Regulatory Reform and the Environment III: The Future

December 4, 2013. Two earlier posts  looked at  the history of regulatory reform in North Carolina and regulatory reform’s  focus on environmental rules.  The current General Assembly has continued  to work on regulatory reform in general and  limiting environmental rules in particular.  Regulatory reform legislation adopted by the N.C. General Assembly since 2011  reflects two basic  ideas: 1. Some number of agency rules are simply unnecessary and should be repealed;  and 2.  If  a federal  environmental standard exists, state and local environmental rules should not go beyond the federal requirement except in extraordinary circumstances. More about the  assumptions behind  recent regulatory reform efforts below.

Assumption: State agencies have unnecessary and overly burdensome rules that should be repealed. There will always be a need to review, update and in some cases repeal outdated rules, but it is not clear that rooting out “unnecessary” rules can  do much to turn down the political heat over regulations. It isn’t for lack of trying. In October 2010, Governor Beverly Perdue issued an executive order on regulatory reform.   Executive Order 70    invited citizens to identify overly burdensome and unnecessary rules and  directed state agencies to  do  an internal review to identify unnecessary and outdated rules.   In 2011, the General Assembly’s  Regulatory Reform Committee   invited the public to identify “outdated,  unnecessary, unduly burdensome, or vague rules…that are an impediment to private sector job creation”  in a series of public meetings. The  legislature also amended the state’s Administrative Procedures Act in 2011 to put the rules review process created under Executive Order 70 into  law.  G.S. 150B-19.2 

The earlier post on the history of regulatory reform describes the somewhat underwhelming results of both efforts to root out unnecessary and overly burdensome rules.  Although state agencies identified several hundred unnecessary rules  through the internal review required under Executive Order 70 , most of those rules related to programs that no longer existed or had been superceded by new standards.  Since the rules were no longer being enforced, repeal  did nothing to ease complaints about regulatory burden. On the other hand, rules identified by citizens as unnecessary or unduly burdensome often turned out to be required  by  state or federal law or the result of a significant  policy  debate and unlikely candidates for  a politically painless  repeal.

The  Regulatory Reform Act of 2013 (Session Law 2013-413 ) takes  a  new  approach,  requiring state agencies to review and readopt all existing rules every ten years.  If a rule is not reviewed   on the schedule set by the state’s Rules Review Commission, the rule automatically expires. (Rules needed to carry out a delegated federal program  will not automatically expire,  but  still have to be reviewed and readopted.)   Continuing its preoccupation with environmental rules, the General Assembly directed the  Rules Review Commission to schedule state water quality standards and wetland rules for the first round of review in 2014.  Ten-year review and readoption  may one day settle into a manageable  routine,  but several potential pitfalls  lie ahead:

— Given N.C.’s lengthy rulemaking process,  a 10-year  readoption  schedule could lead to constant churning and little certainty for either regulators or the public.  Nothing in Session Law 2013-413 shortens the process for readoption of an existing rule, so the agency would need to go through all of the usual rule adoption steps: public notice, fiscal analysis, review by the Rules Review Commission, and  possible legislative disapproval.  The Falls Lake nutrient rules took about five years from beginning to effective date and the rules include some requirements that phase-in even later.  Streamlining the process for readoption and starting the ten-year review period at full implementation of a rule (rather than adoption)  could reduce the churning.

— Review and readoption of rules will be even  more disruptive if it is used to constantly revisit policy decisions rather than simply identify outdated, unnecessary rules. The fact that the General Assembly targeted water quality and wetland rules for the first round of review and readoption suggests  a policy agenda.  Public statements by the director of  the state’s water quality programs,  Tom Reeder,   indicate that  the Department of Environment and Natural Resources has already put  stream buffer and  wetland rules  — repeatedly targeted by development interests — in the spotlight for the first round of water quality rule review.

