The Senate Budget and the Environment: Money

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May 20, 2013: Last night the North Carolina Senate put out a draft budget. The new version of Senate Bill 402 has the budget bill text — which includes both  legislative provisions related to the budget and other non-budget things that the Senate wants. (More about those in another post.) A detailed overview  of the budget numbers can be found in the report of the Senate Appropriations/Base Budget Committee. Here is a quick take on the how the Senate budget would affect environmental programs. 

Overview of  DENR Budget Cuts

Although the Senate’s proposed  budget shows  a 40% increase in the budget for the Department of Environment and Natural Resources (DENR), the budget actually reduces funding for existing DENR programs in three ways:

1, The budget cuts funding department-wide by  $2,277,894  (2%), allowing DENR to decide where to take the reductions.

2. The budget  then takes an additional $2,055,782 in cuts to individual programs and funds. Some of the specific reductions include

– Elimination of  funding for the Sustainable Communities Task Force

– Reduction or elimination of funding for some programs in the Division of Marine Fisheries

– Reduction in funding for the Adopt-a-Trail Program

– A cut in operating funds for the N.C. Zoo

3. The budget significantly reduces funding dedicated to parks and conservation by shifting revenue from the real estate excise tax (the deed stamp tax) to the state’s General Fund.  By law, the deed stamp tax is now dedicated to the Parks and Recreation Trust Fund and the Natural Heritage Trust Fund to be used for  conservation, parks acquisition and improvement of park facilities.  The budget repeals the law that dedicates deed stamp tax revenue for those purposes and replaces the tax revenue with appropriations  at much lower levels. (More detail below.)

 Funding  for Conservation and Parks

The Senate budget proposes to do two significant things. First, it combines the Clean Water Management Trust Fund (CWMTF) and  DENR’s  Natural Heritage Trust Fund into a new Land and Water Conservation Fund. Then, the budget bill repeals the state law that  dedicates revenue from the deed stamp tax to conservation and parks projects and makes both the new Land and Water Conservation Fund and the  Parks and Recreation Trust Fund dependent on appropriations. The budget appropriates  $12 million for the Land and Water Conservation Fund and $11 million for the  Parks and Recreation Trust Fund; the $23  million total represents a reduction of about 65% compared to  2011 funds earmarked for  CWMTF,  the Natural Heritage Trust Fund and the Parks and Recreation Trust Fund combined. According to a N.C. Department of Revenue report,  the deed stamp tax generated $63.5 million in revenue in 2010-2011 to be divided between the Parks and Recreation Trust Fund  (75%) and the Natural Heritage Trust Fund (25%).  The Clean Water Management Trust Fund received a 2011 appropriation of  $11.25 million. Together, the deed stamp tax and CWMTF appropriation represented $74 million in total funding  for land and water conservation projects and parks.    Although the General Assembly  diverted money from both the Parks and Recreation Trust Fund and the Natural Heritage Trust Fund over the last four years because of budget shortfalls (so the full amount could not be used),   the  Senate budget permanently eliminates the deed stamp tax as a  dedicated funding source  to make much smaller appropriations through the budget process.

Programs that Receive Increased Funding

Much  of the apparent  increase in DENR’s budget comes from transfer of programs from other departments. For example, the State Energy Office and the Grassroots Science Museum pass-through grants would move to DENR from the Department of Commerce and the existing state funding would follow those programs.  Other  “new” appropriations really shift existing DENR activities from a dedicated  funding  source  to appropriations – generally at the same or lower funding levels.  In addition to the deed stamp tax, the list of dedicated funding sources diverted to the General Fund and replaced by appropriations includes the scrap tire disposal tax, the white goods disposal tax, and a portion of the solid waste disposal tax.

Actual increases in funding for existing or expanded DENR programs would go to:

– The Division of  Energy, Mineral and Land Resources to support the Mining and Energy  Commission; pay membership dues in the Southern States Energy Board (an organization of southern states supporting energy development) ;  market  North Carolina shale gas resources and do additional geological sampling and data collection on the state’s shale gas resource.

