Tag Archives: Energy Efficiency

The North Carolina Response to EPA’s Clean Power Plan Rule

July 26, 2015.  In one way, the proposed  U.S. Environmental Protection Agency (EPA) rule to limit carbon dioxide (CO2) emissions from power plants  — expected to be final in August — looks like a typical air quality rule. The Clean Power Plan rule sets state by state reduction goals for a pollutant (CO2) from a particular set of of sources (electric generating facilities).  But the rule takes an unusual and  innovative approach to meeting those goals. The rule identifies  four components  (or “building blocks” in EPA rule-speak ) of a plan to reduce CO2 emissions associated with power generation : 1. reducing power plant CO2 emissions (the traditional Clean Air Act approach); 2. energy efficiency measures; 3. increased  electric generation from renewable energy sources;  and 4. transition of electric generation facilities from coal to natural gas.   In effect, the rule aims to lower CO2 emissions per kilowatt hour used and allows the  states to take credit for CO2 emissions avoided through increased energy efficiency and by shifting electric generation to energy sources with low or no CO2 emissions.

The proposed EPA rule requires each state to submit a plan for meeting its CO2 reduction target by June 30, 2016. The state plan can rely on any or all of the four “building blocks” in the EPA rule; it can also include measures that fall outside those categories as long as the plan achieves the CO2 reduction target for regulated electric generation facilities. If a state fails to develop a plan, EPA can create a federal plan for the state.  An earlier post  provides more detail on the  proposed federal rule.

The McCrory administration has opposed the Clean Power Plan rule in  written comments and in testimony before Congressional committees. In part,  the administration has argued that the Clean Air Act does not authorize EPA to issue  a rule that relies on measures — such as energy efficiency and increased reliance on renewable energy — that go beyond limiting  pollutant emissions from regulated power plants.  Last week,  the practical implications of  that   position became more clear when DENR  Secretary Donald van der Vaart  told a Senate committee that  the McCrory administration intends to resist the flexibility offered under the federal rule and submit a CO2 reduction plan  based entirely on requiring additional CO2 emission reductions at  power plants.

The Secretary’s comments came  as a state Senate committee debated House Bill 571, which requires DENR to develop  a state CO2 reduction plan with the participation of the public and the electric utilities. DENR did not support House Bill 571, but the bill passed the House with a bipartisan majority and the support of  the state’s major electric utilities and environmental organizations. Last Wednesday, the  Senate Agriculture and Environment Committee took up a substitute draft of  H 571 that would prohibit DENR from taking any action or expending any state resources on development of a CO2 reduction plan until all legal challenges to the federal rule had been resolved or until July 1, 2016 (whichever came later).  Asked to comment on the proposed substitute bill,   Secretary van der Vaart  indicated that DENR  would prefer to submit a CO2 reduction plan by June 30, 2016 as required under the federal rule — but a plan based entirely on reducing  power plant emissions.

Based on the Secretary’s statement, the McCrory administration response to the Clean Power Plan rule puts the state in a strange place:

♦  DENR has argued for an interpretation of  the Clean Air Act that would force the federal rule to be more rigid and offer the state less flexibility to meet CO2 reduction targets.   (A number of environmental law experts disagree with this narrow interpretation of EPA authority; the issue will likely have to be settled in court.)

♦  Based on this narrow interpretation of EPA authority, DENR intends to develop a state CO2 reduction plan that relies entirely on further reducing  CO2 emissions from power plants even though existing  state policies have North Carolina on a path to achieve much (if not all)  of the necessary reductions through increased renewable energy generation, greater energy efficiency, and  transition of power plants from coal to natural gas.  Although DENR has not provided an analysis of the state’s ability to meet the state’s CO2 reduction target based on those existing policies, others have. You can find one (an analysis by the Natural Resources Defense Council)  here.

♦  Relying  entirely on lowering power plant emissions could  make meeting the CO2 reduction target more difficult and more costly for electric utilities and consumers. Again, DENR has not provided a comparative analysis of the cost of relying entirely on power plant pollution controls versus  a comprehensive CO2 plan that takes credit for energy efficiency measures, renewable energy generation and transitioning power plants from coal to natural gas.

Most states have started planning to meet the  CO2 reduction targets. Even in coal-producing states where political opposition to the EPA rule tends to be highest,  state air quality agencies have begun sketching out CO2 reduction scenarios in case the rule survives the expected legal challenges. Only one state — Oklahoma — has prohibited its environmental agency from developing a plan. A recent Washington Post story  reported that even coal-dominated states like Kentucky seem confident of meeting the  CO2 reduction target thanks in part to recent investments in renewable energy generation. It isn’t clear that any state other than North Carolina has decided to develop a plan based solely on CO2 reductions at coal-fired power plants.

Which leaves something of a public policy mystery. A state with significant advantages in renewable energy, energy efficiency and already on the road to transitioning power plants from coal to natural gas seems to have settled on a policy that throws those advantages away. Instead of working with electric utilities, consumers and environmental organizations to develop the most cost-effective  CO2 reduction plan for the state, DENR intends  to unilaterally develop a plan based entirely on reducing power plant emissions.  It isn’t clear why or what that policy choice could cost the state.

Note: The Senate committee approved the substitute draft of House Bill 571 on Wednesday, but offered to continue talking to DENR about the content of the bill. The bill was pulled off the Senate calendar last Thursday; when the bill  reappears on the Senate calendar, there may be amendments as a result of the ongoing discussions.

Update: The original post has been revised to make it clear that state CO2 reduction plans can also rely on measures other than those covered by the  four “building blocks” identified in the EPA rule.

