First Meeting of Coal Ash Management Commission

November 10, 2014. The N.C. Coal Ash Management Commission will meet for the first time at 9:00 a.m. on Friday, November 14 at the Friday Center in Chapel Hill.  The agenda for the first meeting will be orientation for the new commissioners, including presentations on open meetings  and public records law;  the Coal Ash Management Act (Session Law 2014-122);  and   issues surrounding coal ash disposal. You can find a copy of the meeting agenda on the State Government Radio website here.

The Coal Ash Management Act gave the commission two tasks to complete in the next year:

1. A report to the legislature’s Environmental Review Commission (ERC) on ways to “promote, incentivize and prioritize  beneficial use of coal combustion products”  by  December 1, 2014.   (Expect a request for additional time.)

2.  By October 1, 2015, the commission must report on the potential for closing some coal ash ponds with no further action or natural attenuation. Natural attenuation relies on long-term, natural degradation of  contaminants rather than active  remediation.  It isn’t clear how legislators plan to use the report.  DENR’s Division of Water Resources  has responsibility for implementing  existing state groundwater protection rules adopted by the Environmental Management Commission. The groundwater remediation rule, 15A NCAC 2L.0106,  already allows DENR to approve natural attenuation of groundwater if other remediation goals can be met. Those  goals include:  removal, treatment or  control of  the original contamination source; elimination of  any continuing source of contamination (including highly contaminated soils); prevention of fire, explosion, and noxious fumes; and containment of the contamination to prevent  migration and violation of groundwater standards beyond a compliance boundary. The Coal Ash Management Act  specifically referenced the  existing groundwater remediation standards in  requirements for assessment and remediation of the coal ash impoundments.

The commission may spend some part of the first year looking toward  early 2016 when the commission will need to take final action on  prioritization of all of the coal ash impoundments as high, intermediate or low risk. This may be the commission’s most important responsibility, since the Coal Ash Management Act links the  risk classification  to specific closure methods. Coal ash impoundments classified as high or intermediate risk must be closed by permanently removing the coal ash or by temporarily moving the ash to allow the impoundment to be converted to a lined industrial landfill. But impoundments classified as low risk can be closed by capping the coal ash  in place — as long as the closure plan includes  measures that will prevent exceedence of groundwater standards beyond the compliance boundary after closure.

The  stakes could be high. Duke Energy has  advocated for wide use of capping in place  because of the lower cost.  See an earlier post  for a link to a Duke Energy presentation to legislators on the comparative costs of removing the coal ash  versus capping the ash in place.  But  information already available suggests that most of the coal ash  impoundments have multiple risk factors, including existing groundwater contamination.

The law requires DENR to  propose a  risk classification for each impoundment by December 31, 2015, but gives the commission final approval authority.  The Coal Ash Management Act  lists  a number of  factors to consider in prioritizing impoundments, but does not provide guidance on how to translate the factors into high, intermediate and low risk categories.   Specific criteria for sorting the impoundments into risk categories would make prioritization more consistent and predictable, but development of those criteria would likely require either additional legislation or rule adoption. (The Environmental Management Commission has authority to adopt rules to implement the Coal Ash Management Act.)  Otherwise, the Coal Ash Management Commission will be left to figure out in the next year how to make those prioritization decisions.

Environmental Issues in the Courts

October 26, 2014.  Some recent state and federal court decisions dealing with   environmental controversies in North Carolina:

Cape Fear River Watch, et al v. Environmental Management Commission. An earlier post provides background on the issues in the case. In  brief,  several environmental organizations  appealed a 2012 decision by the  N.C.  Environmental Management Commission  (EMC)   interpreting state groundwater rules to give  older, unpermitted waste disposal facilities the same groundwater remediation  options available to  permitted waste disposal facilities. All of the coal ash ponds in N.C would be considered “unpermitted” waste disposal facilities and  Duke Energy intervened in the  Cape Fear River Watch case to support the EMC  decision.

In March, Superior Court Judge Paul Ridgeway reversed part of the  EMC decision. Judge Ridgeway  interpreted groundwater remediation rules to require  facilities permitted before December 30, 1983  to  immediately remove the source of any groundwater contamination.  The decision has significant implications for coal ash ponds and old, unlined landfills where the waste material disposed of in the facility often turns out to be the contamination source. Under Judge Ridgeway’s interpretation of the rules,   waste material causing groundwater contamination would have to be immediately excavated and removed.  Although state rules allow the use of other (potentially less costly) measures to control groundwater contamination,  pre-1984 ash ponds and landfills would not have any option other than removal of the waste.

Duke Energy appealed Judge Ridgeway’s  decision to the N.C. Court of Appeals.  But before the Court of Appeals could take up the case, two things happened to alter the course of the litigation.  First,  the General Assembly enacted legislation  intended to moot the  Ridgeway decision. Section 12 of Session Law 2014-122 (the Coal Ash Management Act of 2014)  amends a groundwater statute to direct the EMC to require remediation of  groundwater contamination at a waste disposal facility without regard to the date  the facility had been permitted.  Legislators acknowledged that the provision was intended to reverse  Judge  Ridgeway’s interpretation of  the groundwater  remediation rules  as applied to facilities permitted before  December 30, 1983. As a practical matter, the new law allows DENR to approve an alternative means of controlling groundwater contamination associated with a  coal ash pond or pre-1984  landfill but does not guarantee approval.

Then,  on October 10, 2014,  the N.C. Supreme Court issued an  order removing  Cape Fear River Watch v. Environmental Management Commission from the Court of Appeals docket  to  the Supreme Court docket.  The Supreme Court removed the case on its own motion, surprising the parties and their lawyers.  (The court  issued similar orders in four other civil cases at around the same time.)  The court’s action  has no recent precedent and little precedent  in the court’s history. The one-paragraph  order offered no explanation for removal of the case to the Supreme Court.  The next step in the Cape Fear River Watch case will now be the filing of briefs in the  N.C. Supreme Court.

City of Asheville v. State of N.C. and Metropolitan Sewerage District of Buncombe County.  In 2013, the General Assembly enacted a law transferring the City of Asheville’s water system to the  Metropolitan Sewerage District of Buncombe County.  Session Law 2013-50,  drafted  to apply only  to the City of Asheville water system,  had the unprecedented effect of transferring the system’s assets  (infrastructure and a 17,000 acre watershed) and debts (over $67 million in water bonds) to a new entity without the city’s consent and without compensation.  Two earlier posts, here and here, provide background on the legislative action and constitutional issues raised by the law.

In June, N.C. Superior Court Judge Howard Manning issued an order concluding that Session Law 2013-50 violated several provisions in the  N.C. Constitution. Among Judge Manning’s findings:

♦ The law violated Article II, Section 24  of the N.C. Constitution which prohibits the General Assembly from adopting  certain types of legislation  to apply in  only one jurisdiction in the state. Judge Manning concluded Session Law 2013-50 violated  constitutional  prohibitions against local acts relating to “health, sanitation or the abatement of nuisances”  and local acts regulating  nonnavigable streams.  Although  Session Law 2013-50 did not mention the City of Asheville or the  Metropolitan Sewerage District of Buncombe County  by name,  it described water systems affected by the law  in a way that only applied to the Asheville system.  As a result, Judge Manning found the law to be an unconstitutional  local act addressing  health and sanitation (operation of a drinking water system) and regulation of nonnavigable streams.

