Monthly Archives: February 2013

House Changes to Senate Bill 10 — The Environment Commissions

On Wednesday, the House Committee on Commerce and Job Development approved a new version of Senate Bill 10 (reorganizing important state commissions) that  looks very different from  the bill approved by the Senate last week. The changes did not please  Senate bill sponsor Tom Apodaca who appeared in the House committee to present the Senate bill.  The most significant House changes affecting environment commissions:

Coastal Resources Commission

— Increased the number of CRC members from the 11 proposed by the Senate to 13;  nine members would be appointed by the Governor and  four by legislative leaders

— Restored seats representing commercial fishing, sports fishing, wildlife and agriculture.

Like the Senate Bill, the House PCS would eliminate specific seats for members with experience in forestry, finance, marine ecology and conservation.

— Restored language limiting the number of CRC members who receive income from real estate development or construction. The House bill would require that seven of thirteen seats on the CRC  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”.

— Added language requiring that all members be N.C. residents and either  reside or  own property in the coastal area

— Makes the transition in CRC membership  more gradual by allowing four current members to serve for another year.  The bill would end the terms of all  CRC members when the bill becomes law with the exception of 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

— Increases the number of EMC members to 15 (compared to 13 in Senate bill); nine members would be appointed by the Governor and six by legislative leadership.

—  Restores the  seat  for  a person  with experience  in air pollution or air pollution control.

— Adds back a seat for a  member with expertise in fisheries, marine ecology  or fish and wildlife conservation

— Restores the EMC conflict of  interest language. The House bill would require that all of the Governor’s appointees (a majority of the EMC members) must be people who  do not derive any significant portion of their income from “persons subject to permits or enforcement orders” under  the water and air quality statutes.

— Makes a more gradual transition to new appointments, taking the same approach used in the CRC appointments. The terms of all current EMC members would  end March 15, except that  four members would serve out terms  scheduled to end on June 30 2015.  Those four  EMC members now hold  seats earmarked for: agriculture; an engineer with experience in water supply  or in water or air pollution; a citizen interested in water or air pollution; and a person with expertise in air pollution or air pollution control. (As explained by legislative staff, the four EMC members hold over for two years  because of the way EMC terms are staggered.)

After a stop in the House Rules Committee on Thursday,  the bill can go to  the House floor.  From there, it will almost certainly  have to go to a conference committee to work out differences with the Senate.

Senate Bill 10 and Federal Conflict of Interest Laws

A bit more about Senate Bill 10. 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. To have  — and keep —  delegated permitting authority, North Carolina must meet those standards. North Carolina law gives the Environmental Management Commission (EMC) authority to issue federal water quality and air quality permits. Although the EMC has delegated much of its permitting authority to Department of Environment and Natural Resources (DENR) staff,  the EMC still makes decisions on major variances, declaratory rulings, civil penalty remission requests and final decisions in some administrative  appeals.

Senate Bill 10 removes language in N.C. General Statute 143B-283(c) that has allowed the EMC to meet federal conflict of interest standards. The sentence to be repealed closely tracks 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]”.   Under G.S. 143B-283(c),   at least nine Environmental Management Commission members must not “derive any significant portion of their income from persons subject to permits or enforcement orders under [the water and air quality statutes]”.  (When it was adopted, nine members represented a majority of the EMC; more about that below.) Although the Clean Water Act’s conflict of interest  language is worded differently, EPA has also accepted G.S. 143B-283(c) as meeting requirements for delegation of  water quality permitting authority.

Since the EMC expanded from 17 members to 19 members in 2001,  nine no longer represents a majority of the commission.  EPA picked up on the math problem more than a year ago and began questioning whether North Carolina’s delegated permitting programs  still met federal conflict of interest standards. The question first came up in connection with the air quality program and DENR’s Division of Air Quality has addressed the issue in recent implementation plans for federal air quality standards. DENR seems to have satisfied EPA by making sure that permit-related decisions go to EMC committees that have a “public interest” majority at the committee level.

Complete repeal of the EMC conflict of interest language would force EPA to look at the issue again  under circumstances that make inconsistency with federal standards more difficult to resolve.  The EMC appointment criteria in Senate Bill 10 no longer assure that even EMC committees could have a “public interest” majority.