North Carolina and EPA’s Proposed Carbon Rule

September 30, 2014. On June 2, the U.S. Environmental Protection Agency  released  a draft rule to reduce  carbon dioxide (CO2)  emissions from power plants.  Gov. Pat McCrory’s administration has taken a number of opportunities  to  question the legal basis for the  rule. An earlier post described  a presentation by DENR Deputy Secretary Don van der Vaart  to the N.C.  Energy Policy Council soon after EPA  released the draft rule in June.  DENR actually began staking out a position in opposition to the proposed carbon rule even earlier. (See the DENR website for a number of agency policy documents related to the carbon rule.)  Each time, DENR focused on legal arguments — challenging EPA’s authority to regulate a power plant’s CO2  emissions under Section 111 of the Clean Air Act —  rather than the actual impact of the rule on the state and its electric utilities.

Evaluating the impact of the rule on an  individual state can  be challenging because the rule takes an innovative approach to reducing CO2. Instead of putting the burden and cost of CO2 reductions entirely on the power plants,  the rule tries to harness  other  trends in energy generation — increased  reliance on renewable energy;  adoption of  energy efficiency standards for buildings, appliances and equipment; and a shift in generation from coal-fired plants to natural gas units — to help lower CO2 emissions associated with power generation.  Many of those trends developed in response to other environmental concerns (stricter  air quality  standards for ozone and particulates) or economic incentives (the lower cost of natural gas). EPA’s proposed  carbon rule builds on those trends to also drive down CO2 emissions associated with power generation.

Steps  North Carolina has taken over the last 10-15 years to increase renewable energy  generation and energy efficiency seem to put  the state  in a favorable position to meet the CO2 reduction goal in the rule and come out the other side with competitive energy costs.  This post is intended to provide some  (very basic) background on how the rule works and to  identify the questions that need to be answered to understand what more the state may need to do to meet the CO2 reduction goal in the proposed rule.


♦ The rule only addresses CO2 emissions associated with electric generating units (EGUs) that burn fossil fuels; the rule does not affect industrial sources of CO2.

♦ The rule sets a carbon reduction goal for each state in the form of a rate – pounds of carbon dioxide emitted per megawatt hour of electricity generated or CO2/MWh.

♦ Instead of setting a CO2 emission limit for each EGU, EPA proposed a statewide average CO2 emission rate – allowing the goal to be met in part by shifting electric generation from high to low emission units; increasing renewable energy and nuclear generation; and creating “savings” through energy efficiency measures.

♦ The rate is based on net generation (electricity delivered to the grid) rather than gross generation measured at the EGU. Net generation excludes energy used at the power plant to run fans, pumps, motors and pollution control devices.

♦ The rule sets a final goal for each state to meet in 2030 and interim goals for 2020-2029.

♦  CO2 reduction goals differ from state to state. In calculating the goals, EPA considered the existing mix of electric generation facilities in each state (nuclear, coal, natural gas) and each state’s potential for  increased renewable energy generation and growth in energy efficiency savings.


State goals are not based on simply requiring  fossil-fuel burning power plants to reduce their CO2 emissions per megawatt hour from 2012 levels.  Although  EPA used the EGU’s 2012 reported emissions of CO2 as one factor in calculating  the goals, it is not quite correct to describe 2012 as the “base year” for reductions.   The state goals represent something different — reductions in EGU emissions combined with a shift in electric generation capacity to cleaner sources (such as renewable energy and nuclear power) and increases in energy efficiency. More about the rate calculation below.

To set the state CO2 emission rate goals, the EPA rule adjusted the  2012 calculation of CO2/MWh in two ways:

1. EPA reduced the net CO2 emissions  reported by regulated EGUs in 2012 (the numerator in the CO2/MWh equation) by assuming those units can achieve a 6% improvement in heat efficiency. In states where there are both coal-fired plants and natural gas plants, EPA adjusted the numerator again if any natural gas plant in the state operated at less than 70% utilization. Assuming  every natural gas plant could operate at 70% utilization, EPA shifted a corresponding amount of electricity generation from  coal-fired plants to the underused natural gas plants and and adjusted the pounds of CO2 emitted to reflect the natural gas plants’ lower CO2 emissions rate.

So the numerator in the goal represents pounds of CO2 emitted by  the state’s existing power plants after each individual plant has become more heat efficient and after power generation across the entire system has been  reallocated  to better utilize low-emission natural gas units. Both adjustments reduce the amount of CO2 generated by the EGUs  below the amount actually reported  in 2012.

2. EPA then adjusts the denominator in the CO2/MWh equation to spread the pounds of CO2 generated  by the EGUs across the megawatt hours generated by all electric generating sources in the state and megawatt hours of electric generation saved through energy efficiency measures. The denominator becomes:  total megawatt hours generated by the EGUs + new renewable energy generating capacity + new or preserved nuclear generation capacity + an estimate of annual avoided power generation associated with demand-side energy efficiency.  (“Preserved” nuclear power refers to  an existing nuclear plant operating beyond a previously announced closure date.)

The final 2030 CO2 emissions goal as a rate =

Net CO2 emissions for regulated EGUs – 6% heat efficiency*
Total net MWh (EGUs + renewable energy + new/preserved nuclear + avoided generation)

* In some cases there has also been an adjustment for under-utilized natural gas plants.

Although the rule does not propose CO2 reductions from any baseline year, EPA has estimated the rule will result in a 30% reduction in CO2 emissions as compared to 2005.


The proposed  2030 goal for North Carolina is  992 lbs CO2/ MWh. By comparison, North Carolina’s electric generating units reported 2012  emissions  of  1647 lbs CO2/ MWh. (Source: Congressional Research Service report.) The EPA rule would require North Carolina to reduce CO2 emissions from:

1647 lbs of CO2 per megawatt hour  of electricity generated by fossil fuel EGUs


992 lbs of CO2 per megawatt hour of electricity generated by fossil fuel EGUs + estimated new renewable energy generation+ new or preserved nuclear capacity+ electricity generation avoided by energy efficiency measures

The Clean Power Plan goal does not require  North Carolina power plants to reduce CO2 emissions by 40%.  The rule requires the state’s  electric generation  system  as a whole to  meet demand for electric power at a 40% lower rate of CO2 emissions.