– Creation of a new water and wastewater infrastructure program that combines the existing drinking water and wastewater revolving loan programs with  new grant funding for local water and sewer needs.   The appropriation includes funding for a new Assistant Secretary for Infrastructure, a new division director position and funding for a water and sewer database as well as $3.2 million in grant funding for 2013. (The amount increases to $4.7 million for 2014.)

– A program to monitor the impact of  gill net fishing on endangered sea turtles (required as part of an agreement with federal agencies under the Endangered Species Act).

– Two new positions in the Division of Waste Management to evaluate groundwater contamination  that may threaten water supply wells.

–  Repair and replacement of trams at the North Carolina Zoo.

DENR Budget Bottom Line:

Reductions to existing programs: $4,333,676 or approximately – 4%  (not including reductions in funding to the Clean Water Management Trust Fund, Natural Heritage Trust  Fund and Parks and Recreation Trust Fund)

Loss of a dedicated funding source for conservation and parks resulting in a reduction of approximately 65% from the amount of  funding provided by deed stamp tax revenue.  

Proposed cuts come on top of  a 40% reduction in the DENR budget since January 2009 (including reductions in both operating funds and trust funds).

Increases to existing programs:  $6,200,000 (this figure does not include appropriations that simply replace dedicated funding sources eliminated in the  proposed budget or replace funds taken on a one-time basis  last year).  Most of the new funding — $4,000,000 —  goes to the  reorganized  water infrastructure program for two high level management positions,  a water and sewer database and grants to local governments.

Other apparent increases in the DENR budget involve the  movement  of money to follow the transfer of programs and positions from other state agencies or to fill gaps created by eliminating dedicated funding sources for DENR programs.   Six positions and $1.7 million in operating funds come to DENR with transfer of the State Energy Office from the Department of Commerce. Over $2 million would be transferred from Commerce for pass-through grants to the Grassroots Science Museums.   Appropriations also take the place of revenue from the white goods, scrap tire, and solid waste disposal taxes; those tax revenues would go to the General Fund to be appropriated by the legislature.

Cross-Over Continued: Repeal of Jordan Lake Water Quality Rules

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May 15, 2013:    Yesterday, the  Senate Agriculture and Environment Committee approved a new version of  Senate Bill 515 (the  ironically named Jordan Lake Water Quality Act)  to  repeal state  rules adopted to address  water quality  problems in Jordan Lake. The problems come from excess nutrients (nitrogen and phosphorus) that  can cause algal blooms affecting the smell and taste of the water. (Smell and taste are important to Triangle communities taking water from the lake for drinking water supply.) In hot summer conditions, algal blooms  also contribute to fish kills.  Reducing nutrient pollution can be a real environmental policy challenge because of the number of different  nutrient  sources –  wastewater discharges, stormwater runoff from developed areas, agricultural activities — and the need to ask upstream communities to spend money  for water quality improvements that do not directly benefit their citizens. The Jordan Lake rules came out of years of work by the state’s  Division of Water Quality to understand  how much nitrogen and phosphorus reaches the lake from different sources and  identify the reductions needed to  improve the lake’s water quality.  Development of the rules involved  nearly two years of meetings with a stakeholder group  that  included local government officials, the N.C. Farm Bureau, wastewater system operators, the N.C. Homebuilders Association, the N.C. Realtors Association and others.  After the Environmental Management Commission adopted final rules for the Jordan Lake watershed in 2008, the General Assembly  modified the rules through session laws adopted in  2009. (See S.L. 2009-216 and  S.L. 2009-484.)  The revised Jordan Lake rules finally went into effect in August of 2009, but the rules allowed several years for local governments in the  watershed to improve wastewater treatment and  create stormwater programs needed to reduce nutrient loading to the lake.

