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State environmental policy innovations: North Carolina's Clean Smokestacks Act.

B. Plant Retirements and Replacements

Between 2002 and 2007, both utilities concentrated on constructing their highest priority N[O.sub.x] control technologies and beginning their major investments in S[O.sub.2] scrubbers to meet the 2007 cap and amortization deadlines. (178) As early as 2005, Duke expressed concern about the cost of SNCR technology and the narrowness of its compliance margin to meet the initial 2007 N[O.sub.x] cap, and suggested that it might therefore consider using SCR rather than SNCR or even perhaps retire some plants to assure compliance. (179) It also accelerated construction of scrubbers on its Allen units to assure compliance with the new federal CAIR promulgated by EPA in 2005 and the anticipated federal mercury rule. (180) Progress reported in 2004 that it was able to attain higher rates of S[O.sub.2] removal from its scrubbed units, thereby enabling it to cancel a scrubber it had proposed for one of its smaller units (Lee 3). (181)

In 2005, Duke took a major step further, requesting permission from the Utilities Commission to build two new 800-megawatt pulverized-coal units at its Cliffside site, both equipped with state of the art control technology, and at the same time to retire rather than retrofit the four oldest Cliffside units (Cliffside 1-4) by 2013. The Utilities Commission approved one of these two new units (Cliffside 6) coupled with requirements for the retirements of Cliffside 1-4 and for additional programs promoting energy efficiency. (182)

Beginning in 2005, both utilities began to report somewhat higher costs than initially anticipated: 18-31% higher in various years for Duke, 10% higher for Progress in 2005 but increasing to as much as 67% higher in 2006 and 90% higher in 2008, before ultimately finalizing in 2011 at 23% higher for Duke and 30% higher for Progress than their original estimates. (183) Both utilities therefore began documenting their possible intent to request additional cost amortization in 2008 and 2009. Progress also declared that it did not intend to request amortization of more than its initial $813 million cost estimate: any costs above that amount it proposed to request adding to its rate base and charging to its customers instead. (184)

In 2007, both utilities met their first N[O.sub.x] caps and achieved significant reductions in S[O.sub.2] emissions: Duke had reduced its N[O.sub.x] emissions to 33,000 tons (versus a cap of 35,000, a 60% reduction since 2002), and its S[O.sub.2] emissions by 15%, while Progress had reduced its N[O.sub.x] emissions to 24,383 tons (versus a cap of 25,000, a 59% reduction since 2002) and its S[O.sub.2] emissions by 25%. (185) Both also met their financial mandates for amortization of 70% of compliance costs by 2007, and Progress sought authorization to amortize an additional $243.9 million (the balance of its initially estimated $813 million) in 2008 and 2009. (186) Duke, however, negotiated a new stipulation that it would not seek any further accelerated amortization--leaving $225.2 million of its originally estimated compliance costs unamortized--but would seek instead to have them added to its rate base. (187) Progress subsequently also requested that all compliance costs beyond its initial $813 million be included in its rate base, and in 2008 followed Duke's lead in asking to terminate its accelerated amortization program and add all additional costs to its rate base instead. (188)

In 2008, Progress also began reconsidering the costs of additional control technology at several of its smaller plants (for instance, Cape Fear 5 and 6), to determine which technology would ultimately be most cost effective. (189) Then in 2009, it went a major step further and announced its intention to retire all three units of its Lee facility (397 megawatts total), and instead to build a 950-megawatt, state of the art combined cycle natural gas plant at that site. (190) This major natural gas substitution would dramatically reduce its S[O.sub.2], mercury, and C[O.sub.2] emissions as well as N[O.sub.x]. It would thus be a more cost effective option especially in light of North Carolina's tough new regulations of mercury emissions, and the anticipation of possibly tighter federal regulations including the CAIR, mercury, and possibly C[O.sub.2] rules as well as the tighter 2013 cap on S[O.sub.2] under CSA--than adding end of pipe Control technology at the Lee and Sutton 3 units.

In December 2009, Progress went even further, announcing plans to retire all its remaining unscrubbed coal plants--eleven units totaling 1,485 megawatts, including Cape Fear 5 and 6, Sutton 1-3, Weatherspoon 1-3, and Lee 1-3--by 2017, rather than invest more than $500 million of capital costs in additional control technology--as well as some $580 million in operating and maintenance costs--on these old coal plants. (191)

In short, from an initial plan aimed at installing N[O.sub.x] controls on all its units and scrubbers on all its large units, Progress's compliance strategy had shifted to maintaining only its seven largest units and adding a major new natural gas plant. It would then retire its other eleven units, representing nearly one-third of its total 1,533-megawatt coal-fired capacity.

With these facility retirements and the completion of scrubbers and N[O.sub.x] control technologies at most of their other units, both Duke and Progress easily met their compliance mandates under the tighter 2009 caps, with emissions that were well below the required levels: Duke emitted only 20,474 tons of N[O.sub.x] (versus a cap of 31,000 tons) and 22,038 tons of S[O.sub.2] (versus a cap of 150,000 tons, a dramatic reduction from its 2002 levels as eleven of its twelve scrubbers came on line); Progress emitted only 18,810 tons of N[O.sub.x] (versus a cap of 25,000 tons) and 51,416 tons of S[O.sub.2] (versus a cap of 100,000 tons). (192) Duke's S[O.sub.2] emissions in 2009, in fact, were even well below their 80,000-ton cap for 2013, and Progress's were well on their way to achieving its 50,000 ton 2013 cap for 2013. (193)

By 2011, Duke had completed the installation of S[O.sub.2] scrubbers and N[O.sub.x] control technologies at all generating units that it planned to continue operating, and Progress expected to complete the rest by the end of 2011. Progress also had scheduled the retirements of all its older and smaller nonscrubbed units, and Duke in its 2010 Integrated Resource Plan announced plans to retire all of its nonscrubbed units; six of these units had already been idled by 2011. (194) Even before all these retirements had been completed, the utilities' combined annual emissions of N[O.sub.x] had been reduced by more than 80% since 1998, and their emissions of S[O.sub.2] by more than 76%. Both continued to meet their 2009 caps for both N[O.sub.x] and S[O.sub.2], and with Progress's planned retirements of its Lee units in 2013, both confidently expected to meet or exceed their S[O.sub.2] cap requirements for 2013; Duke, in fact, had already far more than met its 2013 S[O.sub.2] cap. (195) In 2011, Duke for the first time acquired and surrendered to the State 28,492 S[O.sub.2] allowances and 1,958 annual N[O.sub.x] allowances, both for compliance year 2009; Progress surrendered 41,259 tons of S[O.sub.2] allowances for 2009 (it had no N[O.sub.x] allowances to surrender).