The draft EPA  rule  requires  states to  use four “building blocks” to comply; the building blocks correspond to the factors EPA used to calculate each state’s  CO2 reduction goal:

1. Increased heat efficiency at EGUs —  EPA has  assumed each EGU can achieve  6% improvement in heat efficiency.

2. Increased “dispatch” of power generation from higher emission coal-fired units to lower emission Natural Gas Combined Cycle (NGCC) plants —   EPA has assumed every NGCC  unit can be operated at 70% utilization.

3. Increased generation of electricity from renewable sources and new or preserved nuclear generation.  EPA has estimated the  potential for growth in renewable energy generation and new or preserved nuclear generation individually for each state.

4. Energy efficiency measures to lower demand,  measured by  megawatt hours of generation avoided. EPA set a  goal of increasing demand-side efficiency by 1.5% annually.

The individual building block goals set out for each state are not requirements. EPA  used  these assumptions and estimates  to calculate  each state’s  CO2 reduction goal, but  the rule allows a state to weight the  building blocks differently in  its  compliance plan.  For example,  difficulty meeting EPA’s expectations  for demand-side energy efficiency can be offset  by increasing renewable energy generation (or vice-versa).


Media reports have  reflected a lot of confusion about the impact of the proposed rule on states like North Carolina that have already taken significant steps to increase renewable energy and energy efficiency.   The proposed federal rule actually stresses  reliance on programs already in place and gives the states  credit for expanded renewable energy generation or growth in energy efficiency as a result of  existing programs.

In talking about the final state emission rate goals,  the rule notes that  “EPA is also proposing that measures taken by a state or its sources after the date of this proposal, or programs already in place, and which result in CO2 emission reductions at affected EGUs during the 2020-2030 period, would apply toward achievement of the state’s CO2 goal.” 

The rule makes a similar statement about renewable energy generation:  “We note that with the exception of hydropower, the renewable energy generation levels represent total amounts of renewable energy generation, rather than incremental amounts above a particular baseline level. As a result, this RE generation can be supplied by any RE capacity regardless of its date of installation.”

Table 6 in the proposed rule  shows North Carolina’s 2012 renewable energy generation as 2% and a proposed final 2030 goal for North Carolina of  10%.  The  N.C. Utilities Commission has reported that North Carolina electric utilities met the first state Renewable Energy Portfolio Standard (REPS) goal of  3% of retail electricity sales in 2012. The final goal under the existing state law will be 10% of retail sales for electric membership corporations/ municipal systems  (by 2018) and 12.5% of retail sales for the electric public utilities (by 2021).  Under the EPA rule, the state will get credit for any new or expanded renewable energy generation in 2014 or later as a result of the existing state REPS requirement.

Since the state REPS goal requires electric utilities to continue to increase renewable energy generation and energy efficiency through 2021,  the increases realized between 2014 and 2021 will also move North Carolina toward the federal goal. To know whether the proposed carbon rule will require the state to do more on renewable energy, the state will need a gap analysis.  The analysis will have to separate  renewable energy generation from energy efficiency savings; the two have been combined in the state REPS goal, but are calculated separately under the federal rule.

The federal rule sets a goal of having every state achieve a 1.5% annual incremental savings based on  demand-side energy efficiency measures.  EPA assumes that states already realizing  a 1.5% in annual incremental savings  will continue  and  maintain that rate through 2029 — giving states that engaged in energy efficiency measures early full credit for the incremental energy savings achieved through existing programs. To understand how close North Carolina may already be to meeting the  carbon rule’s  energy efficiency goal, the state will need to calculate the incremental annual  demand side savings that can be attributed to the state REPS goal and  add incremental savings associated with other energy efficiency programs (such as energy efficiency standards incorporated in the State Building Code).


The big  question to be answered is this: How far will North Carolina’s existing renewable energy and energy efficiency programs go toward closing the gap between 1647 lbs CO2/MWh generated by EGUs that burn fossil fuels  and 992 lbs CO2/ MWh generated by power plants+ renewable energy + new/preserved nuclear + generation avoided by energy efficiency?

It appears the remaining gap may be small, giving  North Carolina  an advantage over states that haven’t adopted policies supporting renewable energy generation and energy efficiency.   If so, the advantage will be economic as well as environmental by holding down increases in state energy costs.


Text of the Clean Carbon Rule (from the June 18, 2014 Federal Register notice)

Congressional Research Service Report: State CO2 Emission Rate Goals in EPA’s Proposed Rule for Existing Power Plants, Jonathan Ramseur, Specialist in Environmental Policy, July 21, 2014.

2013 NC Utilities Commission Annual Report Regarding Renewable Energy and Energy Efficiency Portfolio Standard in North Carolina

Compromise on LEED Certification

The bill proposing to prevent state construction projects  from   seeking  “green building” certification  under LEED  standards  (House Bill 628) appears to be moving toward a compromise.  An earlier post described the controversy over  LEED standards for wood products.  Yesterday, the Senate Agriculture and Environment Committee approved a  new – and entirely rewritten – version of  House Bill 628.  You can find the new bill draft here. The Senate version of House Bill 628 does two things:

  1.  The bill adds entirely  new  language on  energy efficiency standards for state construction projects. The Senate bill  would  change existing law to only require state construction projects to meet more aggressive energy efficiency standards adopted by the General Assembly  in 2008  if the result would be a net savings in construction and operating costs.  To calculate “net savings”, the bill uses construction costs added to operating costs for the first ten years after completion (as compared to building the same structure without meeting the energy efficiency standards).   The committee heard some concerns about using ten years of operating costs to calculate net savings.  Apparently most energy efficiency construction contracts use 15-20 years as the time period for recovery of costs and calculation of net savings.  Senator Tommy Tucker, who offered the amended bill language in committee, said that he would be willing to consider a different time period as long as it is reasonable.
  2. The bill completely replaces the original House Bill 628 language on acceptable  “green” building certification.  The Senate version would allow state construction projects to  use any energy efficiency/environmental design rating system that  “(i) provides certification credits for, (ii) provides a preference to be given to, (iii) does not disadvantage, and (iv) promotes building materials or furnishings, including masonry, concrete, steel, textiles, or wood that are manufactured or produced within the State”.   The LEED rating system seems to meet that requirement by  providing  specific credits for use of  regional  materials. You can find the list of LEED credits available for new building construction/major renovation projects here.    A new commercial building must meet basic  LEED  requirements  and earn a minimum of 40 points on a 110-point  rating  scale to get  LEED certification. Use of wood products meeting  Forest Stewardship Council standards  can provide one  point, but use of regionally sourced  building materials can provide  two  points  (if 20% of the building materials meet the regional material standard).