Although most local governments in the Jordan Lake watershed began moving to  meet nutrient reduction targets set in the rules,   local governments in the Haw River arm of the  watershed  (including Greensboro and Burlington) continued to push back. Objections from those  local governments led to legislation in 2010, 2011 and 2012 to extend the time allowed for  upgrading wastewater treatment and creating (or modifying) local stormwater programs.  The current dates for compliance with the wastewater and stormwater requirements of the Jordan Lake rules come from legislation adopted by the General Assembly in 2011 and 2012.   Section 14 of  Session Law 2011-394   extended the  time  for completion of wastewater treatment plant improvements to December 31,  2016.  (The actual completion date could be  as late as  December 31, 2018   if the wastewater system receives state  approval of the  improvement  plan by the end of 2016). In 2012, the General Assembly pushed back the deadline for creation of local stormwater programs in the Jordan Lake watershed to August 10, 2014 at the earliest. The actual date could be later depending on the schedule for renewal of a city’s existing Clean Water Act stormwater permit.  For reasons too convoluted to go into here, identical  provisions  delaying  development  of local  stormwater programs  appeared in Section 9 of  Session Law 2012-200 and Section 11 of  Session Law 2012-201.

The latest repeal effort  again  comes from communities in  Guilford and Alamance counties that want to avoid the cost of  wastewater treatment improvements and stormwater controls needed to reduce the amount of nitrogen and phosphorus reaching Jordan Lake from the Haw River. The primary bill sponsors are Sen. Rick Gunn ( who represents Alamance and Randolph counties) and  Sen.Trudi Wade (Guilford County).  The bill would immediately repeal the entire set of Jordan Lake nutrient management rules and provide no replacement other than a legislative study to develop new rules. One of the reasons offered by Sen. Gunn in committee was the failure of the 2009 Jordan Lake  rules to improve water quality in the lake. There was no mention of the  fact that  the General Assembly had  extended the  compliance  timelines in the rules. Given that many measures required under the Jordan Lake rules may not be in place for another three or more years, the lack of water quality improvement to date should not be a surprise.

The bill aims for a technological solution based on mitigation of pollution at the lake  — and without the need for pollution reductions upstream.  In response to a question in committee, Sen. Gunn could not say whether effective technologies exist or at what cost. It is difficult to imagine technologies so effective that  no upstream nutrient reductions would be needed, although it  may be possible to   shift  the balance between treatment technology at the lake and upstream pollution reductions. If new mitigation and treatment technologies exist, one difficult environmental policy question will remain — who pays for water quality improvement in Jordan Lake?    The Triangle communities that take water from Jordan Lake  and rely on the lake as a recreation area may resist an effort to put the entire cost of upstream pollution on their citizens.

One last wrinkle. The Jordan Lake rules exist in part to meet a federal Clean Water Act requirement. Under federal law, North Carolina’s water quality program must have a plan to reduce the discharge of excess  nutrients  that  hurt water quality  in Jordan Lake. The plan currently approved by the U.S. Environmental Protection Agency (EPA) has  been based on the 2009 Jordan Lake nutrient rules. Those rules share the cost and regulatory burden among all of the sources that contribute to the lake’s  water quality problem — wastewater discharges, stormwater runoff  (both near the lake and upstream), and agricultural activities. Without an alternative plan approved by EPA, the Clean Water Act would force the  nitrogen and phosphorus reductions to come entirely from  sources that require Clean Water Act permits — largely the wastewater treatment plants in the Jordan Lake watershed. That could actually increase reductions required from Greensboro and Burlington wastewater treatment plants, since  sources that fall outside Clean Water Act permitting requirements would not contribute to  overall nutrient reductions.

Senate Bill 515 is on the Senate calendar today.

A Rush of Environmental Legislation

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May 12, 2013: The bill “cross-over” deadline arrives this week. By May 16, most  bills  must pass either the House or the Senate and “cross over” to the other chamber  to avoid sudden death. (There are exceptions for finance bills, budget bills and constitutional amendments.) Because of the deadline, bills have been flying out of committees and to the House and Senate floor — leading to a flurry of posts. Two more bills that came out of committee last week (and are scheduled for votes this evening on the Senate or House floor):

Senate Bill 638 (N.C. Farm Act of 2013) makes  a  significant change to state water quality law by excluding  any wetland that is not considered “waters of the United States” from protection under the  state’s water quality permitting requirements.  The bill  takes a term (“waters of the United States”)   that  describes  federal  Clean Water Act  jurisdiction and  uses it  to  remove state protection for  wetlands that fall outside federal jurisdiction.  For reasons that mostly have to do with limits on federal authority under the Commerce Clause of the U.S. Constitution, not all state waters or wetlands are considered “waters of the United States”.  The limit on federal jurisdiction has nothing to do with the  importance of the wetland — it has to do with how the Constitution divides responsibility between the  federal  government and the states. The change in definition would mean that  someone could fill or discharge pollutants to wetlands that fall outside federal jurisdiction without any water quality  permit from the state. In committee, the change was described as one intended to help farmers, but developers are likely to benefit more.

