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NCLM News & Political Report

Coinciding with the coming of fall, the state's top decision-makers are turning over a new leaf with new appointees filling key regulatory and legislative environment positions.

N.C. Environmental Management Commission

Meeting for the first time since the state budget reduced the number of commissioners and directed new appointments to each of the fifteen seats on the N.C. Environmental Management Commission (EMC), the board swore in thirteen new members at its meeting last week. Of the thirteen, five members previously served on the EMC, including chair Benne Hutson and members Steve Keen, Kevin Martin, Clyde "Butch" Smith, and Steve Tedder. Governor McCrory must still appoint the last two commission members, one who is a licensed physician and another at-large seat.

While the legislature eliminated an EMC seat specifically designated for local government, several of the newly sworn-in commissioners have past local government experience, either as elected officials or as professionals working for local governments. The League looks forward to sharing the perspective of its regulated members with all EMC commissioners.

N.C. Environmental Review Commission

Senate President Pro Tempore Phil Berger and Speaker of the House Thom Tillis made appointments last week to the legislative N.C. Environmental Review Commission (ERC). The three chairs of the Commission will drive the ERC agenda and all have previous legislative leadership positions on environment committees. The chairs of the 2013-14 ERC are Rep. Mike Hager, Rep. Ruth Samuelson, and Sen. Brent Jackson.

Duties of the ERC, a non-standing legislative commission that meets in between regular sessions of the N.C. General Assembly, include oversight of all state environmental boards, such as the EMC. The ERC also receives presentations on topics of interest for legislation in the upcoming session, and it conducts studies as directed by laws passed in the previous legislative session. This year, the ERC may conduct studies on three environment topics of interest to cities and towns: whether and when a city ordinance may be more stringent than a corresponding state or federal statute or rule; consolidation of the different types of water and sewer providers in the state; and technical review of plans by non-professional engineers. The legislature directed all three of those studies in HB 74 Regulatory Reform Act of 2013 (S.L. 2013-413).

Division of Water Resources

Finally, the N.C. Division of Water Resources (DWR), the main regulatory Division of cities and towns in the N.C. Department of Environment and Natural Resources, publicized its reorganization chart (includes detail of the Planning Section), including names of Division leaders. These new assignments follow a substantial reorganization effort directed by state legislators. League members will likely recognize many familiar faces from the ranks of the Division's section chiefs, some of whom hold new assignments:

To go along with the DWR reorganization, the Division is undertaking a systematic review of its programs. This review includes input from an Outside Involvement Committee on which the League participates as a stakeholder. Division Director Tom Reeder also stated that the following three subjects will receive priority for an overhaul via legislation or rulemaking:

  • Buffer rules (consolidate existing state rules)
  • Isolated wetlands rules
  • SA (shellfish) water classification

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State, Feds Solicit Input on Water Quality Standards

Both the state and federal government moved forward on actions related to surface water quality standards this month. League members prioritized changes to the state's water quality standards are one of their top regulatory areas of interest.

N.C. Water Quality Standards

Most immediately, the N.C. Division of Water Resources (DWR) received approval last week from the N.C. Environmental Management Commission (EMC) to hold a public hearing on the state's current water quality standards (more detail in the presentation in Action Item #1).

While the state has undertaken an extensive review of these standards since 2009 as part of the federally-mandated "triennial review," this public hearing would not be held to gather feedback on that proposal. Instead, according to state regulators, the state would solicit feedback from the public on any types of changes recommended to the current water quality standards. This public hearing would satisfy a federal requirement to hold a public hearing on a state's surface water quality standards every three years.

While the state undertakes this comment-gathering effort, the proposed triennial review package would be placed on hold. In presenting this idea to the EMC, DWR regulators stressed that the triennial review rule package needed further work to (1) identify actual costs and benefits of the rules, and (2) comply with additional legislative requirements placed on fiscal notes. The state planned to refine the triennial review rule package in light of comment received at the as-yet unscheduled public hearing.

State regulators estimated that the triennial review rulemaking would be completed by the end of next year. Read a recent status report on the triennial review and the effects of changes to water quality standards on cities and towns in this article from last month's edition of EcoLINC.

