Tag Archives: North Carolina

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.

The “Ag-Gag” Bill

June 3, 2015.  Today, both the House and the Senate overrode Governor Pat McCrory’s veto of House Bill 405 (the Private Property Protection Act). From the beginning,   animal welfare activists opposed H 405 as another attempt to enact  “ag-gag” legislation in North Carolina.  (The term “ag-gag” has been used by opponents of  laws intended to deter activists  from taking jobs with agricultural operations  to  document animal cruelty.)  But House Bill 405  affects all employees – not just agricultural workers — and opposition to the bill broadened out of concern that the bill will discourage employees from documenting and reporting all sorts of unlawful activities.

Bill supporters, including the N.C. Chamber of Commerce,  describe H 405  as necessary to protect businesses from activists, undercover reporters,  and industrial spies. At its heart, the bill aims to discourage employees from making photographs, videos, and recordings in the workplace and using the documentation to the disadvantage of their employer.    Supporters point to “whistle blower” protections in the bill to answer concerns that the bill  will  discourage  employees from documenting and reporting dangerous, cruel and even criminal behavior.

Opponents fear the  bill will become a shield for unlawful activity. The American Association of Retired Persons  (AARP)  lobbied against the bill because of the potential impact on documentation of  abuse in nursing homes and other care facilities.   Although not mentioned in the legislative debate, the bill could also deter employees from providing evidence of  environmental and public health violations.

What the bill does. House Bill 405 allows an employer to take legal action against an employee who enters a “nonpublic” area of the workplace;   takes photographs, makes recordings, or copies records without permission; and uses those documents against the interest of the employer.   The employer can already fire the employee; H 405 allows  the employer to also sue the employee  for  monetary damages,  including legal fees and a $5,000 per day penalty.

Employees affected by the bill.   Supporters describe H 405 as a  defense against infiltrators and  industrial spies, but the legal actions authorized by the bill are not limited to those circumstances.  Some bill language  seems to focus on employees who are not  legitimately in the workplace to  “do business with” the employer.   But the bill can be interpreted to authorize  legal action against any  employee  who  makes  photos, recordings or copies of records without permission and uses those documents against the employer’s interest.  (The employer would certainly argue that the  employee  was not — at least in the moment — there  “to do business with” the employer.)   If the General Assembly intended H 405  to authorize legal action only against an employee who purposefully took the  job to sabotage, collect damaging information or steal trade secrets, the law  needs to be more clear.

Protection for “whistle blowers”.  H 405 provides only limited “whistle blower” protection for private sector employees.   The bill  incorporates a number of anti-retaliation laws  that shield employees who file claims under worker health and safety standards.  So H 405 would not allow an employer to take legal action against an employee who documented  violations of Occupational Safety and Health (OSHA) rules, mine safety regulations, or laws that protect agricultural workers from exposure to pesticides.

But none of the “whistle-blower”  provisions in H 405  protect  a private-sector  employee  who documents  a violation of environmental standards, public health regulations, or other laws protecting the general public.  Under H 405, an employee who (without the employer’s permission) photographs illegal dumping of hazardous waste and provides the photo to DENR could  be required to pay damages to the company that caused the violation.

A model for whistle-blower protection. In debate on the veto override, legislators  seemed to agree on  both the need to protect businesses from unethical activities and the importance of  shielding  whistle blowers who uncover violations of the law. Legislators disagreed on how effectively House Bill 405 shields whistle-blowers.   On this, bill opponents appear to have the stronger argument; H 405 does not protect private sector employees who document and report violations other than those directly related to worker health and safety laws.

But H 405 includes a reference to a state law that could be a model for providing more effective  “whistle-blower” protection.  In addition to protecting employees documenting violations of  worker health and safety standards, H 405 bars legal action against state employees covered by  G.S. 126-85.  That law protects state employees  who report unlawful, fraudulent or unsafe actions by a state agency as long as the employee did not know or have reason to know that the information reported was inaccurate.

The problem is that G.S. 126-85 only protects state employees  who report violations caused by a state agency or a state employee.  At the moment,  nothing in H 405 provides an equivalent level of protection for private sector employees who document unlawful, fraudulent or unsafe activities.

