.)  As a result, the $7 million civil penalty now covers only  groundwater violations at the Sutton Plant.

Signs and Portents? DEQ made several unusual decisions in assessing and then settling the Sutton civil penalty case:

The  original $25 million civil penalty for the Sutton groundwater violations broke from past enforcement practices.  State programs  rarely impose daily penalties for newly discovered groundwater violations. Daily penalties are usually reserved for willful, intentional violations and for violators who  fail to quickly address contamination once it has been detected.  DEQ didn’t cite either of those aggravating factors in assessing the original $25 million Sutton penalty.  To reach the $25 million total, DEQ assessed a penalty of either $1,000 or $5,000 a day (depending on the contaminant) from the date of detection to the date of assessment.  (The contamination persists today and will until coal ash on the site has been removed, which everyone understands will require more time.)  The question is whether DEQ’s very aggressive penalty for the Sutton violations indicates a change in enforcement policy that may affect  other groundwater cases.

There doesn’t seem to be any precedent for DEQ agreeing –as it did in the original Sutton settlement — to limit its own permitting and enforcement authority to settle a civil penalty case.  State agencies often settle  civil penalty cases for a lower penalty amount. In the Sutton settlement, DEQ  also agreed not to change groundwater monitoring conditions on Duke Energy’s NPDES permits except in very narrow circumstances. Most of those circumstances required  some outside force  — federal law, a court order — to compel the change. In effect, DEQ  gave up the ability to use its permitting authority to  require monitoring for additional contaminants. The department also agreed not to issue Notices of Regulatory Requirements (orders for assessment and remediation of contamination)  or take  new enforcement actions against Duke Energy based on coal ash contamination at the 14 sites in N.C. The settlement agreement was conditioned on Duke Energy complying with provisions in the Coal Ash Management Act on  groundwater assessment and corrective action, but those requirements assume application of state groundwater regulations. It isn’t clear why DEQ would agree to give up use of normal groundwater enforcement tools like the Notice of Regulatory Requirements. Limits on DEQ use of groundwater data for enforcement purposes could have affected the state’s ability to address  groundwater problems discovered later.

What Does it Mean?  Assuming Judge Berger’s revised order has set much of the Sutton settlement agreement aside, the Sutton case is mostly  interesting as an insight into DEQ’s enforcement decision-making. It is hard to identify a consistent principle that would explain both  DEQ’s very aggressive use of civil penalty power in the first instance and DEQ’s willingness to  give up significant permitting and enforcement authority  to settle the  case. The question is whether the Sutton decisions  were peculiar to it or have broader implications.

Risk-Ranking Coal Ash Impoundments

February 12, 2016.  The 2014 Coal Ash Management Act, Session Law 2014-122 , required the Department of Environmental Quality (then the Department of Environment and Natural Resources) to propose classifications for  coal ash impoundments in the state as High, Intermediate or Low Risk. The risk classification determines both how quickly the impoundment must be closed and whether closure requires removal of the coal ash for beneficial reuse or disposal in a lined landfill. (Only Low Risk impoundments can be closed by de-watering and capping the coal ash in place.)  The General Assembly designated Dan River Steam Station, Riverbend, Asheville and the Sutton Plant as high risk by law;  DEQ and the Coal Ash Management Commission have responsibility for classifying the remaining 10 coal ash sites.

Statutory Criteria for Risk Classification. The law, in G.S. 130A-309.211,  listed factors to be considered in classifying the impoundments:

(1)        Any hazards to public health, safety, or welfare resulting from the impoundment.
(2)        The structural condition and hazard potential of the impoundment.
(3)        The proximity of surface waters to the impoundment and whether any surface waters are contaminated or threatened by contamination as a result of the impoundment.
(4)        Information concerning the horizontal and vertical extent of soil and groundwater contamination for all contaminants confirmed to be present in groundwater in exceedance of groundwater quality standards and all significant factors affecting contaminant transport.
(5)        The location and nature of all receptors and significant exposure pathways.
(6)        The geological and hydrogeological features influencing the movement and chemical and physical character of the contaminants.
(7)        The amount and characteristics of coal combustion residuals in the impoundment.
(8)        Whether the impoundment is located within an area subject to a 100‑year flood.
(9)        Any other factor the Department deems relevant to establishment of risk.

