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NCLM News & Political Report

For the past month, the League and other stakeholders in the environmental regulatory world have busily met to lay the groundwork for more cooperation on future initiatives.

Among all these activities, the League is most excited about the official formation of the Stormwater Association of North Carolina (SWANC). Prior to taking final steps such as electing a board of directors and approving bylaws earlier this month, this group of municipal, academic, and private industry stormwater professionals met for several years to hash out a vision for an organization. That vision focused on advocacy and professional relationships among the state's stormwater professionals. Due to the close fit between the vision of SWANC's founding members and the League's regulatory and legislative advocacy efforts, the organization is pursuing an affiliate arrangement with the League. When fully operational, the group intends to function as the go-to resource for state decision-makers on all stormwater matters, as well as advancing policy positions to assist local government stormwater managers in implementing their local programs.

The League also looks forward to working closely with members of the N.C. Environmental Management Commission that have been chosen to lead the Commission's committees. Announced last week, the committee chairs included:

  • Air Quality: Charles Carter
  • Groundwater: Kevin Martin
  • NPDES: Kevin Martin (interim)
  • Water Allocation: Steve Keen
  • Water Quality: Steve Tedder

DENR Updates

N.C. Division of Water Resources Director Tom Reeder addressed League members at the NCLM Annual Conference yesterday, stating that DENR has prioritized local economic development efforts to the fullest extent possible, including making sure any necessary environmental permits are granted in a timely manner to allow such projects to move forward. In response, League members expressed their appreciation for the cooperative attitude espoused by the agency leaders and staff. In addition to this renewed partnership to bring jobs to the state, the League and its municipal members have been involved in multiple efforts this past month by the N.C. Department of Environment and Natural Resources (DENR) to refine proposals and existing rules in a cooperative fashion.

First, the League members provided additional feedback to state regulators during a meeting last month about the state's draft Nutrient Criteria Development Plan, part of an agreement between the state and federal governments that outlines a work plan for regulators to use in addressing nutrient impairments across the state. This ongoing effort, a top regulatory priority of League members, was discussed in last month's EcoLINC. As a result of this stakeholder meeting, DENR will accept more written comments on the plan through November 8. The League will provide additional suggestions during this time.

Also last month, DENR solicited input from a broad range of stakeholders on desired changes to the state's water rules. Numerous municipalities and the League participated in an in-person meeting, where Reeder outlined rules DENR intended to ask the legislature to reform next session. Those topics included river basin boundaries, isolated wetlands, an effort to consolidate existing buffer rules, and changes to the State Environmental Policy Act. Reeder also stated DENR's desire to hear from stakeholders regarding rules that were conflicting, obsolete, or do not provide environmental benefit. After this initial review of rules, Reeder said, DENR intended for the stakeholder group to continue meeting to provide ongoing feedback to DENR on its water programs.

Finally, DENR spokesman Drew Elliot stated that the federal government shutdown had minimally impacted the agency so far. DENR implements many federal environment programs, including the water quality programs that affect cities and towns. While DENR does depend on the federal government to partially fund 430 positions, Elliot said agency leaders found enough funding to cover all those positions but four. Only one of those four positions was in a water program, and that furloughed position served the underground injection program. Otherwise, Elliot said the agency did not expect operations to be further impacted, so long as the shutdown did not last for many more months.

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Legislators Announce Plans to Study Aspects of Cities' Environment Programs

Meeting for the first time since adjournment of the legislative session in July, legislative leaders of the N.C. Environmental Review Commission (ERC) last week outlined the leadership and timelines for each of the four studies authorized in HB 74 Regulatory Reform Act of 2013. All four studies touched on aspects of municipal water, wastewater, and stormwater programs.

Duties of the ERC, a non-standing legislative commission, include conducting any studies contained in legislation from the previous session of the N.C. General Assembly. The ERC must also oversee all state environmental boards and programs as well as review changes to federal environmental laws. Importantly, the ERC may propose bill language on any topic related to the environment. Generally, such proposals stem from studies and presentations received by the commission during its meetings in between legislative sessions.

ERC Utilizes Workgroups for Studies

ERC Co-Chair Rep. Mike Hager stated that legislators planned to conduct the four regulatory reform studies through the use of workgroups, a novel process for ERC studies. According to Hager, each workgroup would be led by one Senator and one Representative. All announced workgroup leaders were ERC members. The Commission planned to stagger workgroup reports and recommendations throughout the interim, with the last study suggesting legislation scheduled for a hearing in March. Ultimately, these studies will likely lead to ERC approval of legislation for the 2014 Short Session, which begins in May.