In pushing for an override of the governor’s veto,  bill supporters  expressed a willingness to continuing working on the law and to make changes if necessary. ( With the veto now overridden, H 405 becomes law so any changes would  have to be  made in separate legislation.)  G.S. 126-85 could be a good starting point if legislators are serious about protecting the ability of private sector employees to report unlawful and dangerous activities without fearing a lawsuit by their employer.

The Senate Budget and the Environment: Policy

May 21, 2013

Like all budget bills, the  Senate budget bill released on Sunday evening  makes  a number of changes to environmental laws — some related to the budget and some not. Here is a quick outline:

Conservation and Parks Programs

Section 14.3 creates a new Water and Land Conservation Fund by combining the Clean Water Management Trust Fund with the Natural Heritage Trust Fund.  The statutes creating the Natural Heritage Trust Fund  would be repealed. Staff of the Clean Water Management Trust Fund would move to DENR and the combined staff of CWMTF and the Natural Heritage Program  would work under an executive director appointed by the DENR Secretary. The existing Clean Water Management Trust Fund Board and Natural Heritage Trust Fund Board would be replaced by a new Water and Land Conservation Authority made up of nine members; appointments would be divided equally among the Governor, Speaker of the House and the President Pro Tempore of the Senate. The bill gives the Authority power to both develop criteria for grant awards and to make grant decisions.

Section 14.4(a)  reduces the  size of  the Parks and Recreation Authority from fifteen members  to nine.   Appointments  would be divided equally among the Governor, the Speaker of the House and  the President Pro Tempore of the Senate. Section 14.4(b) ends the terms of all current members of the Authority on June 30, 2013 to allow  for appointment of new members.

Bernard Allen Memorial Emergency Drinking Water Fund

Section 14.14  makes a number of changes to the law creating the Bernard Allen Memorial Emergency Drinking Water Fund. The fund was created in  2006 to  pay  for well testing in areas with suspected groundwater contamination and to provide a clean water supply to low income residents with contaminated drinking water wells. The changes, recommended by the Department of Environment and Natural Resources, do three things: 1. Allow  more frequent retesting of wells in areas where groundwater contamination may be migrating; 2.  Increase (from $10,000 to $50,000) the amount that may be spent per home  to provide  a new, clean  water supply. (The  increase is largely intended  to allow DENR to contribute more funding toward water line extensions that can be too expensive for a local water systems to do alone.);  and 3. Give priority to groundwater contamination that is manmade rather than naturally occurring.

Noncommercial Petroleum Underground Storage Tanks

Section 14.15 amends the law governing the state’s  Noncommercial Underground Storage Tank Trust Fund. The Noncommercial Fund pays the full cost of assessing and cleaning up groundwater and soil contamination from noncommercial petroleum underground storage tanks (such as home heating oil or farm supply tanks). The owner of the leaking  tank pays only to have the leaking tank removed. The changes  proposed by the Senate would for the first time require both a $1,000 deductible and a 10% co-pay by the owner of the tank.  The Senate budget  also appropriates $3.5 million to the Noncommercial Fund.

Water and Wastewater Infrastructure Funding

Section 14.21  creates a new Division of Water Infrastructure in DENR and a Water Infrastructure Authority. The new division would  combine the infrastructure loan  programs under the Drinking Water State Revolving Fund (now in the Division of Water Resources) and the Clean Water State Revolving Fund (now in the Division of Water Quality)  and  add  a grant program. The Appropriations/Base Budget Committee Report  describes the grants  as  “planning and supplemental” grants to local governments for drinking water and wastewater projects. The budget allocates $3.2 million in 2013-14 and $4.7 million in 2014-15 for the grant program. Note: Creation of the DENR water infrastructure grant program  seems to be related to Section 15.27 which eliminates all new state funding for the  N.C. Rural Economic Development Center.  In recent years, the Rural Center has received the only state grant funds for water and sewer infrastructure. The Rural Center funds have been  awarded through two different water and sewer grant programs –one for planning and supplemental grants and  another for  economic development projects. The Senate budget appears to divide the existing Rural Center grant programs between the proposed DENR Division of Water Infrastructure (which would award planning and supplemental grants) and  the new Division of Rural Economic Development in the Department of Commerce (which would make water and sewer grants for economic development projects). In an odd twist, Section 15.23 leaves it to the two cabinet secretaries (DENR and Commerce) to work out an agreement  to divide staff  in the Community Development Block Grant program (now in Commerce) between DENR’s Water Infrastructure Division and the Commerce Rural Economic Development Division.