DEQ’s Proposed Risk Classifications. On January 29, 2016,  DEQ  released a report providing information to support proposed classifications for most coal ash impoundments.  (Several impoundments have temporary classifications pending complete information on impacts to water supply wells.)  DEQ has based its risk classifications on three “key factors” — one each for groundwater, surface water and dam safety risks:

Groundwater Risk Factor: The number of people served by water supply wells within 1500 feet and down-gradient of the impoundment’s compliance boundary that are potentially or known to be exposed to groundwater contamination related to the impoundment. DEQ used a scale based on the number of people affected by well contamination:  0 people = Low Risk; 11-20 people = Intermediate Risk and  >  30 people = High Risk.  Transitional  classifications of Low/Intermediate Risk and Intermediate/High Risk cover the gaps between the three basic categories.

Surface Water Risk Factor:   The impoundment’s location relative to the 100-year floodplain.   Impoundments located outside of the 100-year floodplain or contained by a stream valley embankment with an engineered discharge (such as a spillway) have been classified as Low Risk. Impoundments sited along the run of a river, in the floodplain, and within the 100-year flood level are classified as  High Risk.

Dam Safety:  Structural integrity and maintenance as reflected in dam safety inspections.    Impoundments that received a Notice of Deficiency  identifying non-structural deficiencies at the last dam safety inspection have been classified as Intermediate Risk.  Impoundments that received a Notice of Deficiency identifying structural deficiencies  at the last inspection have been classified as High Risk. One important note —  a number of impoundments have a High Risk dam safety rating because of structural deficiencies identified in the last inspection, but DEQ has discounted that factor in the overall facility risk rating by assuming  the impoundments will be Low Risk once the structural deficiencies has been corrected.

Other Risk Factors.  The DEQ  report describes a number of  “other considerations”  that were not given the same weight in risk classification as the key factors. “Other considerations”  for groundwater and surface water risk include significant site conditions such as:  toxicity of contaminants exceeding groundwater standards; the extent of groundwater contamination; proximity of coal ash to the water table; potential impact of groundwater contamination on surface waters; location of the impoundment in a stream or drainage way; the water quality classification and use of  nearby surface waters; and proximity to a drinking water intake.

How DEQ Arrived at Each Proposed Classification.  The exact method DEQ used to arrived at the overall classification for each site is something of a mystery.   We know the three “key factors” largely drove the classification because the report tells us that. But there is no explanation of how (or whether) DEQ also used the information on “other considerations”  or even how the three key factors were weighted.

Example: Buck Steam Station.  Looking in greater depth at the classification of  one coal ash facility  provides a little more insight into DEQ’s classification decisions. DEQ has  temporarily  given Buck Steam Station a Low-Intermediate classification until the department receives additional information on impacts to water supply wells. If no well users near Buck Steam Station are  affected  by contamination associated with the impoundments (or well users have an alternate water source),  DEQ intends to classify the Buck  impoundments as Low Risk. Well impacts will be the deciding factor in the proposed classification. Buck rated as Low Risk under the key factor for surface water impacts because the impoundments are outside the 100-year flood plain. The three impoundments at Buck rated as  High Risk for dam safety, but DEQ assumed the  impoundments would  be Low Risk once the deficiencies have been corrected.

Looking  beyond the three key factors,  however, Buck rated as  high risk on a number of other groundwater and surface water parameters including:   contaminants exceeding state groundwater standards at or beyond the compliance boundary;  proximity of coal ash to the water table;  and discharge of contaminated groundwater to surface waters. It rated Intermediate risk based on the use of adjacent surface waters (the Yadkin River has been classified for water supply) and proximity to a drinking water intake. On some other parameters related to surface water, Buck Steam Station rated as low or intermediate risk.  (See pages 92-99  for the entire list of risk ratings for the Buck impoundments.)

The Buck classification seems to be fairly representative. Overall,  the  “other considerations”  discussed at great length in the report are  irrelevant to DEQ’s proposed classifications.  (The one exception is that  after focusing the “key factor” for groundwater on impacts to down-gradient water supply wells, DEQ has deferred classification of several sites to get additional information on up-gradient and side-gradient wells.)   It is also unclear how DEQ weighted different risk levels for the three key factors to arrive at an overall classification.   The Cape Fear Steam Station  was ranked Low Risk for groundwater (no impacted wells); High Risk for surface water (all of the impoundments are in the 100-year floodplain); and High Risk for  half of those impoundments because of dam safety deficiencies. The facility as a whole received a classification of Intermediate Risk.

There may be more method to the  proposed classifications than it appears. It is possible that DEQ weighted the key factors and “other considerations”  or viewed some conditions as mitigating others.  Since the report does not provide any explanation, it is difficult to know.  The Coal Ash Management Act itself did not provide any guidance on how to translate nine statutory criteria into three risk classifications. Normally, that gap would be filled through rulemaking.   In the absence of  rules (or even a clear explanation in the DEQ report), it is hard to identify  the principles underlying the classification decisions.  The approach to groundwater risk classification may be particularly controversial since an impoundment that contains a very large volume of coal ash; extends below the water table; has documented groundwater standard violations at or beyond the compliance boundary; and discharges contaminated groundwater to surface water could be classified as Low Risk as long as no existing water supply wells users are affected.