EPA Water Quality Standards Rulemaking

And earlier this month, the U.S. Environmental Protection Agency (EPA) released its long-anticipated water quality standards rule. This rulemaking addressed how EPA expected states such as North Carolina to write and implement their water quality standards. The League reported on this rulemaking last month in "N.C., EPA Tee Up Water Quality Standards Rules."

While EPA will accept comment through December 3, it also planned to hold educational webinars for the public throughout the comment period, on Sept. 24 and Nov. 14. To register for a webinar, visit this EPA website.


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NCLM Legal Memos Explain Specifics of Reg Reform, 811 Bills

Attorneys on the League staff have produced a series of legal memos to explain nuances of certain complex new laws passed in this legislative session. Importantly for municipal staff running water, wastewater, and stormwater programs, the memos cover the many provisions included in HB 74 Regulatory Reform Act of 2013, the significant rewrite of our state's 811 "call before you dig" laws in HB 476 Rewrite Underground Damage Prevention Act, and the expansion of project contracting to include design-build in HB 857 Public Contracts/Construction Methods/DB/P3.

You may access these memos on the League website:


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Budget Contains Significant Infrastructure Financing Changes

The 2013 State budget made several significant changes to state funding for infrastructure projects that will impact how cities and towns can access these funds. The end result of these legislative changes is that the only funds available that can be used exclusively for water and wastewater infrastructure grants are available through a new state board that will administer the State Revolving Fund programs.

State Revolving Fund Changes

Perhaps most importantly, the budget created the State Water Infrastructure Authority (SWIA), a politically appointed board that will now be tasked with administering loans and grants from the Clean Water State Revolving Fund (CWSRF), the Drinking Water State Revolving Fund (DWSRF), the Wastewater Reserve, and the Drinking Water Reserve.

The nine-member SWIA board includes dedicated seats for "a representative of an urban local government wastewater system or public water system" and "a representative of a rural local government wastewater system or public water system," both of which are to be appointed by the Senate President Pro Tempore. The statute directs other SWIA members to be appointed by the Governor (2) and the Speaker of the House (2). The remaining three members of the board include the Director of the Division of Infrastructure Finance (only votes to break ties), the Secretary of Commerce or designee, and the Director of the Local Government Commission or designee.

Members of SWIA have not yet been appointed, but they will need to be soon if the state is to maximize its available funding. The deadline for applications for the next CWSRF funding cycle was earlier this month, and as a revolving fund, future available money will be reduced the longer it takes to be awarded.

Clean Water Management Trust Fund

Legislators also revamped the board of the Clean Water Management Trust Fund (CWMTF) as part of the state budget. Whereas the board previously consisted of 21 members, it will now also be a 9-member board appointed by the Governor, Senate President Pro Tempore and Speaker of the House of Representatives.

Other changes to the CWMTF are consistent with a larger theme of changes to state funding of infrastructure -- less money dedicated solely to water and wastewater projects. Importantly, the state budget eliminated wastewater and stormwater infrastructure projects from the list of possible awards from the CWMTF. As detailed in this blog post by former N.C. Department of Environment and Natural Resources (DENR) official Robin Smith, the budget consolidated the CWMTF with the Natural Heritage Trust Fund, meaning projects that may have previously been funded by the CWMTF will now compete with land acquisition for limited funds. Additionally, legislators allocated more than $1 million from the CWMTF to a specific project in Jordan Lake, further reducing available funds for this year.

Rural Infrastructure Fund & CDBG Funds

In addition, the legislature made changes to another source of water and wastewater infrastructure funding that could reduce the overall amount of funds going toward those purposes. To replace grant programs formally administered by the N.C. Rural Economic Development Center, funding for water and wastewater projects is now available through the new Rural Economic Development Division in the Department of Commerce. However, these funds are also available for any rural economic development project and are not earmarked for utilities.

In the same vein, infrastructure funds for the Community Development Block Grants program are now opened up to purposes beyond water and wastewater infrastructure.


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State Regulators Return to Drawing Board with Nutrient Criteria Plan

Following rejection of the first draft of the state's latest Nutrient Criteria Implementation Plan (NCDP) by the U.S. Environmental Protection Agency (EPA), state regulators revised the document and committed to seeking further stakeholder input on the plan (revised NCDP), beginning with a meeting later this month. The topic of nutrient impairment is a top EPA priority.