A footnote on the issue of LEED certification and  use of N.C.  wood products: There has been an ongoing fight over what should count as “sustainable” forestry. (See the earlier post  on a recent complaint filed with the Federal Trade Commission about  “green” labelling for wood products.) Setting that aside,  concerns about the  impact of LEED certification on use of N.C. wood products  may   also come  from  the  way architects translate LEED standards into specifications for individual construction projects   The  House bill sponsor, Representative Michele Presnell,  used an example of major renovations at Tryon Palace (a colonial era building in New Bern) where the material specifications required use of wood products meeting Forest Stewardship Council  standards. Although major wood producers are located within a stone’s throw of Tryon Palace,  Representative Presnell said  they were closed out of bidding because none of those producers operate under FSC  standards.   I don’t have any direct knowledge of the specifications for the Tryon Palace project, but if that happened it seems to be an unnecessary result even under LEED standards. With a 110-point rating system, there are many different ways to reach the  40 points needed for LEED certification.  It is possible to reach  LEED certification without relying on the one point for wood products at all. (And the wood products credit only requires that 50% of the permanent wood products used in the building meet the FSC  standard.)

A conversation between the N.C. forest products industry and the state chapter of the American Institute of Architects about how specifications for LEED projects can be written to support use of N.C. products might benefit the industry even more than legislation.

House Bill 628 is on the Senate calendar today and will then go to a conference committee to work out the differences between the House and Senate versions.

Cross-over Scorecard

May 29, 2013:

Now that the  May 16 cross-over deadline has come and gone, it is time to look at the bills that  survived and the bills left on the battlefield. (Under House and Senate rules, most bills  had to pass at least one chamber and “cross over” to the other by May 16  to remain eligible for consideration in the 2013-14 legislative session. There are exceptions for  revenue bills, appropriation bills, redistricting bills and constitutional amendments.) I am going to focus on some of the most significant environmental bills; you can find a complete list of bills that survived cross-over here.

The Bills Left Behind

The two environmental bills that  received the most attention earlier in the session,  but failed to reach a floor vote  were  House Bill 298 and its Senate  counterpart (Senate Bill 365). With the support of a number of conservative political organizations — including Americans for Prosperity — the bills proposed to repeal the state’s renewable energy portfolio standard (REPS).  An earlier post talked about the politics of the renewable energy standard and  the practical problem the bill presented for Republican  legislators. The tension between the practical (jobs) and the political (conservative opposition to  support for renewable energy) played out in both the House and the Senate committees.  In the end, neither bill got all of the committee approvals needed to get to  a floor vote.

Some  other environmental bills that failed to make cross-over:

Senate Bill 679  would have halted reductions in groundwater withdrawals from two depleted aquifers in the Central Coastal Plain, maintaining withdrawals at current levels. In  the 15 Central Coastal Plain counties,  state rules have required large water users to gradually reduce withdrawals from  the  Upper Cape Fear and  Black Creek aquifers by as much as 75% to allow the aquifers to recover. The bill proposed to  cap  the required reductions in water withdrawals at 25% unless groundwater in the aquifers  dropped below 2012 levels.

House Bill 770  would have suspended enforcement of  state and local  water quality rules for the Falls Lake watershed rules for two years and required a study of alternatives to the nutrient rules.

House Bill 983  proposed to  designate red drum, spotted sea trout and striped  bass as coastal game fish. The  game fish bill has become a flashpoint in an ongoing  tug of war between recreational fishermen (who want the game fish designation as a way to prevent over-fishing of the species through use of commercial nets and trawls) and  commercial fishermen (who don’t).

Technically, all of the  bills above are dead for the 2013-2014 legislative session. BUT there are ways around the cross-over rule.  One way to revive a dead legislative proposal is to put the  language into another  bill  — one that is still eligible for adoption.  One reason to read bills very carefully in the last few weeks of a legislative session.

Bills that Made the Cross-Over Deadline

Among the environmental bills still eligible for adoption:

House Bill 74 creates a complicated process for review of existing state rules — potentially leading to automatic repeal of environmental rules that are not readopted on a schedule set by the state’s Rules Review Commission. An earlier post talks about  House Bill 74 and  its Senate counterpart (Senate Bill 32). The Senate bill never got to the Senate floor for a vote.

House Bill 94 (Amend Environmental Laws 2013) has a number of relatively minor changes to environmental laws. Many, but not all,  of the changes were recommended by the Department of Environment and Natural Resources. One change to note —  the bill again extends the deadline for  some underground petroleum storage tanks located near water supply wells or high quality surface waters to have secondary containment.  Since 2001, secondary containment has been required for new tanks installed  within 500 feet of a public water supply well or within 100 feet of a private well.  Secondary containment is also required for tanks located within 500 feet of shellfish waters and other water bodies with exceptional water quality. For tanks installed between 1991 and 2001, House Bill 94 would extend the deadline for providing secondary containment  to 2020.

House Bill 300  gives coastal cities clear authority to deal with nuisance situations on the beach. (Similar language appears in Senate Bill 151.) An earlier post  describes the court case that prompted the legislation.

House Bill 628  would prohibit new state building projects from seeking a Leadership in Energy and Environmental Design (LEED)  certification as environmentally sustainable and energy efficient under standards set by the U.S. Green Building Council.  (LEED certification is entirely voluntary; the Green Building Council does not have any regulatory authority.) An earlier post explains the North Carolina forest products industry concern about the Green Building Council’s  LEED sustainability standard for wood.