Appointments to Environmental Commissions

Section 14.23  has the Senate changes to the makeup of the Environmental Management Commission (EMC). The language appears to be identical to language in  the failed House/Senate compromise on Senate Bill 10. Like earlier Senate versions of the EMC reorganization, the  budget bill  repeals  conflict of interest language now in the EMC appointments law. See an earlier  post about  the controversy over removal of that language.

Section 14.24  has Senate changes to the makeup of the Coastal Resources Commission. Again, the language appears to be very similar to the  last version of  Senate Bill 10. One thing that appears to be missing is the language requiring members of the CRC to either live or own property in the coastal area. That could be an oversight; sometimes language gets lost when legislative staff tries to cut and paste a provision from one bill to another.

Section 14.25 changes membership of the Coastal Resources Advisory Council. This language seems to match language in Senate Bill 10.

Oregon Inlet Jetties

Section 15.24 creates a 13-member  Oregon Inlet  Land Acquisition Task Force to look at the possibility of acquiring the land on either side of Oregon Inlet from the federal government “to preserve Oregon Inlet and to develop long-term management solutions for preserving and enhancing the navigability of Oregon Inlet.”  In short, the purpose of the Task Force  will be to  revisit the now ancient conflict over construction of jetties at Oregon Inlet. The federal government owns the land on either side of the inlet. Those lands are managed by the National Park Service (Cape Hatteras National Seashore) and the U.S. Fish and Wildlife Service ( Pea Island National Wildlife Refuge) .  Federal management plans for the  wildlife refuge and national  seashore do not allow construction of  permanent erosion control structures on the shoreline, making federal approval of the jetty project unlikely.  This is the latest chapter in a very old story that is  partly about  environmental policy and the effect of jetties on ocean shorelines and partly about money.  If you are interested in  more  information on the possible costs, benefits and environmental impacts of the Oregon Inlet jetty project,  the most recent analysis may have been a 2002 General Accounting Office report .

The Senate Budget and the Environment: Money

May 20, 2013: Last night the North Carolina Senate put out a draft budget. The new version of Senate Bill 402 has the budget bill text — which includes both  legislative provisions related to the budget and other non-budget things that the Senate wants. (More about those in another post.) A detailed overview  of the budget numbers can be found in the report of the Senate Appropriations/Base Budget Committee. Here is a quick take on the how the Senate budget would affect environmental programs. 

Overview of  DENR Budget Cuts

Although the Senate’s proposed  budget shows  a 40% increase in the budget for the Department of Environment and Natural Resources (DENR), the budget actually reduces funding for existing DENR programs in three ways:

1, The budget cuts funding department-wide by  $2,277,894  (2%), allowing DENR to decide where to take the reductions.

2. The budget  then takes an additional $2,055,782 in cuts to individual programs and funds. Some of the specific reductions include

— Elimination of  funding for the Sustainable Communities Task Force

— Reduction or elimination of funding for some programs in the Division of Marine Fisheries

— Reduction in funding for the Adopt-a-Trail Program

— A cut in operating funds for the N.C. Zoo

3. The budget significantly reduces funding dedicated to parks and conservation by shifting revenue from the real estate excise tax (the deed stamp tax) to the state’s General Fund.  By law, the deed stamp tax is now dedicated to the Parks and Recreation Trust Fund and the Natural Heritage Trust Fund to be used for  conservation, parks acquisition and improvement of park facilities.  The budget repeals the law that dedicates deed stamp tax revenue for those purposes and replaces the tax revenue with appropriations  at much lower levels. (More detail below.)