The NCDP is required as part of an agreement between the N.C. Division of Water Resources (DWR) and EPA that outlines a work plan for regulators to use in addressing nutrient impairments across the state. Similar work plans, negotiated for all states receiving EPA funding, contained a description of an agency's tasks, timelines, and milestones for development of "numeric nutrient criteria," or numerical standards for nitrogen and phosphorus.

In North Carolina and across the country, pollution from these two nutrients presents the most urgent yet difficult water quality issue to address. Past N.C. regulations to control nutrients include the Jordan Lake Rules, Falls Lake Rules, Neuse Rules, Tar-Pamlico Rules, and Randleman Rules.

NCDP Revisions

North Carolina is a state without numeric nutrient criteria, though the state has regulated the nutrient content in waters for decades using other measures such as chlorophyll-a, a parameter that can indicate biological impairment of aquatic life in the waters. In the original NCDP, North Carolina proposed to continue basing certain nutrient management strategies on chlorophyll-a, a tactic that EPA said must be scientifically supported by the plan before EPA would approve it.

Dianne Reid, DWR Environmental Sciences Section Chief and leader of the NCDP effort, told the N.C. Environmental Management Commission (EMC) last week (Information Item #7) that the state remained committed to addressing EPA's concerns with the initial NCDP. In addition to providing more scientific support for a regulatory approach based on chlorophyll-a, she said, the NCDP would also honor EPA's requirement to spell out steps for writing numeric nutrient criteria.

Before seeking final EPA approval of the NCDP, expected in 2014, Reid said the agency would ask for EMC approval of the plan. That approval, expected in early 2014, was important because the EMC would ultimately promulgate any rules to write numeric nutrient criteria into the state's water quality standards and any other related rulemakings that implemented the NCDP.

The League participated in all previous NCDP efforts and reported extensively on them in previous EcoLINC articles:

Nutrient Regulation is Costly for Cities and Towns

Turning to regulations based on numeric nutrient criteria would likely impose enormous costs on local governments, which is why League members selected the issue of nutrient management as their highest regulatory priority. Municipalities assume a primary responsibility for implementing the requirements of the federal Clean Water Act (CWA).

This responsibility comes because many municipalities hold federal wastewater and/or stormwater permits, which allows them to discharge into various waters of the state. When one of those water bodies exceeds the numerical criteria measuring the effects of nutrients on those waters and is determined to be impaired, the CWA requires clean-up plans. In those instances, permitted dischargers to impaired waters, like municipalities, receive new permit limits and program directives as they become subject to nutrient management strategies. Implementation of those strategies is expensive and drives up compliance costs for the municipality as well as rates paid by system customers.

EPA Support for Criteria Development

Since 2011, EPA committed to assisting states in developing numeric nutrient criteria. That year, EPA released a memo stating its intention to offer support and technical assistance to all states without numeric nutrient criteria in place: "While EPA has a number of regulatory tools at its disposal, our resources can best be employed by catalyzing and supporting actions by states that want to protect their waters from nitrogen and phosphorus pollution."

In the past month, EPA announced the creation of a nutrient toolkit, a suite of documents and other tools intended to guide state regulators as they consider means of regulating nutrients. Developed in conjunction with the national association of state water quality regulators, the toolkit contained guidance on topics such as water quality monitoring and assessment as well as methods a state could employ when developing numeric nutrient criteria.

One specific document of interest in the toolkit was released Thursday. It described a framework in which EPA encouraged states to develop numeric nutrient criteria based not only on concentrations of nitrogen and phosphorus, but also "response indicators," or measures of impact on aquatic health from the presence of nutrients. Groups such as the League have argued in favor of this dual approach to nutrient management as one that is more reflective of actual aquatic health conditions.


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Board Proposes Slew of Hydraulic Fracturing Rules

The N.C. Mining & Energy Commission (MEC), the state board charged with writing the regulatory and permitting framework for the hydraulic fracturing industry in the state, spent the past half-year considering rules on an array of topics of interest to local governments. Primarily, Commission members reviewed information and rule language related to wastewater disposal, setbacks, and baseline testing. A related study group also finalized a report on local government regulatory authority over the industry.