House Bill 938  deals with wetlands and stream mitigation. The bill  legislatively sets the mitigation value for isolated wetlands at 1/3 the value of  wetlands  adjacent to surface waters. The bill also establishes the mitigation value of intermittent streams at 1/3 the functional value of a perennial stream. The changes would reduce the amount of mitigation required by the state for development projects that impact isolated wetlands and intermittent streams.

House Bill 1011  is the new bill that changes appointments to a number of state boards and commissions, including the Environmental Management Commission (EMC)  and the Coastal Resources Commission (CRC). The bill is a  House replacement for Senate Bill 10 — the original board and commission reorganization bill — which crashed and burned when the House refused to adopt a negotiated compromise between  House and Senate versions of the bill. Note:  Senate Bill 402 (the budget bill)   has similar  EMC and CRC appointment language.

Senate Bill 76 makes a number of changes to the Mining and Energy Commission, the state Energy Policy Council and laws on  oil and natural gas production. One of the most significant changes would allow certain types of wastewater from hydraulic fracturing to be injected into deep wells for disposal. State law has not allowed underground injection of any type of wastewater since the 1970s. See an earlier post for more background on  underground injection of waste.

Senate Bill 112 ( Amend Environmental Laws 2013). The Senate bill  contains some things not found in the House version including a  section allowing  material from land clearing and right of way maintenance to be taken off site and burned without an air quality permit.The current law requires a permit for open burning  off-site unless the material is taken to a permitted air curtain burner.

Senate Bill 151 makes changes to fisheries laws and, like House Bill 300,  clarifies local government authority in public trust areas. The bill also makes significant changes to the law allowing construction of terminal groins to stabilize inlets at the North Carolina coast. After prohibiting permanent erosion control structures for nearly 40 years, the General Assembly amended state law in 2011 to allow construction of terminal groins at inlets. The 2011 legislation only allowed  construction of four terminal groins as a pilot project. Senate Bill 151 removes the limit on the number of terminal groins permitted even though no groins have been  built yet — and no new information on groin impacts provided by  the pilot project. The bill repeals language allowing the use of a terminal groin only if  the shoreline cannot be stabilized in other ways. The bill also weakens protection of nearby property owners;  the  bond  required for  groin construction would no longer  cover property damage.

Senate Bill 341 makes changes to the interbasin transfer law that requires state approval to move  water from one river basin to another. (Transfer of 2 million gallons per day or more requires a certificate from the state’s Environmental Management Commission.) For the most part, the bill simplifies the  approval process for:  modification of an existing interbasin transfer;   new interbasin transfers to provide water to offset reductions in groundwater withdrawals in the Central Coastal Plain Capacity Use Area; and  new interbasin transfers in certain coastal counties.

Senate Bill 515  would repeal state water quality rules that require reductions in the  discharge of  nitrogen and phosphorus to Jordan Lake and its tributaries and set up a legislative study  to identify alternative ways to protect water quality in the reservoir.  This post provided background on Jordan Lake’s  pollution problems and the history of the rules that Senate Bill 515 would repeal.

Senate Bill 612 (Regulatory Reform Act of 2013) would generally  require state environmental programs to repeal or change environmental standards that go beyond requirements of a federal rule on the same subject.   See this earlier post  for more detail on what the change or repeal requirement could mean. Note:  A section of Senate Bill 612 repealing the Neuse River  and Tar-Pamlico River stream buffer rules was removed from  the bill  before Senate adoption.

Senate Bill 638, among a number of other things, would eliminate the need for a water quality permit to fill or discharge waste to a  wetland that is not considered “waters of the United States” under the Clean Water Act. See an earlier post  for more background.

House Bill 628 : It’s Not Easy Being “Green”

May 7, 2013:  I just learned of  House Bill 628 (Protect/Promote N.C. Lumber)  today and set out to understand why the N.C. General Assembly would  want to stop  state construction projects from trying to  meet energy efficiency and environment sustainability standards. The short answer may be a perfect symbol of the  current environmental moment — an industry has asked the state legislature to do something to influence  a private nonprofit organization’s voluntary  environmental sustainability standards  because those standards set a higher bar than the industry wants to meet  to get credit for being “green”.

First, House Bill 628 really protects and promotes the particular type of “green” certification for  wood products supported by the N.C. Forestry Association. Certification of products and buildings as energy efficient and environmentally sustainable has become both an environmental movement and a marketing tool.  “Green” labels on consumer products appeal to environmentally conscious consumers. A green building certification appeals to those same consumers and to large institutions (public and private) interested in  environmental protection or cost savings from energy and water efficiency.  That consumer appeal gives a “green” label economic power and a war is currently raging over the kind of forestry practices that should get credit toward green product labels and green building certification.

House Bill 628 wades into the green building controversy. The U.S. Green Building Council, a nonprofit organization,  has developed the most widely known and accepted standards for environmentally sustainable and energy efficient construction.  The Green Building Council’s  program gives credit toward LEED (Leadership in Energy and Environmental Design) building certification for use of wood products that meet standards set by  the Forest Stewardship Council. You can find more information on LEED certification standards here.

The American  Forest and Paper Association created its own set of sustainable forestry standards in the 1990s.  The Forest and Paper Association’s  Sustainable Forests Initiative has since separated from the industry organization and operates as an independent nonprofit that maintains voluntary standards for sustainable forestry practices and  certifies  forestry operations meeting those standards.  The forest products industry has pushed the U.S. Green Building Council to give credit toward LEED certification for use of wood from a forestry operation certified by the Sustainable Forests Initiative, but the Green Building Council has resisted the change.