♦  The law violated Article I, Section 19 by transferring the Asheville water system to a different entity without the city’s consent and without any rational basis. Article I, Section 19, known as the “law of the land” clause of the N.C. Constitution, has been interpreted to require both due process and equal protection. Judge Manning found Session Law 2013-50 violated the clause by depriving the City of Asheville of property without any  rational basis, suggesting a due process violation and expressly finding a denial of equal protection.

♦ Other sections of  Judge Manning’s  order concluded that Session Law 2013-50 violated Article I, Section 19 and Article 1, Section 35 (a broad reservation of rights) by taking city-owned property and by doing so without providing compensation for the property.

One key to the court’s decision:  operation of a  water system is considered to be a proprietary rather than a governmental function. Proprietary functions don’t involve peculiarly governmental powers and could also be carried out by a nongovernmental entity. Other examples of proprietary functions would be  operation of an electric utility, a recreational facility  or a sports venue.   With respect to proprietary functions,  Judge Manning concluded that  local governments have  the same constitutional protection against  uncompensated taking of property as a nongovernmental entity.

Judge Manning’s order did not address the city’s argument that the law also unconstitutionally interfered with contracts between the city and bondholders.  The state, throughout the Attorney General’s Office, indicated an intent to appeal the decision to the N.C. Court of Appeals. A final decision by the appeals court would not be expected for about a year.

Erica Y. Bryant, et al v. United States, 11th Circuit Court of Appeals, October 14, 2014.  The plaintiffs  had sued the United States government seeking compensation for health problems allegedly caused by exposure to contaminated drinking water at the Camp Lejuene Marine Corps Base near Jacksonville,  North Carolina.  A recent U.S. Supreme Court decision in another North Carolina groundwater contamination case, Waldberger v.  CTS, Inc.,   held that the state’s 10-year statute of repose barred a lawsuit alleging injury and property damage caused by groundwater contamination filed more than 10 years after the  last act contributing to the contamination —  even though the plaintiffs first learned of the contamination much later.  (You can find more on the Waldberger decision in an earlier post. The same post also includes additional background on the contamination problem at Camp Lejuene.)

The N.C. General Assembly responded to the  Waldberger decision  by enacting a law excluding claims for property damage and personal injury related to contaminated groundwater from the 10-year statute of repose. See Session Law 2014-17.  The law was written to apply to both pending cases and cases filed after its enactment. In the Bryant decision, however, the 11th Circuit Court of Appeals ruled that the new law could not retroactively apply to pending cases. The appeals court treated the 10-year statute of repose as a sort of property interest benefitting (in this case) the U.S. government. The court ruled  that the state legislature could not retroactively remove that benefit.  The decision turned, in part, on the court’s conclusion that Session Law 2014-17 changed rather than clarified the state’s prior law.

The 11th Circuit decision seems to leave the Camp Lejeune plaintiffs without any legal remedy for long-term health effects allegedly caused by exposure to the contaminated drinking water.

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

N.C. Coal Ash Bill Becomes Law

September 24, 2014. On September 20, Senate Bill 729 (the Coal Ash Management Act) became law without the Governor’s signature. Governor Pat McCrory had expressed concern that a provision in the bill giving legislators the majority of appointments to the new Coal Ash Management Commission violated the constitutional doctrine of separation of powers. Rather than  veto the bill, the governor allowed the bill to become law without his signature and signaled an intent to ask the N.C. Supreme Court for an advisory opinion on the constitutionality of the appointments provision.

In the meantime,  Senate Bill 729  — now Session Law 2014-122 — makes a number of  immediate changes to state law  and sets in motion a  15-year  process for remediating and then closing thirty-three existing coal ash impoundments. An earlier post provided an overview of the  final bill and now attention will turn to implementation.

 NEAR TERM 

  • Effective October 1, 2014 the law prohibits utilities from building new impoundments or expanding existing impoundments for disposal of coal ash.
  • Also effective October 1, 2014, the law  prohibits use of impoundments at closed electric generating facilities for coal ash disposal. The provision prevents a utility from transporting coal ash from an active generation plant to a closed facility for disposal in an impoundment.
  • By October 1, 2014, the utilities must submit a survey to the Department of Environment and Natural Resources (DENR) identifying all drinking water wells within 1/2 mile down-gradient of an impoundment.
  • The law requires the utilities to submit groundwater assessment plans  and  maps showing discharges to surface waters (both permitted and unpermitted) for all 33 impoundments by December 31,  2014.  The maps and groundwater assessment plans represent the first in a series of steps leading to remediation of  groundwater contamination around the impoundments and elimination of unpermitted discharges to surface waters.
  • S.L. 2014-122 sets much more stringent standards for use of coal ash in large structural fill projects and puts a moratorium on smaller structural fill projects to study appropriate standards for those projects.  (“Structural fill” projects involve the use of coal combustion residuals as fill material to level a construction site, build up a road bed, or otherwise change site elevation before construction.) The new standards include setbacks from surface waters and drinking water wells; a requirement for synthetic liners and a leachate collection system; a four-foot separation between the lowest level of fill and groundwater; financial assurance; and standards for closure.
  • Amendments to the state Dam Safety Act require dam owners to  prepare an emergency action plan for each high and intermediate risk impoundment. (The provision applies to all impoundments regulated under the Dam Safety Act and not  just coal ash impoundments.)
  • Dam Safety Act amendments also set minimum requirements for inspection of coal ash impoundment by the utilities   (weekly and following storms) and by DENR  (annually).
  • A new fee imposed on electric utilities that own coal ash impoundments will fund regulatory activities at DENR and the new Coal Ash Management Commission. The law authorizes use of the revenue to create  5 positions in the Department of Public Safety to support the Coal Ash Management Commission and 25 new positions in DENR.
  • S.L. 2014-122 amends state law  to require notice to DENR of any wastewater spill to  surface waters  as soon as practicable, but no more than 24 hours after the spill reaches surface waters.  The law also shortens the time allowed to provide notice to the public  from 48 hours to 24 hours.
  •  S.L. 2014-122 repeals most of a controversial 2013 regulatory reform provision on groundwater remediation by eliminating statutory language that: 1.  created a presumption that the groundwater compliance boundary around a waste disposal site should be at the property boundary;  and 2. limited DENR’s ability to require measures within the compliance boundary to control groundwater contamination. A provision in the same section of  S.L. 2014-122  created a new controversy, however, by reversing a recent superior court decision interpreting state groundwater remediation rules. (For an explanation of the controversy, see the earlier post.)
  • The law creates new civil and criminal penalties for violation of laws related to management of coal ash.

The law also requires a number of actions over the next year intended to  expand beneficial uses of coal ash. The most unusual provision requires the electric utilities  to issue a request for proposals by December 31, 2014 for:

(i) the conduct of a market analysis for the concrete industry and other industries that might beneficially use coal combustion residuals and coal combustion products; (ii) the study of the feasibility and advisability of installation of technology to convert existing and newly generated coal combustion residuals to commercial-grade coal combustion products suitable for use in the concrete industry and other industries that might beneficially use coal combustion residuals; and (iii) an examination of all innovative technologies that might be applied to diminish, recycle or reuse, or mitigate the impact of existing and newly generated coal combustion residuals.

LONGER  TERM

S.L. 2014-122 gives  the impoundments at four coal-fired plants (Dan River Steam Station, Riverbend Steam Station, Asheville Steam Electric Generating Plant and the Sutton Plant) priority for final closure. The law then directs DENR to classify  the other 10 impoundment sites in the state based on risk by the end of 2015. Under  the law,  final closure of impoundments classified as high or intermediate risk will require removal of all coal ash for disposal in a lined industrial landfill (on or off-site) or for  beneficial reuse. Impoundments classified as low risk  have the additional closure option of capping the coal ash in place as long as the closure plan includes measures that will prevent groundwater contamination beyond the compliance boundary.