Wastewater Disposal

The Commission's Water and Waste Management Committee continued its consideration of methods of fracking fluid waste disposal earlier this month, with committee members reiterating their preference for reuse of the fluids over injection into coastal aquifers or treatment by municipal wastewater treatment plants. The committee has responsibility for writing the rules governing disposal of these wastes. It noted that absent further action from the N.C. General Assembly, injection of any wastes into underground aquifers was illegal in the state. The current draft rule under consideration by the committee does not contain provisions regarding underground injection.

At the meeting, the committee made further revisions to the current waste disposal draft rule, and committee Chair Vikram Rao reviewed a draft white paper that explored various liquid waste disposal options and concluded, "A rule set that in effect requires multiple re-uses, followed by treatment for discharge or other purpose, will not be a deterrent to prospective operators. It will also be the most environmentally responsible option for our state."

Committee members also spent nearly an hour questioning a guest engineer employed by a hydraulic fracturing company in Arkansas on that company's liquid waste disposal procedures. In particular, the committee was interested to learn that the Arkansas operation has approached nearly 100% reuse of its liquid wastes, with the remainder being pretreated on-site before being discharged to surface waters according to a National Pollution Discharge Elimination System (NPDES) permit the company holds.

Setbacks

The Commission's Environmental Standards Committee gave further consideration to a draft rule regarding setbacks at its meeting earlier this month. The draft rule was intended to formalize the distances between various components of industry activity -- such as well pads, tanks or tank batteries, and pits -- and other land uses such as occupied dwellings, property boundaries, public roads and utilities, and streams or other water bodies.

While acknowledging the draft rule had a long way to go before being finalized, committee members stated their preference that any setback distances be chosen based on objective health and safety considerations. During the discussion, agency staff noted the difficulties in obtaining such information. One commissioner suggested that in the absence of scientific studies as to appropriate setback distances, the MEC may need to use its best professional judgment in choosing a setback distance. This judgment, commission members agreed, may be made by taking into consideration the setback distances used in other states.

Setback recommendations by groups affiliated with the MEC varied. The MEC's Local Government Regulation Study Group (including League representation) recommended general setback distances of at least 100 feet in its final report. And a group of stakeholder advisers (also including League representation) recommended general setback distances of at least 500 feet at their meeting Friday (read more in this WRAL report, "State panel says gas wells shouldn't be too close to homes").

The conflict between setting a statewide rule and local governments' traditional authority to impose setbacks revealed a difference of opinion among Commission members during a full MEC discussion of this proposed rule. MEC Chair Jim Womack expressed a preference for having this regulation set by state rule. "Sometimes you don't want to invite trouble, and that's what I'm fearful of," he said. "If you say it's up to local government jurisdictions, then you're going to see fighting that battle at the local level." Womack stated that he would like the rule to include an option for local governments to petition the MEC for a variance from the state setback distances if they desired a different setback.

Baseline Testing

In addition to formulating the setbacks rule discussed above, the MEC Environmental Standards Committee also approved a draft rule on baseline testing of water supplies earlier this summer. The rule also received approval by the MEC Rules Committee, a group that reviews all proposed rules to ensure conformity between different rule sets as well as conformity with other state and federal laws.

As directed by S.L. 2012-143, the rule covered testing periods prior to drilling as well as after drilling activities began, and it applied to all water supplies within 5,000 feet of a proposed oil or gas well. Under the proposal, a permittee must test wells on the following schedule:

  • Initial testing: No earlier than 12 months and no later than 30 days prior to the commencement of drilling
  • Subsequent testing: between six and twelve months after production has commenced, and again 24 months after production has commenced until all permitted wells have been completed on a well pad
  • Additional testing: as required by the N.C. Department of Environment and Natural Resources (DENR) upon evidence of an increase in concentration of any tested substance in comparison with previous tests

The rule listed all substances for which a permittee must sample. While the initial and first round of subsequent tests must collect data on the same substances, for further testing, Commissioners voted to reduce the number of substances sampled to those that were "tracers," or substances that indicated a presence of other contaminants of concern. The rule required reports of all testing to be provided to well owners, DENR, and local public health agencies within 30 days of receipt of the testing results.

Importantly for any water supply owners, the rule contained a provision to allow them to request sampling of their water supply by the permittee, if they suspected contamination as a result of drilling activities.