 Funding  for Conservation and Parks

The Senate budget proposes to do two significant things. First, it combines the Clean Water Management Trust Fund (CWMTF) and  DENR’s  Natural Heritage Trust Fund into a new Land and Water Conservation Fund. Then, the budget bill repeals the state law that  dedicates revenue from the deed stamp tax to conservation and parks projects and makes both the new Land and Water Conservation Fund and the  Parks and Recreation Trust Fund dependent on appropriations. The budget appropriates  $12 million for the Land and Water Conservation Fund and $11 million for the  Parks and Recreation Trust Fund; the $23  million total represents a reduction of about 65% compared to  2011 funds earmarked for  CWMTF,  the Natural Heritage Trust Fund and the Parks and Recreation Trust Fund combined. According to a N.C. Department of Revenue report,  the deed stamp tax generated $63.5 million in revenue in 2010-2011 to be divided between the Parks and Recreation Trust Fund  (75%) and the Natural Heritage Trust Fund (25%).  The Clean Water Management Trust Fund received a 2011 appropriation of  $11.25 million. Together, the deed stamp tax and CWMTF appropriation represented $74 million in total funding  for land and water conservation projects and parks.    Although the General Assembly  diverted money from both the Parks and Recreation Trust Fund and the Natural Heritage Trust Fund over the last four years because of budget shortfalls (so the full amount could not be used),   the  Senate budget permanently eliminates the deed stamp tax as a  dedicated funding source  to make much smaller appropriations through the budget process.

Programs that Receive Increased Funding

Much  of the apparent  increase in DENR’s budget comes from transfer of programs from other departments. For example, the State Energy Office and the Grassroots Science Museum pass-through grants would move to DENR from the Department of Commerce and the existing state funding would follow those programs.  Other  “new” appropriations really shift existing DENR activities from a dedicated  funding  source  to appropriations – generally at the same or lower funding levels.  In addition to the deed stamp tax, the list of dedicated funding sources diverted to the General Fund and replaced by appropriations includes the scrap tire disposal tax, the white goods disposal tax, and a portion of the solid waste disposal tax.

Actual increases in funding for existing or expanded DENR programs would go to:

— The Division of  Energy, Mineral and Land Resources to support the Mining and Energy  Commission; pay membership dues in the Southern States Energy Board (an organization of southern states supporting energy development) ;  market  North Carolina shale gas resources and do additional geological sampling and data collection on the state’s shale gas resource.

— Creation of a new water and wastewater infrastructure program that combines the existing drinking water and wastewater revolving loan programs with  new grant funding for local water and sewer needs.   The appropriation includes funding for a new Assistant Secretary for Infrastructure, a new division director position and funding for a water and sewer database as well as $3.2 million in grant funding for 2013. (The amount increases to $4.7 million for 2014.)

— A program to monitor the impact of  gill net fishing on endangered sea turtles (required as part of an agreement with federal agencies under the Endangered Species Act).

— Two new positions in the Division of Waste Management to evaluate groundwater contamination  that may threaten water supply wells.

—  Repair and replacement of trams at the North Carolina Zoo.

DENR Budget Bottom Line:

Reductions to existing programs: $4,333,676 or approximately – 4%  (not including reductions in funding to the Clean Water Management Trust Fund, Natural Heritage Trust  Fund and Parks and Recreation Trust Fund)

Loss of a dedicated funding source for conservation and parks resulting in a reduction of approximately 65% from the amount of  funding provided by deed stamp tax revenue.  

Proposed cuts come on top of  a 40% reduction in the DENR budget since January 2009 (including reductions in both operating funds and trust funds).

Increases to existing programs:  $6,200,000 (this figure does not include appropriations that simply replace dedicated funding sources eliminated in the  proposed budget or replace funds taken on a one-time basis  last year).  Most of the new funding — $4,000,000 —  goes to the  reorganized  water infrastructure program for two high level management positions,  a water and sewer database and grants to local governments.

Other apparent increases in the DENR budget involve the  movement  of money to follow the transfer of programs and positions from other state agencies or to fill gaps created by eliminating dedicated funding sources for DENR programs.   Six positions and $1.7 million in operating funds come to DENR with transfer of the State Energy Office from the Department of Commerce. Over $2 million would be transferred from Commerce for pass-through grants to the Grassroots Science Museums.   Appropriations also take the place of revenue from the white goods, scrap tire, and solid waste disposal taxes; those tax revenues would go to the General Fund to be appropriated by the legislature.