House Bill 677 (Local Government Regulatory Reform)  came out of the House Regulatory Reform Committee. Language in the bill could interfere with efforts  to  keep the state’s urban areas in compliance with the  federal air pollution standard for ozone.  Meeting the ozone standard will be an increasing challenge as  population grows  and the ozone standard becomes tighter.  An area that fails to meet the ozone standard risks losing federal highway funding and new industrial development projects.  House Bill 677  prohibits cities and counties from adopting an ordinance that “[r]equires an employer to assume financial, legal, or other responsibility for an employee’s carbon footprint, which may result in the employer being subject to a fine. fee, or other monetary, legal, or negative consequences”.   Although the intent of House Bill 677 isn’t completely clear (and there was little committee discussion), the  bill  could  affect local programs to reduce  motor vehicle emissions that account for as much as 70% of the ozone pollution in urban areas. For example, a Durham  ordinance  requires large employers to do certain things to reduce commuter miles traveled by employees   in an effort to  reduce motor vehicle emissions.  The question is whether House Bill 677 will take away some tools that fast-growing urban areas like Durham can now use to stay  in compliance with the ozone standard.

Night of the Living Dead: Board and Commission Reorganization

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In House Bill 1011 (Government Reform and Reorganization Act). the  boards and commission reorganization bill rises and walks again.  An earlier bill, Senate Bill 10,  died  when the House refused to adopt  compromise language negotiated with the Senate. The new bill came out of the House Rules Committee last week and quickly passed on the House floor.   Changes to the environmental commissions:

Coastal Resources Commission

– Reduces  the number of CRC members from  15 to 13;  nine members would be appointed by the Governor and  four by legislative leaders

– Eliminates  one at-large seat and the seat on the CRC currently designated for a representative of a  state or national conservation organization.

– Limits the number of CRC members who receive income from real estate development or construction. Seven of thirteen seats on the CRC  would have to be  filled by individuals “who do not derive any significant portion of their income from land development, construction, real estate sales, or lobbying and do not otherwise serve as agents for development related business activities”.

– Requires that all CRC  members be N.C. residents and either  reside or  own property in the coastal area

– Makes the transition to new appointees in two steps.  The bill would end the terms of all  CRC members  on June 30, 2013  with the exception of  the four members who have existing terms ending June 30, 2014.  Those four members are now in seats designated for commercial fishing,  wildlife or sports fishing, local government  and one of the three at-large seats.

Environmental Management Commission

–  Reduces  the number of EMC members to 15; nine members would be appointed by the Governor and six by legislative leadership.

– The bill keeps most of the categories for appointment to the EMC that appear in the existing statute (although in some cases, the number of EMC members in a given category may be reduced or categories have been combined). The bill eliminates the seat currently designated for a member  with public health experience and the seat for a member with experience in local government pollution control activities.

– The terms of all current EMC members would  end  on June 30, 2013. Eight new members will initially be appointed to two year terms and the remaining seven members to four year terms (to stagger the  terms). After the first set of new appointments, all members will be appointed to serve four-year terms.

The  bill also removes conflict of interest language in the EMC appointment statute. See N.C. General Statute 143B-283(c).  Both the Clean Air Act and the Clean Water Act   have conflict of interest standards  for members of state boards and commissions with  authority to issue federal permits. Under N.C. law, the EMC  has both air quality and water quality permitting authority. Although  the commission has delegated most permit decisions to DENR,  the EMC  still makes some permit and enforcement decisions (such as approval of major variances and civil penalty remissions requests.) To have  – and keep —  delegated permitting authority, North Carolina must meet the federal conflict of interest standards.  The sentence to be repealed closely tracks federal  Clean Air Act language requiring any state commission that approves permits or enforcement orders to have a majority of members who “represent the public interest and do not derive any significant portion of their income from persons subject to permits or enforcement orders under [the delegated air quality permitting program]“. An effort to amend the bill on the House floor to reinstate the conflict of interest language failed.