Local Government Regulation Report

Finally, the MEC Local Government Regulation Study Group finalized its report last month. The report was directed by S.L. 2012-143 and was produced with input from the League and the N.C. Association of County Commissioners, among other stakeholders. The study group met a dozen times since December, with most meetings occurring at locations throughout the Triassic Basin, the area with the highest potential for oil and gas operations in the state.

Overall, the report recommended that local governments maintain their authority as appropriate, but should not be used exclusively to prohibit oil or gas operations within the local government's jurisdiction. It contained more specific recommendations for rules or legislation on the following topics:

  • Setbacks
  • Noise/odor/light restrictions
  • Emergency preparedness
  • Zoning
  • Infrastructure impacts
  • Placement of gathering lines
  • Cost reimbursement

While the report did not recommend expansion of local government authority in any of these areas, it recommended that local governments remain the primary regulatory entities for these areas of local impact from the industry. A summary of the recommendations listed the study group recommendations in more detail. Both the summary and the full report will be submitted to the N.C. General Assembly by October 1, as required by S.L. 2012-143.


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League Makes Final Arguments in Duke Rate Case, Awaits NCUC Final Order

The League submitted a post-hearing brief last month to make final arguments and solidify positions litigated at the July Duke Energy Carolinas rate increase hearing before the North Carolina Utilities Commission (NCUC). In that brief, the League focused on a request for lower rates, specifically for water and wastewater facilities and LED street lights. Those arguments will be considered by the NCUC as it issues its Final Order in the case, expected perhaps by the end of this month. The Final Order will set the new Duke rate schedules and contain other rate and utility-management directives for Duke to pursue.

The League's intervention in this case is supported by the over 100 League members who belong to the NC Municipal Energy Group. Read more specifics about the Duke rate increase hearing in this July EcoLINC article and other efforts supported by this group in this June EcoLINC article.

Lower Rates for Water, Wastewater Facilities

As a result of the League’s and other groups’ interventions in the case, Duke agreed in a June stipulation agreement to cut its rate request in half (read details in this article from June’s EcoLINC). That agreement also included two other rate-related concessions that, should they be incorporated into the NCUC's Final Order, would further reduce rates for the user categories that include water and wastewater utilities.

In its post-hearing brief, the League reinforced its argument to include a lower electric rate for water and wastewater facilities if Duke proceeded with a re-design of the OPT rates as proposed in its stipulation agreement. The League’s argument involved a request to consolidate two rates, OPT-I and OPT-G. If Duke redesigned the rate as requested by the League, water and wastewater facilities would be able to take advantage of a more favorable OPT rate, especially if that redesign was based on voltage or load factor. In addition, the League’s brief included a request for more time-of-use options for utilities. If allowed by the NCUC, time-of-use options would assist utilities in managing their energy costs by rewarding utilities for shifting their intense energy use to off-peak times.

LED Street Light Rates

At the July hearing, the League secured a commitment from Duke to devise an LED street lighting schedule by the end of the 2013. In its post-hearing brief, the League reinforced its argument that although Duke has committed to making an LED-specific street lighting rate available, in order for that rate to be feasible for municipal customers, the customers must be given the option of owning their own fixtures or otherwise benefitting from the decreased fixture costs. If Duke only created the LED-specific rate without a way to benefit from the decreasing fixture costs, a rate higher than conventional street lights would result. 

Also in its post-hearing brief, the League requested that the NCUC order expressly require Duke to work with League representatives in developing an LED rate schedule that was economically feasible for municipal customers. This would create an opportunity for cities in the Duke service area to make the most efficient use of electricity and achieve savings that result from LED use.


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Recent EPA TMDL, 303(d) List Documents Include "How-to" Guides

In the midst of North Carolina's activities to develop its next list of impaired water bodies, the U.S. Environmental Protection Agency (EPA) released two significant documents to guide all U.S. states in this aspect of their federal Clean Water Act (CWA)-based programs.

One document updated the federal agency's "vision" for the impaired waters clean-up plan program and included instructions to states on how to implement that vision. The other document described specific procedures for states to follow when developing their impaired water body lists, such as how to list waters in the absence of standards such as those for the nutrients nitrogen and phosphorus.