Next Steps.  DEQ has scheduled public meetings on the proposed classifications as required under the law.  Those meetings will take place in March.  The final decisions on classification will be made by the Coal Ash Management Commission.  (Assuming the Commission can be reconstituted in time; see an earlier post on the Commission’s inability to act because  appointments to the Commission violated the N.C. Constitution.)

Appointments to Environment/Energy Commissions Violated N.C. Constitution

February 1, 2016. On January 29, 2016, the N.C. Supreme Court issued a decision in McCrory v. Berger — a lawsuit filed  by Governor Pat McCrory  to challenge the constitutionality of two recent state laws that created new executive branch commissions dominated by legislative appointees. The ruling in the Governor’s favor means the three commissions cannot act until the General Assembly changes the statutes governing commission appointments.

Background. The lawsuit concerned appointments to the Coal Ash Management Commission,  the Oil and Gas Commission,  and the Mining Commission. The Coal Ash Management Act of 2014  gave the Coal Ash Management Commission authority to (among other things) make final decisions on closure of coal ash impoundments.  The 2014 Energy Modernization Act eliminated the  Mining and Energy Commission (created in 2012) and divided its regulatory responsibilities  between a new Oil and Gas Commission and a reconstituted Mining Commission. In each case, the legislature gave itself the power to appoint a majority of the commission members.

The lawsuit filed by Gov. McCrory argued the legislative appointments violated the N.C. Constitution. In March of 2015, a special panel of three superior court judges ruled in the Governor’s favor, concluding that the N.C. Constitution bars legislative appointments to commissions that have executive authority. “Executive authority” generally means authority to implement existing laws as distinct from legislative authority to adopt new laws.   See an earlier post  on the superior court decision.

N.C. Supreme Court opinion. The N.C. Supreme Court opinion disagrees with the superior court decision on one key point — the Supreme Court ruled that the N.C. Constitution does not entirely bar the legislature from making appointments to executive branch commissions.  The court interpreted the Constitution’s “appointments clause” to allow the legislature to make appointments to statutorily-created offices including commission seats. The court ruled, however, that  legislative appointments to the Coal Ash Management Commission,  Oil and Gas Commission  and Mining Commission violated the separation of powers clause in Art. I, § 6 of the N.C. Constitution,  which requires that  “[t]he legislative, executive, and supreme judicial powers of the State government shall be forever separate and distinct from each other.”

The court concluded that the appointments scheme for the three executive branch  commissions interfered with the Governor’s constitutional duty to insure that state laws are faithfully executed:

In light of the final executive authority that these three commissions possess, the Governor must have enough control over them to perform his constitutional duty. The degree of control that the Governor has over the three commissions depends on his ability to appoint the commissioners, to supervise their day-to-day activities, and to remove them from office.

The court pointed to three factors that combined to create an unconstitutional legislative  interference with the Governor’s executive powers and responsibilities:

1. Each commission has authority to take final executive action  (i.e., the Coal Ash Management Commission has the final authority to prioritize coal ash ponds for closure and approve final closure plans);

2. The legislature appointed a majority of the members to each commission; and

3. The legislature limited the Governor’s ability to remove commission members by allowing removal only for cause (such as misconduct).

The implication of the decision is that a separation of powers violation has occurred when all three conditions exist.  The court included a footnote specifically suggesting that the outcome may be different with respect to a body like the Rules Review Commission that exercises a different kind of authority.

The court refused to address another separation of powers issue raised in the case. The Governor  argued that the legislature also violated separation of powers  by statutorily directing the Coal Ash Management Commission (CAMC)  to operate “independently” of the executive department where it is housed.  (Legislation creating the CAMC placed the commission under the Department of Public Safety.) The Supreme Court held the issue had been mooted by the portion of its decision ruling appointments to the CAMC unconstitutional.  The issue could come up again if the  legislature changes the appointments statute in response to the court’s decision,  but leaves the “independence” provision  in place.

Implications.  The three commissions directly named in the case cannot act until the legislature changes the unconstitutional appointment provisions and new appointments are made.  The Coal Ash Management Commission (CAMC) began meeting in 2014, but has not met since the March 2015 superior court decision that first ruled appointments to the CAMC unconstitutional. In the meantime, other pieces of the Coal Ash Management Act have moved  forward; a newly appointed CAMC will need to catch up.  The Oil and Gas Commission took over implementation of state laws on oil and gas development from the Mining and Energy Commission, so the court’s ruling could delay decisions related to hydraulic fracturing.