Both utilities thus used the law's combination of firm time-dated caps with flexibility as to how they could achieve them to make unprecedented 70-80% reductions in their emissions of both N[O.sub.x] and S[O.sub.2], initially by planning to install scrubbers and N[O.sub.x] control technologies at most or all of their facilities but then substituting retirements of their older, smaller and least efficient units. (196) The shift to retirements of older units indicated a shift in strategy by both utilities to shut down their older, smaller, and least efficient coal-fired power plants because of a combination of inefficient operating costs, the expenses that would be required to bring them into compliance with CSA and with anticipated new federal regulations, and undoubtedly also the rapidly falling cost of natural gas as an alternative fuel. (197) Each also used the CSA compliance process as an opportunity to propose new and larger generating units--the Cliffside 6 pulverized-coal plant by Duke, and the Wayne combined-cycle natural gas plant by Progress--that would not only be cleaner and more efficient but also significantly larger, to provide for additional anticipated demand growth.

The costs of achieving these results were higher than originally estimated, but still well below the estimated benefits of the air pollution damage that was avoided. Duke's 2012 estimate of its total compliance costs was $1.84 billion, which was $340 million (23%) higher than its original 2002 estimate of $1.5 billion; Progress's was $1.055 billion, which was $242 million (30%) higher than its $813 million estimate in 2002. (198) In comparison, Hoppock et al. estimated the median cumulative mortality benefits to North Carolina in the range of $6 billion to $16 billion, not including other benefits such as to health effects other than mortality and to tourism. (199) Based on the Utility Commission's audit, the total annual impact of each utility's compliance with CSA on its cost of service to its residential customers was $2.64 per 1,000 kilowatt hours per month for Duke, and $1.97 per 1,000 kilowatt hours per month for Progress. (200)

C. Enforceability Confirmed

In September 2011, the U.S. EPA formally accepted the Clean Smokestacks emission caps as an integral element of North Carolina's SIP for meeting the 1997 [PM.sub.2.5] and eight-hour ozone NAAQS, among other federal standards; for improving visibility in the mountains and other scenic vistas; and for reducing acid rain. (201) In doing so, EPA noted that all areas in the State that were designated as nonattainment for the 1997 [PM.sub.2.5] and eight-hour ozone NAAQS were currently attaining the standards. (202) The effect of this action was that as of 2011, the CSA caps would become permanent as a matter of federal and state law, and thus become federally enforceable. (203)

Similarly, in January 2012 the Southern Environmental Law Center (SELC) announced a legal settlement with Duke Energy on behalf of a group of conservation organizations, confirming Duke's commitment to retire a number of its old coal-fired generating units totaling 1,667 megawatts in order to assure that Duke's addition of the Cliffside 6 unit would be carbon neutral by 2018. (204) These retirements would include Cliffside 1-4, plus additional units of Duke's choice, to total 998-megawatts by 2018 and 669-megawatts more by 2020--most likely the same traits that Duke had announced for planned closure under the CSA (that is, its older, unscrubbed coal-fired units). Incorporation of these plans into the settlement of SELC's lawsuit made them legally enforceable commitments. (205)


In addition to its impacts on North Carolina's utilities, the CSA had far broader interstate impacts resulting from legal proceedings initiated under the mandate of section 10 of the law, which directed, the attorney general to pursue all legal avenues to reduce upwind pollution sources. (206) The first of these proceedings was a petition and subsequent lawsuit against the EPA, challenging its proposed use of unrestricted allowance trading to reduce interstate air pollution. (207) The second was a lawsuit filed against the TVA, the largest single source of upwind pollution affecting North Carolina and the real target of the mountain region constituencies and legislators who initiated the law. (208)

A. North Carolina's EPA Petition and Lawsuit

Before its enactment of the CSA, North Carolina had generally been considered an "upwind" state, one of the large group of Midwestern and Southern states that were responsible for pollution affecting the "downwind" states in New England and the Northeast. With its enactment of the CSA, however, North Carolina asserted itself also as a downwind state: it argued that it had now taken effective action to reduce its own pollution, but was prevented from full compliance with the NAAQS by continuing emissions from interstate sources upwind. At the time, thirty-two of North Carolina's 100 counties were out of compliance with one or both of the ozone and fine particulate standards. (209)

In March 2004, North Carolina petitioned EPA under section 126 of the Clean Air Act to issue a finding that power plants in twelve upwind states contributed significantly to its noncompliance with the ozone standard, and five to its noncompliance with the [PM.sub.2.5] standard. EPA denied the petition, acknowledging that "for purposes of Section 126(b)" many of these upwind sources were in fact contributing significantly to North Carolina's noncompliance with the particulates standard, but arguing that its federal implementation plans (FIPs) for the new CAIR, which it had proposed in January 2004 and published in May 2005, would solve these problems. (210) The CAIR would in fact require substantial reduction of emissions across all 28 eastern states, but only in the aggregate: it used a cap and trade approach allowing emissions trading across the entire region, which would not assure that emissions from particular sources upwind of North Carolina, for instance, would in fact reduce their emissions rather than simply buy allowances from overcompliance elsewhere. (211)

North Carolina therefore sued EPA, arguing that unrestricted allowance trading under the CAIR would not in fact assure that North Carolina would be freed from the burden of upwind pollution, and that whereas section 126 required emission controls within three years, relying on FIPs under CAIR could postpone upwind compliance indefinitely. (212) In 2008, the D.C. Circuit ruled that EPA must revise CAIR's emissions trading program to assure that it would not allow continued significant interstate contributions to North Carolina's noncompliance or interfere with its maintenance of compliance. (213) Initially, it vacated the entire rule but on reconsideration left it in place while EPA developed an acceptable alternative. (214) In 2010, the EPA issued a substitute rule, initially entitled the Clean Air Transport Rule (subsequently finalized in July 2011 and renamed the Cross-States Air Pollution Rule, or CSAPR), which it proposed to remedy the problems. (215)

In short, North Carolina was the first state to challenge EPA's proposed CAIR over the potential problems with its unrestricted trading of emissions allowances and its weaker deadlines for compliance. It thus deserves primary credit for forcing development of the stronger CSAPR that resulted. Whether the CSAPR will itself withstand broader legal challenges by upwind states and utilities remains to be seen: It was vacated in August 2012 by the D.C. Circuit, leaving the previous CAIR rule in place once again. (216) North Carolina's section 126 petition, initially denied by EPA, was reinstated by the D.C. Circuit in 2009 and remanded to EPA for reconsideration pending the outcome of judicial review of the CSAPR and CAIR. (217)

