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League Bulletin

September 15, 2015

Summer may have ended, but legislators are still in town as legislative business slowly proceeds while legislative leaders negotiated provisions of the state budget. Legislative leaders made public yesterday afternoon key aspects of the budget deal and released the full package this morning. It will be put to a vote before the House and Senate this week and passage of a budget should clear the way for adjournment of the legislative session within two to three weeks. A continuing budget resolution that allows state government to operate in the absence of a final budget is set to expire on Friday.

Budget Negotiations

League staff is analyzing the budget bill for provisions affecting municipalities and will communicate about many details of the bill provisions on Friday in our weekly LeagueLINC Bulletin legislative publication. However, legislative leaders confirmed over the weekend that the budget included tax policy changes. In yesterday's announcement, more specifics were given, specifically that the budget deal does not reallocate any existing local sales tax and that it instead includes an expansion of sales taxes to services involving the repair and installation of tangible property. Through that expansion, about $85 million will be distributed to county governments and municipalities in the mostly rural counties that would have benefited from an earlier sales tax reallocation plan promoted by Senate Majority Leader Harry Brown.

Legislative leaders also indicated that the House and Senate are now in agreement on an infrastructure bond and business recruiting incentives. The House's previous bond proposal would have provided money for state and local infrastructure, including water and sewer projects. A major bond proposal has not been put before North Carolina voters since 2000, although legislatures from 2001 through 2010 borrowed money for capital construction using non-general obligation bond methods that did not require voter approval. A bond package that supports transportation and infrastructure investment and benefits local government would achieve key League legislative advocacy goals.

Since legislative discussions have focused on the budget, there hasn't been considerable public action on other bills. As discussed in more detail below, although conference committees have been chosen to negotiate the details of two regulatory reform measures (HB 44 Local Government Regulatory Reform 2015 and HB 765 Regulatory Reform Act of 2015), official compromise language has not been released for either bill.

League Member Involvement

As reported in the July edition of EcoLINC, there were some key environmental-related provisions of importance to cities and towns in the Senate's proposed budget, including provision that would effectively eliminate the State's in-lieu fee mitigation program. During a July meeting of House environment budget writers, Heather Keefer, a stormwater expert from the Town of Holly Springs and member of the League's Regulatory Action Committee, provided public comment in opposition to the provision, explaining the program provides a quick, cost-effective means for public and private entities to compensate for environmental harms when land is disturbed during development. League staff is happy to confirm this provision was not included in the compromise budget package.

League members also have been active before regulatory bodies and in regulatory decision-making. Following on the heels of a July presentation developed by the League and partners, League members from the Greenville Utility Commission and Cape Fear Public Utility presented last week to the N.C. Environmental Management Commission (EMC) Water Allocation Committee, continuing the discussion of ways the EMC could assist in reducing the impediments to developing water supplies. Commissioners commended the quality of all the presentations they received on the topic, expressing hope that N.C. Department of Environment and Natural Resources (DENR) staff would make recommendations on action the Commission could take. The EMC committed to continuing the discussion at its November meeting.

Evident by the examples above, League members continually push to ensure that state legislators and regulators consider the municipal perspective when making decisions. Driving the League's involvement in legislative and regulatory priority issues are the League's policy committees, and we are continuing to seek applicants to serve and get involved in advocacy efforts. The deadline to fill out an interest form is November 2. You can return the form to Government Affairs Coordinator Karen Waddell. The Legislative Action Committees and Regulatory Action Committee serve a crucial role in developing League priorities and in making the needs of cities and towns known to state and federal policymakers.

Although budget negotiations significantly dominated legislative discussions the past two months, some environmental provisions of interest to cities and towns have seen action. Most notably, in late July, the full House rejected the Senate's omnibus regulatory reform proposal, HB 765 Regulatory Reform Act of 2015, and both chambers appointed conferees to work out the differences. This regulatory reform package followed an earlier Senate effort that is also in conference negotiations now, HB 44 Local Government Regulatory Reform 2015.

The House's vote on the Senate's version of HB 765 vote occurred after it held a rare committee meeting to discuss the provisions of the bill. It originated in the House as a one-page technical corrections bill, but upon receiving that bill, the Senate added dozens of provisions that ballooned the bill to 58 pages. Procedurally, when a bill is sent back to the chamber in which it originated with changes made by the other chamber, there is only the opportunity for that originating chamber to vote up or down  on whether it agrees to the changes, known as a "concurrence vote." Because additional changes cannot be made by the originating chamber, these concurrence vote bills typically go straight to the originating chamber's floor and do not receive a committee hearing.