One afternoon has not been enough to fully understand the differences between certification under the Sustainable Forests Initiative versus the Forest Stewardship Council, so I am not going to try to resolve the controversy over their relative merits.  For purposes of understanding the political fight, conservation organizations believe the Forest Stewardship Council standards used for LEED certification do a better job of protecting endangered species and old growth forests and are less likely to result in clear-cutting.  The forest products industry prefers the Sustainable Forests Initiative standards as less costly and sustainable enough.

What does House Bill 628 do?

●   It prevents any future state construction projects from seeking LEED Certification.  (The bill only allows state projects to seek green building certification from a program that gives credit under the Sustainable Forests Initiative and uses standards approved by the American National Standards Institute.  The LEED program does not meet either of those requirements.) The move away from LEED certification for state buildings  will likely set back efforts to push state construction projects to greater energy and water efficiency and a smaller environmental footprint.

●   Ironically, the bill may hurt other North Carolina industries that benefit from LEED standards encouraging use of local materials.  A representative from Nucor Steel (a North Carolina-based company that produces steel from recycled   materials)   spoke against the bill in the House Agriculture Committee meeting today  and noted the value of  LEED standards as an incentive to use of domestic steel in construction.

Is there an offsetting benefit to the North Carolina lumber industry? That is not clear. Nothing the N.C. General Assembly does can compel the U.S. Green Building Council to change  LEED standards; it is entirely possible that House Bill 628 will order the state to abandon LEED certification for state construction projects without achieving any change in LEED standards for wood products.  It also isn’t clear that the LEED standard for wood represents a real barrier to use of North Carolina lumber.  The LEED standard for wood represents a very small part of the LEED green building certification. A commercial building must meet basic  LEED  requirements  and earn a minimum of 40 points on a 110-point  rating system scale for  LEED certification. Meeting the wood standard  just provides one point.   The wood standard itself is modest —  a builder can earn that one point by using only 50% (based on cost) of wood-based materials and products certified by the Forest Stewardship Council for permanent building components( such as framing and floors); temporary construction materials do not count against the percentage.

It is also difficult to argue that the LEED standards disadvantage N.C.  products, when each  N.C. forestry operation can choose to meet  the  voluntary Forest Stewardship Council certification standards that  receive credit  toward  LEED certification. The real issue is that N.C. wood producers want the benefits of a “green” product label — but also want to set the standards for being “green”.

Yesterday in the General Assembly

May 2, 2013: A brief update on  legislative action:

Renewable Energy. The House Public Utilities and Energy Committee  did not take  up  House Bill 298 again (although it appeared on the committee calendar), but the Senate Finance Committee approved a Senate bill to repeal the renewable energy portfolio standard (REPS). Senate Bill 365 would sunset the renewable energy standard in 2023, but immediately caps the renewable energy portfolio  standard  at 3% of retail sales — a standard that both Duke Energy and Progress Energy have already met. (The  2007 legislation creating the renewable energy portfolio standard  required Duke Energy and Progress Energy to meet  3% of retail sales with renewable energy or energy efficiency measures by 2012 and gradually increased the target to 12.5% of retail sales by 2021.)  Senate Bill 365 keeps  specific set-asides for energy generated by poultry and swine waste  although   renewable energy  from those  facilities  (which are not yet in operation) will not be needed to meet a  3% REPS requirement.   The Finance Committee vote to approve Senate Bill 365 became contentious as the committee chair ignored a member’s request for a show of hands  and  called  a very close voice vote for the ayes. The Senate bill now goes to the Senate Commerce Committee. The House bill remains in the House Public Utilities and Energy Committee and could be brought up for another vote at any time.

Regulatory Reform. Senate Bill 612 passed the Senate, but only after several floor amendments. The most significant amendment removed language that would have eliminated the Neuse River and Tar Pamlico River stream  buffer requirements.  The bill still requires state environmental agencies to repeal all state rules that are more stringent than federal rules on the same subject. The bill now goes to the House.

May Day at the General Assembly: Environmental Bills

May Day: An ancient celebration of spring.  “Mayday” : an international distress call. 

There will be lots of activity on significant environmental legislation today at the N.C. General Assembly:

Renewable Energy.  Rep. Mike Hager will attempt to revive House Bill 298 repealing the state’s renewable energy portfolio standard (REPS). Earlier posts on the REPS bill can be found here and here. The bill will be back in the House Public Utilities and Energy Committee at noon. A  motion to approve the bill failed in the same committee last week by a 5-vote margin, but the committee never voted to disapprove the bill.  A  story by John Murawski in today’s Raleigh  News and Observer suggests little change in the lineup for and against the bill. Conservative political organizations (including Americans for Prosperity) and anti-tax crusader Grover Norquist continue to push for repeal of the renewable energy standard as part of a national political strategy that has little to do with the costs and benefits of  repeal  in  North Carolina. Some key House lawmakers  still  oppose the bill because the renewable energy standard has brought new private investment and jobs to the state. A Senate version of the  REPS repeal bill  (Senate Bill 365) will get a first hearing in the Senate Finance Committee today. Rarely does an issue so clearly require a legislator to choose between the state’s interest and a position being promoted  by national political organizations.

Regulatory Reform. Senate Bill 612 (Regulatory Reform Act of 2013) will be up for a floor vote in the Senate this afternoon.  See an earlier post on bill language essentially repealing Neuse and Tar Pamlico River buffer requirements and a  more recent  post about  a provision requiring  environmental agencies to repeal state rules that are more stringent than federal regulations on the same subject. (Putting those two proposals in the same bill is interesting all by itself since the Neuse and Tar Pamlico buffer rules are critical parts of  federally required and federally approved state plans to reduce nutrient pollution in the two river systems. It appears that even a federal requirement may not be enough to save environmental rules in some cases.)