TMDL "Vision" Document

The League reported on EPA's TMDL "vision" document a year ago in the EcoLINC article "Not a Rule, Not Guidance...EPA has a New 'Vision' for TMDLs." That article explained how EPA had memorialized a shift in program philosophy for the development of water body clean-up plans, or as they were called in the CWA, "total maximum daily loads (TMDLs)."

In essence, the new vision moved away from accumulating as many TMDL plans as possible to a program that prioritized clean-up of highly impaired waters and targeted program resources to yield the most returns on clean-up activities. Often, TMDLs require permit-holders such as cities and towns to further restrict discharges into impaired waters. These restrictions typically involve upgrades to wastewater treatment plants or more dedicated resources for municipal stormwater programs. Therefore, the League membership prioritized more openness, transparency, and flexibility for development of TMDLs. This League regulatory priority included support for prioritizing water body clean-up efforts.

Earlier this summer, EPA published an updated draft of the vision document. In it, the agency clarified the six tenets of the TMDL program it encouraged states to follow: prioritization, assessment, protection, alternatives, engagement, and integration. And for the first time, this document included guidance to states on how to implement these six priorities of the program, including timelines for specific action steps.

Importantly for the regulated community affected by TMDLs, the new program direction contained in the vision document emphasized measuring improvements to water bodies rather than counting the number of clean-up plans completed. It also encouraged states to explore alternate clean-up strategies and to take actions that would protect high-quality waters.

Because it was not a rule, EPA could not use the vision document as the basis for any enforcement actions. Still, the document served as a guide to EPA's overall TMDL program philosophy.

2014 Guidance for 303(d) List

Before a state develops a TMDL, it assesses waters and lists them according to their level of impairment on the state's 303(d) list, named after the section of the CWA that mandates development of the list. The CWA requires states to update their 303(d) lists every two years. Currently, states are preparing their 2014 303(d) lists. (Read background on changes to North Carolina's listing process secured earlier this year in this March 2013 EcoLINC article, "League Achieves Goal with Vote on Impaired Waters List Process.")

To assist states with that preparation, EPA issued a memo detailing points of emphasis for the 2014 303(d) lists. The bulk of the memo discussed how EPA expected states to place waters on the list when the state lacked numeric nutrient standards (for nitrogen and phosphorus) on which to evaluate the health of those waters. That advice included examples of how states without such nutrient standards could assess waters for nutrient impairment.

This section of the memo was important to regulated dischargers such as cities and towns due to the potential costs for upgrading wastewater facilities and stormwater programs to comply with more stringent discharge limits. North Carolina is one of the states that lacks numeric nutrient criteria. Read more about the state's efforts to comply with EPA's goal of instituting these criteria in "State Regulators Return to Drawing Board with Nutrient Criteria Plan," above.


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Regulatory Briefs

The state Point Source Branch will now receive the following wastewater-related submittals: (1) authorization to construct (Ron Berry 919.807.6396), (2) applications for alternative and standard sewer extensions (Michael Leggett 919.807.6312), and (3) tax certifications for exemption of pollution abatement equipment (John Hennessy 919.807.6377)...Union County issued a notice of intent to pursue a 28 MGD IBT certificate to transfer waters within two Yadkin River sub-basins, with public hearings to be held October 3, 14, and 15...DWR granted a 401 certification for a long-sought Cleveland County reservoir, sparking controversy and inviting legal challenges by environmental groups...EPA published updated ammonia criteria, a move that will likely tighten permit limits for N.C. wastewater dischargers once the state incorporates this new standard during its next surface water quality triennial review...To complement DENR's permit tracker, the agency released nine new permitted facilities maps; the maps show locations of all municipal wastewater treatment facilities, land application sites, sewer collection systems, and permitted stormwater programs...EPA revoked part of Arkansas' delegated water permitting program last month in response to state legislation that left the state agency unable to issue permits in compliance with the Clean Water Act criteria for minerals...DWR released its combined Neuse-Cape Fear hydrologic model and will offer training sessions on how to run the model...Industry groups lost the first round of their legal challenge to the Chesapeake Bay TMDL, with the federal judge finding EPA was entitled to establish load allocations for nonpoint source discharges, such as those from agricultural lands, and apply them in states bordering those with the targeted impaired water bodies...


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NCLM and State Government Environmental Meetings & Events