Monthly Archives: July 2014

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.

Status of Regulatory Reform Legislation

July 15, 2014.   For the last two weeks, substantive bills have been held in committee during  budget negotiations (some would describe this as hostage-taking).  But Senate leaders have signaled an intent to begin moving bills out of committee and to the Senate floor.  Two of the bills waiting for action are regulatory reform bills. An earlier post described Senate Bill 734 (Regulatory Reform Act of 2014) . The House made significant changes to the bill after it came over from the Senate, stripping out all of the environmental provisions. The bill (or what is left of it) is now back in the Senate for a concurrence vote.

The House put  its environmental regulatory reform provisions into a different Senate bill.  Senate Bill 38 came over to the House as an emergency management bill.  The House stripped out the original provisions; inserted some of the environmental provisions from Senate Bill 734; added a few new environmental provisions; and retitled the bill “Amend Environmental Laws”.  Senate Bill 38 has also been returned to the Senate for concurrence.

Key differences between Senate environmental regulatory reform proposals in S 734 and  the House proposals (now in S 38) below; these provisions will  have to be negotiated if the Senate  refuses to simply accept the House changes to both S 734 and S 38.  The Senate had proposed more –and more controversial — environmental provisions, so much of the negotiation will likely focus on Senate provisions left out of the House bill. (References to S 734 below  refer to the Senate version — Edition 3 of the bill on the General Assembly website.)

Senate provisions in controversy:

♦ A new environmental audit privilege and immunity for self-reported violations.  The Senate version of S 734  makes the results of an environmental audit confidential and gives the company immunity from civil penalties for environmental violations voluntarily reported to DENR as a result of an audit. The concept of immunity for self-reporting has some merit. The Senate provision had not been tightly drafted, however, and could allow a facility to avoid  penalties for longstanding, continuing violations by self-reporting under cover of a recent environmental audit.

♦   Limits on citizen appeals of air quality permits.  S 734 proposed  to limit citizen appeals to circumstances involving violation of a national ambient air quality standard.  As noted in the earlier post, this would eliminate citizen appeals of  permits issued  for sources of toxic air pollutants which are regulated under a different section of the Clean Air Act than the six pollutants covered by national ambient air quality standards.

♦   Authority for the Governor to waive environmental impact statements and Coastal Area Management Act  (CAMA) permit review for projects to protect, maintain or rebuild Highway 12 on the Outer Banks. (For  more on  conditions surrounding Highway 12 see  an earlier post.)

♦   A provision allowing a local government to block classification of a stream or river segment   for  water supply under state water quality rules.  State rules protect water supply sources through  in-stream water quality standards and development standards  (such as stormwater controls and stream buffers) in the water supply watershed. The water supply classification  must be approved by the Environmental Management Commission (EMC) before a water intake can be constructed.  The Senate provision intervenes in a conflict between  Caswell County and the towns of Roxboro and Yanceyville   over classification of a segment of the Dan River for water supply.  The EMC approved the Dan River water supply classification in 2012; the proposed water intake would supply Roxboro, Yanceyville and the Town of Milton.  The watershed for the new water supply extends into Caswell County, which had agreed to revise  its ordinances to meet water supply watershed development standards. Political opposition to the watershed ordinance led  Caswell County  to reverse course and petition the EMC to undo the Dan River water supply classification.  The EMC denied the Caswell County request last year.  The provision in S 734  directs the EMC  to grant any  request  to reverse a water supply classification made by an affected local government —  without regard to the effect on water supply.  The provision only applies to requests submitted after January 1 2012 and before the effective date of the provision — in other words, the  Caswell County request.

♦  Elimination of  air quality monitors not required by the U.S. Environmental Protection Agency.   The provision would significantly reduce the number of  state monitors used to assess air quality and demonstrate compliance with federal ambient air quality standards. The origin of the provision has been somewhat mysterious;  the legislator who requested the provision cannot seem to explain why. DENR’s Division of Air Quality has expressed concern about the loss of the monitors.

♦ A provision exempting animal waste lagoons at  dairy farms from closure requirements in state water quality rules. The rules reference closure standards for animal waste management systems developed by the Natural Resource Conservation Service in the U.S. Dept. of Agriculture.  The exemption would apply to waste lagoons constructed before 1967 and in use as recently as 2006.