Update on Injection of Drilling Waste in North Carolina

On Thursday, the Senate Commerce Committee approved a new version of Senate Bill 76 (the Domestic Energy Jobs Act) after adopting several amendments.  One amendment  somewhat narrowed  language in Section 4 of the bill that would for the first time allow underground disposal of waste in North Carolina.  The official amendment text is not yet  on the General Assembly website, but as it was read in committee  the amendment would allow  injection of  hydraulic fracturing fluid “and water produced from subsurface extraction” of natural gas resources.   The new phrase refers to water  that flows back out of the well after fracturing and continues to be produced (in smaller amounts) as long as the well  produces gas. It is a mixture of hydraulic fracturing fluid and groundwater; the quality of the water depends on the makeup of the fracturing fluid and groundwater conditions.

Underground  disposal of  flowback water from a natural gas well requires a federal Underground Injection Control (UIC)  permit under the Safe Drinking Water Act.  (Injection of  fluid to fracture an oil or gas well is exempt from UIC permitting.)  Like many other states,  North Carolina has  received a delegation of authority  from EPA to issue injection well  permits.  Under N.C. G.S. 87-88(j), injection must be approved by the state’s Environmental Management Commission (EMC), which also has the authority to  adopt rules for well construction and injection.   Since state law   prohibits underground injection of  waste, the EMC has not adopted  standards for waste disposal wells.

To  keep  the delegated injection well permitting program,  North Carolina will have to assure EPA  that the change in state law will not allow contamination of underground drinking water supplies.  States that  permit  injection of flowback water from oil and gas operations (or other types of waste)  usually adopt some version of the  federal rule language  that prohibits injection into an underground source of drinking water if  it  could cause a violation of  federal drinking water standards or  health  problems. Those states  also  adopt specific rules on  location, construction and use of waste injection wells to make sure the general standard can be met.  For one example, see the  Texas rules for underground injection of water from drilling operations.

Questions that arose in committee discussion (with my additional comment in italics below):

Does the law require the water from a drilling operation to be reinjected on the same site?  Response  in committee – No.

     SmithEnvironment: Water from a drilling operation would not be injected into  an area that could produce gas; injection wells either go into an area off-site that doesn’t have a gas resource or  in some cases an old gas well that is no longer producing will  be converted to a disposal well.

Would the language allow injection of water from drilling operations in other states?  Response in committee — That is not the intent, but the language may need to be clarified.

Can the Mining and Energy Commission adopt rules on injection of water from drilling operations? Response in committee — Yes,  the Mining and Energy Commission has the authority to adopt rules.

     SmithEnvironment:   Under the state’s federally delegated injection well permitting program, the Environmental Management Commission  adopts rules for injection wells and also has permitting responsibility.  That hasn’t changed. The 2012 hydraulic fracturing legislation  gave the Mining and Energy Commission authority to regulate  production wells, but not waste disposal wells (which were still prohibited).


Senate Bill 10: The Environment Commissions

The North Carolina  Senate is considering a bill that would significantly change appointments to several influential state boards and commissions. This post focuses on two commissions affected by Senate Bill 10 — the Coastal Resources Commission (CRC) and the Environmental Management Commission (EMC). (This analysis is based on Edition 3 of the bill.)

The bill  immediately  gives the new governor and legislative leadership complete control over  the membership of these commissions by causing the terms of current members to end as soon as the bill becomes law — even though months or years may remain on each member’s statutory  term of office.   Senate Bill 10 also amends the appointment statutes for  the CRC and the EMC to reduce the total number of commission members;  increase the number  appointed by legislative leadership (reducing the governor’s influence);  and change appointment criteria. More detail on changes proposed for each commission below.

The Coastal Resources Commission (CRC) has  authority to adopt rules for development in environmentally sensitive areas of the twenty coastal counties.  Changes proposed in Senate Bill 10 would reduce the number of CRC members from 15 to 11 and for the first time divide appointments among the Governor, President pro tem of the Senate and Speaker of  the House. (Currently all CRC members are appointed by the Governor.)  The bill also changes the criteria for appointing CRC members by:

• Increasing the number of “at-large” members ( who do not have to meet specific appointment criteria).

• Eliminating seats  now earmarked for members with knowledge or experience in coastal fisheries, agriculture, forestry, marine ecology, conservation, and finance.