B. North Carolina's Lawsuit and Settlement With TVA

In the meantime, in January 2006 the North Carolina Attorney General also sued the TVA, noting North Carolina's progress under the CSA in reducing its own emissions, and arguing that continued air pollution from TVA's upwind power plants constituted a public nuisance under the laws of their own states (Alabama and Tennessee), causing damage to North Carolina's health, environment and economy, and that TVA had repeatedly declined to make binding commitments to clean it up. (218) Significantly, public nuisance is a matter traditionally deemed in state law, not a federal claim that TVA was failing to comply with the Clean Air Act. (219)

In 2008, perhaps in response to this lawsuit, TVA added additional N[O.sub.x] controls (SNCR) at all four units of its John Sevier site, one of four TVA facilities within 100 miles of North Carolina that were the subject of North Carolina's complaint; it also added an S[O.sub.2] scrubber to its Bull Run unit, one of its largest units and another of those closest to North Carolina. (220) Bull Run thus became one of only five TVA units equipped with scrubbers, and the only one to which they were added in the decade since 2000.

In January 2009, Judge Lacy Thornburg of the U.S. District Court for western North Carolina nonetheless ruled in North Carolina's favor with respect to the twenty-two generating units at the four TVA power plant sites within 100 miles of North Carolina, ruling that all those units must be fitted with emission controls by 2013 and several of them earlier. (221) In his decision he specifically noted North Carolina's progress in aggressively cleaning up its own emissions under the CSA, as well as its related efforts to obtain relief from upwind sources by petitioning EPA. (222)

TVA appealed, and in 2010 the Fourth Circuit Court of Appeals reversed and remanded Thornburg's decision, holding that such a decision would "encourage courts to use vague public nuisance standards" to bypass the regulatory scheme of the Clean Air Act. (223) North Carolina requested review by the U.S. Supreme Court in 2011, arguing that the appellate reversal had improperly treated the Clean Air Act as preempting state tort laws, that it was inconsistent with decisions by the highest courts in Alabama and Tennessee, and that it was also inconsistent with the leading precedent of the Supreme Court itself in a similar interstate water pollution case. (224) Faced with strong arguments by North Carolina and several amicus briefs, TVA in 2011 agreed to a negotiated settlement in which they met all of North Carolina's demands and more. (225) TVA agreed to cap aggregate emissions from all its power plants, reducing S[O.sub.2] emissions to 38% of their 2011 level by 2019 and N[O.sub.x] to 51% by 2018; and to retire or add scrubbers at nearly all its coal-fired generating units (fifty-nine units at eleven sites), beginning with those closest to North Carolina. (226) As under the CSA, any excess emissions allowances generated by these actions would be retired rather than sold. These commitments were equivalent or even more stringent than the cap levels set by the CSA for North Carolina's utilities, and in applying to TVA's entire fleet of coal-fired plants, the settlement agreement also was far broader in its consequences than the district court decision would have required. In addition, TVA agreed to spend $290 million on environmental mitigation projects (mainly energy efficiency and renewable energy) and to pay $60 million to the four states for similar projects, including $11.2 million to North Carolina. (227) The agreement also settled the NSR claims that EPA and the several states had previously been unable to resolve.

In his presentation to TVA's board requesting approval of this settlement, TVA's president noted that most of these units were more than fifty years old, and that it did not make sense to continue operating or investing in controls at many of them. (228) He proposed a vision that by 2020 TVA would become one of the nation's leading providers of low cost, cleaner energy, and specifically that TVA would idle or retire 2400-4700 megawatts of coal-fired generating units and instead plan to invest in a 3600-5100-megawatts equivalent of energy efficiency improvements, 1500-2500 megawatts of renewable energy, 1500-5900 megawatts of nuclear capacity, and 900-9300 megawatts of natural gas generation. This vision represented a dramatic change from a recent history in which TVA had been the nation's largest consumer of coal, more than haft of it strip mined. (229)

By 2012, the results were already becoming clear. EPA data show that between 2001 and 2011, TVA added N[O.sub.x] control technologies at all twenty-one of its units within 100 miles of North Carolina, added an S[O.sub.2] scrubber to the largest of them (Bull Run), and reduced usage of these units by 50%, including idling Widows Creek 1-5 beginning in 2011. (230) The effect of these decisions was to reduce its 2011 S[O.sub.2] emissions affecting North Carolina by 79%, and its N[O.sub.x] emissions by 91%. (231) Most of the S[O.sub.2] reductions arguably are attributable to North Carolina's legal initiative under the CSA, since the Bull Run scrubber was the only one TVA installed in the decade since 2000 and was installed after TVA had successfully resisted an EPA attempt to require additional controls, and only after North Carolina had initiated its lawsuit. The idling of Widows Creek 1-5 also occurred at the time of the legal settlement; and TVA's binding commitments to retire two units per year in 2013, 2014, and 2015 were also specific conditions of the settlement agreement. Some of the N[O.sub.x] reductions (particularly the addition of SNCR technology at John Sevier 1-4) may also be attributable to North Carolina's pressure, although earlier reductions likely should be credited to the N[O.sub.x] SIP Call. A major additional cause of both these reductions was the 50% reduction in TVA's generation of power from these units, which was likely due to a mix of these considerations along with other decision criteria.

In April 2011, TVA confirmed further plans to retire ten of these units, among others. (232) Comparing to their emissions in 2011, the retirements would further reduce TVA's 2015 S[O.sub.2] emissions affecting North Carolina by 32% from their 2011 levels (or 85% from the 2001 baseline), and N[O.sub.x] emissions by 43% from 2011 or 95% from 2001. (233) All these retirements were associated with legal commitments established by the settlement agreement. (234)


The CSA took effect during a period when the utilities also were reducing N[O.sub.x] emissions in response to other mandates, including the N[O.sub.x] SIP Call, the Clean Air Act amendments of 1990 (the acid rain cap-and-trade program), the anticipated implementation of federal CAIR and mercury rules, and a possible further tightening of the federal ozone standard. In this context, how much improvement in air quality and associated benefits actually resulted from the CSA?