Wildlife Resources Commission

– Shortens the term for Governor’s appointees to the WRC from  six years to four years. (Members appointed on the recommendation of legislative leadership will continue to serve two-year terms.)

– The terms of all current WRC members would end on June 30, 2013.

– About one-half of the  Governor’s new appointees would be appointed to two-year terms and the remainder to four-year terms (to create staggered terms). After the initial appointments, all Governor’s appointees would be appointed to four-year terms.

Regulatory Reform — Existing Rules

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Last week, Senate and  House committees approved separate bills requiring review of existing state agency rules.  Under  Senate Bill 32,  all existing environmental protection rules would expire on December 31, 2017 unless readopted and approved by the state’s Rules Review Commission.  The problems:  1. Rather than identifying and fixing rules that create an unnecessary burden, the bill  puts scarce state resources  (both staff time and cost)  toward  readoption of every rule now  in existence;  and 2. If DENR and the environmental commissions  cannot  readopt  all environmental rules within four years, some number of the rules could automatically expire without regard to public health, public safety  or the impact on federally delegated environmental programs.

The House Regulatory Reform Committee approved a new version of House Bill 74 (Periodic Review and Expiration of Rules). The  original House bill draft  basically mirrored Senate Bill 32 and required review and readoption of all state agency rules every ten years.  Responding to concerns about the cost/benefit of readopting all rules, the new  House bill draft requires state agencies to review rules every ten years and sort the rules into three groups:

● Rules that are necessary and of substantive public interest;

● Rules that are necessary and without substantive public interest; and

● Rules that are unnecessary.

The intent was to make the  process less burdensome by only requiring readoption of rules that have “substantive public interest”.  The problem is that “substantive public interest”   now includes  any rule affecting property interests and any rule that any person may object to.  Under that standard,  very few rules would avoid the readoption requirement.  (I am  an optimist by nature, but experience tells me that rulemaking paradise in which  lions and lambs all lie down together is not a realistic goal.)

The bill would also automatically repeal any rule that the adopting agency fails to review  — or fails to review on the schedule set by the state’s Rules Review Commission (RRC). The idea of automatic repeal is a problem for several reasons, but the most basic is that rules needed to protect public health, safety and welfare should not be repealed because of a bureaucratic  error or a slipping timeline.  The bill also gives the RRC  power to require an agency to review an individual rule at any time – which makes a hash of the scheduled review, potentially disconnects an individual rule from related rules,  and raises the prospect of automatic repeal if the agency cannot immediately respond to the RRC request.

Like Senate Bill 32, the House bill applies even to state rules that adopt federal standards needed to carry out a delegated federal program.    Before going in that direction, the state needs to know what effect the readoption and automatic repeal provisions may  have on  the U.S. Environmental Protection Agency’s approval of the state’s Clean Water Act, Clean Air Act, Safe Drinking Water Act and hazardous waste programs.  When the question came up in committee last week, bill sponsor Ruth Samuelson indicated  a willingness to look into the issue more before the Regulatory Reform Committee meets again today.

In short, It is not clear  what Senate Bill 32 and House Bill 74  would accomplish — or even what the General Assembly hopes to accomplish with new rule review legislation.  Just last session, the General Assembly amended the state’s Administrative Procedures Act (APA) to include a new rules review process. G.S. 150B-19.2 invites the public to identify rules that are unnecessarily burdensome and requires the rulemaking agency to respond to those complaints. The APA  has long had a provision allowing anyone to petition a state agency for a rule change – including repeal of a rule. Under  G.S. 150B-20,  the agency must provide a formal response to each petition for rulemaking;  if the agency decides  not to make the requested rule change, its decision can be appealed.

It would be possible to tie the public comment under G.S. 150B-19.2 more closely to petition for rulemaking under G.S. 150B-20. It may also be helpful to amend G.S. 150B-20 to expressly identify rule repeal as one use of a petition for rulemaking. ( I don’t think there is any question the petition process can be used to request repeal of a rule, but  members of the public may not realize that.) Using some variation on those existing laws also has the benefit of focusing in on problem rules — rather than using a shotgun approach that aims at everything and may hit nothing.