Two other pending lawsuits  raising similar separation of powers issues may be affected by the McCrory v. Berger decision. The N.C. State Board of Education sued to challenge Rules Review Commission authority over rules adopted by the Board.  The Board of Education raises several constitutional issues, including a separation of powers violation based on the fact that all Rules Review Commission members are legislative appointees.   The McCrory v. Berger footnote about the Rules Review Commission seems to caution against assuming the court would also find  RRC  appointments to violate separation of powers.   The footnote suggests that the Rules Review Commission’s specific function — to review and object to rules adopted by executive branch agencies — may put it in a different category than the commissions addressed in McCrory v. Berger.

Another pending separation of powers case  in Wake County Superior Court challenges the constitutionality of appointments to the Mining and Energy Commission (MEC). The MEC  seems to fit the McCrory v. Berger template: the commission had authority to take executive actions; the legislature made a majority of commission appointments; and the Governor only had the power to remove a commission member for cause. But the case also presents an additional question: Are actions taken by an unconstitutionally appointed commission void? Over a two-year period, the MEC developed and adopted state rules for hydraulic fracturing.  Plaintiffs in the MEC case (Haw River Assembly and a Lee County property owner) have asked the Wake County judge to rule appointments to the MEC unconstitutional and  void the rulemaking actions already taken by the commission.  The superior court judge had delayed hearing the MEC case until the N.C. Supreme Court issued a decision in McCrory v. Berger. While the Supreme Court decision now provides a roadmap for addressing the separation of powers issue, it doesn’t provide any guidance on how a separation of powers violation affects past commission actions.

Court Refuses to Stay EPA Rule Reducing Power Plant CO2 Emissions

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

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

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

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

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

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

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

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

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

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

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

2015 in Review — Legislation

January 12, 2016. Some trends in environmental legislation:

Limiting Local Government Authority. After several years of legislation limiting the regulatory authority of state environmental agencies, the General Assembly turned to local government.

  Senate Bill 119  (Session Law 2015-264)  may have the practical effect of  eliminating local government  authority to regulate shale gas operations under  zoning, land use, stormwater, health,  and sedimentation control ordinances.  In 2014,  Session Law 2014-4  preempted local ordinances that  “would prohibit or have the effect of prohibiting oil and gas exploration, development, and production activities, or use of horizontal drilling or hydraulic fracturing for that purpose”.   But the 2014 law created a presumption that local zoning and land use ordinances applicable to other types of development  (such as zoning, setbacks, buffers  and stormwater standards) could also apply to shale gas operations.

Senate Bill 119  rewrites  the 2014 provision to completely  preempt  local ordinances.  The new Oil and Gas Commission (replacing the Mining and Energy Commission) now has power to preempt the application of  local development ordinances even if  the ordinance would not preclude shale gas development or conflict with state standards.  Although the presumption  in favor of zoning and land use ordinances still appears in the law, the 2015 amendments direct the Commission to preempt a local ordinance at the request of the shale gas developer if the  drilling operation has received  state/federal permits and the Commission finds that exploration and development

…will not pose an unreasonable health or environmental risk to the surrounding locality and that the operator has taken or consented to take reasonable measures to avoid or manage foreseeable risks and to comply to the maximum feasible extent with applicable local ordinances.

In effect,  the Oil and Gas  Commission can set aside any  local ordinance and substitute its judgment about risk for that of local elected officials. Preemption of local ordinances could have several implications —

1. Complete preemption of local ordinances may  leave gaps in basic regulation of shale gas activities  since state standards do not address a number of   issues normally dealt with by local government such as noise,  traffic, solid waste disposal (trash — not drilling waste), and open burning.

2.  The law potentially allows preemption of local  stormwater ordinances needed to  meet state water supply watershed protection standards; comply with federal stormwater permits; or  minimize flooding.    The Environmental Management Commission has adopted stormwater rules  for shale gas operations, but those  rules expressly recognize that additional stormwater standards may apply to a particular operation and reserve the right to apply those standards — whether implemented by DEQ or by a local government.  The new preemption language in Senate Bill 119 does not recognize the possibility that local stormwater ordinances may be required under state or federal law.

3.  The provision  raises a question about implementation of  sedimentation control requirements through local sedimentation programs. The state’s Sedimentation Pollution Control Act allows cities and counties to take over implementation of the sedimentation program. In areas with local programs, sedimentation control requirements are set and enforced through local ordinances.  Nothing in Senate Bill 119 prevents the Oil and Gas Commission from preempting a local sedimentation ordinance.