House environmental regulatory reform provisions in controversy:

♦ A reduction in the amount of financial assurance required for a construction and demolition debris landfill (from $2 million  — the amount required for municipal solid waste landfills and industrial landfills —  to $1 million).

♦ Two provisions easing regulation of onsite wastewater systems. One would  prevent state regulators from putting certain conditions on approval  of  innovative systems using expanded polystyrene synthetic aggregate particles as the dispersion media. Another eliminates any requirement for an inspection or performance audit to review the performance of modified onsite wastewater systems.

♦  A new requirement for disclosure of mineral, oil and gas rights to prospective purchasers of real property.

♦ The House and  Senate bills have slightly different proposals to reduce state oversight of development  affecting isolated wetlands. The Senate bill would only require an individual water quality permit for activity affecting more than one acre of isolated wetlands. The House bill maintains a distinction that exists in the water quality rules between wetlands in the eastern and western parts of the state, requiring a permit for activity affecting 1/3 acre or more of isolated wetlands west of Interstate 95 and for activity affecting 1acre or more of isolated wetlands east of the interstate. Efforts to limit state protection for isolated wetlands began last year; see an earlier post for more background.

The House also put a number of provisions recommended by the General Assembly’s Environmental Review Commission into Senate Bill 38. The same provisions were introduced in the Senate as freestanding bills and  shouldn’t be in controversy.

The N.C. House on Coal Ash

July 7, 2014. Last week, the N.C. House approved a  revised version of Senate Bill 729 (Coal Ash Management Act of 2014).  See the 5th edition of the bill on the General Assembly website.   The bill now goes to a conference committee to resolve differences between the House and Senate  bills.   There is little or no disagreement between the House and Senate on the most important requirements of S729.  Usually — although not always —  uncontroverted sections of a bill appear in the final bill.   Only a handful of the House changes  are likely to meet opposition from the Senate and some of those have more political than policy significance.   Under Senate rules,  the  conferees can consider any change  germane to the original bill. House rules allow conferees to consider provisions not in controversy between the two chambers to the extent the Senate rules allow, but require entirely new provisions to go back through a House committee before adoption of the conference report. In any case, comparison of the Senate and House bills should give a fairly clear picture of  the final bill.

 House/Senate Agreement. The House and Senate agree on:

♦  Barring electric utilities from recovering the cost of addressing an illegal discharge to surface waters from a CCR impoundment through a rate case.

♦  Timelines for  assessing all  CCR impoundment sites for groundwater contamination and unpermitted discharges to surface waters. House and Senate bills also have identical  corrective action requirements based on existing state groundwater rules.

♦  Deadlines for final closure of CCR impoundments.   Both bills have the same  deadlines for  converting all N.C. coal-fired power plants from wet to dry ash handling; ending disposal of ash in wet impoundments;  and completing final closure of all 33 CCR impoundments in the state. The bills require final closure of  all impoundments by the end of  2029, but set earlier deadlines for closure of high and intermediate risk impoundments. (Final closure  involves dewatering the impoundments  and taking additional steps — which may include removal of the CCRs from the site — to prevent future groundwater and surface water contamination.)

♦   Priority  for closure. Both the House and the Senate  direct DENR to give four  impoundments  highest priority for closure (Riverbend, Asheville, Dan River and Sutton). Like the Senate, the House voted down a number of amendments attempting to add sites to the immediate closure list. Both bills direct DENR and the Coal Ash Management Commission to prioritize the other 10 CCR impoundment sites for closure based on risk. Neither  bill  provides guidance  on how to translate  risk factors listed  in the bill  into high, intermediate and low risk classifications. Uncertainty about how the risk factors will be used to  prioritize impoundments for closure has caused concern on the part of both the electric utilities and environmental organizations since risk classification also determines the allowable closure methods.

♦  The link between prioritization for closure and the method of final closure.  Under both House and Senate bills,  high and intermediate risk impoundments  must  be closed by permanently  removing the coal combustion residuals from the impoundment for disposal in a permitted facility; removing the CCRs for use in structural fill or another beneficial reuse  allowed under the law; or temporarily moving and storing the CCRs  for disposal in an industrial landfill to be built on the old impoundment site.  Both  bills allow low risk impoundments to be closed by  capping the CCRs in place under closure standards that apply to municipal solid waste landfills.