S.L. 2014-122 sets final closure deadlines based on the risk classification — December 31, 2019 for high risk impoundments; December 31, 2024 for intermediate risk impoundments and December 31, 2029 for low risk impoundments.

OPPORTUNITIES AND PITFALLS

S.L. 2014-122 marks a real and significant change in environmental policy — forcing a transition away from use of wet impoundments for coal ash disposal and toward more protective methods of disposal and safe reuse.   In support of that policy decision, the law provides statutory timelines  for assessment, remediation and final closure of all 33 impoundments and  new resources for state oversight.

Even with resources to implement S.L. 2014-122, it will be difficult to hold to the timelines in the law without an ongoing commitment on the part of the General Assembly, DENR and the electric utilities. Any number of bureaucratic and technical problems could delay or derail implementation of the law.  (The thirty new positions authorized under the bill do not magically appear  when the bill becomes law — getting from legislative authorization of a new position to having a person  on the job  usually  takes months.) The goals of the law won’t be met if the state too easily gives in to unnecessary delays.

Decisions on remediation; classification of impoundments for closure; and approval of closure plans will present a different kind of challenge. There will be an inevitable tension between the utilities’ desire to keep the  cost of compliance  low and the state’s responsibility to protect  groundwater and surface water resources. The bill creates another potential source of tension by giving the new Coal Ash Management Commission  — not DENR — the authority to make final decisions on classification of impoundments and approval of closure plans. The Commission will have a very small staff and the law does not require any commission member to have expertise in  groundwater hydrology or water quality  –  likely to be critical in prioritizing sites for closure and approving closure plans.  With good luck and the right appointments, the arrangement  might work; or it could  lead to  conflict and overly politicized decision-making.

Regulatory Reform 2014

September 23, 2014.  Late last week, Governor Pat McCrory signed Senate Bill 734 (the Regulatory Reform Act of 2014)  on the final day to either sign or veto the bill.  The bill, now Session Law 2014-120, includes both substantive  changes to environmental laws and  amendments to the state Administrative Procedures Act  affecting environmental rule-making and administrative appeals. Below, some of the more significant  environmental provisions; a future post will look at the administrative law changes.

Air Quality: Open burning and fireplaces. Section 24 of Senate Bill  734 eliminates the need for  a state air quality  permit for open burning of leaves, stumps, logs, tree branches, yard trimmings under certain circumstances.  It  also  prohibits a city from banning or limiting open burning of debris in the city’s  1-mile extra-territorial jurisdiction unless the city provides yard waste pickup or access to drop off centers in the area to the same extent provided to residents in the city.  These provisions are the latest in a series of  legislation actions over the last three years to reduce  regulation of open burning.

Section 24(h) prohibits local air pollution control programs and the state from regulating any combustion heater, fireplace, etc. in a private dwelling except as required by federal law. This appears to be a preemptive move; I am not aware of any state or local air quality initiative  to regulate residential fireplaces and heaters.

Coastal Development:  Coastal stormwater;  inlet hazard areas; and permit appeals.

Coastal Stormwater. Section  25 of   Senate Bill  734 extends a  grandfathering provision in the coastal stormwater rule,  15A NCAC 02H .1005,   to expansion of the grandfathered development onto adjoining  property.

Inlet hazard areas. Since ocean Inlets  often move in response to changing nearshore condition and cause  accelerated  shoreline change, state coastal development rules have long put additional density and size limitations on development in  designated inlet hazard areas. In 2012, the General Assembly directed the Coastal Resources Commission (CRC) to study the Cape Fear River Inlet Hazard Area.  Within the past year,  the CRC expanded the review  to all  inlet hazard areas. Although the CRC review has not been completed,   Senate Bill 734 preemptively  removes some coastal shorelines  from existing inlet hazard area designations:

(1)  An inlet hazard area associated with an inlet that has been closed for at least 15 years.  The provision applies only to Mad Inlet in Brunswick County. The inlet originally separated Sunset Beach from Bird Island to the south, but  closed naturally in 1998.  The CRC  had already amended coastal management  rules to remove the Mad Inlet hazard designation earlier this year.

(2)  Inlet hazard area designations that no longer include the current inlet location due to shoreline change.  This provision also applies to Mad Inlet, but it is not clear that the impact will be limited to Mad Inlet. Other inlets have moved due to natural shoreline change or  engineered inlet relocation projects and  a comparison of current inlet locations to the corresponding inlet hazard area will be necessary to fully understand the potential impact of the provision.

(3)  The inlet hazard area surrounding an  inlet providing access to a State Port via a channel maintained by the United States Army Corps of Engineers. This provision eliminates the inlet hazard area designated around the mouth of the Cape Fear River at the entrance to the  Wilmington port,  which now includes part of the Bald Head Island shoreline.  The Village of Bald Head Island had pushed for removal of the inlet hazard area designation.

Shorelines  removed from  an inlet hazard area will be regulated instead under the general standards for  development on ocean and estuarine shorelines.

Coastal Area Management Act (CAMA) Permit Appeals. Section 23 of  the bill  eliminates  the automatic stay of a CAMA permit that has been appealed by a third party.  Under the amended law, a petitioner appealing the issuance of a CAMA permit will have to request an administrative law judge to stay the permit pending appeal. The amendment makes the CAMA appeal statute consistent with stay provisions in the state Administrative Procedures Act, but third parties  seeking to appeal a CAMA permit will continue to face a hurdle that is not imposed on other petitioners  —  the need for a preliminary determination by the CRC that the appeal has merit.

Environmental Permitting. Most permitting programs apply the standards in effect at the time of the permit decision. If  a rule or ordinance  changes during review of a permit application, the project may have to be  modified to meet the new standard.  In those circumstances, Section 16 of Senate Bill 734  now allows the permit applicant to choose whether to construct under the new standard or the old standard. The provision applies to development permits issued under state environmental laws or under  local ordinances. The new law does not define “development permit”, but clearly excludes zoning ordinances from the “permit choice” option.  The provision does not  recognize any exception based on requirements of federal law.

Engineered Plans. Section 29  of Senate Bill 734 makes a number of changes in the way state and local government permit reviewers interact with professional engineers  responsible for  design of a  proposed project. The  legislature’s Environmental Review Commission recommended the provision. See the section on review of engineered plans in an earlier post for more detail and  background on the conflict between PEs and state/local permit reviewers.

Onsite Wastewater Systems: Innovative systems and permitting changes

Innovative wastewater systems. Section 28 of Senate Bill  734 changes the law on approval of innovative onsite wastewater systems using polystyrene aggregate as a substitute for the gravel traditionally used in trenches for dispersion lines. “Innovative” systems do not meet established standards for onsite wastewater systems and require approval by the Department of Health and Human Services (DHHS). The new provision prevents DHHS and the Commission for Public Health from conditioning approval of a system using polystyrene synthetic aggregate on using a certain particle or bulk density.  The provision also requires DHHS and the Commission to rescind and reissue any  approval that may have included  those conditions. The legislative record does not  reflect  any  discussion of the density  conditions  — either the reason the conditions had been imposed or the effect that removal of the density  conditions may have on the performance of the wastewater systems.

Permitting. Section 40  expands the current permitting law to  cover ground absorption systems and removes the 5-year limit on a permit issued for installation of an on-site wastewater system. Under the provision, the permit holder would not require a new authorization even  if   standards for those systems have changed.