♦  House Bill 44  included two provisions limiting local government authority to adopt or enforce other types of development ordinances —

Section 2 bars  local governments from enforcing a “voluntary” state environmental rule,  but defines “voluntary” rule in a creative way to include any state rule  that has  been repealed;  has been adopted, but is not yet in effect; or has been “temporarily or permanently held in abeyance”.  The last category would cover the  Jordan Lake water quality rules that have been delayed by legislative action.  Preventing  local enforcement  of existing Jordan Lake stormwater ordinances  may have been the main purpose of the provision, but it could also raise questions about the enforceability of other local ordinances. No one has  attempted to catalog all of the local ordinances that include requirements that once appeared in a now-repealed state rule or are proposed to be included in a new state rule that has not yet been adopted.   The House Bill 44 provision seems to assume that local environmental ordinances always follow  state regulatory action; it  ignores direct grants (by the General Assembly) of local government authority to  adopt ordinances to protect  public health and the environment.  For more on the implications of this provision,  see an earlier post.

Section 13  limits local government authority to adopt riparian buffer requirements.  The bill defines “riparian buffer”  to mean any setback from surface waters —  which could include a setback imposed for flood control.  (The definition seems broader than other  language in the provision  specifically referring  to  riparian buffers for water quality protection.) Under the bill, a local government cannot adopt and enforce a riparian buffer ordinance for water quality protection  that  goes beyond requirements of state or federal law or the conditions of a state or federal permit unless the EMC  approves the ordinance.

Shielding Evidence of Possible Environmental Violations

♦  House Bill 765  (the Regulatory Reform Act of 2015)  creates a new legal  privilege for information contained in an environmental audit report. (Companies use environmental audits  to identify  compliance problems;  opportunities for waste reduction;  and operational changes to reduce environmental impacts.)   Information covered by the privilege does not have to be shared with regulators and cannot be used by  regulatory agencies to document an environmental violation in  a civil enforcement case.   The privilege does not apply in a criminal  case, but the vast majority of environmental enforcement actions rely on civil rather than criminal penalties. See the section on environmental audit privilege/self-disclosure immunity in this earlier post for more on the scope of the privilege.

♦   House Bill 405    allows an employer to take legal action against an employee who 1. enters a “nonpublic” area of the workplace;  2.  takes photographs, makes recordings, or copies records without permission; and 3.  uses those documents “against the interest of the employer”.   The employer can sue the employee  for  monetary damages,  including legal fees and a $5,000 per day penalty.   Animal rights activists referred to House Bill 405  as the “Ag-Gag” bill — a term used for legislation targeting activists who go undercover on farms and in  processing facilities to document animal cruelty violations. But House Bill 405 is not limited to agricultural workers or documentation of animal cruelty. The bill could also be used to punish an employee who documents  illegal dumping of hazardous  waste and shares the evidence with regulators or the media.  See an earlier post for more on House Bill 405.

Lessening the Consequences for Some Environmental Violations.

♦  House Bill 765 grants immunity from civil penalties and fines for environmental violations that are voluntarily disclosed to state regulators.  The bill defines “voluntary” disclosure;  immunity would not apply to violations  documented  through information the company has a legal duty to report under state or federal law, for example. The bill limits how often a person (or company) can claim self-disclosure immunity — no more than once every two years; twice in a five-year period; and three times in a ten-year period.  The bill never defines “civil penalties and fines”, leaving a question about the breadth of the immunity.  For example, the bill is silent on whether “civil penalties and fines” includes natural resource damages such as  fish kill damages assessed for a wastewater spill. For a more detailed comparison to past state and present U.S. Environmental Protection Agency enforcement policies on self-disclosed violations, see an earlier post.

♦  A provision in the budget bill (S.L. 2015-241) limits the total civil penalty for ongoing  violations of the Sedimentation Pollution Control Act to $25,000 if: 1. the violator had not previously been assessed a penalty for a sedimentation violation (which does not necessarily mean the person has not previously violated the law); and 2. the violator addresses damage caused by the violations within 180 days.  Previously, the law allowed the Department of Environmental Quality to assess a maximum penalty of $5,000 per violation, per day for continuing sedimentation violations. The fact that the meter on civil penalties could run until the violator addressed the problem created a powerful incentive for quick response — even though DEQ rarely assesses the maximum penalty. Quick action to correct a violation  translates to  less stream damage from uncontrolled erosion and sedimentation.  The recent amendments have the somewhat perverse effect of assuring the violator that  sedimentation violations can go uncorrected for nearly six months without resulting in an increased penalty.  The provision also means that committing numerous sedimentation violations on the development site will result in the same penalty as a single violation.  The new cap on continuing violation penalties also applies to penalties assessed by local sedimentation programs.