A. In-State Emissions Reductions

To identify emissions improvements attributable to the law, we identified from compliance reports all generating units that installed S[O.sub.2] or N[O.sub.x] control technologies and recovered their costs specifically in compliance with the CSA. We then compared the actual emissions from those units in 2011 (the most recent year for which data were available) with the emissions they would otherwise have released based on their emissions rate for the year before installation of the new technologies, adjusted for the actual use of each generating unit in 2011. All data are from EPA's Clean Air Markets Division (CAMD) database. All emissions are calculated from unit-specific heat input and tons of emissions each year as reported to CAMD. (235)

As shown in Table 1, as of 2011, the two utilities' actions specifically in response to the CSA had reduced their total annual S[O.sub.2] emissions by 315,035 tons (81%), and their N[O.sub.x] emissions by 54,663 tons (58%). Both utilities' emissions for 2011 were substantially below the 2009 CSA caps, and Progress was close to meeting (and Duke was already far below) their stricter caps for 2013 S[O.sub.2] emissions. (236)

In short, the CSA produced dramatic reductions in S[O.sub.2] levels in North Carolina.

As noted earlier, S[O.sub.2] emissions are a major source of health damage and the primary source of acid rain and regional haze that damages visibility in the North Carolina mountains and natural areas. (237) An estimated 85% of the state's S[O.sub.2] emissions came from power plants alone, and they had not been subject to EPA standards forcing cleanup of pre-1977 power plants. Reducing S[O.sub.2] emissions had the additional cobenefits of removing large fractions of fine particles ([PM.sub.2.5]) and mercury.

B. Additional Upwind Emissions Reductions

In addition to emissions reductions by Duke and Progress, it is also reasonable to project the additional results of TVA's added emission controls and plant retirements as specified in its CSA-driven settlement agreement with North Carolina. Table 2 shows actual emissions reductions documented from 2002-2011 in EPA's CAMD annual data series, and projects these further to account for the required retirements of additional units as specified in the settlement agreement and planned by TVA. As these projections show, TVA's emissions of S[O.sub.2] over the period 2001-2011 were reduced by 79% as of 2012, and of N[O.sub.x] by 91%. By 2015 they are projected to be reduced even further, by 85% and 95% respectively, though these reductions may be offset in part by emissions from other units picking up their loads. All these outcomes mean far less upwind emissions affecting health, tourism, and other benefits in North Carolina.

C. Assessments

To date there have been only two other empirical analyses of the consequences of the CSA, one by a conservative advocacy group (238) and the other by a research team led by David Hoppock at Duke University. (239) Both have important limitations.

The Locke Foundation report compared data on ozone monitor readings in North Carolina with those of four neighboring states over 1999-2009, and concluded that while North Carolina's utilities had undertaken significant additional costs to comply with the CSA (initially estimated at $2.3 billion, ultimately increased to $3.2 billion), there was no identifiable additional ozone reduction in North Carolina compared to its neighboring states which did not implement such legislation. (240)

This study presented data only on ozone levels and not on the far more important reductions the CSA produced in sulfur oxides and associated emissions of particulates, mercury, and greenhouse gases. Ozone levels are driven by motor vehicles and NO from power plant emissions, particularly so in North Carolina, where in 2000 only 45% of N[O.sub.x] emissions came from power plants. In contrast, 82% of its sulfur emissions and 65% of its mercury emissions came from power plants. (241) In addition, N[O.sub.x] emissions in all five of the states compared were heavily driven by the EPA SIP Call. The CSA undoubtedly contributed to North Carolina's strategy for reducing them, but it is hardly surprising that the other states would also have made somewhat similar progress during this period.

Far more important, the overwhelming majority of expenditures for compliance with the CSA were used not for ozone reduction, but for scrubbers to reduce S[O.sub.2] emissions (and as cobenefits, particulate and mercury emissions), a dramatic set of emission reductions attributable directly to the CSA that were not previously mandated by the EPA, and which as shown by subsequent data, have benefited North Carolina's health, environment, regional haze reduction, and tourism. North Carolina's settlement with TVA, also derived from a CSA mandate, contributed significant additional benefits in upwind emissions reductions, many of them occurring after the 2009 cutoff point for the Locke study. (242)

Hoppock et al. focused on S[O.sub.2] emissions reductions rather than N[O.sub.x] and ozone, and examined the impacts of the CSA on health benefits and ratepayers over an eleven-year period, comparing what the costs of compliance with the federal CAIR, CSAPR, and Mercury Rule (MATS) would have been with and without the CSA that preceded them. (243) They concluded that earlier compliance with the CSA produced health benefits--based on reduced premature mortality from S[O.sub.2] emissions reductions--that were approximately an order of magnitude greater than the potential increases in costs for ratepayers, and that the emissions reductions achieved under Clean Smokestacks likely reduced other environmental compliance costs as well. (244) In addition, they found that Clean Smokestacks spread out the compliance costs and created the potential for future savings if retrofit costs were to escalate during the shorter compliance period for CSAPR and MATS. (245) In short, they argued that the CSA produced significant benefits to public health by beginning several years earlier than EPA's requirements. It also significantly benefited ratepayers by lowering compliance costs as an early mover compared to the costs that would have been bid up by later inflation, and as multiple states competed for the same vendors and materials during the federal compliance period.

These benefits are important and are probably significantly understated. First, Hoppock et. al. calculated only extra benefits estimated from the CSA being implemented earlier than the CSAPR and MATS, reasoning that tougher federal regulations were already foreseeable at the time CSA was enacted. (246) It is true that some increased stringency of federal regulations was anticipated in 2002, but the timing, the stringency, and the form of the federal regulations was not clear at the time. The Bush administration had just taken office in 2001 with strong support from the fossil fuel and electric utility industries, and was actively opposing the Clinton enforcement agenda against grandfathered coal-fired power plants under NSR. (247) The CAIR, CSAPR, and MATS rules had not yet been developed and, in fact, were still being litigated a decade later. Moreover, in 2003, (248) the EPA's attempts to tighten regulation of TVA's power plants were overruled by the courts. (249)

Second, Hoppock et al. did not discuss additional CSA benefits from ozone reduction (as noted above, many but not all of these were probably attributable to compliance with the EPA SIP Call), from reduction of particulate emissions, or from reductions in regional haze (which was both a direct environmental benefit as well as an economic benefit to the tourism economy, and an additional compliance benefit with respect to EPA's anticipated regional haze regulation). Nor did they include the sizable additional benefits resulting from the TVA settlement, implementation of which is still in progress.

