Coal ash policy has been a heated topic between Duke Energy and environmentalists in North Carolina for years. Disputes range from controversy over how the coal ash is stored, whether it's polluting surrounding groundwater, how much clean up would cost and who's going to pay for it.
The debate hit a number of pressure points in recent months: In November, the utility's own filings found that 24 of its 26 coal ash ponds were not compliant with federal coal combustion residual rules. The only two basins in compliance had already been fully excavated, fueling environmentalists' argument that full excavation is the only way to protect groundwater from the toxic chemicals.
Furthering that debate, the state's Department of Environmental Quality (DEQ) earlier this year ordered the utility to excavate all its coal ash ponds, agreeing with environmentalists that the method was the "only closure option that meets the requirements of [the] Coal Ash Management Act to best protect public health."
Now, the battle is coming to a head.
Duke filed a petition on Friday challenging the DEQ's April order. On the same day, the North Carolina Attorney General and the Sierra Club filed an appeal with the state Supreme Court against the Public Utilities Commission's earlier rate approval that would require Duke customers to absorb the costs of the utility's coal ash clean up. The estimated cost of the cleanup was $5.6 billion before the DEQ excavation order, and now the utility says it will cost $4-5 billion more.
Also on Friday, the Energy Justice NC Coalition released a report detailing Duke campaign spending on local legislators and how that ties to a bill the utility is pushing through the state Senate, opposed by business, environmental and consumer protection groups.
The bill would, in part, allow Duke to establish multiyear rate cases, and although the utility doesn't have a set plan, "it could be used to incorporate coal-ash recovery," Duke Energy North Carolina President Stephen De May told the Charlotte Business Journal.
But how did Duke get to this point?
Duke's coal ash battle
The utility has for years battled with environmental groups over whether it stores its coal ash safely — a fight further amplified after the 2014 Dan River spill, during which more than 39,000 tons of coal ash spilled from one of its coal ash basins. Following the spill, the utility pled guilty to nine different criminal violations of the Clean Water Act, and it remains in its last year of federal probation.
In 2016, North Carolina passed the Coal Ash Management Act (CAMA), spurred by a Republican-led effort after the Dan River spill. While coal ash management was not a new issue between the state and the utility, the disaster and constituent concerns that followed spurred legislators into action, state Representative Joe Sam Queen, D, told Utility Dive in April.
"Duke is a very powerful player in this state and in this legislature, and they pretty well get their way most of the time," said Queen. "They're the big sheriff on the block. But when the disaster occurred, Chuck Mcgrady, a very strong Republican leader from western North Carolina led their caucus to a very appropriate clean up."
The act in part designated coal ash ponds as "high", "intermediate" or "low" risk areas — high and intermediate risk areas necessitated full excavation and "low risk" areas were subject to other options, including the utility's preferred method of capping the ponds and leaving them in place.
"[R]esults collectively demonstrated there was no measurable benefit to excavation compared to safely capping the ash in place."
Spokesperson, Duke Energy
Since then, eight of the utility's 14 coal plant sites have been slated for full excavation across the state. The April DEQ order addresses the remaining six sites, ordering those to be fully excavated as well.
In Duke's Friday appeal, it argued the "DEQ's order requires the most expensive closure method available despite scientific and engineering evidence that ... less expensive and more rapid closure options would continue to fully protect human health and the environment."
The utility conducted hundreds of tests across its "low risk" impoundments at the six sites, Duke Energy spokesperson Bill Norton told Utility Dive in an email. "Those results collectively demonstrated there was no measurable benefit to excavation compared to safely capping the ash in place."
But how the "low risk" designation was assigned is a point of contention among environmentalists in the state. Ponds can move from high or intermediate risk to "low risk" by repairing any dams in the area and providing an alternative supply of drinking water to residents near the ponds.
That language was updated from the original CAMA bill in what environmentalists say was a "closed door" discussion between the utility and legislators to strip environmental and clean water requirements from the law. Duke says the changes were made to allow more ponds to avoid excavation.
"They were actually intermediate risk sites under the original statue and that that so-called label of 'low risk' doesn't take into account any of the key environmental or clean water concerns in creating that label."
Senior Attorney, Southern Environmental Law Center
"State law evolved more in line with federal laws regarding safe closure methods," said Norton. "[A]s we've conducted more in-depth scientific study, it's clear there's no measurable difference between excavation and capping in place for the remaining nine basins, which is the most important point in terms of continuing to protect our neighbors and the environment."
"When they said 'Oh, these sites had been determined to be low risk,' what they don't tell you is that's just a label put on them by the legislature when Duke energy lobbied the legislature to change the law," Frank Holleman, senior attorney at the Southern Environmental Law Center, told Utility Dive. "They were actually intermediate risk sites under the original statue and that so-called label of 'low risk' doesn't take into account any of the key environmental or clean water concerns in creating that label."
Four of the previous eight sites were excavated because they were classified "high risk" under CAMA and the other four were slated for excavation after pending lawsuits resulted in a settlement. Environmentalists note the coincidence: The eight ponds that previously necessitated clean up also happen to meet Duke's standards for full excavation.
CAMA "was silent for political reasons on who pays."