However, the House Environment Committee took the opportunity to discuss the bill and take public comment prior to the House vote. Also, in comments offered throughout the meeting, members of the committee cited the greatly enlarged scope of the bill and lack of review time as major reasons for recommending rejection of the Senate package.

As mentioned in previous EcoLINC coverage, the largest concern for cities in the bill was a provision that would prohibit public entities from using their judgment in the selection of piping materials for water, wastewater, or stormwater projects. The League opposed this provision and has continued to work with a coalition of stakeholders to remove it from the final negotiated bill. Five speakers testified during the public hearing, both in opposition to and in favor of this piping preference provision, including League allies from the Professional Engineers of North Carolina and the NC Rural Water Association.

Regarding another issue of concern for cities and towns in this package, other speakers backed the League's opposition to the elimination of recycling fees paid by certain electronics producers. A portion of those fees support state-mandated municipal collection of these recycled products. 

Before the bill can advance further, both chambers must adopt a conference report negotiated by the conferees. However, since July, negotiations slowed because many of the conference committee members remained tied up in budget negotiations. In addition, the progress of HB 765 will likely lag that on HB 44; the League has heard that the chambers will conclude negotiations regarding HB 44 before discussing HB 765 in detail. Read more analysis of these two omnibus bills in the July edition of EcoLINC.

Wastewater Systems Must Accept Heating/Cooling Condensate

Another environmental bill of interest to cities and towns moved quickly into law early last month when the House unanimously voted to concur with the Senate's amendments to HB 538 Water and Sewer Service Related Changes. That bill included a late add-on that put a new requirement on wastewater systems to accept liquid condensate from residential heating and cooling systems. These provisions became law upon receiving the Governor's signature on August 11.

Historically, the condensate, or liquid that results from the operation of residential heating and cooling units, is drained outside the house. However, with the installation of new high efficiency units that produce more condensate, drain lines have frozen in the winter, resulting in a shut-off of heat for homes and broken drainage lines. These problems led to a push for the liquid to be piped into a residential unit’s wastewater collection system. Issues of concern with wastewater systems being required to accept this liquid include (1) the low pH of the condensate; and (2) if a large amount of connections are requested, the increased volume of water requiring treatment could take up needed capacity and be a detriment to a wastewater treatment system's efficiency. Requiring wastewater systems to accept this liquid, especially if large numbers of connections are requested, could create concerns for municipal systems.

The League filed an amicus brief with the N.C. Supreme Court in July in a case that will determine the ability of both public and private sector utilities to preserve access to their easements. The central issue under appeal in Duke Energy Carolinas v. Gray concerns the length of time given to utilities in enforcing encroachments on their property. Examples of encroachments on utility easements include outbuildings and fences. For cities, the N.C. Court of Appeals decision now being appealed to the state's high court would affect their access to their own water, wastewater, and electric line easements. The League's brief supported Duke Energy's contention that the lower court misapplied the law, and that easements held for public purposes deserved protection from claims that interfered with provision of that public service.

An adverse unanimous ruling handed down by the Court of Appeals late last year judicially created a new law by imposing a six-year statute of limitations that begins running from the time of encroachment rather than from the time that the encroachment is discovered. If the N.C. Supreme Court agrees and requires a utility to discover and bring an enforcement action against encroaching property owners within six years of when the encroachment began, the costs of providing utility services statewide will increase.

That increased cost comes because, to comply, utilities may have to expend additional resources to police millions of miles of utility lines across the state. Or, they may have to initiate condemnation actions to recover use of an easement whose rights they already hold. Utilities that cannot keep their easements clear also run the risk of violating the terms of their environmental permits, opening them up to state and federal enforcement actions.

Like the League, three other organizations submitted amicus briefs in the case to assist the Court in understanding the context of the decision. Those organizations were Piedmont Natural Gas, the N.C. Electric Membership Corporation, and the N.C. Association of Electric Cooperatives.

The U.S. Environmental Protection Agency (EPA) released its long-awaited water quality standards rule last month, updating the standards for the first time in over 30 years and finalizing the revisions that were initially proposed two years ago.

The final rule addressed how EPA expected states such as North Carolina to write and implement their water quality standards (WQS), which in turn implement the Clean Water Act (CWA). Under the CWA, "water quality standards" are legally binding provisions of law that describe the desired condition, or level of protection, of a water body. These standards represent the foundation of the CWA's water quality programs and consist of:

  • Designated uses of a water body, such as recreation, water supply, aquatic life, or agriculture.
  • Water quality criteria to protect designated uses.
  • Antidegradation policies that maintain and protect existing uses and high quality waters from pollutant discharges that unnecessarily degrade those waters.
  • General policies to address program implementation issues.