Finally, Hoppock et al. did not mention the additional benefits of increased reliability of North Carolina's electric generation as a result of making the transition to pollution controls or plant retirements ahead of EPA regulations and of other states. A 2012 report by the U.S. Government Accountability Office noted that some states were likely to experience potential reliability issues due to the difficulties of meeting EPA regulatory deadlines. (250) By cleaning up under the CSA ahead of these requirements, North Carolina not only did not experience reliability issues due to the CSA, but also protected itself from this risk.

D. Ambient Air Quality

There is evidence of beneficial changes in North Carolina's ambient air quality associated with these emissions reductions. Figures 1 and 2 show annual mean measured levels of fine particulates for the mountain and Piedmont regions of North Carolina respectively, for the years 1999-2011. These measurements provide both a direct measure of airborne particulates and a plausible surrogate for S[O.sub.2] emissions, since sulfate is one-third of the total measured particulates. In both regions the ambient levels of particulates fell gradually from 1999-2003, probably as a result of previous control measures to satisfy EPA's national cap and trade program under the 1990 Clean Air Act amendments, but then rose again from 2003 to 2005 as those previous measures reached the limits of their effectiveness and electric generation increased. From 2005 onward, however, in both regions the measured pollutants fell consistently and dramatically, almost certainly due in large part to the new controls and plant retirements resulting from the CSA. In September 2011, the EPA noted that all areas in the State that were designated as nonattainment for the 1997 fine particulate matter and eight-hour ozone NAAQS were now attaining the standards. (251) A full modeling of the health and economic benefits of these changes is beyond the scope of this paper, but these data document significant and widespread improvements in North Carolina's air quality. These trends should improve even further from 2011 to 2018 as TVA's additional controls and plant retirements are implemented, and with further anticipated plant retirements by Duke and Progress Energy.

The annual changes in ozone concentrations were even more dramatic. As shown in Figure 3, the high and rising concentrations of ozone that occurred during the 1990s, exceeding federal NAAQS standards, declined precipitously from 2001 to 2004. This decline was most likely the result of measures complying with EPA's NO SIP Call. Ozone concentrations declined even more dramatically from 2007 to 2009, most likely reflecting the new controls put in place under the 2007 CSA deadline. In 2002, thirty of North Carolina's 100 counties were not complying with federal ozone standards. As of May 2012, only parts of seven counties in one metropolitan area (Charlotte) still were not fully compliant, and compliance in that area was anticipated soon. (252) Overall, in 2011 North Carolina recorded the second-lowest annual ozone levels since the state began monitoring air quality in the early 1970s. (253) Statewide, ozone levels exceeded the ozone standard of 0.075 ppm (adopted by EPA in 2008) on twenty-six days--the same number as in 2010--compared to about fifty days per year on average over the past ten years. (254)

Overall, the state's air quality was significantly improved by 2012, and the associated damages of air pollution both to health--asthma and other lung diseases in particular--and to visibility, and the associated economic benefits of the state's recreation and tourism economy, also could reasonably be assumed to have been reduced. N[O.sub.x] emissions from the utility sector are not the only source of ozone--more aggressive emissions inspections of motor vehicles also contributed to the reductions--but the CSA played a key role in requiring reduction of power plant N[O.sub.x] emissions by 58% in addition to earlier SIP Call reductions, and of h S[O.sub.2] emissions by 81%. (255)

E. Mercury

Reduction in mercury emissions was expected to be a significant additional cobenefit of installing S[O.sub.2] scrubbers or retiring unscrubbed coal-fired power plants from use. The CSA directed the state Air Quality Division to develop further recommendations on control of mercury emissions. Acting on those recommendations, North Carolina's Environmental Management Commission in 2006 issued a mercury rule requiring that electric utilities reduce mercury emissions 88% by 2018 without reliance on allowance trading. It also required closure of any units that did not have scrubbers to remove mercury in addition to S[O.sub.2]. (256) In July 2012, North Carolina's Division of Air Quality released a report documenting more than a 90% reduction in mercury emissions from the seven largest power plants in North Carolina, and that all the smaller ones were scheduled for retirement by 2015 (Figure 4). (257) Overall, the Division of Air Quality data showed more than a 70% reduction in power plant mercury emissions by 2010, and projected more than 80% reduction by 2025. (258) Since power plants were responsible for 52% of the state's total mercury emissions, these reductions would amount to nearly a 47% reduction in the state's total mercury pollution, with the associated health benefits. It also positioned North Carolina for compliance with forthcoming federal mercury standards well ahead of their 2018 deadline, as well as with North Carolina's own strict mercury standard. (259)

In short, the CSA placed North Carolina and its utilities in a position of leadership not only in S[O.sub.2] and N[O.sub.x] reduction, but also in reduction of mercury and particulate emissions, and well ahead of others in complying with the federal mercury rules that were ultimately issued in 2011. The early adoption of mercury controls as a CSA cobenefit added some eight years of extra health benefits as a result of earlier reduction of mercury exposure.

F. Regional Haze

Finally, a major outcome of the TVA settlement for North Carolina was reduction of regional haze, as a cobenefit both of the Clean Smokestack Act's stringent caps on S[O.sub.2] and NO. emissions and of TVA's legal settlement reducing its upwind emissions by similar amounts. According to a National Park Service briefing statement in 2010, the Great Smoky Mountains National Park (GSMNP) had regularly experienced some of the highest measured amounts of air pollution of any national park in the U.S, and was designated as part of a nonattainment area for EPA's NAAQS for both ozone and fine particles. (260) It reported that ozone concentrations during the summer months routinely exceed[ed] standards to protect public health and vegetation; that the park had experienced 264 unhealthy ozone days since 1997 under the older 85 ppb standard and over 500 days under the new 75 ppb standard; and that more than thirty plant species showed visible damage from ozone pollution. (261) Visibility on the worst days averaged only about fifteen miles, compared to natural visibility of seventy-seven miles, and sulfate particles reportedly accounted for 84% of the haze on the worst days. (262) High levels of acid deposition were damaging high-elevation streams and saturating soils with too much nitrogen, which harmed both wildlife and trees, and high levels of mercury had also been detected in a number of bird species. (263)

The North Carolina Division of Air Quality released a SIP for Regional Haze in 2007. (264) EPA's Regional Haze Rule required all states to plan to restore natural visibility conditions in all national parks, national forests and wilderness areas (Class I visibility areas) by 2064. (265) North Carolina's SIP projects that the controls required by the CSA will be sufficient to assure that North Carolina more than achieves its targets for visibility improvement in 2018, its first regional haze compliance period, as steps toward the 2064 goal. (266)

As of 2012, TVA's annual emissions reports to EPA showed a 79% reduction in upwind emissions of S[O.sub.2] and 91% reduction in N[O.sub.x] already achieved, and an additional 32% reduction in S[O.sub.2] and 43% reduction in N[O.sub.x] projected by 2015 (cf. Table 2 above); and North Carolina's ambient monitoring data for particulates in the mountain area already showed steady and steep reductions in particulate levels (Figure 2 above).267 These data show that major improvements in regional haze are occurring as a result of the CSA, with their associated benefits to health, tourism, and other economic benefits.