Parks. Section 31 of the bill allows the Secretary of Environment and Natural Resources to waive the 25 mile per hour speed limit in state parks for special events and  gives  the Commissioner of Agriculture the same authority in state forests. Media reports during the legislative session indicated the waiver had been requested by groups interested in using  a state park for private race events.  See a  report by the Raleigh News and Observer.

Water Quality: Isolated wetlands and stormwater. 

Isolated Wetlands. Section 54  raises the permitting threshold  for disturbance of isolated wetlands.  (See an earlier post for an explanation of the term “isolated wetlands”.) West of Interstate 95 (the unofficial dividing line between eastern and  piedmont/western  N.C. ), the permitting threshold has been raised  from 1/10 acre to 1/3 acre. East of I-95, the permitting threshold has been raised from 1/3 acre to 1 acre.    During the legislative debate, DENR indicated that raising the permitting threshold to 1 acre east of I-95 would effectively eliminate permitting requirements for isolated wetlands in the eastern part of the state. The bill also  reduces  the mitigation ratio for  all wetland impacts from 2:1 to  1:1 and directs DENR to study the definition of isolated wetlands and whether mountain bogs  should be regulated differently  than other isolated wetlands.

StormwaterSection 45 of Senate Bill 734  reverses  a 2013 regulatory reform. The Regulatory Reform Act of 2013 (Session Law 2013-413)  changed   stormwater  standards to  treat gravel areas as “pervious” and to exclude gravel from the calculation of “built-upon” area on a development site.  Since the amount of built-upon area determines the level of stormwater control required, developers had  pushed for exclusion of gravel areas from the calculation as a way to reduce stormwater management requirements. The 2013  provision  also directed the legislature’s Environmental Review Commission (ERC)  to study state stormwater programs “including how partially impervious surfaces are treated in the calculation of built-upon area under those programs”.

The ERC study group  encountered an unexpected complication — the lack of consensus on  the definition of  “gravel” had  created uncertainty  about implementation of the 2013 provision.   Instead of moving  on to the next reform requested by developers, the ERC  focused  on defining gravel and found that gravel  may not be pervious depending on the  nature of the aggregate material and the underlying substrate.   On recommendation of the ERC,  Section 45 of Senate Bill 734 effectively repeals the 2013 provision and directs the Department of Environment and Natural Resources (DENR)  to contract with N.C. State University for a study of the pervious/impervious qualities of different types of aggregate materials.

Water Supply: Interbasin transfer.  Sec. 37 of Senate Bill  734  extends an expedited interbasin transfer  approval process (originally created for certain coastal counties) to allocation of water from  reservoirs managed by the U.S. Army Corps of Engineers.  The intent may be to speed approval of an  interbasin transfer that would allow the City of Raleigh to take drinking water from Kerr Lake.

N.C. Enacts Coal Ash Legislation

August 21, 2014.  After two weeks of drama in which the House and Senate had a falling out over one critical provision  and threatened to adjourn without voting on a final bill, the N.C. General Assembly enacted coal ash legislation by strong bipartisan margins in both chambers.  The  final bill now goes to Governor Pat McCrory for signature.  Senate Bill 729  follows eighteen months of controversy over the environmental impacts of the 33 coal ash impoundments located at 14  electric generating facilities  in North Carolina and the McCrory administration’s response to the problems.   Coal ash became an urgent  legislative priority after  a stormwater pipe under an  impoundment in Rockingham County ruptured and spilled more that 30,000 tons of coal ash into the Dan River. (Earlier posts on N.C. coal ash impoundments  and the Dan River spill here and here.)

What Senate Bill 729  Does:

♦ Sets timelines for  conversion from  wet to dry ash handling;  an  end to deposition of  coal combustion residuals (CCRs)  in wet impoundments; and final closure of  all 33 impoundments under  environmental standards.  Nothing in existing state or federal law otherwise requires any of those actions. Under current law, the state  can take enforcement action  to require a utility to address  unpermitted  wastewater  discharges or groundwater standard violations associated with an impoundment, but it is more difficult to effect comprehensive policy change through individual enforcement cases.

Under prior N.C. law, CCRs in a wet impoundment had been considered “wastewater residuals” and  exempt from the state’s solid waste disposal laws.  Senate Bill 729   requires CCRs removed from a wet impoundment  to be disposed of as solid waste.  Unless put to an approved reuse, the  bill requires disposal in a landfill that meets the most current standards  for  industrial landfills (including a liner system, leachate collection,  groundwater monitoring, and financial assurance).

♦  Sets  timelines for groundwater assessment and remediation  for all 33 CCR impoundments.  The state would otherwise have to seek assessment and remediation through enforcement cases. Even in response to enforcement action, existing state  rules generally allow the person (or company) responsible for the contamination to propose a schedule for assessment and remediation.

[Note:  In  litigation over  how state groundwater remediation rules apply to  pre-1984 CCR impoundments, a superior court judge recently interpreted the rules to require “immediate” removal of  coal ash causing  groundwater contamination beyond the compliance boundary. Senate Bill 729 reverses that decision;  see  “Controversies” below.]

♦ Requires the utilities to  identify drinking water wells within one-half  mile down-gradient of each CCR impoundment; test  wells potentially affected by groundwater contamination from the impoundment;  and provide  an alternative water supply if  testing finds a contaminant associated with  CCRs at levels exceeding the groundwater standard.  Under existing law, DENR can use enforcement authority to require a person responsible for groundwater contamination  to  identify and test wells for contamination.  Enforcement actions  focus on conditions at individual sites and the groundwater assessments tend to be more incremental, gradually working out from the known source of contamination and continuing  only as far as testing  shows high levels of contamination. The  comprehensive requirements of Senate Bill 729 may provide more information on well contamination more quickly.

The bill requires the utilities to provide  alternative water supply to any well owner whose drinking water well shows high levels of a contaminant associated with coal combustion residuals.  Without this kind of statutory remedy, a well owner may have to sue for damage to the water supply well — bearing both the upfront costs of  litigation and the burden of proving the impoundment caused the  well contamination. Senate Bill 729  requires  the electric utilities to provide an alternative drinking water supply within 24 hours  and alternative water supply for other purposes (such as bathing) within thirty days based  simply on data showing  that the well water exceeds the  groundwater standard for any constituent associated with CCRs.

♦ Requires the utilities to inspect all CCR impoundments;  report on all wastewater discharges (permitted and unpermitted) ;  and take action to eliminate unpermitted discharges to surface waters on a timeline set in the law. DENR has existing authority to take enforcement action in response to an unpermitted discharge of wastewater to surface waters, but would  normally have to take those actions on a site by site basis. Senate Bill 729 may prompt earlier identification and correction of the violations.

♦  Establishes stricter design, construction and siting standards for large projects  using coal ash as fill for construction projects and puts a moratorium on smaller structural fill projects. (Any project using more than 8,000 tons of coal ash per acres or more than 80,000 tons  total will be considered a “large” structural fill.) Existing  state rules  governing use of coal ash as structural fill have significant gaps. The new law fills a number of those gaps by requiring large structural fill projects to be lined;  have leachate collection systems;   monitor for groundwater impacts and provide financial assurance.  The bill also  establishes new siting criteria for large structural fills, including  setbacks from streams, wetlands, wells and property boundaries.

The bill puts a one-year moratorium on smaller structural fill projects while DENR studies  the adequacy of standards for those projects. The bill allows for two exceptions to the moratorium on small structural fills: 1. voluntary compliance with the new, stricter standards applied to large structural fill projects; or 2. use of CCRs as structural fill for a  public road  project.

