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.

2 thoughts on “Status of Regulatory Reform Legislation

  1. Jeff Cherry

    Robin, re, your comment on the Envt’l Audit privilege component of the Senate Reg. Reform bill that it was not “tightly drafted” and could allow companies to avoid liability for “longstanding, continuing violations”, note that proposed G.S. 8-58.53(a)(5) excludes from the document privilege “Documents prepared as a result of multiple or continuous self auditing conducted in an effort to intentionally avoid liability for violations.”, as well as, in subdivision (7) “Information in instances where…the owner or operator failed to either promptly take corrective action or eliminate any violation of law identified during the environmental audit within a reasonable period of time.” Later provisions of the bill allow a court to revoke the privilege for the rather broad basis that “The material shows evidence of significant noncompliance with applicable environmental laws; the owner or operator of the facility has not promptly initiated and pursued with diligence appropriate action to achieve compliance with these environmental laws or has not made reasonable efforts to complete any necessary permit application; and, as a result, the owner or operator of the facility did not or will not achieve compliance with applicable environmental laws or did not or will not complete the necessary permit application within a reasonable period of time.”

    1. rwsmith Post author

      The bill does two things: 1. provides confidentiality (or privilege) for internal documents prepared as part of an environmental audit; and 2. provides immunity from civil penalties for violations that have been self reported as a result of an environmental audit. I believe all of the provisions cited in the comment have to do with audit privilege rather than immunity from penalties. The bill does exclude some documents from the audit privilege; the provision in the proposed G.S. 8-58.53(a)(5) would not allow a company to engage in continuous environmental audits as a way to prevent regulators from using internal documents to support an enforcement case. It is less clear that the bill would prevent a company that has paid scant attention to compliance in the past from using a single environmental audit to shield longstanding violations from penalties. The immunity provisions in the bill put no time limitation on a claim of immunity. Language in the bill limiting the immunity to instances where the violator “diligently pursues compliance and promptly corrects the noncompliance within a reasonable period of time” do not make it clear whether the clock starts when the violation first occurred or when the environmental audit documented the violation. That lack of clarity opens the door to use of environmental audits to immunize the violator from penalties for violations that may have been ongoing for many years.

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