G. Costs

Critics of the law have charged that none of these benefits were clearly documented at the time the law was developed and passed, and that the claims of its anticipated benefits were overstated and its costs understated. (268) They have asserted that the costs of compliance increased from $2.3 billion (the amount provided in the law's cost recovery mechanism) to $3.2 billion, plus additional costs of replacing coal plants with new natural gas units. (269)

The requirements of the CSA did turn out to cost more than originally anticipated: $340 million (23%) more for Duke Energy, and $242 million (30%) more for Progress, costs that subsequently were charged to the ratepayers. (270) This amounted to an estimated total annual impact of $2.64 per 1,000 kilowatt-hours per month for Duke's residential customers, and $1.97 for Progress's. (271) These additional costs were actually lower than those publicly estimated by Senator Metcalf when he introduced the original Senate Clean Smokestacks bill. (272)

Overall, this outcome was still a positive one. For the public and the many tourism-related businesses, it provided the health and environmental benefits of much cleaner air, the estimated economic benefits of which were still well above their costs, especially when including cobenefits of fine particulate matter and mercury pollution, as well as regional haze reduction and value to the mountain economy. It also provided whatever benefits might have resulted from EPA regulations years earlier than they would otherwise have occurred.

For the utilities, it provided a cost recovery mechanism for pollution control equipment that they might soon have been required to install anyway by EPA regulations, paying for them using excess profits that might otherwise have triggered a rate reduction process involving greater cost and greater uncertainty. They also gained relief from a number of potentially costly lawsuits and other regulatory pressures (on NSR, for instance),27s and paid lower installation costs than if they had waited for EPA regulations and then had to pay costs inflated by competition with other utilities for vendors.

The ratepayers did eventually have to pay higher rates to cover costs beyond the initial cost recovery mechanisms, but far less than they would otherwise have had to pay if the entire cost had been borne by the ratepayers in a later proceeding to comply with EPA requirements: Under CSA, the first $2.95 billion of these costs was covered by the excess profits mechanism, leaving only $592 million (less than 1796) still to be paid in addition by the ratepayers. (274) Far greater rate increases were attributable to Duke's new Cliffside 6 coal plant, yet North Carolina's electric rates remained far below the national average. Finally, many industrial customers may also have experienced less pressure and thus lower costs to further clean up their own emissions, due to the air quality improvements resulting from so significantly cleaning up the power plants. (275)

Finally, the, full costs of replacing old coal-fired units with new generating traits were not solely attributable to the CSA. Duke Energy requested three rate increases between 2009 and 2013 totaling 7% in 2009, 7.2% in 2012 (subject to a lawsuit by the state Attorney General, not yet decided), and 9.7% in 2013 (not yet acted upon). (276) In its 2013 application, it attributed these requests to a nationwide process among utilities of replacing decades old power plants, noting that in its own fleet many of its coal plants were over fifty years old, and even its nuclear units and many of its natural gas combustion turbines were over twenty-five years old. (277) Its filing noted the major changes in national regulatory and market forces the utilities were now facing, including rapidly falling natural gas prices and the prospect of more stringent federal environmental regulations. (278) Progress Energy also requested a rate increase of 11% in October 2012, which it attributed similarly to the need to modernize its fleet of aging facilities in light of these broader trends; it also noted that this was its first rate increase request in twenty-five years. (279) As of February 2013, Progress announced its agreement to halve this request to just 4.7%. (280) Significantly, both Duke's and Progress's annual CSA compliance reports document that they were well on track to compliance with the CSA caps before making many of these additional investments. (281)


A. Results

In short, North Carolina's CSA achieved the benefits of direct and dramatic reductions in air pollutant emissions by its own electric utilities, by TVA, and by other upwind utilities in the future because of North Carolina's legal pressure on EPA to protect downwind states more explicitly in its CAIR. More broadly, it thus became an early state-led driver in the current transition in U.S. energy use from coal-fired generation toward a more primary future reliance on natural gas and other less damaging fuels. The CSA was not the only factor driving this process: Others included political and legal pressures from other downwind states and EPA, and importantly, the rapidly fn]ling price of natural gas as an alternative fuel. (282) Both by example and its early success, however, as well as by successful litigation against TVA and EPA, the CSA played an important role in promoting this transition.

On November 4, 2013, the North Carolina state president of the newly merged Duke Energy Carolinas and Duke Progress Energy, Paul Newton, published a column in the Raleigh (NC) News & Observer hailing both the CSA and the broad-based and bipartisan coalition process that produced it, as a "landmark" that not only produced major reductions in air pollution but also triggered far-reaching modernization programs at both utilities: retiring more than twenty-four old coal-fired units, investing far more aggressively in new natural gas facilities instead of coal, and significantly increasing their commitments to energy efficiency and renewable energy. Over the next fifteen years, he said, they now plan to meet more than 30% of projected demand growth through energy efficiency, demand-side management and renewable energy options, and to create a new "Green Source Tariff' for large business customers that want to offset future electric consumption with new renewable energy sources, while still maintaining rates well below the national average. (283)

How was such an innovative and effective law enacted and implemented, particularly in the context of the larger events of 2001-2002? Nationally, during that time George W. Bush's presidency was in full swing, promoting aggressive fossil fuel production and opposing environmental regulation. The September 11 terrorist attack on the World Trade Center and the prospect of war in Iraq dominated the national agenda, marginalizing public attention to the environment and other issues. And an economic recession in the wake of the dotcom bust had seemingly trumped whatever other environmental concerns might have remained. North Carolina was an economically progressive state, but nonetheless a Southern state with a strongly manufacturing-based economy. Like others in that region, North Carolina had prospered for decades on cheap coal-fired electricity and low electric rates. By 2001-2002, it was suffering serious losses of traditional manufacturing industries and jobs to China, Mexico and other countries, and its two investor-owned utilities were among the most influential businesses in the state.

B. Success Factors

In retrospect one can identify at least four key factors that influenced the law's successful enactment and implementation: an unusual crosscutting alliance of supporting organizations; a set of stakes that could provide each party to the negotiations with benefits; creative problem solving by key leaders at important junctures; and a good faith, mutually beneficial negotiation process, as well as a number of favorable contextual factors.