Regulatory Reform — Existing Rules

Last week, Senate and  House committees approved separate bills requiring review of existing state agency rules.  Under  Senate Bill 32,  all existing environmental protection rules would expire on December 31, 2017 unless readopted and approved by the state’s Rules Review Commission.  The problems:  1. Rather than identifying and fixing rules that create an unnecessary burden, the bill  puts scarce state resources  (both staff time and cost)  toward  readoption of every rule now  in existence;  and 2. If DENR and the environmental commissions  cannot  readopt  all environmental rules within four years, some number of the rules could automatically expire without regard to public health, public safety  or the impact on federally delegated environmental programs.

The House Regulatory Reform Committee approved a new version of House Bill 74 (Periodic Review and Expiration of Rules). The  original House bill draft  basically mirrored Senate Bill 32 and required review and readoption of all state agency rules every ten years.  Responding to concerns about the cost/benefit of readopting all rules, the new  House bill draft requires state agencies to review rules every ten years and sort the rules into three groups:

● Rules that are necessary and of substantive public interest;

● Rules that are necessary and without substantive public interest; and

● Rules that are unnecessary.

The intent was to make the  process less burdensome by only requiring readoption of rules that have “substantive public interest”.  The problem is that “substantive public interest”   now includes  any rule affecting property interests and any rule that any person may object to.  Under that standard,  very few rules would avoid the readoption requirement.  (I am  an optimist by nature, but experience tells me that rulemaking paradise in which  lions and lambs all lie down together is not a realistic goal.)

The bill would also automatically repeal any rule that the adopting agency fails to review  — or fails to review on the schedule set by the state’s Rules Review Commission (RRC). The idea of automatic repeal is a problem for several reasons, but the most basic is that rules needed to protect public health, safety and welfare should not be repealed because of a bureaucratic  error or a slipping timeline.  The bill also gives the RRC  power to require an agency to review an individual rule at any time – which makes a hash of the scheduled review, potentially disconnects an individual rule from related rules,  and raises the prospect of automatic repeal if the agency cannot immediately respond to the RRC request.

Like Senate Bill 32, the House bill applies even to state rules that adopt federal standards needed to carry out a delegated federal program.    Before going in that direction, the state needs to know what effect the readoption and automatic repeal provisions may  have on  the U.S. Environmental Protection Agency’s approval of the state’s Clean Water Act, Clean Air Act, Safe Drinking Water Act and hazardous waste programs.  When the question came up in committee last week, bill sponsor Ruth Samuelson indicated  a willingness to look into the issue more before the Regulatory Reform Committee meets again today.

In short, It is not clear  what Senate Bill 32 and House Bill 74  would accomplish — or even what the General Assembly hopes to accomplish with new rule review legislation.  Just last session, the General Assembly amended the state’s Administrative Procedures Act (APA) to include a new rules review process. G.S. 150B-19.2 invites the public to identify rules that are unnecessarily burdensome and requires the rulemaking agency to respond to those complaints. The APA  has long had a provision allowing anyone to petition a state agency for a rule change – including repeal of a rule. Under  G.S. 150B-20,  the agency must provide a formal response to each petition for rulemaking;  if the agency decides  not to make the requested rule change, its decision can be appealed.

It would be possible to tie the public comment under G.S. 150B-19.2 more closely to petition for rulemaking under G.S. 150B-20. It may also be helpful to amend G.S. 150B-20 to expressly identify rule repeal as one use of a petition for rulemaking. ( I don’t think there is any question the petition process can be used to request repeal of a rule, but  members of the public may not realize that.) Using some variation on those existing laws also has the benefit of focusing in on problem rules — rather than using a shotgun approach that aims at everything and may hit nothing.

The Senate and House rule review proposals also seem to be disconnected from the realities of rulemaking.  Many agencies – and particularly the environmental   agencies– long ago reformed the rulemaking process  in ways the General Assembly  may not recognize. On complicated issues, environmental rulemaking looks very much like negotiated rulemaking. The Department of Environment and Natural Resources   (DENR) has not done a major environmental rule in fifteen years without involving representatives of the regulated community  in development of the rule.  Depending on the subject, rule development  may include the Manufacturers and Chemical Industry Council, N.C. Homebuilders Association, N.C. Realtors Association,  local government,  electric  utilities,  commercial fishermen, the N.C. Farm Bureau, Department of Agriculture, Department of Transportation and others.  Sometimes all of the above.