Amends the state Dam Safety Act to require Emergency Action Plans for all  high or intermediate hazard dams (including CCR impoundments) and  sets specific inspection requirements for CCR impoundments.

♦ Amends water quality laws to require  earlier notice to DENR and to the public following a wastewater spill that reaches surface waters. Prior law had been unclear about notice to DENR and allowed 48 hours  for notice to the public. Senate Bill 729 requires notice to DENR as soon as practicable  (and no later than 24 hours after the spill reaches surface waters) and to notify the  public within 24 hours. The new notice requirements apply to all wastewater spills and not just those associated with CCR impoundments.

♦ Repeals  much  of a 2013 regulatory reform provision dealing with groundwater contamination. Senate Bill 729   repeals two significant parts of the 2013 law: 1. a  presumption that the groundwater compliance boundary should be at the property line;  and 2.  restrictions on  DENR’s ability to require action inside the compliance boundary to control  groundwater contamination. (See the section on groundwater legislation  in an earlier post  for  more explanation of  what the 2013 provision did and Senate Bill 729 now undoes.)

♦ Imposes a new fee on electric utilities that own CCR impoundments to support implementation of the law. The bill allocates funds for 25 new  positions in DENR to work on coal ash and 5 positions in the Department of Public Safety to support the Coal Ash Management Commission.

Weak Points:

Creating a  new Coal Ash Management Commission in the Department of Public Safety with  authority to overrule DENR decisions on prioritization of impoundments for closure and approval of closure plans — but without the expertise or staff support to make those decisions. The Department of Public Safety has no experience with implementation of state and federal environmental laws and the bill authorizes a small staff of five to support all of the commission’s activities.  Commission appointment criteria do not require any member to have expertise in  groundwater hydrology or water quality  –  likely to be critical in prioritizing sites for closure and approving closure plans.

The bill provides few guiding standards for classifying impoundments based on risk. Risk classification will be one of the most important decisions required under the law  because the classification determines whether coal ash has to be removed from the site or can potentially be capped in place. The bill lists a number of factors to be considered, but provides no guidance on how to translate the  factors into high, intermediate and low risk classifications. Existing state programs that use similar classification systems to guide remediation work  have gone through rulemaking to  adopt specific criteria for defining high, intermediate and low risk. In the absence of rulemaking, the lack of legislative guidance could lead to inconsistent and arbitrary decision-making. Senate Bill 729   identifies four sites for immediate closure and in debating the bill a number of legislators questioned  the basis for prioritizing those four over others with similar environmental problems. Those kinds of question aren’t going to go away when the prioritization process shifts over to DENR and the new commission.

The bill authorizes  the Coal Ash Management Commission to issue variances from the impoundment closure deadlines, although the final version of the bill  allows only one variance of no more than three years for an individual impoundment.

Controversies:

In debate on the final bill, Democratic lawmakers again raised concerns about  the impact on ratepayers if  utilities  try to recover assessment and cleanup costs in a rate case. Senate Bill 729 prevents  utilities from recovering costs associated with an illegal spill (like the one on the Dan River), but only puts a  brief moratorium on recovery of  costs associated with assessment, cleanup and closure of coal ash impoundments.  The moratorium ends January 15, 2015 — before the utilities are likely to have incurred significant costs.  Some  legislators  would clearly prefer to leave the cost recovery issue entirely to the N.C. Utilities Commission; others  suggested  the General Assembly will  have time to revisit the cost recovery issue next session.

A number of environmental organizations have criticized the bill for potentially allowing use of capping in place to close impoundments that have CCRs  in  close proximity to  groundwater. This  issue  nearly derailed the bill completely  as House and Senate conferees tried to reach agreement on a final bill.     Both House and Senate versions of the bill required removal of CCRs from impoundments classified as high or intermediate risk.  Although worded differently, both versions of the bill allowed low risk impoundments to be closed by dewatering the coal ash and  installing an impermeable clay cap over the ash under standards  applied to closure of solid waste landfills  — the practice known as  “capping in place”.   Neither version of the bill  addressed  the concern  that a “low risk” impoundment may  be in close proximity to groundwater, allowing  CCRs to be a continuing source of groundwater contamination even after installation of a cap.

House  members  raised the issue for the first time in conference and proposed  new language to bar  “capping in place” if any part of the impoundment was located below the seasonal high water table. See an earlier post for more on the conflict between House and Senate conferees and the cost concern in the background of  debates over capping in  place. The final bill did not include the language proposed by House conferees, but added a sentence  barring approval of  a “cap in place” closure

…unless the Department finds that the proposed closure plan includes design measures to prevent, upon the plan’s full implementation, post-closure exceedances of groundwater quality standards beyond the compliance boundary that are attributable to constituents associated with the presence of the impoundment.

The new language would allow the utilities to cap in place  CCRs  in close proximity to groundwater as long as the closure plan  includes other measures (such as engineered groundwater remediation systems) to  prevent groundwater standard violations  beyond the compliance boundary.   The language clearly does not provide as high a level of protection  as a separation between the  coal ash  and groundwater — but  would   be consistent  with existing state  rules allowing DENR to approve a groundwater remediation plan based on use of engineered systems  to treat or control the contamination source and prevent groundwater violations beyond the compliance boundary. The question may be the level of confidence in DENR’s review and approval of remediation measures and the utilities’ commitment to long-term maintenance of remediation systems.

A final (related) controversy has to do with  language in Senate Bill 729  to   overrule a recent superior court decision interpreting state groundwater rules to impose more rigid remediation requirements  on waste disposal systems permitted before 1984. An earlier  post discusses the issue and Judge Ridgeway’s decision (now on appeal to the N.C. Court of Appeals) in more detail. In brief, the judge interpreted  state rules to require  immediate removal of the contamination source at any pre-1984 waste disposal site where contamination has caused a exceedance of a groundwater standard beyond the compliance boundary.   At a waste disposal facility, the contamination source usually turns out to be the waste disposed of in the facility  — which  could  be garbage  put in  a landfill or coal ash placed in an impoundment. The judge’s interpretation does not allow the alternative of using engineered groundwater remediation systems to treat or control the source of contamination at these older facilities — something the rules  allow for newer  facilities.

Senate Bill 729 reverses the effect of Judge Ridgeway’s decision by requiring groundwater remediation rules to be applied consistently to all waste disposal facilities without regard to the date of permitting.  Legislative intervention  seemed to be driven  by  some combination of concern about completely foreclosing the possibility of capping coal ash in place  and the impact of the decision on county and municipal waste disposal sites permitted before 1984.

The bill now sits  on the Governor’s desk, waiting for signature or veto.

Coal Ash Legislation Hits the Wall

August 2, 2014. Senate Bill 729 (Coal Ash Management Act of 2014) hit a wall  this week  when the conference committee  trying to resolve differences between House and Senate versions of the bill failed to reach agreement and the Senate adjourned for a two-week recess.  (The House adjourns today following a final budget vote.)  The General Assembly  returns on August 14, although the Senate’s adjournment resolution suggests the coal ash bill may not be eligible for consideration then. It  may  be November before the General Assembly takes up  coal ash legislation again.