The creation of a broad based alliance of political support was one key success factor. Environmental advocacy groups successfully allied themselves with the western North Carolina business community, normally a conservative, Republican, antigovernment region of the state, but in this case a constituency that also shared strong concerns about the effects of air pollution on mountain tourism. The two affected utilities also were open to the initiative for reasons of their own, and the broad and well organized statewide support of the public health and medical communities and parents concerned about asthma also contributed. And the fact that by the end of the negotiations even the Manufacturers and Chemical Industries Council had agreed to the proposal even if under pressure allowed the legislature to bless a bill that had already been agreed to by virtually all the key stakeholders. (284)

Essential to the creation of this alliance was a set of stakes that could be negotiated to provide important benefits to each of the key stakeholders. The environmental groups chose to focus their negotiations solely on the air quality provisions and not on the cost recovery issues, and they also accepted the idea of an overall cap rather than the unit by unit technological controls recommended in their 2001 Clean Smokestacks Plan. They did insist, however, that any emissions allowance credits generated by compliance beyond federal requirements--that is, by meeting North Carolina's tighter requirements under the CSA--not be saleable to upwind states and emissions sources to generate extra profits for the utilities. And they wanted leverage to go after upwind pollution from TVA.

The utilities in turn anticipated stronger federal standards in the near future, and were willing to accept the air quality caps so long as they got a cost recovery mechanism and could postpone the uncertainties of a rate hearing process. Their key issues were the details of how the proposed rate freeze would actually come into effect, the timetables for meeting the caps, and the assurance that the caps would be on total emissions rather than plant by plant, leaving them flexibility to make their own decisions about how to control each individual generating unit. They also saw opportunities to finesse legal threats from EPA and environmental groups over NSR, and to save money by getting ahead of the EPA rules by negotiating lower prices from vendors than would be possible once all states had to comply with national rules. And they lobbied hard until the very end of the negotiations-though ultimately unsuccessfully--to retain ownership over emissions credits that might be generated.

The industrial stakeholders wanted the emissions credits to be owned and sold by the utilities and used to reduce their rates, but they too anticipated tougher EPA regulations in the future, and recognized--perhaps unusually for an industrial lobby group--that any emissions reductions achieved efficiently by the utilities might in turn reduce pressures and costs on the manufacturing and chemical industries to reduce their own emissions. (285) The governor's staff, in turn, was willing to be flexible about the timing of reaching the caps so long as the caps were assured, but they did not support giving the utilities what they considered undeserved benefits in the form of emissions credits.

Given these opportunities to craft a mutually beneficial solution, the skill and creativity of the political leadership that guided the negotiation process Was a third key success factor. Initial leadership credit goes to the leaders of all the stakeholder organizations who were receptive, however reluctantly initially, to working together on the issue. The governor also deserves particular credit for intervening at a key moment with a creative solution to the cost recovery issue, and also for making it clear that his staff would lead the negotiations and that he was committed to a successful outcome. Finally, a quiet but important leadership role was played by the executive director of the MCIC group, whose personal history included previous service as head of the state environmental management regulatory agency: he understood far better than most heads of such organizations the technical issues and regulatory tradeoffs between air pollution control by the utilities and by his member businesses, and could thus persuade them to support the final compromise. (286)

None of this might have mattered had not the governor's staff members who led the negotiations also managed to create and maintain a good faith, mutually beneficial negotiation process, with a key legislative drafting role by the widely trusted staff lawyers of the Attorney General's office. Participants in this process noted that the consistent focus was not on the public positions each negotiator stated, but on finding ways to meet their essential underlying organizational needs and interests. In contrast to the gridlocked adversarial politics of the federal Congress in recent years, the CSA provides an example of a case in which stakeholders with different interests were able to negotiate a compromise solution that provided benefits to each participant as well as major benefits to the public.

Finally, several historically contingent factors also contributed to the success of the outcome. One was a decade's prior regional interstate collaboration on the Southern Appalachian Mountains Initiative (SAMI), which produced both sophisticated modeling data supporting state actions to reduce emissions, and widespread bipartisan public concern about the fate of North Carolina's mountain forests, scenic views, and the health effects of air pollution. Another was a widely shared expectation of new EPA regulations that would require further action by the utilities, and possibly by other industries as well: the proposed Clean Air Interstate, Clean Air Mercury, and Regional Haze Rules, further tightening of NO. standards and SIPs, possible revival of EPA lawsuits for noncompliance with NSR, and others. And finally, there was the fact that the utilities had recently paid off major debts for their nuclear power plants and asbestos liabilities, leaving them with higher profits than allowed and thus facing the potential uncertainties and administrative burden of a rate-reduction process--thus opening the opportunity for the governor's creative cost recovery proposal.

C. Lessons

What insights, then, does the Clean Smokestacks case offer for other states and for national solutions to environmental policy challenges? It is not likely that it could be exactly replicated in other states, owing to the various unique and serendipitous historical contingencies from which it emerged in North Carolina (the politics, economics and leadership of a particular time and place, and the particular circumstances that allowed for its unique cost recovery mechanism, for instance). It does nonetheless offer broader lessons for initiatives in other states.

First, especially in a period of ideological and partisan acrimony at the national level, and in many states as well, it offers a valuable reminder of what government can accomplish through good faith negotiation to solve a longstanding problem, with serious respect for competing interests and not merely sound bite positions. Many of the specifics are inevitably unique to its particular historical circumstances, but the principles for seeking such solutions are not: building broad and crosscutting alliances, mutual respect for key interests and needs, creative leadership, and good faith negotiation, among others.

Second, it demonstrates that innovative initiatives by state governments can solve long-festering problems within individual states, and can also achieve regional and national leverage. Air pollution from grandfathered coal-fired power plants had continued for three decades without solution. Some possible national solutions had begun to be considered, but North Carolina's CSA was the first state legislation to set fixed, permanent, year-round caps on key pollutants--particularly sulfur, but also its attendant pollutants--at a level stringent enough to force cleanup or retirement of the old coal-fired plants. Both North Carolina's example and its subsequent successful lawsuits against TVA and EPA also played influential roles in forcing similar outcomes throughout the eastern United States. In effect the CSA, along with lawsuits by other downwind states, represents a reversal of the more familiar pattern of environmental federalism: in this case tighter environmental standards by a state were not only taking the lead within its own borders, but also using petitions and lawsuits to pressure the federal government to follow with stronger action against its upwind neighbors.