Where  Senate Bill 32 and House Bill 74 assume that each rule is discrete, in reality environmental rulemaking often involves give and take among stakeholders to reach a set of interlocking standards.  One example would be the water quality rules protecting the Falls Lake water supply – water quality in the lake can only be protected by addressing all of the major pollution sources, so the rules allocate pollution reductions among  wastewater dischargers, development activity and agriculture. Pulling out any one of those standards affects  the other stakeholders and the effectiveness of  the water quality strategy.

To work, regulatory reform and rules review legislation needs to start with an understanding of how rulemaking  actually happens and target specific problems. Otherwise, the result will be costly chaos  — uncertainty for the regulated community, conflict with federal program requirements, and  costs  out of all proportion to the benefits. One risk is that the only benefit may go to individual interest groups that can use the process to avoid (or undo) the compromises needed for effective and equitable environmental protection programs.

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.

Fracking Chemicals: The Most Secret of Trade Secrets

April 2, 2013

An earlier post talked about the N.C. Public Records Act and protection of trade secrets. Drilling companies and their suppliers sometimes want to withhold the  identity of a chemical used in hydraulic fracturing as a “trade secret”  to avoid sharing commercially valuable information with competitors. The N.C. Public Records Act generally gives the public a right to information gathered by  a state agency in doing the public’s business, but makes an exception for certain types of personal  data  and for information that is legitimately a  trade secret.

Last week, the Mining and Energy Commission’s (MEC) Environmental Standards Committee approved a draft rule requiring  disclosure of chemicals used in hydraulic fracturing. The  draft rule allows a drilling operator to withhold from the public the identity of a fracking chemical that the operator or  supplier designates as a trade secret.   In  the  required  disclosure  to  the public,  the drilling operator would identify a trade secret  chemical  by its chemical  “family”.   More specific information could be  requested by  a health professional or  by emergency   response personnel if necessary to diagnose and  treat a health condition  or to respond to  an emergency.

The rule draft  presented at the start of the  meeting  also  allowed  a drilling operator  to withhold  trade secret  information  from regulatory staff in the Department of Environment and Natural Resources (DENR).    The trade secret information would only have been provided to DENR if  requested  by the department in response to a spill or health concern.  Entirely relying on disclosure  after an environmental emergency or health impact  raises at least two concerns.  In a real-time emergency — such as a major spill or fire —  it may be difficult to  get information from the drilling operator or  supplier quickly enough. For longer term problems (such as groundwater contamination),  the length of time between completion of the well and discovery of the problem may make it difficult to get accurate information at all.

The committee amended the trade secret protection  language  to require the operator to provide  the  trade secret information  to DENR  at roughly the same time the operator  claims the trade secret protection and discloses other  information to the public.   (All disclosure — to DENR and to the public —  would still happen after completion of the hydraulic fracturing operation.) The new language also requires the operator to provide the justification for trade secret designation.

The rule approved by the committee  limits the ability of the public to challenge a decision to  keep information about a fracking chemical  confidential — directly conflicting with the N.C. Public Records Act.  The Public Records Act allows “any person” to request records from a public agency and to take legal action  challenging an agency decision to withhold  the information. That includes the right  to challenge the appropriateness of a decision to keep information confidential under the trade secret exception. Under the  draft MEC rule, a decision to  keep   the identity of a fracking chemical confidential  could only be challenged by  a person who owns or rents  land where  a wellhead is located; the owner of  land adjacent to  a wellhead site; any other person who has “a legal interest in real property”; or a state agency having an interest that may be adversely affected by a chemical used in the fracturing fluid.

Under the draft rule, some  people  who  have a right  under the Public Records Act  to challenge  the withholding of  requested information  would not be allowed to challenge a decision to withhold information about  a fracking chemical.  Renters  would  be unable to challenge the withholding of information about chemicals used in nearby drilling operations.  Depending on how the rule is interpreted, it may also  affect the ability of  nonprofit organizations, news media, and local governments to challenge the appropriateness of  treating a fracking chemical as a trade secret.