Cities and towns could be impacted by all four topics proposed to be studied, and the League requested involvement in all four studies. The study topics and legislative leadership are:

  1. The statutory models for establishing, operating, and financing certain organizations that provide water and sewer services in the state (Sen. Fletcher Hartsell and Rep. Mike Hager); presentation to ERC in November, final recommendations in December
  2. The technical review of plans by non-professional engineers (Sen. Stan Bingham and Rep. Chris Millis); presentation to ERC in November, final recommendations in January
  3. The state stormwater programs, with a specific focus on how partially impervious surfaces are treated in the calculation of built-upon area under those programs (Sen. Brent Jackson and Rep. Ruth Samuelson); presentation to ERC in December, final recommendations in February
  4. The circumstances under which cities and counties should be authorized to enact environment ordinances (Sen. Andrew Brock and Rep. Chuck McGrady); presentation to ERC in January, final recommendations in March

Creedmoor WWTP Project

Another item of interest to cities and towns from the ERC's first meeting was the committee's discussion of a wastewater treatment plant project in Creedmoor. N.C. Division of Water Resources Director Tom Reeder briefed committee members on the City's proposed wastewater treatment plant, which had caused tensions with the county's regional wastewater system and environmental interests. While the City ultimately entered into negotiations for wastewater treatment with the regional system, opponents of the project requested ERC examination of the issue anyway.

ERC 2013-2014 Meeting Schedule 

ERC leaders also announced the Commission's tentative interim meeting schedule, choosing to meet on the second Tuesday of each month:

  • November 13, 2013
  • December 11, 2013
  • January 8, 2014
  • February 12, 2014
  • March 12, 2014
  • April 9, 2014

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Municipalities Receive Lower Rate Increase than Other Duke Customers

Handing a win to municipalities in their second collective intervention in an investor-owned utility rate case, the N.C. Utilities Commission (NCUC) issued a Final Order last month that minimized the impact of Duke Energy Carolinas' initial rate increase proposal on municipal operations. Adding up individual components of the Final Order, rates for typical municipal energy uses such as water and wastewater operations, streets lights, and traffic signalization were much lower than other classes of Duke customers.

The League intervened in the rate case earlier this year with the support of a large coalition of N.C. cities called the NC Municipal Energy Group (NC-MEG). This group of over one hundred League members allowed the League to contract with specialized outside legal counsel that represented cities and towns in negotiations with the state's investor-owned utilities and the NCUC. The group supported an intervention in the Progress Energy Carolinas rate case prior to this effort in the Duke rate case.

The goal of the League’s interventions was to reduce the financial burden that an increase in electricity rates would bring upon municipal governments served by each utility. Increases in electricity rates can significantly impact municipal budgets, particularly in those cities and towns providing such services as water and wastewater treatment, street lighting, traffic signals, and recreational facilities.

Read more specifics about this intervention and past efforts supported by this group in these September 2013 and June 2013 EcoLINC articles.

Duke Final Order Lowers Municipal Rates

In its Final Order, the NCUC allowed Duke an aggregate revenue increase of $232 million, or 5.1%, spread over two years. To achieve those revenue increases, the NCUC allocated rate increases across the various classes of energy users in Duke's rate structure. Overall, the NCUC chose to raise rates for typical municipal categories of energy use less than for other classes of users such as residential and other industrial users.

The total revenue increases for those rate schedules most utilized by municipalities and water/sewer authorities were approximately:


Average net rate
increase percentage

Street Lighting Service

Traffic Signalization Service

Small General Service

Large General Service

OPT / TOU General

Year 1

1.54 percent

6.11 percent

3.10 percent

3.82 percent

3.31 percent

Year 2 & after

2.20 percent

7.13 percent

3.74 percent

4.45 percent

3.91 percent


The League argued for lower municipal rates in its intervention and in a post-hearing brief submitted to the NCUC in August. The post-hearing brief made final arguments and solidified positions litigated at the Duke rate hearing before the NCUC in July. In that brief, the League focused on a request for lower rates, specifically for water and wastewater facilities and LED street lights.  

Following the intervention of numerous parties, the filing of the League’s testimony, and negotiations with the Public Staff, Duke lowered its requested revenue increase in a stipulated settlement agreement with the Public Staff that cut its requested rate increase in half.

