The “Best” Regulatory System Money Can Buy: Lessons from North Carolina's “Regulatory Reform” Movement

For years, Duke Energy has enjoyed virtual free rein to contaminate North Carolina’s surface and ground waters with arsenic, lead, selenium, and all of the other toxic ingredients in its coal ash waste in clear violation of the Clean Water Act and other federal environmental laws.  And it seems that both North Carolina’s regulators and state legislators are determined to keep it that way.

Last year, the state’s environmental agency actively thwarted citizens’ efforts to sue Duke for violating the Clean Water Act by intervening in the lawsuit at the last minute and then settling with the company for just over $99,000—chump change for a company worth more than $50 billion—and no obligations to clean up their coal ash waste sites or prevent future pollution.  As detailed previously on CPRBlog, the head of the state’s environmental department—appointed by Gov. Pat McCrory, a former executive at Duke who had worked for the company for nearly three decades—promised that he would work as a “partner” to regulated industries in the state.  Federal prosecutors are now looking into whether North Carolina’s environmental regulators engaged in any criminal activity in their efforts to shield Duke.

But it wasn’t just the state’s environmental regulators that had Duke’s back—the company has also been able to count on a lot of friends in the North Carolina state legislature as well.  As the AP reported, Duke’s lobbyists were able to persuade key Republican lawmakers to enact legislation that significantly weakened regulatory requirements for controlling industrial pollution of groundwater.  Under prior law, operators of coal ash storage ponds were required to clean up any groundwater pollution whenever on-site monitors found contamination levels had exceeded relevant groundwater standards anywhere within the facilities’ “compliance boundaries,” which encompasses the entire area within 500 feet of the edge of the coal ash ponds.  The prior law established this requirement so that facilities would catch any contamination problems early, so that they could be cleaned up before they “migrated” off the coal ash pond operator’s property onto neighboring properties or, in a worse-case scenario, harmed nearby drinking water supplies.

Thanks to this new dirty groundwater law, Duke no longer has to clean up any groundwater pollution problems within its compliance boundaries, except in very limited circumstances.  Instead, the company’s cleanup obligations are only triggered when pollution problems occur at or beyond the compliance boundary, which the dirty groundwater provision redefined as the coal ash pond operator’s property boundary.  Since Duke could simply extend its property boundary by acquiring adjacent properties, and since acquiring adjacent properties is cheaper than cleaning up groundwater pollution, the new dirty groundwater law effectively allows the company to avoid taking any responsibility for its groundwater pollution for the foreseeable future.

The dirty groundwater law isn’t just noteworthy for its brazenly anti-environmental content, though; it’s also significant for how it came into being.  Rather than being enacted through stand-alone legislation, it was instead included as a tiny provision—less than 400 words long—in a mammoth omnibus “regulatory reform” bill–nearly 60 pages in length.  (If you’re curious, the dirty groundwater provision can be found on page 29.)

For those who have been following the Republican and industry attacks on the regulatory system in Washington, DC, the last few years, the North Carolina “regulatory reform” bill will no doubt sound familiar.  Known as the “Regulatory Reform Act of 2013,” the bill was described as “an act to improve and streamline the regulatory process in order to stimulate job creation, to eliminate unnecessary regulation, to make various other statutory changes, and to amend certain environmental and natural resources laws.”  When Governor McCrory signed the bill into law, he added “For decades, Democrats have stifled small businesses and job creators with undue bureaucratic burden and red tape.  This common-sense legislation cuts government red tape, axes overly burdensome regulations, and puts job creation first here in North Carolina.”

The dirty groundwater provision isn’t the only gift to Duke and other well-connected corporate interests that was included in the North Carolina anti-regulatory law.  It is stuffed with provisions weakening existing regulations affecting a wide variety of industries.  The law even includes a provision mandating the “Periodic review and expiration of existing rules,” which requires state agencies to conduct thorough reviews of each of their rules at least once every 10 years; with limited exceptions, those rules not reviewed automatically expire.  (See pages 3-5.)

The North Carolina antiregulatory bill—and the dirty groundwater provision in particular—illustrate exactly what is behind congressional Republicans’ “regulation reform” efforts.  As last month’s Duke coal ash spill demonstrates, we have too few regulatory safeguards—not too many.  The problem with the regulatory system is not that issues too many regulations; in fact, the Environmental Protection Agency, the Food and Drug Administration, and other protector agencies have become so hampered by shoestring budgets, political interference, and outdated statutes, they simply cannot keep up with the new and emerging threats posed to public health, safety, and the environment by industrial powerhouses like Duke.  Indeed, coal ash waste is one of the largest sources of hazardous waste in the U.S., and yet it is almost completely unregulated, save for a patchwork of weak and poorly enforced state requirements. 

Just a few weeks ago, House Republicans passed a slew of anti-regulatory bills—some containing provisions not dissimilar from those contained in the North Carolina law—as part of its so-called “Stop Government Abuse” week.  (I discussed one of the bills that were voted on that week here.)  These antics marked just the latest of dozens of occasions over the last few years when House Republicans—at the behest of their corporate benefactors—have recycled the same old anti-regulatory bills designed to stop protector agencies from doing their jobs.  And, as always, they trotted out the same tired talking points—all of which are virtually identical those in support of North Carolina’s anti-regulatory law—to defend these bills. 

These antiregulatory bills will do nothing to promote economic growth, help small businesses, or spur job creation.  Instead, these bills are all about protecting the already-healthy bottom lines of some of the most profitable corporations in the U.S., including Duke.  The truth is that these bills are meant to distract the public’s attention—both from the fact that it is inadequate regulation that led to the recent economic downtown and from the fact that the Republicans really have no viable plans for improving the economy.

Worse still, if these bills were to be enacted, the public would continue to be stuck bearing the costs of the polluting activities of Duke and its ilk.  The lack of adequate regulation of coal ash ponds in North Carolina has saved Duke millions of dollars over the years.  And it is now the people living downstream of the company’s recent coal ash spill who are paying the price.  These people include the residents of Danville.  Though they were able to protect their drinking water supply, the community’s water treatment plant has been fouled by the spill, and the adjoining Dan River is now off-limits to fishing and recreational activities for the foreseeable future.  It is probably of great consolation to North Carolina’s regulators and legislators that the people of Danville will not be able to hold them accountable for putting Duke ahead of the public interest; after all, the city is located just over the border in Virginia.