♦ House Bill 765  amends existing state laws to allow broader use of “risk-based”  cleanup  of environmental contamination. In a risk-based cleanup, the person responsible for environmental  contamination is not required to fully restore contaminated soil and groundwater. A risk-based  cleanup plan relies on a combination of limited remediation and land-use controls (such as deed restrictions) that prevent exposure to contamination  remaining on the site after the partial cleanup.  Groundwater cleanup costs represent a significant consequence of violating environmental laws — often exceeding penalties assessed by regulators — so  allowing a  more limited cleanup reduces the cost of violating the law.  (It also means the groundwater may remain contaminated and unusable for a very long time.)

House Bill 765 extends the benefits of lower cost, risk-based cleanup to several categories of  contaminated sites that had been  excluded  under  the state’s  2011  law  allowing risk-based remediation of  industrial contamination. Two of those categories broaden the use of risk-based remediation in ways that may undermine incentives for present environmental compliance:

—  New contamination incidents.  House Bill 765 repeals statute language  limiting use of risk-based remediation to contamination  reported  before the 2011 risk-based remediation law went into effect.  In 2011, allowing risk-based cleanup of industrial sites was seen as an incentive for remediation of properties with longstanding contamination  —  often resulting from activities that had been lawful at the time. Remediation costs remained  a significant incentive for present-day compliance with environmental standards. Removing the date restriction means that a  risk-based cleanup will now be an option for new contamination incidents resulting from activities violating current environmental laws.

—  Sites contaminated by petroleum releases from above-ground  storage tanks (ASTs).  There has long been a risk-based cleanup program for petroleum underground storage tanks (USTs),  but UST operators also have to meet extensive regulatory standards to  prevent future pollution incidents.  House Bill 765 gives AST owners  the benefit of risk-based cleanup without regulatory standards to prevent future releases.

Eliminating or Streamlining State Permit Requirements for Environmental Infrastructure

♦ The state budget (S.L. 2015-241)  includes a provision that changes landfill permitting, allowing issuance of a single “life of site” permit to cover construction and operation of a landfill that  often has a 30-year lifespan.  State rules had previously  required review and approval of the entire landfill site before construction, but also required each 5 or 10-year phase of the landfill to have a construction and operation permit.   Landfill construction will continue to be done in phases for economic and practical reasons,  but the “life of site permit” eliminates state compliance review for each new  phase of the landfill.   The change also seems to close the door on  new permit conditions for construction or operation of later landfill phases in response to scientific or  technological developments. The budget provision does not set minimum landfill inspection requirements in place of the 5 and 10-year phased permit reviews.

♦ House Bill 765 creates a new private permitting option for septic systems and other small on-site wastewater systems now permitted by local health departments. The provision  allows  a property owner to hire an engineer and soil scientist to approve the location and design of the system. The local health department will receive information about the system, but the engineer’s approval substitutes for a permit. It isn’t clear that  the laws allows the health department to prevent construction of an engineer-certified system based on inconsistency with state siting and design standards.

Skepticism about State Water Quality Rules. The 2015 General Assembly continued to focus on water quality rules and particularly those affecting real estate development activities — such as stormwater standards, wetland and stream mitigation requirements, and riparian buffer protection rules.

The state budget includes a special provision further delaying implementation of the Jordan Lake water quality rules for  another 3 years or one year beyond completion of the Solar Bee pilot project (whichever is later). See an earlier post  here on the  2013 legislation creating the pilot project. The rules had been developed by the state’s Environmental Management Commission to address poor water quality  caused by  excess nutrients reaching the lake in wastewater discharges and  runoff from agricultural lands and developed areas.  Since adoption of the rules, the legislature has taken repeated steps over several legislative sessions to delay compliance deadlines in the rules. This session,  the  legislature also barred local government enforcement of stormwater ordinances adopted to comply with the Jordan Lake rules.

♦ House Bill 765  limits  regulatory authority and mitigation requirements for isolated wetlands and intermittent streams. (Isolated wetlands are wetlands that fall outside federal permitting jurisdiction under the Clean Water Act because the wetlands lack a connection to “navigable waters”.)  These provisions continue a several-year legislative trend toward limiting  protections for wetlands and waters to the minimum required under federal law.

♦ Some proposals to significantly roll back other water quality rules (particularly stormwater and  riparian buffer rules) failed this session, but became the subject of legislatively mandated studies. Among the studies required before the April 2016 legislative session: a study of coastal stormwater rules; a study on the feasibility of entirely exempting linear utility projects (such as pipelines) from  environmental standards;  and an Environmental Review Commission study of the  state stormwater program.