The Senate and House rule review proposals also seem to be disconnected from the realities of rulemaking.  Many agencies – and particularly the environmental   agencies– long ago reformed the rulemaking process  in ways the General Assembly  may not recognize. On complicated issues, environmental rulemaking looks very much like negotiated rulemaking. The Department of Environment and Natural Resources   (DENR) has not done a major environmental rule in fifteen years without involving representatives of the regulated community  in development of the rule.  Depending on the subject, rule development  may include the Manufacturers and Chemical Industry Council, N.C. Homebuilders Association, N.C. Realtors Association,  local government,  electric  utilities,  commercial fishermen, the N.C. Farm Bureau, Department of Agriculture, Department of Transportation and others.  Sometimes all of the above.

Where  Senate Bill 32 and House Bill 74 assume that each rule is discrete, in reality environmental rulemaking often involves give and take among stakeholders to reach a set of interlocking standards.  One example would be the water quality rules protecting the Falls Lake water supply – water quality in the lake can only be protected by addressing all of the major pollution sources, so the rules allocate pollution reductions among  wastewater dischargers, development activity and agriculture. Pulling out any one of those standards affects  the other stakeholders and the effectiveness of  the water quality strategy.

To work, regulatory reform and rules review legislation needs to start with an understanding of how rulemaking  actually happens and target specific problems. Otherwise, the result will be costly chaos  — uncertainty for the regulated community, conflict with federal program requirements, and  costs  out of all proportion to the benefits. One risk is that the only benefit may go to individual interest groups that can use the process to avoid (or undo) the compromises needed for effective and equitable environmental protection programs.

House Bill 628 : It’s Not Easy Being “Green”

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May 7, 2013:  I just learned of  House Bill 628 (Protect/Promote N.C. Lumber)  today and set out to understand why the N.C. General Assembly would  want to stop  state construction projects from trying to  meet energy efficiency and environment sustainability standards. The short answer may be a perfect symbol of the  current environmental moment — an industry has asked the state legislature to do something to influence  a private nonprofit organization’s voluntary  environmental sustainability standards  because those standards set a higher bar than the industry wants to meet  to get credit for being “green”.

First, House Bill 628 really protects and promotes the particular type of “green” certification for  wood products supported by the N.C. Forestry Association. Certification of products and buildings as energy efficient and environmentally sustainable has become both an environmental movement and a marketing tool.  “Green” labels on consumer products appeal to environmentally conscious consumers. A green building certification appeals to those same consumers and to large institutions (public and private) interested in  environmental protection or cost savings from energy and water efficiency.  That consumer appeal gives a “green” label economic power and a war is currently raging over the kind of forestry practices that should get credit toward green product labels and green building certification.

House Bill 628 wades into the green building controversy. The U.S. Green Building Council, a nonprofit organization,  has developed the most widely known and accepted standards for environmentally sustainable and energy efficient construction.  The Green Building Council’s  program gives credit toward LEED (Leadership in Energy and Environmental Design) building certification for use of wood products that meet standards set by  the Forest Stewardship Council. You can find more information on LEED certification standards here.

The American  Forest and Paper Association created its own set of sustainable forestry standards in the 1990s.  The Forest and Paper Association’s  Sustainable Forests Initiative has since separated from the industry organization and operates as an independent nonprofit that maintains voluntary standards for sustainable forestry practices and  certifies  forestry operations meeting those standards.  The forest products industry has pushed the U.S. Green Building Council to give credit toward LEED certification for use of wood from a forestry operation certified by the Sustainable Forests Initiative, but the Green Building Council has resisted the change.

One afternoon has not been enough to fully understand the differences between certification under the Sustainable Forests Initiative versus the Forest Stewardship Council, so I am not going to try to resolve the controversy over their relative merits.  For purposes of understanding the political fight, conservation organizations believe the Forest Stewardship Council standards used for LEED certification do a better job of protecting endangered species and old growth forests and are less likely to result in clear-cutting.  The forest products industry prefers the Sustainable Forests Initiative standards as less costly and sustainable enough.

What does House Bill 628 do?