House and Senate versions of the bill differed  in several ways (such as appointments to the Coal Ash Management Commission),  but  negotiations apparently blew up over a new issue. House negotiators became concerned that the bill’s  provisions on closure of coal ash impoundments could allow coal ash in close proximity to groundwater to be  “capped in place” and remain a source of ongoing groundwater contamination.    “Closure”  means  final cleanup and restoration of the impoundment site under environmental standards.  “Capping in place” refers to a closure method that allows the coal ash to be dewatered  and then covered by a layer of low-permeability soil (such as clay) to reduce infiltration of rainwater.  Another layer of soil on top of the clay cap  provides a base for vegetation to stabilize the site and prevent erosion.

Capping the dewatered coal ash on site  avoids the expense of  moving  the coal ash for disposal in an industrial landfill.  Although Duke Energy has said the company has no bias in favor of capping in place (other than the lower cost), company representatives have  stressed to legislators the high cost of  removing all of the coal ash from impoundments at  14 electric generation sites in North Carolina (some operational and others closed).  Duke Energy’s State President for North Carolina,  Paul Newton,  used the graph below in an April presentation to the legislature’s Environmental Review Commission. The graph  shows a  “baseline” cost of  approximately $2.5 billion dollars to close impoundments at all 14  sites and convert to dry ash handling. The baseline estimate assumes that Duke Energy will entirely remove the coal ash  at four facilities  (Dan River, Riverbend, Asheville and Sutton) and use capping in place at the other ten facilities. Duke Energy estimated the cost of removing coal ash from all 14 facilities to be $10 billion.

(Duke Energy’s cost estimates are provided to give a sense of the utility’s message to legislators and not to validate the numbers.)  Mr. Newton’s entire presentation can be found here.

Negotiation of Senate Bill 729 broke down over the House conferees’ insistence on language that would put additional limits on capping in place.   S 729 requires coal ash  in  impoundments prioritized by DENR as high risk or intermediate risk to be removed and either  placed in a lined  industrial landfill or put to an approved beneficial reuse.  The bill allows low risk impoundments to  be closed by  capping in place under the same standard applied to closure of a municipal solid waste landfill.  But unlike  landfills, coal ash impoundments  were not  required to have a  liner  and maintain a minimum separation (in feet)  between the lowest level of waste  and groundwater. House negotiators became concerned that an impoundment with coal ash in  close proximity to  groundwater  could be  classified as low risk under the bill — allowing the coal ash to be capped in place  and  continue leaching contaminants into groundwater through direct contact with the water table.

House  conferees  proposed language  to  prevent the use of capping in place to close  impoundments below the seasonal high water table – by either  excluding  those impoundments from the low risk category completely or by  changing standards for  closure of low risk impoundments to allow capping in place only at impoundments located above the seasonal high water table.   Senate conferees agreed to  add proximity of coal ash to groundwater as another factor in  prioritizing  impoundments for closure, but  rejected House language to prevent  a “cap in place” closure  of  coal ash in impoundments  below the seasonal high water table.  House conferees refused to accept a bill without assurance that groundwater would be protected from ongoing contamination by coal ash in the water table.

Senate conferees prepared and signed a conference report including only the changes in S 729 acceptable to the Senate. House conferees prepared an alternative conference report. The Senate then adjourned  without final action on  the Coal Ash Management Act of 2014.

Update (1:30 p.m.)  The legislative session will continue until at least early next week because of lack of agreement on the adjournment resolution. The House modified  the  adjournment resolution adopted by the Senate to allow more bills to be considered during the August 14 session (including coal ash). The Senate, having already gone home, has not  voted on  the modified adjournment resolution so session continues. Senate will reconvene on  August 5 at 10:00 a.m. and the House on August 6 at  12:00 p.m. Whether the two bodies will do anything next week beyond agree on an adjournment resolution remains to be seen.

Update on 2014 Budget: The Environment

July 31, 2014 (8:00 p.m.) At this point in the legislative session it’s a minute to minute situation. Last night, the General Assembly  released budget documents providing more detail on the House and Senate budget deal announced on Tuesday.  The budget conference report still must be approved by each chamber in two votes on successive days. The budget gives with one hand and takes away with the other — providing additional earmarked appropriations to DENR and funds for (very small) state employee pay raises, while making additional reductions  in DENR programs.  Some of the  more significant  budget  decisions  affecting environment and natural resource programs:

Coal Ash – The budget provides no additional resources  for response to the environmental threat posed by 33 coal ash impoundments across the state.    An appropriation for coal ash  regulation and oversight  ($1.7 million and authorization for  23 positions in DENR) had been one area of agreement between the House and Senate budget bills,  but the appropriation does not appear in  budget documents coming out of the conference committee.  The General Assembly could  add an appropriation  once  the House and Senate resolve their differences on the substantive  coal ash bill (Senate Bill 729) that is still in a conference committee. Given significant cuts to DENR’s water quality program over the last year, additional resources will be needed to respond to groundwater contamination; illegal discharges of wastewater to rivers and streams; and structural concerns associated with the coal ash impoundments with or without new  coal ash  legislation.

Diversion of Monies from Environmental Cleanup and Conservation Funds —  The budget transfers interest earned by  a number of DENR special funds to the  state’s General Fund.   Conservation  funds affected include the Clean Water Management Trust Fund; the Marine Conservation Fund; and the Parks and Recreation Trust Fund.  The transfer also affects a number of environmental cleanup funds including the Dry-Cleaning Solvent Cleanup Fund (remediation of sites contaminated by dry-cleaning solvents);  the Commercial Underground Storage Tank Fund (remediation of petroleum contamination from underground storage tanks);  the Non-Commercial Underground Storage Tank Fund (remediation of petroleum contamination from smaller USTs, including home heating oil tanks);  the Inactive Hazardous Sites Fund (assessment and remediation of sites contaminated by hazardous substances); the Bernard Allen Emergency Drinking Water Fund (funding alternative water supplies for  low income homeowners whose drinking water wells have become contaminated);  and the Brownfields fund (supporting  redevelopment of contaminated sites).

The Dry-Cleaning Solvent Cleanup Fund and the Commercial UST Trust Fund receive funding from  fees and taxes on the commercial activities  associated with past contamination problems. The Brownfields program  operates entirely on federal  funds and fees paid by prospective developers of contaminated sites; the program receives no state appropriations, so the special fund provides the only source of state operating funds.  A number of the  environmental cleanup funds (including the Commercial UST Fund) have been chronically underfunded and transfer of the interest income will only further reduce the resources available for assessment and cleanup of contamination. The transfer of interest income from these funds  allows the legislature to appropriate those funds for unrelated purposes as part of the General Fund budget.

Fisheries Enforcement —  The budget bill authorizes the state Division of Marine Fisheries to enter into a joint enforcement agreement with the National Marine Fisheries Service.  Commercial fishing interests  successfully opposed  a joint state-federal enforcement agreement for a number of years.  Under the agreement, state marine patrol officers will enforce federal fisheries regulations and DMF  will receive federal funding for those enforcement  activities.

Fee Increases —  The budget raises  several  license fees for commercial fishermen. Some of the fees will be used to replace General Fund appropriations for the At-Sea Observer Program.  (The  program  monitors the deaths of endangered species, such as sea turtles,  associated with the use of gill nets.  Federal regulators have required the observers as a condition for continued use of gill nets, which incidentally cause sea turtle deaths, by N.C. fishermen.)   The budget also authorizes new fees for access to GIS information collected by the Natural Heritage Program.

Missing from the compromise budget — 

No new state funds are appropriated for analysis of the state’s  shale basins and existing gas wells, digitizing shale gas data  and marketing the state’s shale gas resources. (The Senate had proposed appropriating $1.17 million.)

