Duke faced few fines over decade

North Carolina regulators socked Duke Energy with a flurry of environmental violations after it dumped a 70-mile slug of coal ash into the Dan River last month.

But the seven violations filed on Feb. 28 were aberrations, state records show.

The N.C. Department of Environment and Natural Resources had cited Duke and Progress Energy, now part of Duke, for only 31 water-quality violations in the previous decade.

That’s despite the statewide footprint of the combined Duke. The company serves most of North Carolina, inhaling millions of gallons of water a day to cool its 19 power plants.

Duke and state regulators have been under intensifying public scrutiny since the Dan River spill. Environmental advocates contend state regulators are too cozy with Duke to aggressively police the company. Both have been subpoenaed to appear before a federal grand jury that meets in Raleigh next week.

The nation’s biggest utility, worth $50 billion, has been fined only four times for a total of less than $4,000 since 2004, according to an Observer analysis of data from DENR’s Division of Water Resources. These civil penalties are the department’s most severe enforcement action, a step above Notices of Violation.

The sewage treatment plant for the small Gaston County town of Dallas, by contrast, was fined about $200,000 over that period.

DENR spokeswoman Sarah Young said wastewater permits make up the majority of the permits issued by the water resources division. Because they have the capacity to cause the most environmental damage, she said, they merit the most scrutiny.

Larger companies such as Duke often have few regulatory problems because they have staff dedicated to environmental compliance, she said.

State Water Resources Director Tom Reeder added Friday: “We have limited resources, and we try to focus those resources on emerging problems or problems that are likely to pose the biggest risks. We try to focus our energy where we think we can do the most good.”

Duke declined to comment, referring questions about DENR’s enforcement to the environment agency.

Total fines have dropped since 2007, when the legislature began trimming water-quality budgets. That trend accelerated when Republicans took control of the legislature in 2011 and Republican Gov. Pat McCrory’s appointees took over the environment department in 2013.

Fines that totaled about $2 million a year from 2006 to 2008 dropped to $518,000 last year, the first under new environment Secretary John Skvarla.

In 2013, the department issued some 350 water-quality penalties, less than half as many as in 2008. The average total penalty in 2013 – $1,472 – was a little more than half the average in 2008.

A new approach

Skvarla brought a customer-friendly approach to regulation. DENR adopted a mission statement, prominently displayed within the department, that pledged to weigh economic costs in its decision-making. The agency would not be, it said, “a bureaucratic obstacle of resistance.”

Amy Adams, a former DENR regional supervisor who resigned last fall, said she no longer felt support by superiors to take aggressive enforcement action.

“What changed was that after the McCrory administration came in, we were going to make these decisions based on the mission statement, which referred to economics,” said Adams, who now works for the advocacy group Appalachian Voices. “It was more of a focus on getting what (regulated entities) wanted than in doing what was best for the environment.”

DENR said a number of factors could contribute to the decline in penalties. They include a downturn in the economy, increased willingness by violators to fix problems and a “tiered” enforcement strategy that bases penalties on the threat to the environment.

Former staff members say the change in enforcement focus became pronounced in 2011, when the legislature convened with Republican majorities in both chambers for the first time in more than a century.

Under a legislative mandate, the N.C. Division of Water Quality – which had authority for protecting lakes, streams, wetlands and groundwater – was dissolved last year. Its staff was folded into the N.C. Division of Water Resources, which had dealt with water-supply issues.

The division became a target of budget cuts, most recently when it lost 68 positions on March 1. Water-quality staffing had fallen 20 percent between mid-2008 and mid-2013.

Reeder warned his staff in a departmental video last July that legislators were unhappy with “certain segments” of the division.

“We’re in the cross-hairs right now. We are the bulls-eye,” Reeder said. The division would focus on helping applicants win permits and violators get in compliance without fines, he said.

In an interview, Reeder said his philosophy has evolved from by-the-book enforcement to a more collaborative approach.