The idea  that  state environmental rules  can simply track federal regulations  really misreads  federal environmental law. Senate Bill 612  assumes that federal agencies have adopted environmental regulations that can be simply picked up and applied by the state and that isn’t the case. Federal regulations alone would not, in most cases, be enough to make for a functioning   environmental permitting program  — or one that actually responds to the state’s needs.   All federal environmental laws  assume — and in many cases require —  that individual states will tailor the  federal  program to  address conditions in the state. (Since you won’t find estuaries in Arizona, that state’s Clean Water Act program does not look like  North Carolina’s program.)  This misunderstanding of the relationship between federal law and state environmental  rules means the most likely outcome of the Senate Bill 612 repeal requirement  will be conflict and confusion. It is unclear why the Senate chose to use a sledge-hammer rather than focus regulatory reform efforts on issues actually raised by citizens in comments to the Joint Committee on Regulatory Reform or through the rule review process  created  in G.S. 150B-19.2.

Water System Management.  House Bill 488 (transferring the Asheville water system to the Buncombe County Metropolitan Sewer District)  has come out of a conference committee to resolve differences between House and Senate versions of the bill. See an earlier post for background on the Asheville controversy.   The Senate has approved the conference report; the conference report does not appear on today’s House calendar yet, but could be added. Note: The Buncombe County MSD  had a major sewer spill yesterday;  the details (such as cause and the total amount of raw sewage spilled to the French Broad River)  are not yet clear. The spill caused me to look at House Bill 488 again and it turns out that the bill does not condition transfer of the Asheville water system on the MSD’s compliance with environmental standards or on actual transfer of the water system’s operating permit to the MSD.

Renewable Energy Repeal Fails Committee Vote

April 25, 2013

House Bill 298, the bill to repeal the state’s renewable energy portfolio standard (REPS), failed to win approval in the House Public Utilities and Energy Committee yesterday. (See an earlier post for  background on North Carolina’s  renewable energy standard and House Bill 298.)

Although the bill had the backing of conservative political organizations,   the Republican-controlled House of Representatives never seemed particularly enthusiastic.  The bill won approval of the House Commerce and Job Creation Committee two weeks ago by only a one vote margin even after the bill sponsor  revised the bill  to  wind  the REPS program down more slowly.

When the bill reached the Public Utilities and Energy Committee, it  had been modified again to push complete repeal of the renewable energy standard out three more years –from 2018  to 2021. A friendly amendment in committee made two additional changes to soften the  impact of repeal on renewable energy companies that  invested in North Carolina in reliance on the REPS requirement.  The amendment  removed language allowing electric utilities to use power generated by large hydroelectric projects  to meet the REPS standard (returning to language in 2007 legislation creating the  REPS requirement). The change was made to prevent large existing hydropower plants operated by Duke Energy and Progress Energy  from crowding out new renewable energy sources even before the REPS repeal date. The amendment also  extended the time allowed for  electric utilities to recover costs associated with  renewable energy contracts. Americans for Prosperity again spoke in support of the bill and  submitted a letter of support signed by  a number of other conservative political organizations.

In spite of those efforts, the motion to approve the bill failed by a vote of 13-18 in a committee dominated by Republican legislators.  Republicans voting against the bill included members of the House  leadership —  Republican Conference Chair Ruth Samuelson and  Rules Committee Chair Tim Moore.

The bill failed for a very practical reason — the REPS requirement has brought private investment and jobs to North Carolina at a minimal cost to consumers.  “Riders” on electric bills allow the utilities to recover any additional cost of using renewable energy; the riders have never approached  caps included  in the 2007 REPS legislation. The cost of solar energy in particular has fallen by nearly half as solar companies expanded operations in North Carolina in response to REPS incentives and those costs continue to fall.  (Duke Energy’s residential  customers now pay 21 cents per month to cover the additional cost of  solar energy.  In a rate case filed with the N.C. Utilities Commission  earlier this year, Duke proposes to take the residential  REPS rider to -1 cent. Although Duke Energy has proposed rate increases, those increases are  associated with the cost of conventional energy generation.)

At the same time, private  investment in response to the renewable energy standard brought jobs to the state. See  a 2013 report  by Research Triangle Institute/ LaCapra Associates,   The Economic, Utility Portfolio, and Rate Impact of Clean Energy Development in North Carolina,  for more on the economic impact of the  N.C.  REPS requirement and state renewable energy tax incentives. A  September 2012 clean energy jobs census by the N.C. Sustainable Energy Coalition  identified  over  15,000 jobs associated with clean energy companies.

Conservative political organizations like Americans for Prosperity have made  renewable energy standards a  target for repeal nationwide.  Given extremely low consumer cost and increased private  investment and job creation,  there was little in  the N.C.  REPS experience that could be used  as an argument for repeal.  Supporters of House Bill 298  increasingly had to rely on an ideological argument against energy subsidies in general.  That position has a significant weakness — conventional energy sources  (such as coal, natural gas, and nuclear power) also benefit from subsidies, but conservative  opposition  seems to focus only on subsidies for renewable energy.   Bill supporters  also cited  stories of high cost and renewable energy business failures in other states and countries.

Approving House Bill 298 would have required legislators to ignore  real economic benefits to the state  in favor of an ideological argument against renewable energy subsidies. A majority of committee members chose  reality.

N.C. Renewable Energy Update

April 10, 2013:  A little more detail on the new version of House Bill 298. (For some reason, it took a week for the version  approved  in committee last Wednesday to be posted on the General Assembly website).

Instead of  immediately repealing   the entire   2007 renewable energy portfolio standard (REPS)  requirement, the bill would cap the amount of electric generation  to be met by renewable energy sources at 6%  of 2014  retail sales and sunset the REPS requirement  in 2018. The 2007 legislation (Senate Bill 3) required the electric utilities to generate 6% of 2014 retail sales  using renewable energy sources by 2015 and then increased the REPS goal to 10% of retail sales by 2018 and 12.5% of retail sales from  2021 on. SB 298 cuts the renewable energy goal in half and the 2018 sunset means that  the electric utilities could abandon even the 6% renewable energy target after 2018.

Other changes:

●   The amount of the REPS requirement that could be met with energy efficiency measures would immediately increase from 25% to 50%

●   Existing hydropower facilities could be used to meet the REPS goal. Since both Duke Energy and Progress Energy generate a significant amount of electricity from hydropower facilities, the change may allow existing hydropower to crowd out new renewable energy sources.