States craft their standards to set the water quality goals for each class of waterbodies within a state, which are reviewed by EPA every three years in a process known as the "triennial review." A highly technical scientific process mandated by the CWA, the review accounts for updated toxicological studies and other research regarding the aquatic health of surface waters. A state's standards impact wastewater treatment costs as well as the growth of business and industry in communities because municipalities holding National Pollutant Discharge Elimination System (NPDES) wastewater discharge permits must adhere to those surface water quality standards. A complex mathematical exercise translates the standards into permit limits, and the assumptions made in those calculations determine whether or not a wastewater system (1) must make upgrades, or (2) can accept more wastewater connections from industries and other customers such as residences and businesses.

North Carolina last updated its surface water quality standards in November, and at that time, the N.C. Environmental Management Commission (EMC) noted that it would likely initiate the next triennial review fairly soon to address standards for ammonia, methyl-mercury, and sources of industrial pollution (such as coal ash and hydraulic fracturing).

Details of EPA's WQS Final Rule

EPA's rule package has been underway since late 2009, and EPA stated that the final rule addressed the following key WQS program areas: (1) administrator’s determination that new or revised WQS for states and tribes are necessary, (2) designated uses of waters, (3) triennial reviews of state and authorized tribal WQS, (4) antidegradation provisions to protect water quality, (5) WQS variances, and (6) provisions authorizing the use of schedules of compliance for water quality-based effluent limits (WQBELs) in NPDES permits.

For the final rule, EPA made changes from its 2013 proposal to address states' requests for clarification of terms and flexibility in implementation. Among other things, the final rule included the following substantive changes:

  • Designated-uses: The final rule gave states a procedure to use to determine a “highest attainable use” for a water body whose current designated use was unattainable.
  • Variances: The final rule removed a proposed mandatory 10-year expiration date for variances that allowed more lenient state standards in some circumstances. However, the rule also included statements that the agency had the power to approve or reject states' use of variances. These statements came despite the wastewater industry's stated preference that variances be determined at the state and not federal level, given that variances often address local conditions.
  • Antidegradation: The final rule established stronger antidegradation requirements to enhance protection of high quality waters. These more stringent standards did not take into account the wastewater industry's request that EPA remove any claim to oversee a state's antidegradation policy or the industry's argument that the CWA did not give EPA the authority to set minimum requirements for states in this aspect of their water quality standards.

To learn more about the history of this rulemaking, see these previous EcoLINC articles:

EPA published a comparison of the proposed and final rule. More background on this rulemaking and information about public webinars can be found at EPA's water quality standards rulemaking website.

DENR and other state partners formed a task force in August to protect public health and the environment in the event that Avian Influenza reaches NC...Despite law preempting local governments from prohibiting hydraulic fracturing, the Chatham County Board of Commissioners adopted an ordinance in August imposing a two-year moratorium on county approvals for oil and gas development to give the county time to develop a permit process for such operations; meanwhile, the Lee County Commission will consider a similar moratorium Monday…After a year of data collection, DWR published preliminary data from sampling conducted in relation to the Jordan Lake SolarBees...In response to RRC objections, the EMC approved modifications Thursday to its recommendation for the long-awaited consolidated buffer mitigation rule... The EMC also approved the reclassification of the lower Cape Fear River in New Hanover and Brunswick Counties and the accompanying water quality management plan...Additionally, the EMC's Water Quality Committee received a presentation Wednesday from DEMLR staff, explaining DEMLR's plan to seek approval for the full "rules review" package of updated stormwater rules when it brings the MDC and fast-track permitting rules to the committee in November...In August, EPA announced that for the first time since 1997 NC was in attainment for all air pollutants in all areas of the state...Additionally, EPA sent its final revised NAAQS for ozone for pre-publication review by OMB prior to its October 1 required release and indicated the standard will be set at 70 ppb -- a level at which all of NC would remain in compliance...EPA also released its final 2014 effluent limitation guidelines in August without identifying new industries, deciding instead to continue to study whether revised wastewater discharge limits were needed to address conventional oil and gas development and other areas...If passed, language in a pending federal transportation infrastructure funding bill would remove WIFIA's current ban on the use of tax-exempt financing to meet matching fund requirements for water projects...Senator Richard Burr co-sponsored an amendment to national cyber security legislation that would extend liability protections and incentives for voluntary information sharing to publicly owned utilities...A number of lawsuits have been filed in the wake of EPA and USACE announcing their CWA jurisdictional rule, including N.C. DENR joining other states that have challenged the rule's validity...Rose Acres Farm recently filed with 4th Circuit for the U.S. Court of Appeals a notice to appeal a U.S District Court's July determination that the farm's attempt to block a novel North Carolina-crafted CWA permit for air emissions of feather and farm dust should be decided in state court.