●   It prevents any future state construction projects from seeking LEED Certification.  (The bill only allows state projects to seek green building certification from a program that gives credit under the Sustainable Forests Initiative and uses standards approved by the American National Standards Institute.  The LEED program does not meet either of those requirements.) The move away from LEED certification for state buildings  will likely set back efforts to push state construction projects to greater energy and water efficiency and a smaller environmental footprint.

●   Ironically, the bill may hurt other North Carolina industries that benefit from LEED standards encouraging use of local materials.  A representative from Nucor Steel (a North Carolina-based company that produces steel from recycled   materials)   spoke against the bill in the House Agriculture Committee meeting today  and noted the value of  LEED standards as an incentive to use of domestic steel in construction.

Is there an offsetting benefit to the North Carolina lumber industry? That is not clear. Nothing the N.C. General Assembly does can compel the U.S. Green Building Council to change  LEED standards; it is entirely possible that House Bill 628 will order the state to abandon LEED certification for state construction projects without achieving any change in LEED standards for wood products.  It also isn’t clear that the LEED standard for wood represents a real barrier to use of North Carolina lumber.  The LEED standard for wood represents a very small part of the LEED green building certification. A commercial building must meet basic  LEED  requirements  and earn a minimum of 40 points on a 110-point  rating system scale for  LEED certification. Meeting the wood standard  just provides one point.   The wood standard itself is modest –  a builder can earn that one point by using only 50% (based on cost) of wood-based materials and products certified by the Forest Stewardship Council for permanent building components( such as framing and floors); temporary construction materials do not count against the percentage.

It is also difficult to argue that the LEED standards disadvantage N.C.  products, when each  N.C. forestry operation can choose to meet  the  voluntary Forest Stewardship Council certification standards that  receive credit  toward  LEED certification. The real issue is that N.C. wood producers want the benefits of a “green” product label — but also want to set the standards for being “green”.

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

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

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

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

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

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

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

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

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

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

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

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

Yesterday in the General Assembly

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

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

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

May Day at the General Assembly: Environmental Bills

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

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

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

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

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

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

Regulatory Reform 3.0

April 29, 2013:  Last Thursday, the N.C. Senate’s Committee on Commerce approved a new version of Senate Bill 612 (Regulatory Reform Act of 2013) — the third in a series of “regulatory reform” bills developed since Republicans gained control of both houses of the General Assembly in the 2011. The bill may be on the Senate calendar tonight.

The bill attempts too  much  to describe in one post, but  the  most significant provisions would  repeal stream buffer requirements in the Neuse River and Tar-Pamlico River basins  and  require  repeal or modification of any state rule  that “imposes a more restrictive standard, limitation, or requirement” than a federal law or rule on the same subject. ( See an earlier post  for more detail on the  Senate Bill 612 stream buffer language.) The idea of prohibiting  state agencies from adopting rules (particularly environmental rules) that  go beyond minimum  federal requirements has been around for awhile. The Regulatory Reform Act of 2011     ( Session Law 2011-398 )  prohibited  state environmental  agencies — and only environmental agencies — from adopting  more restrictive standards or requirements  than federal rules on the same subject.   The  law had exceptions  for  rules to address a “serious and unforeseen threat to public health, safety or welfare” and rules required by state law, federal law, state budget policy or a court order.  Even then, the General Assembly had an eye on existing rules as well. The same legislation directed all state agencies to provide the Joint Select Regulatory Reform Committee with a list of existing rules and indicate for each rule whether the rule was mandated by federal law and whether the  rule was more stringent than an analogous federal regulation. (The session law defined analogous to mean that a federal rule regulated the same conduct or activity.)

The Regulatory Reform Act of 2012 (Session Law 2012-187)  did not follow up on the reports  submitted in the fall of 2011.  Senate Bill 612  returns to the issue of state versus federal  standards, but does not appear to use the information submitted by state agencies in 2011 to focus regulatory reform efforts. Instead, the bill directs state environmental agencies — and only environmental agencies –  to  repeal or modify any rule that exceeds minimum federal requirements unless the rule fits under one of  the  exceptions set out in the 2011 legislation for new rules.  The bill  also takes away the authority of  city and county governments to adopt local ordinances that go beyond state and federal environmental standards.