Duke Energy  has openly worried  about the number of impoundments  that may be classified   as high or  intermediate risk and require  more costly closure plans. Environmental organizations see no assurance in either bill that “low risk” impoundments will necessarily be appropriate for capping in place.

♦ Giving the Coal Ash Management Commission final authority to approve  prioritization of impoundments for closure and the final closure plan for each impoundment. Under both bills, the commission would be  directed to approve a closure plan based on consistency with the law; technological feasibility; and a determination that “benefits to public health, safety, and welfare; the environment; and natural resources outweigh the negative impacts on electricity costs and reliability”.  The last part of the standard — weighing public benefits against impact on electricity costs and reliability — suggests that even a technologically feasible closure plan  approved by DENR as consistent with the law  could be disapproved by the commission based on the impact to electric utilities. The bill  doesn’t  seem to set any  minimum  requirement for protection of public health, safety, the environment and natural resources  to put a floor under the commission’s weighting of public benefits versus utility costs.

♦ Expanding “structural fill” use of CCRs to include mine reclamation, construction of embankments, and greenscapes. Existing state rules allow use of CCRs as fill material to support  a building foundation or other structure (such as a  roadbed or airport runway). Both the Senate and House bills  expand the concept of “structural fill” to include  uses unrelated to  construction, such as reclamation of open pit mines;  embankments; and  greenscapes.  The idea of using CCRs  as  fill material for an open pit mine  would be a particularly significant departure from past structural fill uses because of the volume and depth of the fill project.

♦ More stringent standards for large structural fill projects. New standards require liners; leachate collection systems; financial assurance;  groundwater monitoring; and establish setbacks from surface waters, wetlands, water supply wells and other features.  As noted  below,  the bills differ on the dividing line between large projects and smaller structural fill projects that will be deemed permitted under less protective standards.

♦  A moratorium on new structural fill projects that do not meet the more stringent standards for large projects and a moratorium on construction of coal combustion product landfills on top of old CCR impoundments  under standards in  the 2007 Solid Waste Act. The  structural fill moratorium will be linked to a DENR study of structural fill and other beneficial uses of CCRs. The bills also require a study of the 2007 coal combustion product landfill standards.

♦  Earlier notice  to DENR and to the public when untreated wastewater is discharged to surface waters,  picking up on  a recommendation of the legislature’s Environmental Review Commission. This provision would apply  to all wastewater spills and not just  spills  associated with CCR impoundments

♦  Requiring  an emergency action plan for high hazard and intermediate hazard dams. The emergency action plans would be required for both CCR impoundments and other dams regulated under the state Dam Safety Act.   The House and Senate also  agree on specific inspection requirements for CCR impoundments and a  process for decommissioning CCR impoundments under the Dam Safety Act.

♦  Assessment of a fee on electric utilities that own CCR impoundments to fund DENR and Coal Ash Management Commission activities under the law.

♦  Transfer of rulemaking authority for state solid waste programs from the Commission for Public Health to the Environmental Management Commission.

House/Senate Differences.  Some of the more significant differences that will need to be resolved in conference between the two chambers:

♦  The length of a moratorium on cost recovery for expenses related to CCR impoundment assessment, remediation and closure.   The Senate moratorium would end on January 15, 2015; the House extends the moratorium to December 31, 2016.

♦  Makeup and organization of the Coal Ash Management Commission.  The General Assembly would continue to make a majority of appointments to the 9-member commission, but the  House bill gives the Governor  authority to appoint the chair.   The House also made very minor changes to criteria for appointment to the commission. One of the most significant differences between the House and Senate  may  be the administrative location of the commission. The Senate put the commission under the Department of Public Safety; the House  moved the commission under the Department of Environment and Natural Resources.

♦  A shorter deadline for providing alternative drinking water supply when a CCR impoundment causes well contamination. Both the Senate and the House require the electric utility to provide an alternative water supply  when a water supply well has become unsafe because of groundwater contamination associated with a  CCR  impoundment. The House bill added a requirement that  an alternative supply of drinking water must be provided within 24 hours after DENR confirms that contaminants associated with a CCR impoundment have caused exceedance of  a groundwater standard in  a drinking water well. Alternative water supply for other purposes must be provided within 30 days consistent with the Senate bill.