Expanding Use of Erosion Control Structures on Ocean and Inlet Shorelines

♦ A   provision in the budget bill  (S.L. 2015-241)  changes state rules on use of sandbag  structures on the oceanfront.  Rules adopted by the N.C. Coastal Resources Commission have limited use of protective sandbag structures to situations where a building faces an imminent erosion threat. (These sandbag  structures are substantial in size and can have many of the same long-term impacts as permanent seawalls; the rules do not apply to sandbags used to prevent water from entering a building during a flood event.)   The budget bill changes the standards to allow an oceanfront property owner to install a sandbag  structure to align with an existing sandbag structure on adjacent property without showing an imminent erosion threat to a building on their own property.

♦ The budget bill also increases the number of terminal groin structures that can be permitted at the state’s ocean inlets from four to six and identifies New River Inlet for location of two of the additional structures. See an earlier post  for more on earlier legislation allowing construction of terminal groins as a  pilot project. The latest provision continues a several-year trend of reducing regulatory requirements for approval of terminal groin projects and increasing the number of projects that can be permitted.

2015 in Review — Budget Trends

January 6, 2016. The past year  brought significant changes in environmental laws, environmental rules and funding for environmental protection and conservation.  Sometimes the overall picture only becomes clear at the end.  First, a look  at the impact of 2015 budget decisions on environmental and conservation programs.

TRENDS:

 — Separation of  environmental research, education and conservation programs from environmental protection programs. The state budget moved a number of nonregulatory programs from the Department of Environment and Natural Resources (DENR)  to a new Department of Natural and Cultural Resources. The programs being transferred:  the Division of Parks and Recreation, N.C. Museum of Natural Sciences,  N.C. Aquariums, the  N.C. Zoo, the Natural Heritage Program and the Clean Water Management Trust Fund (CWMTF). The new department  combines those programs with historical and cultural programs previously in the Department of Cultural Resources.    The 2015 reorganization continues a series of  program transfers intended to reduce the state’s  environment agency to just the environmental regulatory programs.  (In previous legislative sessions, the General Assembly transferred  the Division of Forest Resources and the Division of Soil and Water Conservation from DENR to the Department of Agriculture and Consumer Services.)  In some cases, the transfers have  separated regulatory and non-regulatory water quality programs originally intended to work as partners in a common effort.  DENR has now  been renamed the Department of Environmental Quality  or “DEQ”.

—  Reduction in state funding for voluntary efforts to improve and protect water quality.   The General Assembly created the Clean Water Management Trust Fund (CWMTF) in 1996 to fund projects to prevent water pollution and restore water bodies  impaired  by pollution. CWMTF  complemented the water quality regulatory program by providing incentives for voluntary measures such as  preservation of riparian buffers and extension of sewer lines to  areas with failing septic systems.  Since 2008, the General Assembly has reduced  annual appropriations to the Trust Fund by 90%.   In 2014,   legislation diluted the original CWMTF focus on water quality protection by authorizing use of  the Trust Fund for acquisition of historic sites and development buffers around military bases.  In 2013-2014, the General Assembly pulled funding away from the core CWMTF competitive grant program for use in a legislatively mandated pilot project and the 2015 budget earmarks additional funds for the Solar Bee project.  (See an earlier post on Jordan Lake for background on the Solar Bee pilot project.)  The 2015 reorganization has the effect of also moving  the Clean Water Management Trust Fund into a new department with a focus on management of public attractions rather than environmental quality.

—  Disinvestment in  data collection on rare and endangered species.   Since 1985, the  N.C. Natural Heritage Program has researched, classified and inventoried the state’s natural resources, including rare and endangered plant and animal species. Information collected by the program can be used to document the natural resource  value of property donated for conservation purposes and to assess the environmental impacts of development projects.  State agencies  like the Department of Transportation, local governments and private developers have relied on the Natural Heritage Program for information necessary to plan projects and meet environmental standards. Following significant cuts in the previous budget cycle, the 2015 budget reduced funding for the Natural Heritage Program by another 40%.  The program now has a statewide staff of six people. Disinvestment in state collection of information on rare and endangered species will not make the requirements of the Clean Water Act and the Endangered Species Act go away.  Loss of the Natural Heritage Program as a reliable and current source of information may, however, increase the amount of time and money developers  have to invest to comply with those requirements.