It isn’t clear how   legislators  mean to interpret the Senate Bill 612 provisions. Even the most detailed federal environmental regulations (like those adopted by EPA under the Clean Air Act and Safe Drinking Water Act) have gaps that need to be filled by state rules.  Federal regulations often lack  detail on program implementation, such as record-keeping and monitoring  requirements. Sometimes the gaps are more substantive; environmental and public health issues of great concern  in North Carolina have not always been national priorities.  Most  federally delegated or authorized  environmental programs  operate under federal regulations  that are much  less detailed than  the Clean Air Act and Safe Drinking Water Act standards. The  state’s  water quality,  solid waste and coastal management programs  all operate under federal  laws  that  create  a framework for state regulatory programs, but  for the most part leave development of specific environmental standards to the state.  For those programs, it will be  difficult to directly compare state rules to federal regulations and determine what is more or less stringent.

So,  the Senate Bill 612 language  raises a number of questions:

– Where fairly detailed federal  standards  exist, would the bill require repeal of state rules that address gaps in the federal regulations?   Or can state rules go beyond  federal regulations to  describe the content of a complete permit application or establish specific  monitoring  and record-keeping requirements?

– In programs that operate under a federal framework for regulation that  leaves  specific standard-setting largely to the state agency (with federal oversight),  will Senate Bill 612 require repeal of  types of standards and requirements not specifically  identified  in the   federal regulations?   Will  the state’s water quality program, for example,  be limited to using regulatory  tools provided under the Clean Water Act (such as wastewater discharge permits) to solve  a water pollution problem? Or can the program continue to address all major water pollution sources and use innovative approaches not contemplated in the federal rules?

– Does the exception for rules addressing a  “serious and unforeseen threat to public health, safety and welfare”    allow state rules to go beyond minimum federal requirements because of particular conditions  in the state or in response to concerns that may not have come up in development of the federal regulation? Or will the General Assembly take the position that if EPA doesn’t think putting a petroleum underground storage tank (UST)  near a drinking water well is a problem, then it must not be a problem?

The  2011 DENR report to the Joint Legislative Committee on Regulatory Reform identified a number of state environmental rules that go beyond the requirements of  federal rules on the same subject. From a quick review, I found some examples of state rules that may have to be repealed under Senate Bill 612 :

● State waste management rules  requiring minimum separation from groundwater for land application of septage (to prevent groundwater contamination) and maximum slopes for land application sites (to prevent runoff to surface waters).

● State rules requiring water systems to  treat drinking water with excessive levels  of iron and manganese; both can cause discoloration of skin and teeth, as well as odor and taste problems.  Federal rules have only “advisory” standards for manganese and iron and do not require water systems to provide treatment to improve the water quality.

● State rules requiring a public water system to notify  the  owner  if routine water system monitoring  finds  a drinking water standard violation or high levels of fecal coliform bacteria in a water sample from a building. Federal rules only require water systems to provide notice to customers  if the water system overall violates Safe Drinking Water Act standards. Since  a water system can  exceed drinking water  standards at some number of  individual monitoring locations without  being in violation as a system (the exact number varies depending on the size of the water system and number of monitoring sites), the federal rules do not require the water system to notify  individual  property owners of  a problem  confined to a particular site. The state notice rule was adopted in 2006 after complaints that local water systems did not notify  citizens of high lead  levels in their drinking water after it was detected in routine water systems monitoring.

● Rules  prohibiting  location of a petroleum  underground storage tank (UST) within  100 feet from a  well serving the public or within 50 feet of any other well used for human consumption.

● Rules requiring setbacks for land application of all wastewater residuals (both sewage sludge and other solids  from wastewater treatment) and setbacks for disposal of coal combustion byproducts. The  rules include setbacks from property lines, public and private drinking water supplies, other water supply wells, and surface waters.

● Limits on emissions of  three toxic air pollutants (arsenic, beryllium and chromium)  by   industrial, medical, hazardous waste and sewage sludge incinerators.

It isn’t clear that these are the kind of “regulatory reforms”  that the General Assembly actually wants to see.

Note: Why the General Assembly believes  environmental rules  to be a greater burden on North Carolina citizens than other types of regulation will be  a subject for another day.