However, the NCUC went further in its Final Order with respect to lowering the proposed increases for rate classes affecting large municipal energy uses:

  • 1CP cost of service allocation methodology. One aspect of the Final Order that resulted in savings to municipal water and wastewater treatment operations came in the methodology the NCUC ordered Duke to use when calculating its production and transmission fixed capacity costs between customer classes. While the NCUC considered two methodologies to calculate the allocation of these costs between customer classes, ultimately, it chose the “summer coincident peak” (1CP) method. Compared to the other alternative, this method lessened the impact of the rate increase on high load-factor rate classes such as those for water/wastewater operations, street lighting, and traffic signals. Therefore, this decision was beneficial to cities, especially to water and sewer system aggregate electric costs and for street lighting.
  • OPT rate differential. Of the utility's three Optional Power Service (OPT) rate classes, municipalities were unable to subscribe to two of those classes, both of which were significantly lower than the only OPT class rate available to municipal customers. As a result, municipal operations, in particular water and wastewater treatment and pumping facilities, were precluded from realizing cost savings under the lower OPT rate schedules. In response, the NCUC ordered an immediate one-third step reduction in the disparity between the two lower rate classes and the OPT rate available to municipalities, and required Duke to file a report within six months explaining the details of new OPT rate schedule criteria. This outcome will likely result in a further reduction of the OPT rates utilized by many water and sewer systems.
  • Street Lighting. A great accomplishment from this rate case was the establishment of an LED street lighting schedule in the Duke service territory. The Final Order required that Duke file a new LED-based lighting tariff with the NCUC by December 31, and specifically stated that Duke shall consider issues brought forward by the League at the hearing in developing this filing. There were additional successes in regards to street lighting in the Final Order, including: 1) requiring Duke to make progress on outage response times; 2) requiring Duke to be transparent with its disclosure of source algorithms and calculations for lighting rates; and 3) reducing the charge rate for additional lighting facilities from 1.7% to 1.1%.
  • TOU and Critical Peak Pricing. To assist cities and towns in managing their energy consumption, the NCUC ordered Duke to propose a pilot peak-time rebate or critical peak pricing dynamic pricing structure within 15 months, and to implement the proposed small general service Time-of-Use (TOU) pilot as quickly as possible. TOU rates generally incentivize users to consume energy during off-peak times, resulting in savings to users that can wisely manage their energy consumption. Many water and wastewater treatment operations can shift their energy usage to these off-peak times and would benefit from robust TOU rates.

For a more technical explanation of the NCUC Order in the Duke case and its effect on cities and towns, read this detailed memo written for NC-MEG members by the attorneys representing the League in this intervention.

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Energy Commission Fleshes Out Timing, Details of Hydraulic Fracturing Rules

The N.C. Mining & Energy Commission (MEC) continued its quick pace of beefing up the state's regulations on the natural gas extraction industry this month, laying out timelines and providing further details on proposals already underway.

Presenting to a legislative committee earlier this month, members of the MEC -- the state board charged with writing the regulatory and permitting framework for the hydraulic fracturing industry in the state -- laid out specific timelines for rulemaking proposals currently under consideration by the board. Proposals on topics such as water management, waste management, baseline testing, and setbacks all affect local government interests.

In addition, the MEC received input on the setback issue from a stakeholder group and the N.C. Department of Environment and Natural Resources (DENR). Finally, a related study group also finalized a report on funding impacts caused to state and local governments should the industry develop in the state.

Rulemaking Timeline

MEC leaders updated the Joint Legislative Commission on Energy Policy, an interim commission of legislators that oversees the work of energy policy boards in the state, in early October on expected timelines for various rules currently under development by the board (full presentation here). The law that directed the MEC to write a regulatory structure for the hydraulic fracturing industry required the MEC to finish all related rulemaking by the end of 2014. MEC Chair Jim Womack reported that the board was on schedule to complete its rulemaking efforts on time, though he noted that the MEC would ask legislators for further flexibilities to allow them to meet this deadline. To ensure they meet the tight rulemaking timeline, the MEC planned to meet at least monthly through the end of next year.

The MEC intended to complete most rules of interest to cities and towns in the first half of next year:

  • January: baseline testing of groundwater and surface water supplies. Read details of the proposal in this article from last month's EcoLINC.
  • February: water management. Read details of the proposal in this article from the March 2013 edition of EcoLINC.
  • April: waste management. Read details of the proposal in this article from last month's EcoLINC. Members of the MEC committee considering this rule continued their discussion of the rule at their late September meeting, but did not take a vote on the proposal.
  • May: setbacks. Read details of the proposal in this article from last month's EcoLINC.