♦   More alternatives for final closure of  “low risk” CCR impoundments.   The  House bill  allows low risk impoundments to be closed using any of  the methods approved for high and intermediate risk impoundments (removal of ash for landfill disposal; removal of ash for beneficial reuse;  or conversion of the impoundment to an industrial landfill)  or  by capping the coal ash in place under standards for closure of a municipal solid waste (MSW)  landfill. The Senate  restricted closure of low risk impoundments  to the “cap in place” option.

♦  Opportunity for electric utilities to request  a variance from CCR impoundment closure deadlines.  The Senate and House bills  have the same deadlines for final closure of CCR impoundments, but the House bill allows the Secretary of Environment and Natural Resources to grant variances from the deadlines. To get a  variance the electric utility must show that : “compliance with the deadline cannot be achieved by application of best available technology found to be economically reasonable at the time and would produce serious hardship without equal or greater benefits to the public”.   The variance standard  requires a cost-benefit calculation  that weighs cost to the electric utility against the public health and environmental benefits of closure.  In that respect, it is similar to the standard for Coal Ash Management Commission approval of closure plans.  As a standard for granting variances from environmental or public health rules, it is unusual in not requiring any minimum level of protection for  public health, safety and natural resources.  There  seems to be no floor under the Secretary’s authority to give  greater weight to electric utility cost than to the public benefit of closure. The provision also puts no limit on the  extension of time allowed by variance.

♦  The threshold for requiring more stringent structural fill standards.  The House bill lowers  the threshold between structural fill projects that will be deemed permitted and those requiring an individual permit under more stringent standards. Under the House bill, any project using 8,000 tons or more  of coal combustion residuals per acre or  a total of 80,000 tons or more for a single project would trigger an individual permit under more protective standards. The Senate bill set the thresholds at 10,000 tons or more per acre and 100,000 tons or more total.

♦ Addition of  a criminal enforcement provision. The House added a criminal enforcement provision, making it a Class 2 misdemeanor (maximum penalty of $10,000) to make a false statement, representation or certification in any application, report or other document required under the law.

♦  Protecting some information in Dam Safety Emergency Action Plans.  The House bill adds a confidentiality provision  excluding “sensitive public security information” from disclosure under the state’s Public Records Act. The bill specifically protects information that is protected from disclosure under Federal Energy Regulatory Commission rules as “Critical Energy Infrastructure Information”.

♦  Groundwater Compliance Boundaries: The Senate bill repeals  most of a 2013 regulatory reform provision  concerning groundwater compliance boundaries around permitted waste disposal sites. For an explanation of the 2013  legislation, see an earlier post. The Senate  bill   repeals everything except a provision clarifying that each individually permitted waste disposal site should have a groundwater compliance boundary without regard to the date the facility first received a water quality permit. The House  adds new language on groundwater corrective action to the Senate provision.

According to one House bill sponsor, the new corrective action language  intends to reverse a recent superior court decision concerning remediation of groundwater contamination caused by CCR impoundments.  Superior Court Judge Paul Ridgeway reversed a declaratory ruling by the  Environmental Management Commission (EMC) interpreting the  groundwater corrective action rule,  15A NCAC 2L.0106, as applied to CCR impoundments.  Judge Ridgeway concluded that the rule does not give older waste disposal systems  (those first permitted under water quality laws before 1984) the alternative of treating or controlling the groundwater contamination source.  Judge Ridgeway  interpreted the rule to require immediate removal of the contamination source in every case involving groundwater contamination associated with a pre-1984 waste disposal  system.

Most CCR impoundments fall into the pre-1984 category and the Ridgeway decision  seems to require immediate removal of coal combustion residuals that are the source of groundwater contamination beyond the compliance boundary.  See this post for more on Judge Ridgeway’s decision. Since the  rule  applies to all waste disposal sites first permitted before  1984,  Judge Ridgeway’s decision  has  also created  concern among local governments  because of the potential impact on some county and municipal waste disposal sites.

It isn’t possible  to fully analyze the  implications of the House language as compared to the  current groundwater corrective action rule;  the Senate provision; and Judge Ridgeway’s order in this post.   But House bill sponsors have clearly  indicated an intent to reverse  the part of the Ridgeway  decision requiring  the owner of a pre-1984 waste disposal facility to immediately remove a source of groundwater contamination that has migrated beyond the groundwater compliance boundary and allow greater flexibility in measures used to  address ongoing groundwater contamination.