— Complex sets of rules have to be reviewed together. Stream buffer rules, for example,  have  generally been adopted as part of  a larger plan to solve a specific water quality problem. Federal law requires the state to  reduce  pollution causing impaired water quality  (like the nutrient problems in Falls Lake and Jordan Lake), but federal rules do not dictate  the solution.    North Carolina ‘s longstanding  policy has been to create  a solution that shares the burden of pollution reduction among all of the major pollution sources (wastewater treatment plants, industrial dischargers, agricultural runoff and development activity).  In most cases, the final rules also represent a long negotiation process.  Using rule review  to respond to one  interest group could shift  more of the regulatory burden and cost  of pollution reduction to others.  A piecemeal approach to regulatory reform carries the risk of making complex environmental protection programs less effective and less equitable, but no less politically charged.

— The interrelationship of rules has practical implications.  According to Tom Reeder, the legislative  mandate  to review surface water standards and wetland rules in 2013 also  draws in two additional sets of rules.   Mr. Reeder expects the 2014 water quality rule review  to  involve  395 rules.

— Rule review comes without any additional staff resources. The massive water quality rule review will create a new workload for a water quality staff still shrinking under budget cuts and reorganization decisions. Mr. Reeder has already suggested that  rule review may further delay  revisions to state water quality standards  needed to  comply with federal  Clean Water Act requirements.

Assumption: State and local environmental standards should not go beyond federal standards except in extraordinary circumstances.

The Regulatory Reform Act of 2011     ( Session Law 2011-398 )  prohibited  state environmental  agencies — and only environmental agencies — from adopting  a more restrictive standard than a corresponding federal rule.   The  law has 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. The same legislation directed all state agencies to provide the General Assembly’s 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.)

An earlier post (originally written about a 2013  Senate  bill)  provides examples of state environmental rules that go beyond  the  corresponding  federal rule.  (The examples come from the 2011 DENR report to the Select Regulatory Reform Committee.)  The post also notes some of the  difficulties in  limiting state environmental rules to  federal standards.  At the most basic level, it turns out to be harder than legislators may think to even figure out whether a state rule is “more stringent” than a corresponding federal rule. It is rarely as easy as comparing two numerical standards; in many cases, federal rules set a framework and goals in the expectation that the state will fill in the detail.  Another  problem is that  federal environmental  statutes and rules set a floor rather than a ceiling on environmental protection — a floor based on national priorities  rather than state needs.   Finally, federal rules rarely   include all of the administrative pieces needed for  a complete environmental protection program. Since the states actually carry out most of these programs, Congress and EPA  left the states a good bit of  flexibility  in setting up permitting and enforcement programs.

Having put limits on new  state environmental rules in 2011, the 2013 General Assembly took on local environmental ordinances.  Session Law 2013-413 puts a one year moratorium on adoption of new local environmental ordinances regulating issues addressed by state or federal environmental rules. An earlier post goes into more detail about the temporary  limit on local environmental ordinances. The one-year moratorium actually represents a compromise to allow time for the legislature’s Environmental Review Commission to look at the appropriate scope of local government authority to adopt environmental standards. The N.C. Senate had proposed to permanently restrict adoption of local environmental ordinances.

Even the one-year moratorium may be a problem for local government.  A number of cities and counties operate environmental infrastructure (like water and wastewater treatment systems) under state-issued permits that require the local government to put  environmental protection measures in place by ordinance.

Behind all of this lies a genuine concern about the layering of federal, state and local requirements. Citizen comments  clearly indicate confusion about where environmental standards come from and how different requirements  fit together.  In spite of everyone’s best efforts, the overlay of federal  rules, state rules  and local ordinances don’t always fit together perfectly.  Conflicts  get  resolved, but the property owner caught up in an unintended consequence of overlapping standards will be understandably frustrated in the meantime.

Which is all to say that there are good reasons to look at the intersection of federal, state and local environmental standards. It is just not as easy as waiving away everything other than the standard adopted by the highest level of government.