● Removes the set-aside for solar energy. (HB 298 repeals a Senate Bill 3 provision requiring the electric utiltiies to supply  at least two-tenths of one percent of the electric power sold to retail customers from 2018 on through a combination of new solar electric facilities and new metered solar thermal energy facilities.) The bill keeps the Senate Bill 3 set-asides for energy generated by swine and poultry waste – although those  set-asides  would sunset in 2018 with the REPS requirement.

● Requires any contract between an electric utility and a renewable energy company to end by December 31, 2018 for purposes of cost-recovery.

Although the bill looks less like immediate repeal of the REPS requirement, the effect would be the same.  New renewable energy sources could be crowded out by existing hydropower and energy efficiency even before the REPS requirement ended in 2018.  Swine and poultry waste would continue to have a set-aside through 2018 — but uncertainty beyond 2018 would make construction of waste-to-energy facilities a very risky business. In the end, the bill would completely undermine the Senate Bill 3 goal of encouraging development of new renewable sources of energy in the state as a source of energy security and job creation.

Renewable Energy: Predictions (and Politics) Meet Reality

April 4, 2013

Yesterday in the North Carolina  General Assembly, the House Committee on Commerce and Job Development took up  House Bill 298. (For background on the bill, see an earlier  post  about the proposed repeal of North Carolina’s renewable energy portfolio standard.)   Rep. Mike Hager presented a slightly revised bill, but repeal of the 2007 renewable energy portfolio standard (REPS)  remains at the center of the legislation. The committee approved the bill on a very close vote (11-10);  two Republican committee members voted  with Democratic committee members to oppose the bill.

Discussion in committee set up an interesting conflict between the reality of North Carolina’s REPS experience and the politics of renewable energy.  Those supporting repeal of the REPS requirement   cite both  ideological reasons  (opposition to  energy subsidies in general and subsidies for renewable energy in particular) and fear that the higher costs of renewable energy will hurt consumers and damage  the   economy.  The problem for bill supporters is that the state has had five years of experience with the REPS requirement and none of the predicted economic  horrors have materialized.  Instead, bill opponents can point to  real economic benefits  in jobs created and  private investment attracted to the state –- at minimal cost to consumers.

Of the fifteen (by my count)  members of the public who  commented on the bill in committee, only three supported repeal of the renewable energy portfolio standard. All three represented conservative political organizations — two  speakers from Americans for Prosperity and  another   from the Civitas Institute.  One argument for repeal laid the responsibility for increased electricity rates at the feet of the renewable energy standard.  In reality, REPS costs have been  low and and continue to decline.  For a residential Duke Energy customer, the  fee (or “rider”)  to cover the additional cost of  meeting the REPS requirement  is now 21 cents per month and  falling.   Although Duke Energy has filed a proposed rate increase  with the N.C. Utilities Commission, the justification for the increase has been recovery of capital costs associated with conventional power generation facilities and improvements to transmission infrastructure  — not  the cost of renewable energy.

Dallas Woodhouse, state director of Americans for Prosperity,  and Brian Balfour from the Civitas Institute also argued that the  higher  cost of renewable energy hurts the state’s economy and leads to job loss.   Their  argument  seems to be rooted in a 2009  report on the  projected  economic impact of  North Carolina’s renewable energy portfolio standard  that was put out by  the John Locke Foundation and the Beacon Hill Institute (BHI)  at Suffolk University. The  Locke/BHI Report looked at two different scenarios and even under the more favorable of the two predicted  that:

“… North Carolina will lose 3,592 jobs, investment will decrease by $43.20 million and real disposable income will fall by $56.80 million by 2021. As a result, the state economic output measured in real state Gross Domestic Product (GDP) will be $140.35 million lower than without the mandate.”

That prediction was made  early in implementation of the state  REPS requirement and the 2013 reality looks very different.    The actual impact of North Carolina’s support for green energy:  $1.4 billion in new green energy investment, more than 15,000 jobs in green energy as of September 2012  and an increase of $1.7 billion in the state’s overall economic output.  (My  earlier post has  links to both a 2013  Research Triangle Institute/La Capra report on the economic impact of the state’s green energy policies and a green energy jobs census conducted by the N.C. Sustainable Energy Association.)

Why were the predictions in the  Locke/BHI Report so wrong?  The costs of meeting the REPS requirement have turned out to be much lower than  the report projected.  The Locke/BHI Report assumed that the electric utilities would need to go  to the maximum cost recovery  rider  allowed under the 2007 REPS legislation (Senate Bill 3).  The report also evaluated a second, even more pessimistic, scenario that assumed actual renewable energy costs would exceed the fee caps.  As it turns out, the  REPS  riders are nowhere near the  statutory caps and  the riders continue to drop from year to year.  Senate Bill 3 capped the  REPS cost recovery rider for residential customers at $1 per month for 2012; the  current  Duke  Energy  rider for residential customers is  21 cents per month. In March, Duke filed an  application with the N.C.  Utilities Commission to set the residential REPS rider for 2013-2014 at  -1 cent, which would result in a  rebate to residential customers.  Costs to  non-residential customers have also come in   below the Senate Bill 3 caps and will continue to fall under the riders proposed by Duke Energy for 2013-2014.

The twelve members of the public who spoke against House Bill 298 in committee represented renewable energy companies  with significant investments in North Carolina; large swine producers  investing in waste-to-energy projects as an innovative  way to dispose  of swine waste;   the Warren County economic development director who pointed to the benefits that solar energy development  has brought to an economically struggling  rural county; and a wind energy developer interested in the North Carolina coast.

Based on the committee discussion yesterday, House Bill 298 has the potential to cause serious heartburn for conservative legislators who are being forced to choose  between a real bright spot in the state’s economy and policy positions advocated by conservative political organizations. The bill still has three more committees to get through in the House; the next stop will be the Environment Committee.