Joe Sam Queen
North Carolina Democratic State Representative
"It strikes me as a little bit misleading if the only places that the engineering required excavation were the exact places that laws or lawsuits required it," David Rogers, North Carolina Beyond Coal representative for the Sierra Club told Utility Dive. "So, according to Duke's logic, the only places where the science actually backed up full excavation are the places that they were required to because of some other outside force, which I find pretty unlikely."
The utility estimates full excavation, including the six sites whose futures now lie in limbo, will cost $10 billion or more, spurring another fight among customer advocates, legislators, the utility and environmentalists: Who is going to pay for the clean up?
Footing the coal ash bill
Legislators are divided on whether to make Duke absorb the costs of coal ash cleanup through its stockholders rather than through ratepayers. Earlier in April, the state House filed a bill that would prohibit the utility from passing any of those costs on to ratepayers. But McGrady said there was "no chance" the bill would pass the majority Republican legislature.
De May noted one potential avenue for cost recovery from ratepayers — through another bill currently in the state Senate that would establish multiyear rates and "could be used to incorporate coal-ash recovery," among other things.
CAMA "was silent for political reasons on who pays," said Queen. "Now we've come down the pike, we've got to answer that question."
Though two legislative paths have been cautiously drawn, there is a third way Duke could recover costs — through existing regulatory approval of rates. The Public Utilities Commission in 2017 approved Duke's rate case which sought to pass all coal ash costs on to customers, ruling "any groundwater pollution caused by Duke’s management of its coal ash was reasonable, on the theory that polluting groundwater is illegal only when the pollution is not cleaned up."
Duke says the commission's rate approval "was the result of a transparent and thorough process," according to Norton. But the Attorney General and Sierra Club disagree, and on Friday filed an appeal against the order.
"As early as 1979, the electric-generation industry was moving in a different direction from Duke — away from unlined coal ash ponds due to their likelihood to leak and cause the unpermitted discharge of coal ash constituents such as arsenic, chromium, iron and manganese to leach into groundwater and surface water," read the appeal. "Despite this trend, Duke continued to construct unlined storage areas for its coal ash until 2009."
While it remains unclear who will absorb those specific costs, and whether the utility will be held to the full clean up, there is another legislative path snaking through the state senate that could give Duke relief on its cost recovery saga.
A controversial proposal
Senate Bill 559 would allow the utility to recover storm costs and, more controversially, allow regulators to approve Duke ratecases for up to five years at a time. The bill was introduced without a stakeholder process to the chagrin of business, environmental and ratepayer interests in the state and has been moving rapidly through the chamber.
"While there was no formal legislative stakeholder process, we have and continue to be committed to gaining feedback from our customers and stakeholders on energy issues that affect them," Grace Rountree, spokesperson for Duke, told Utility Dive in an email.
"I would say the two biggest reasons that [Duke wants the bill] are for grid modernization work and then coal ash cost recovery, because they do not want to have to come in every single year and recover their costs for each of those things," said Rogers. "The opportunity to only have to come in twice over that decade probably is quite appealing to them versus coming 10 times over the decade to recover those costs."
Legislative leadership tasked with moving the bill were some of the top recipients of Duke campaign contributions in 2018, according to the Energy Justice Report.
"[Senator Blue] looked at the bill, he understood the bigger picture of what the utilities commission has before them, and that's why he stuck with it, despite the pushback."
Communications Officer, Senator Dan Blue
"Nearly half of all campaign contributions from Duke Energy in 2018 were donated to only eleven Senators and House Representatives, each of which either represent top Republican leadership, serve as Chair or Vice/Co-Chair on one of the committees Duke's bill has or will have to pass through, and/or is listed as a sponsor or co-sponsor of Duke's bill," the report finds.
Democratic Senator Dan Blue, one of the primary sponsors on the bill, and the only Democrat within the utility's top 11 contributions, received twice as much from Duke in 2018 than in any year previous, according to the report.
The contributions come from a voluntary, employee-led PAC, according to Rountree, adding that all contributions are made publicly available.
"Duke Energy and a lot of other big groups have been big contributors to a lot of campaigns, obviously both Republican and Democrat," Leslie Rudd, communications officer for Blue's office told Utility Dive. "Senator Blue is the Senate Democratic leader, so he's also the biggest fundraiser. So it is kind of one plus one is two on that."
"He's been in the game far too long and been in the General Assembly far too long to get paid off by a couple thousand dollars for this. He looked at the bill, he understood the bigger picture of what the utilities commission has before them, and that's why he stuck with it, despite the pushback," she added.
State Senator Bill Rabbon, R, is another primary sponsor on the bill who was one of the top 11 recipients of Duke campaign funds in 2018. No one was available for comment on the bill, according to his office.
"What has everybody concerned is that [Duke is] going to try to roll a bunch of costs related to grid improvement, essentially coal ash or other other investments, where they might not be spending the money for three to five years, but they'll get upfront approval for that and the public won't have any input when those costs are actually being made," Rory McIlmoil, senior energy analyst at Appalachian Voices and author of the report on the bill, told Utility Dive.
The bill passed the Senate Thursday.