—  Less state funding to cleanup petroleum contamination from underground storage tanks/ lower cleanup standards. The budget eliminates a state fund for cleanup of petroleum contamination from small  petroleum underground storage tanks (USTs) such as home heating oil tanks.   The Noncommercial UST Trust Fund has assisted property owners with the cost of soil and groundwater remediation caused by leaks from farm, home and small commercial USTs.  The budget allocates additional money to  cover pending claims, but petroleum releases reported to DEQ after October 1, 2015 will not be eligible for funding.  As a trade off for loss of state assistance with cleanup costs, the budget bill limits the amount of soil remediation DEQ can require. See an earlier post for more on the change in cleanup standards for noncommercial UST sites. Elimination of the Noncommercial UST Trust Fund means that the cost of cleaning up petroleum contamination discovered in the future  will fall entirely on the homeowner, farmer or business.

The budget reduced funding for the Commercial UST Trust Fund  (which helps offset the cost of cleaning up petroleum contamination from larger USTs) by $600,000. The budget also replaced the Commercial UST Trust Fund’s ongoing annual appropriation from the Highway Fund with a one-time appropriation and a requirement for legislative review to determine whether the Commercial UST Trust Fund should be continued. The Commercial UST Trust Fund operates like an environmental insurance program for the owners of large, commercial USTs.  The  existence of the Trust Fund allows commercial UST owners to comply with federal rules requiring  tank owners to have  financial assurance  to cover environmental remediation costs. In the absence of the Commercial UST Trust Fund, tank owners would have to meet those requirements through self-insurance, bonding or purchase of an environmental insurance policy.

— Elimination of transfers from the Highway Fund to environmental programs.  For many years, the General Assembly has earmarked a small percentage of Highway Fund  revenues for environmental programs related to transportation.  The most significant recipients have been the Commercial and Noncommercial UST Trust Funds, DEQ’s  air quality program,  and the Shallow Draft Navigation Dredging Fund.   The 2015 budget replaces Highway Fund transfers to the Commercial UST Trust Fund, the Mercury Pollution Prevention Fund, and DEQ’s air quality program with onetime appropriations and directs legislative appropriations committees  to study whether the transfers — and the programs receiving the transfers — should be continued in the future, funded differently  or eliminated entirely. The transfers represent a significant amount of funding for the Commercial UST Trust Fund  (approximately $13.3 million in 2015) and the air quality program ($7.2 million in 2015). On the other hand, the budget actually increased the transfer from the Highway Fund to the Shallow Draft Navigation Dredging Fund.

— Increased funding  for  oyster cultivation,  water/sewer infrastructure grants, dam safety inspectors, shale gas exploration, coastal dredging and state parks.  A few programs received increased funding for the two-year budget cycle. The largest budget increases went to maintenance dredging of shallow draft navigation channels at the coast ($40 million);  state water/wastewater infrastructure grants for rural and economically distressed communities ($17.4 million);  and the state parks system  ($11 million). The budget also earmarks $500,000 for additional state testing to identify potential shale gas deposits.

—  Eliminating special fund accounts for environmental permit fees.  For many years, the General Assembly created  “special fund” accounts in the DEQ  budget for permit fees. The special fund accounts existed to insure fee revenue would be used only to support the permitting program; for example,  mining permit fees went into the Mining Fund to be used exclusively to support the mining program.  These special funds were “non-reverting” accounts which means any fee revenue unspent at the end of the state fiscal year rolled over into the next fiscal year budget for the permitting program instead of reverting to the state’s General Fund.  Business and industry tended to support creation of special fund accounts to insure permit fees didn’t subsidize unrelated state government activities. In 2015, the General Assembly continued a several-year trend of eliminating special fund accounts and shifting fee revenue in those accounts to the General Fund budget.   This year, the General Assembly eliminated special fund accounts for mining fees, stormwater fees, and soil remediation fees.   State law still requires DEQ to use the fee revenue to support the permit program that generated the fees,  but any unused funds will revert to the state’s General Fund at the end of the fiscal year. Once reverted to the General Fund, the legislature can appropriate the fee revenue for any purpose.

RESULTS:

1. A smaller, more strictly regulatory,  environment agency.

2. A reduced state commitment to voluntary water quality improvement projects and collection of information on rare and endangered species.

3. A smaller state role in cleanup of environmental contamination from privately owned petroleum underground storage tanks. (A role that may shrink further depending on the results of legislative review of the Commercial UST Trust Fund in 2016.)

4. Increased legislative control over fee revenues generated by environmental permitting programs.

5. Uncertainty about future funding for air quality programs and the Commercial UST Trust Fund.

6. Increased state investment in  programs potentially affecting economic development  such as state parks, water and sewer infrastructure,  maintenance of navigation channels, shale gas exploration, and oyster cultivation.

Challenging Environmental Permits

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

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

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

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

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

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

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

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

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

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

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

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

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