In addition, Benne Hutson, chair of the N.C. Environmental Management Commission (EMC), reported that the EMC's natural gas extraction-related stormwater rulemaking would proceed next year, with an expected full commission vote in September. Hutson's presentation forecast how the EMC planned to change the state's stormwater rules to ensure they adequately addressed the natural gas extraction industry. These proposed changes would account for runoff from well pads, with the intent of approximating no stormwater discharges from those industrial areas.

More Details on Setbacks Proposal

At its late September meeting, the Commission's Environmental Standards Committee continued consideration of a draft rule regarding setbacks. 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. The committee received detailed input on various setbacks from a stakeholder group formed to advise the MEC that included League representation, as well as input from DENR. For most setbacks, DENR concurred with stakeholder recommendations.

Importantly, the stakeholder group discussed whether local governments should be able to regulate setbacks differently than state law, but it did not come to a consensus on the issue. DENR also did not take a position on the extent of local government authority over setbacks. An MEC study group that included League representation weighed in on this issue in its final report last month, recommending that local governments have the authority to request variances from state-established setbacks. 

In general, both the stakeholder group and DENR agreed that a 150-foot setback was too small. Instead, both recommended a 500-foot buffer, with some suggestions for allowing a smaller buffer if the industry undertook other measures to mitigate for impacts. Other recommendations varied depending on the type of land use under consideration:

  • Floodplains: both the stakeholder group and DENR agreed that no industry activities should take place in a floodplain. However, DENR disagreed with a stakeholder recommendation for additional setbacks from the edge of the floodplain.
  • Private water wells: the stakeholder group recommended a 1,000-foot setback, which DENR stated was too conservative. Rather than recommending a smaller setback, DENR recommended further study of the issue.
  • Public lands: the stakeholder group did not make a recommendation for public lands, but DENR suggested a 500-foot setback for any industry-related activities on land surfaces (not underground).
  • Occupied residences, outdoor recreational facilities, and high-occupancy buildings: both the stakeholder group and DENR recommended that the rules distinguish between these different types of land uses.
  • Public road right-of-ways: both DENR and the N.C. Department of Transportation recommended at least a 50-foot buffer from public road right-of-ways, with a preference for a 100-foot buffer.
  • Streams and water bodies: both the stakeholder group and DENR agreed that industry activities should be set back 500 feet from streams and water bodies.

Funding Impacts Study Group Report

The MEC Funding Impacts & Potential Funding Sources study group, created by the 2012 legislation that directed the natural gas extraction rulemaking effort, issued its final report last month. This group, which included representation by the League and the N.C. Association of County Commissioners, met nearly a dozen times since December to propose recommendations for recouping costs to the state and local governments from development of the state's natural gas resources.

Based on the League's research on other states with industrial activity levels similar to those anticipated in North Carolina, the group identified impacts to roads and related transportation infrastructure as the biggest expense for cities and towns from the industry. Therefore, the report recommended a system for posting weight limits on municipal routes and encouraging "Excess Maintenance Agreements" with companies that wished to use municipal roads for truck traffic. This system is utilized in Pennsylvania to recoup costs related to transportation infrastructure repairs needed to support the natural gas extraction industry.

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Regulatory Briefs

Unable to reach agreement on a rulemaking timeline for its planned national post-construction stormwater rulemaking last month, EPA decided to indefinitely delay the rule proposal...Assistance to local government water and wastewater systems featured prominently in DWR's 2013 Success Stories document...EPA and the Army Corps of Engineers submitted a draft rule to clarify federal jurisdiction over waters of the U.S. while dropping plans for controversial interim guidance on the same topic...Anticipating significant comments from states worried about the implementation costs of electronic NPDES reporting, EPA officials stated they expected to hold a second public comment period, with a final rule date pushed back to late 2014 or early 2015...Media attention continued to focus on legislators' involvement in the proposed Cleveland County reservoir, which received DWR approval last month amidst controversy...In response to proposals over the past few years to regulate stormwater discharges based solely on biological indicators in urban streams, a group of N.C. local governments that make up the Urban Water Consortium issued an RFQ to review literature and data on benthic macroinvertebrate studies and stream ratings.
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NCLM and State Government Environmental Meetings & Events