“It’s the same as what I’ve heard the secretary say: If it’s an inadvertent violation because somebody didn’t know any better and we can help bring them into compliance, then that’s a win-win for everybody,” he said. “If it’s something that’s done willfully or repeatedly, we should bring the hammer down.”

‘Dear John’ letter

In contrast to other areas of DENR, water-quality rules tend to have personal and business impacts.

Regulators once focused on catching pollutants flowing out of pipes. Now they also police stormwater flowing off parking lots, backyards and farm fields.

That means property owners may be forced to leave green buffer zones along streams or construction projects scaled back to protect wetlands.

“I guarantee you there are a couple of decades’ worth of grudges out there (against regulators),” said Susan Wilson, a former water-quality staff engineer for 24 years. “When this governor came into play, they’re getting the hatchets out.”

Dispirited by the tone of the new leadership, Wilson left DENR last August. She parted with a “Dear John” letter she wrote to Skvarla.

“From the inspector’s standpoint in the field, you want people to take you seriously to correct what could be a serious problem,” she said in an interview. “When the tone of management is how (Skvarla) has expressed it, it takes away that credibility. Maybe the regulated community doesn’t take that inspector seriously, because he can call a supervisor who’s now an at-will employee. For the people with boots on the ground, you’re taking away their credibility.”

The number of “at-will” employees at DENR – managers and policymakers who are supposed to carry out the governor’s agenda – jumped from 24 to 167 under McCrory’s administration,WRAL in Raleigh has reported.

McCrory, a longtime Duke executive, denies he’s granted any favors to his former employer. Last month he and Skvarla wrote Duke that “we will not stand by” if ash threatens the state’s waterways.

DENR’s philosophy has long been focused on gaining compliance with the rules instead of imposing fines, said John Dorney, a 25-year water-quality official who left the department two years ago.

“At the end of the day you want the site to be fixed,” he said. “The enforcement process takes a tremendous amount of staff time. And we thought our staff time was better spent in trying to get people in compliance than writing correspondence.”

But staff numbers also matter, Dorney added. When a federal grant allowed his wetlands unit to beef up enforcement staff between 2007 and 2011, compliance rates rose fivefold.

“That’s reassuring and points out the value of compliance enforcement in general – if they understand that regulators take compliance seriously, they will too,” he said.

Duke’s violations

The 2011 GOP-controlled legislature also passed a regulatory-reform measure that led to a tiered approach to environmental enforcement that took effect the following year.

The approach aimed to gear penalties to the “potential or actual level of harm” they caused to the environment or public health. The lowest level of infraction, typically for paperwork errors, became Notices of Deficiency instead of Notices of Violation.

Duke and Progress received 31 NOVs, with the Shearon Harris nuclear plant near Raleigh receiving the most at eight.

The Dan River power plant was cited in four, including one issued on Feb. 28 for an illegal discharge related to the Dan River spill. The plant also drew NOVs for exceeding discharge limits in 2007 and 2013, and one Notice of Deficiency in 2013.

A municipal wastewater treatment plant was the biggest offender over the past decade, according to the analysis of civil penalties.

The Hamby Creek sewage treatment plant in Thomasville received total penalties of more than $236,000. Also near the top of the list was Dallas’ wastewater treatment plant, with about $200,000 in fines.

Duke and Progress got fined four times in that decade. Those fines ranged from $298 to $1,552.

Jim Palenick, interim town manager in Dallas, said the town’s treatment plant needed upgrades when it started collecting DENR penalties in 2004. But he said the agency was also sending a message that it wanted smaller municipalities to abandon their plants and consolidate with larger systems.

Dallas has spent more than $500,000 on improvements at its plant and has started design work for a $300,000-plus connection to Gastonia’s system, he said. Palenick said he hasn’t been able to win any relief from DENR on the town’s penalties by arguing that the money could be better spent on improvements.

“There certainly is a very different approach between a small community struggling for resources that tends to get fines that are large and quick, as opposed to a very large multibillion-dollar corporation like Duke who has serious environmental issues,” Palenick said.

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