The budget does not include a special fund for acquisition of federal lands around Oregon Inlet and Highway 12 on Hatteras Island. (The Senate had set aside $15 million for land acquisition and legal fees.) The compromise budget still directs the Department of Administration to attempt to negotiate acquisition of those lands and begin proceedings to condemn the lands in 2015 if negotiations fail.  (State condemnation of federal lands should set up an interesting constitutional issue.) The budget bill also has special provisions authorizing the Governor, by executive order, to waive both Coastal Area Management Act permits and environmental impact statements for projects to reconstruct or relocate Highway 12.  For more on the content of the executive order provision, see an earlier post.

Rushing Stormwater

July 26, 2014. House Bill 201 (Building Reutilization for Economic Development Act) left the House as a  bill exempting restored buildings from the most recent state energy efficiency standards. The bill returned from the Senate with the addition of significant changes to state stormwater standards and a new exemption from  environmental review under the state Environmental Policy Act (SEPA). The bill received final House approval on July 24  without review by an  environment committee in either chamber.  The House approved the new measure on a vote of 66-42 and the bill will go to the Governor for signature.

The stormwater amendments   affect  a number  of existing state water quality  programs, including rules for development in water supply watersheds; coastal stormwater rules to protect the quality of shellfish waters; and nutrient management strategies adopted to restore water quality in rivers and reservoirs already degraded by excess nutrients. In the last 20 years,  stormwater controls have become increasingly important in reducing the amount of pollution running off developed areas into rivers, lakes and streams  The  bill raises two questions — 1. Will higher intensity development with significantly reduced stormwater controls be consistent with maintaining  water quality (particularly  in sensitive areas near shellfish waters  and drinking water supplies)? and 2. Are the changes consistent with federal Clean Water Act requirements?

What the stormwater provisions  do:

♦ A new definition of “development” excludes  existing built-on area from the calculation of stormwater requirements.

♦  The bill  prohibits the Environmental Management Commission (EMC)  from requiring private property owners to install new or increased stormwater controls on existing development “except as required by federal law” — a savings clause that will raise more questions than it answers.

Excluding existing development from the built-on area calculation for a site   could  allow redevelopment with seriously under-designed stormwater controls. Under existing rules for  water supply watersheds,  low density development (defined as no more than 12% built-on area) does not require engineered stormwater controls; projects exceeding 12% built-on area do.   H 201 would allow a  developer  in a  water supply watershed to  increase existing built-on area  by another 12% before being required to install any engineered stormwater controls. If the added built-on area exceeds  12%, the developer will  only have to provide stormwater controls for the added built-on area.

Using redevelopment of a property in a water supply watershed (but outside the water supply critical area) as example: If  the property  already has 50% built-on area,  H 201  allows the developer to  expand the built-on area by another 12%  with no engineered stormwater controls. The developer could add up to 30% additional built-on area (the maximum allowed under the rules) — for a total of 80% built-on area —  and only provide stormwater control  for 30%. The end result could be  a  property in a water supply watershed that is  largely impervious, but has either no stormwater controls  or stormwater controls designed  for only  a fraction of the stormwater generated by the development.  The EMC’s coastal stormwater rules and rules for municipal storm sewer systems also use the low density/high density approach  (with  different high-density  thresholds), so the bill will have similar results in  those programs.

It is less clear how the bill will affect  stormwater requirements  under nutrient management strategies for impaired waters (including the  Neuse River, Tar-Pamlico River, Falls Lake and Jordan Lake).  The nutrient management strategies address  the stormwater impacts of new development ( including  redevelopment that adds built-on area) by limiting nitrogen and/or phosphorus loading associated with the development activity.  Developers   usually  meet those load limits by either limiting built on area or installing stormwater controls, but the nutrient management rules do not directly link stormwater requirements  to percentage of built-on area.  The  question is whether the provision in  H 201  prohibiting the EMC from requiring a private property owner to provide stormwater controls for existing development would also affect the calculation of  nutrient loading on a redevelopment site where some part of the loading comes from  existing built-on area.   Nutrient management strategies will also be affected to the extent  those rules  loop in other stormwater standards (like those for water supply watersheds) in areas  with specific water quality classifications.

H 201 may not have a significant effect on the existing development rules included in the Falls Lake and Jordan Lake nutrient strategies. Depending on the success of other parts of those  nutrient management strategies,  local governments in the two watersheds could be required to  achieve additional reductions in nutrient loading from  existing developed areas.  Although stormwater retrofits will be one way to meet the reduction targets, the rules give local governments  flexibility  to use a number of strategies to achieve the load reductions and those may or may not include requirements on private property owners.

The savings clause  in H 201  allowing  the EMC to require stormwater controls on preexisting development to the extent required by federal law raises the question of what it means to be “required by federal law”. The  federal Clean Water Act  creates  a framework, but  allows the state to develop  water quality standards appropriate for state waters.  The U.S. Environmental Protection Agency (EPA) has delegated implementation of most federal Clean Water Act programs to North Carolina’s Department of Environment and Natural Resources (DENR),  but   subject to EPA approval and continuing oversight.  Federal law does not dictate the content of state water quality rules, but does require the state to have standards adequate to protect  water quality.  In the programs described above, stormwater controls have played an important role in those standards.  The question  is  whether state water quality  standards  will still be  adequate to  meet the goals of  the Clean Water Act  given  the restrictions  imposed by H 201.

The federal Clean Water Act also requires the state to establish a Total Maximum Daily Load (TMDL) for any pollutant contributing to impaired water quality. The  TMDL caps pollutant discharges  to an impaired water body at a level that will allow the waters to meet water quality standards.  TMDLs must be approved by EPA . State nutrient management strategies for the Tar-Pamlico River, Neuse River, Falls Lake and Jordan Lake have been designed (and approved by EPA) to meet the TMDL requirement for those nutrient-impaired water bodies. Each of those nutrient strategies relies in part on stormwater controls to reduce nutrient loading from new development. By significantly changing stormwater requirements as applied to existing development, H 201 has also changed the TMDLs previously approved by EPA.

Amendments to the Clean Water Act in the 1990s extended wastewater permitting requirements to municipal stormwater discharges, requiring municipalities to get National Pollutant Discharge Elimination System (NPDES) permits for storm sewer systems.  To have permit coverage, federal  rules require  municipalities to put  stormwater controls on new development. The EMC’s  urban area stormwater rules, which  set the minimum requirements for coverage under a federal NPDES stormwater permit, will also be affected by H 201.  It isn’t immediately clear whether the changes required by H 201 will be consistent with federal NPDES stormwater rules.

The  EIS exemption  in H 201 will likely have limited impact (positive or negative).  Under the  exemption, a state Environmental Impact Statement (EIS) would not be required for expansion or new construction that does not increase the footprint of a building or facility to more than 150% of the  previous footprint. (In other words, the total footprint of the expanded facility could be 50% larger than the existing facility without triggering an environment document.)  The State Environmental Policy Act, N.C.G.S. 113A-1, et seq.,  only requires an  EIS for a project that requires a state approval and involves expenditure of public funds or use of public lands. As a result,  SEPA  has a limited impact on private development projects.

For projects  meeting the  SEPA triggers,  DENR   rules already exempt many construction projects. The difference is that   H 201 grants an EIS exemption based  on the size of the expansion project alone and without regard to natural resource impacts. To the extent H 201 has an effect on SEPA reviews, it may be to exclude from review some construction projects that  would otherwise require an environmental document   because of the  sensitive location or amount of stream and wetland disturbance.  Note: some projects  will still trigger an EIS under federal law; the National Environmental Policy Act (NEPA) applies to both public and private projects and the H 201 exemption would have no impact on federal environmental review requirements.