• Removing the requirement that a super-majority of commission members (13 of the current 15 members) must live in one of the coastal counties.  Under Senate Bill 10, none of the CRC members would have to actually  live in  a coastal county.

• Designating the six seats that have specific appointment criteria for one representative of a coastal business; two representatives of coastal land owners or developers; one  member with experience in a coastal local government; and two members with a background in either coastal engineering or coastal science.

The new appointment criteria raise several concerns. The Coastal Resources Commission regulates development in the twenty coastal counties, but Senate Bill 10 would no longer  guarantee representation of coastal residents on the commission.  The commission would lose scientific expertise, but even more important it would lose the (nonpartisan) political breadth needed to create consensus on controversial coastal policies.   Under the new appointment criteria, it would be possible to have a CRC composed entirely of members representing  business and development interests, leaving participants in other parts of the coastal economy (such as fisheries, forestry, and agriculture) without  influence on major coastal policy decisions.

The bill also changes the membership of the Coastal Resources Advisory Council, a non-regulatory body  created to advise the Coastal Resources Commission.  Most  members of the Advisory Council represent local governments; each coastal county has a representative selected by the county commissioners and other members represent coastal cities or multi-county planning districts.  Senate Bill 10  reduces the total number of Advisory Council members from 45 to 20 and does not set aside any seats for local government representatives.  The change could  leave coastal  local governments with much less influence over coastal policy.

The Environmental Management Commission has responsibility for adopting state air quality, water quality, and water resource standards. Senate Bill 10 reduces the total number of EMC members from 19 to 13. The governor and legislative leaders already share authority to appoint EMC members, but Senate Bill 10 would lessen the governor’s influence on the EMC relative to the General Assembly by reducing the number of governor’s appointees to seven. Legislative leaders would continue to appoint six members,  representing nearly half of the smaller EMC.

The bill  makes significant changes in appointment criteria for EMC members by eliminating seats now earmarked for members with experience in public health, fish and wildlife conservation, groundwater hydrology, local government, and air pollution.  The new criteria proposed for governors appointments would:

• Retain a seat on the EMC for a physician, but no longer require the physician member to have “specialized training and experience in the health effects of environmental pollution”.

• Require the governor to choose between having  members with experience in hydrology,   water pollution control or the effects of water pollution.

• Require the governor to choose between having a  member with expertise in ecology or a member with expertise in air pollution.

• Reduce the three seats on the EMC for members of the public at large who have “an interest in water and air pollution control” to  one at-large member (without the qualifying language).

The  proposed changes in appointment criteria could  result in a commission without  expertise  in critical areas.  In several instances, the governor will be required  to decide which of several areas of environmental expertise to exclude in making appointments.  For example, choices forced by the new  criteria could leave  the  EMC   without  expertise  in air pollution or air pollution control – one of the most complicated and technically demanding subjects that the EMC has to address.   Knowledge of hydrology, water quality,  ecology and air pollution can be found on the DENR staff, but the EMC would lose the independent perspective provided by commissioners with expertise in each of those areas.

By changing EMC appointments, Senate Bill 10 will also indirectly affect the makeup of other environmental commissions that have seats designated for a member of the EMC. Those include the Mining and Energy Commission and the Sedimentation Pollution Control Commission.

Finally, Senate Bill 10 repeals language requiring that at least nine EMC members must be people who do not derive significant income from  activities regulated by the commission.  The language in G.S. 143B-283(c) exists  in part to meet federal requirements for  delegated permitting programs  under the  Clean Water Act and Clean Air Act.   Complete repeal of the language may cause EPA to question  North Carolina compliance  with federal rules governing those  delegated  programs. More detail about this issue later.

Underground Injection of Wastewater from Natural Gas Operations

Senate Bill 76 changes key provisions of  hydraulic fracturing legislation adopted by the N.C.  General Assembly just eight months ago.  Section 1 of the bill has already attracted attention because  it would allow  the Department of Environment and Natural Resources and the Mining and Energy Commission to begin issuing permits for hydraulic fracturing on March 1 2015 without any further action by the General Assembly – whether adequate fracking rules are in effect or not.

