2015 in Review — Legislation

January 12, 2016. Some trends in environmental legislation:

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

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

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

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

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

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

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

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

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

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

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

Shielding Evidence of Possible Environmental Violations

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

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

Lessening the Consequences for Some Environmental Violations.

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

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

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

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

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

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

Eliminating or Streamlining State Permit Requirements for Environmental Infrastructure

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

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

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

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

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

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

Expanding Use of Erosion Control Structures on Ocean and Inlet Shorelines

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

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