NCDENR Questions Legal Basis for Proposed EPA Power Plant Rule

July 22, 2014.  On June 18, 2014, EPA published a proposed  rule to reduce emissions of carbon dioxide (CO2)   from existing coal-fired power plants.  Both Duke Energy  and  DENR’s   Division of Air Quality  indicated a detailed review of the draft rule would be required to fully understand the impact  on North Carolina’s electric utilities.    More recently,  Donald van der Vaart, DENR’s Energy Policy Advisor,  made a presentation on  the  proposed CO2 rules to the N.C. Energy  Policy Council. You can find both a video  and a copy of the  powerpoint presentation here.  Rather than discussing the rule’s potential impact on the state’s electric utilities, the presentation questioned the legal basis for the EPA rule.  The  legal analysis identified some legitimate questions about interpretation of the Clean Air Act provision  underlying the CO2 rule,  but the analysis also had significant flaws.

EPA  proposed the CO2 rule under Section 111 of the Clean Air Act,  which authorizes EPA to adopt standards for new and existing sources of air pollution by category; in this case, the category consists of electric generating units burning fossil fuels. (The Clean Air Act also gives EPA two other tools for addressing air pollution —   Section 108 authorizes EPA to adopt  ambient air quality standards to be met on an area-wide basis and Section 112 allows EPA to regulate listed hazardous air pollutants, like mercury,   by source category.)

DENR’s  presentation to the Energy Policy Council offered some criticism of  EPA’s proposed CO2 standard for  new power plants, but  made a more pointed  attack on the  rule addressing emissions from existing power plants. The presentation both questioned EPA  authority to regulate CO2 emissions from existing power plants under Sec. 111(d)  and the appropriateness of including  transition to  natural gas;  expanded use of nuclear power and renewable energy sources;  and energy efficiency  as elements of the performance standard  for existing coal-fired power plants. This post will likewise focus on the  proposed  existing source rule under Sec. 111(d) and particularly the DENR objections to the rule that need  more context or correction:

DENR Objection:  EPA cannot  use Sec. 111(d) of the Clean Air Act  to set a standard for an existing air pollution source  also regulated  under  Sec. 112  (addressing  hazardous air pollutants) even if the standard proposed under Sec. 111(d) addresses a pollutant that is not regulated under Sec. 112.

Counterpoint:   This seems to be  a more open question that the presentation suggests. When Congress added Sec. 111 to the Clean Air Act in 1990,   the  House  version prohibited  use of Sec. 111(d)  to set standards for existing sources regulated under Sec. 112 and the Senate  version prohibited  its use to set standards for pollutants regulated under Sec. 112.  Both versions became part of the Statutes at Large.  EPA has consistently interpreted Sec. 111(d)  to prohibit  adoption of  existing source standards  for pollutants  regulated under Sec. 112.   (See a paper  by Adam Kushner and Judith Coleman on the background of the  Sec. 111(d) language and  EPA’s interpretation.) Under EPA’s interpretation, Sec. 111(d)  can be used to regulate CO2 emissions from existing coal-fired power plants because CO2 has not been regulated under Sec. 112 as a hazardous air pollutant.

As a policy matter, EPA certainly seems to have the better interpretation; otherwise, the language in Sec. 111(d) would create a loophole preventing regulation of a dangerous air pollutant from an existing  source (in this case, a  power plant) simply because the facility  also emits hazardous  air pollutants regulated under Sec. 112.  If EPA’s interpretation is challenged, the question will be whether the court recognizes the existence of a conflict in the statutory history of Sec. 111(d)  and defers to EPA’s interpretation.

DENR quotes the Natural Resources Defense Council (NRDC) in support of the more restrictive interpretation of Sec. 111(d), but the NRDC comments concerned  an EPA  rule regulating  mercury emissions  from power plants. Since mercury had been listed as a hazardous air pollutant under Sec. 112,  NRDC challenged EPA’s decision to use Sec. 111 instead of  Sec. 112 as the basis for the Clean Air Mercury Rule (CAMR).  NRDC did not argue that EPA lacked authority to  regulate emissions of other pollutants  from the same source  under Sec. 111 and the federal court decision in the CAMR case did not decide that issue.  (The Kushman/Coleman paper notes that the CAMR decision erroneously says that  EPA conceded a lack of authority.)

DENR Objection: Sec. 111(d) cannot be used to regulate pollutants listed under Sec. 108 of the Clean Air Act (42 U.S.C. § 1408).

Counterpoint:  DENR correctly notes that Sec. 111(d) cannot  be used to regulate an air pollutant  already covered by an ambient air quality standard  or  listed for development of an ambient air quality standard under Clean Air Act Sec. 108. But EPA has not adopted an ambient air quality standard for CO2 or listed CO2 under Sec. 108. The  DENR presentation assumes that EPA’s   2009 finding that CO2 (in combination with other greenhouse gasses) endangers public health and welfare  automatically resulted in a  Sec. 108 listing. The 2009 “endangerment” finding was made under Sec. 202 of the Clean Air Act as a necessary first step toward regulating motor vehicle emissions of  greenhouse gasses. But an “endangerment” finding by itself does not cause a pollutant to be listed under Sec. 108. The two are distinct actions.

DENR Objection: Sec. 111(d) requires controls on individual emission sources; the “performance standard”  cannot be met by alternative  CO2 reduction measures (such as energy efficiency and increased use of renewable energy sources) allowed under the proposed EPA rule.

Counterpoint: This again appears to be a much more open question than the presentation would suggest. EPA’s proposed rule gives states the flexibility to use measures other than  pollution  controls on existing power plants in developing the “standard of performance”  required under Sec. 111(d).  EPA identifies four “building blocks” : increased efficiency at existing  coal-fired units; transition  from coal to natural gas;  greater reliance on nuclear energy and renewable energy sources; and management of electricity demand.   There may well be a debate over what can be considered a “standard of performance” under Sec. 111, but the question has not been settled. A number of legal scholars endorsed a similarly broad interpretation of the “standard of performance” under Sec. 111  well before release of the proposed EPA rule.  (You can find a  2011 discussion  paper on compliance flexibility under Sec. 111  here.)

EPA’s interpretation is also entitled to deference where Congress has not clearly required (or barred) a particular approach to implementation. The federal court decision cited by  DENR  as rejecting  pollution trading under Sec. 111, ASARCO, Inc. v. EPA,   was effectively overruled by the later U.S. Supreme Court decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,  467 U.S. 837 (1984).    In Chevron, the court upheld  EPA’s interpretation of “stationary source” to encompass all of the emission sources at a facility  —  an outcome  contrary to the earlier ASARCO decision-- giving industry the flexibility to modify individual sources at a facility within a facility-wide emissions cap.   The Chevron decision also made a very clear statement about deference to agency interpretation: “When a challenge to an agency construction of a statutory provision, fairly conceptualized, really centers on the wisdom of the agency’s policy rather than whether it is a reasonable choice within a gap left open by Congress, the challenge must fail”.  EPA’s interpretation of the  “standard of performance” language in Sec. 111 to allow greater compliance flexibility and lessen the regulatory burden on electric utilities should be entitled to the same deference.

Whatever the strength or weakness of DENR’s legal analysis of the proposed CO2 rule for existing coal-fired power plants,  the fact of the critique certainly sends a message. It suggests that the McCrory administration may intend to  oppose the proposed rule whether the impact on North Carolina will be positive or negative.