Section 4 of the bill has gotten less attention, but it  may  make  the most significant change in state environmental law.   N.C. law  has long prohibited underground injection of waste because of the risk of  contaminating drinking water supplies. (See  N.C.G.S. 143-214.2) The General Assembly amended the law  in 2012 to make it clear that fluids could be injected  to produce gas by hydraulic fracturing, but kept the prohibition on  injection of  waste.  As amended  by Session Law 2012-143, the law allows injection of  “hydraulic fracturing fluid for the exploration or development of natural gas resources”. Senate Bill 76  proposes to change the law again — this time in a way that appears to allow  underground disposal of wastewater from drilling operations. The  proposed language would allow injection of any “fluid associated with the exploration, production or development of natural gas resources”.

Since the Senate Bill 76 language does not put any limitations on injection of drilling  fluids (including drilling waste), it appears to be inconsistent with  federal Safe Drinking Water Act requirements.  U.S. Environmental Protection Agency rules under the Safe Drinking Water Act allow waste injection wells to be permitted only  where injection  can be done without contaminating groundwater that is suitable for drinking water supply.

Underground injection of drilling waste is a common practice in some oil and gas states, but DENR’s 2012  hydraulic fracturing study recommended against allowing underground injection of drilling waste in North Carolina.  Section 4 of the N.C. Oil and Gas Study talks about the conditions that could make underground injection of waste more risky here than in other gas producing states.  Among the reasons — North Carolina geology makes  it  more  difficult to insure that  waste injected into the  fractured bedrock of the shale region will not move into underground drinking water supplies.



Keeping Information on Fracking Chemicals Confidential

States differ in how they treat disclosure of a fracking chemical  that may be a  “trade secret”.  Several states (including Idaho,  Indiana, West Virginia and Wyoming) clearly  require that even “trade secret” information  must be  provided to the state regulatory agency.  Those states generally rely  on an existing trade secret exemption in the state’s  public records  act to keep the information confidential and prevent disclosure to the public. Other states (such as Montana and Louisiana)  allow the operator to withhold the chemical name of an additive considered to be a trade secret from both state regulators and the public; only the chemical family must be  reported.  In states that allow a well operator to withhold trade secret information from the regulatory agency, the agency can generally request the trade secret information if needed to respond to a spill or citizen complaint. In several states, trade secret information is clearly protected from disclosure to the public, but it is more difficult (on a quick review) to tell whether the information can also be withheld from the regulatory agency.  Most  states   require that trade secret information must be provided to a health professional if needed for diagnosis or treatment of a patient.  The draft rule under consideration in North Carolina would be similar to those in the more restrictive states –the regulatory agency would only receive trade secret information by request in response to a spill, leak or citizen complaint.See Hydraulic Fracturing Disclosure Requirements (a document prepared by the Vinson & Elkins law firm) for a helpful state by state summary of disclosure requirements updated through October 2012.

North Carolina’s public records act  requires  state agencies to keep  “trade secret”  information confidential. To be protected from release under the public records act, the information  has to meet the definition of a “trade secret” and be designated as a confidential trade secret when it is submitted to the agency. (N.C. General Statute 132-1.2.)  The N.C. trade secrets exemption does not allow businesses and industries to use the trade secret designation to withhold information from a regulatory agency that would otherwise have to be submitted.

Disclosure of Hydraulic Fracturing Chemicals — N.C.

The N.C. Mining and Energy Commission’s Environmental Standards Committee  has begun debating a draft rule on when and how to require disclosure of chemicals used in hydraulic fracturing (“ fracking”). The first draft of the rule proposed after the fact disclosure of the chemical additives used in fracking  — within 60 days after a well has been fracked or within 120 days after fracking began (whichever comes first). Disclosure would be made to the Mining and Energy Commission and to the public at the same time.  Information would be made available to the public through the FracFocus website maintained by the Groundwater Protection Council and the American Petroleum Institute.

The draft rule would allow a well operator to withhold information on a fracking chemical designated as a trade secret from both the public and the Commission.  The Commission could request information on a fracking chemical designated as a trade secret only after a spill or a complaint of harm.  The  committee  will take up a new draft in March. That draft will reflect some recommendations from a stakeholder group, but none of the stakeholder recommendations to be included would change the timing of disclosure or the treatment of trade secrets. The January committee discussion suggested that some committee members continue to have concerns about those sections of the draft rule, however,  and there is likely to be more debate. More on “trade secrets” to come.