An amendment to remove this  language from the rule and simply  follow  the Public Records Act  was voted down in committee.  Some committee members acknowledged the inconsistency with the Public Records Act, but indicated an intent to ask the General Assembly to change the law.  Two  things to note about the committee action:

On  several  issues, members of the Mining and Energy Commission have  discussed the possibility of adopting a rule that  conflicts with  existing state  law on the assumption that the commission can persuade the General Assembly to  conform the law to the rule.    The chemical disclosure rule is the first MEC rule to receive committee approval and may be the test of how these conflicts will be resolved.   This would not be the first controversy over consistency of a  rule with  state law, but  usually  the argument comes out of  differing  interpretations of the law.  I can’t think of another example of an agency proposing a rule knowing that it is inconsistent with  existing  law.

To make the Public Records Act consistent with the proposed  MEC  rule,  the General Assembly would need to change the Public Records Act to  either: 1.  limit challenges to all  trade secret claims;  or 2.  give  hydraulic fracturing  special treatment, making it more difficult to challenge  those particular  trade secret claims .  It isn’t clear  how much interest legislators will have in  a fight over public records law in order to provide special treatment for the oil and gas industry.

From here, the draft chemical disclosure rule goes to the Rules Committee of the Mining and Energy Commission  and then to the full commission for discussion.

NOTE: The original post has been revised to  make it clear that the draft rule  as amended on March 25  requires that trade secret information be provided to DENR staff  at the same time the operator discloses  nonconfidential information to the public.

Keeping Information on Fracking Chemicals Confidential

States differ in how they treat disclosure of a fracking chemical  that may be a  “trade secret”.  Several states (including Idaho,  Indiana, West Virginia and Wyoming) clearly  require that even “trade secret” information  must be  provided to the state regulatory agency.  Those states generally rely  on an existing trade secret exemption in the state’s  public records  act to keep the information confidential and prevent disclosure to the public. Other states (such as Montana and Louisiana)  allow the operator to withhold the chemical name of an additive considered to be a trade secret from both state regulators and the public; only the chemical family must be  reported.  In states that allow a well operator to withhold trade secret information from the regulatory agency, the agency can generally request the trade secret information if needed to respond to a spill or citizen complaint. In several states, trade secret information is clearly protected from disclosure to the public, but it is more difficult (on a quick review) to tell whether the information can also be withheld from the regulatory agency.  Most  states   require that trade secret information must be provided to a health professional if needed for diagnosis or treatment of a patient.  The draft rule under consideration in North Carolina would be similar to those in the more restrictive states –the regulatory agency would only receive trade secret information by request in response to a spill, leak or citizen complaint.See Hydraulic Fracturing Disclosure Requirements (a document prepared by the Vinson & Elkins law firm) for a helpful state by state summary of disclosure requirements updated through October 2012.

North Carolina’s public records act  requires  state agencies to keep  “trade secret”  information confidential. To be protected from release under the public records act, the information  has to meet the definition of a “trade secret” and be designated as a confidential trade secret when it is submitted to the agency. (N.C. General Statute 132-1.2.)  The N.C. trade secrets exemption does not allow businesses and industries to use the trade secret designation to withhold information from a regulatory agency that would otherwise have to be submitted.

Disclosure of Hydraulic Fracturing Chemicals — N.C.

The N.C. Mining and Energy Commission’s Environmental Standards Committee  has begun debating a draft rule on when and how to require disclosure of chemicals used in hydraulic fracturing (“ fracking”). The first draft of the rule proposed after the fact disclosure of the chemical additives used in fracking  — within 60 days after a well has been fracked or within 120 days after fracking began (whichever comes first). Disclosure would be made to the Mining and Energy Commission and to the public at the same time.  Information would be made available to the public through the FracFocus website maintained by the Groundwater Protection Council and the American Petroleum Institute.

The draft rule would allow a well operator to withhold information on a fracking chemical designated as a trade secret from both the public and the Commission.  The Commission could request information on a fracking chemical designated as a trade secret only after a spill or a complaint of harm.  The  committee  will take up a new draft in March. That draft will reflect some recommendations from a stakeholder group, but none of the stakeholder recommendations to be included would change the timing of disclosure or the treatment of trade secrets. The January committee discussion suggested that some committee members continue to have concerns about those sections of the draft rule, however,  and there is likely to be more debate. More on “trade secrets” to come.