(1) Clean Air Amendments of 1970, Pub. L. No. 91-604, [section] 111, 84 Stat. 1676, 1683-1684 (1970).

(2) Air Quality/Electric Utilities Bill (Clean Smokestacks Act), N.C. Sess. Laws 2002-4, S.B 1078 [section] 1(i) (2002) [hereinafter Clean Smokestacks Act].

(3) See id [section] 1(b)(2), 1(d)(2). See also William G. Ross Jr., The North Carolina Clean Smokestacks Ac, 72 N.C. MED. J. 128-29 (2011) (outlining that Clean Air Act regulations required only summertime seasonal control of NO. in North Carolina).

(4) Press Release, State of North Carolina Office of the Governor, Easley Signs Clean Smokestacks Bill (June 20, 2002), available at

(5) Clean Smokestacks Act, supra note 2, [section] 1(i).

(6) Id. [section] 10.


(8) 2012 IMPLEMENTATION REPORT, supra note 7, at 19-20.


(10) 2012 Implementation Report, supra note 7, at 14, 19-20.

(11) N.C. DIV. AIR QUALITY, MERCURY EMISSIONS AND MERCURY CONTROLS FOR COAL-FIRED ELECTRICAL UTILITY BOILERS: FINAL REPORT 3 (2005), available at (stating also that emissions of oxidized mercury, the mercury form of greatest concern, were expected to be reduced by 80%).

(12) 15A N.C. ADMIN. CODE 2D.2511(b) (2007); Mercury Emission Limits, 21 N.C. Reg. 1,401, 1,402 (Feb.1, 2007).

(13) Press Release, N.C. Div. Air Quality, Commission Adopts Rules for Curbing Mercury Emissions (Nov. 9, 2006),

(14) WAYNE CORNELIUS ET AL., 2010 AMBIENT AIR QUALITY REPORT 4 (2012); EPA, Clean Air Interstate Rule: North Carolina, (last visited Nov. 23, 2013).

(15) North Carolina ex rel. Cooper v. Tenn. Valley Auth., 615 F.3d 291, 298 (4th Cir. 2010).

(16) Petition for Review, North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008) (No. 05-1244), reh'g in part, 550 F.3d 1176; North Carolina v. EPA, 531 F.3d 896, 896, 906-07 (D.C. Cir. 2008), reh'g in part, 550 F.3d 1176.

(17) The CAIR would have allowed unrestricted nationwide trading of allowances for fine particulates (P[M.sub.2.5]) and ozone precursors, which could have left North Carolina and other states still vulnerable to interstate pollution if upwind utilities were to buy allowances and continue polluting. The CAIR also would have allowed use of a large national pool of millions of NO. allowances carried forward from the 1990 Clean Air Act cap and trade program, which could have delayed actual compliance with its nominal 2015 cap until sometime after 2020. North Carolina, 531 F.3d 896, 903-04 (D.C. Cir. 2008), reh'g in part, 550 F.3d 1176. The CSAPR was itself vacated by the D.C. Circuit in 2012 on grounds that it would force some states to overcomply and interfere with their right to decide how to comply, thus leaving the CAIR in place pending further EPA refinement of the CSAPR. EME Homer City Generation, L.P., v. EPA, 696 F.3d 7, 27 (D.C. Cir. 2012).

(18) Clean Air Act Amendments of 1970, Pub. L. No. 91-604, 84 Star. 1676 (codified as amended at 42 U.S.C. [section][section] 7401-7414 (2006)).

(19) Clean Air Act, 42 U.S.C. [section] 7410 (2006).

(20) Id. [section] 7411.

(21) Id. [section] 7412.

(22) See Heidi Gorovitz Robertson, If Your Grandfather Could Pollute, So Can You: Environmental "Grandfather Clauses" and Their Role in Environmental Inequity CATH. U. L. REV., Fall 1995, at 131, 132, 134-35. According to EPA administrator Douglas Costle, new sources could be restricted by law to 12 pounds of S[O.sub.2] per ton of coal burned; in contrast, power plants built prior to 1979 emitted an average of 83 pounds of S[O.sub.2] per ton of coal burned. Douglas Costle, New Source Performance Standards for Coal-Fired Power Plants, 29 J. AIR POLLUTION CONTROL ASS'N 690, 690 (1979).

(23) Clean Air Act Amendments of 1977, Pub. L. No. 95-95, [section] 108, 91 Stat. 685, 694 (codified as amended at 42 U.S.C. [section][section] 7401-7671 (2006)). A "modification" of a major source is "any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted." 42 U.S.C. [section][section] 7501(4), 7411(a)(4) (2006)). Technically, NSR is required only in "nonattainment areas" (urban or industrial areas already out of compliance with the NAAQS), but there is also a provision requiring "prevention of significant deterioration" of areas of cleaner air, especially around national parks and other protected areas. Jonathan Remy Nash & Richard L. Revesz, Grandfathering and Environmental Regulation: The Law and Economies of New Source Review, NW. U. L. REV. 1677, 1682-83 (2007).

(24) Nash & Revesz, supra note 23, at 1681.

(25) Robert N. Stavins, Vintage-Differentiated Environmental Regulation, 25 STAN. ENVTL. L.J. 29, 49-50 (2006). Similarly, in air quality nonattainment areas (areas already polluted in excess of the NAAQS), new facilities must include technologies to achieve the "lowest achievable emissions rate" (LAER), whereas existing ones must only install "reasonably available control technology" (RACT). Robertson, supra note 22, at 155.

(26) As of 2008, there were 1,140 coal-fired EGUs in operation for electric utility power generation purposes in the U.S., of which 844 were placed in service in 1977 or earlier, these older facilities represented more than 63% of the total 540,583.5-megawatt nameplate capacity of these facilities. An additional 35 EGUs, all pre-1977, were listed as standby or out of service. U.S. ENERGY INFO. ADMIN., ANNUAL ELECTRIC GENERATOR REPORT (2008), available at http://www.eia, gov/cneaf/electricity/page/capacity/existingunitsbs2008.xls.

(27) Gregory Wetstone, A/r Pollution Control Laws in North America and the Problem of Acid Rain and Snow, 10 ESVTL. L. RFA'. 50,001, 50,006 (1980).

(28) Id. at 50,007; James R. Vestigo, Add Rain and Tall Stack Regulation Under the Clean Air Act, 15 ENVTL. L. 711, 730 (1985). In 1970, there were only two stacks higher than 500 feet; by 1980, the average stack height was over 730 feet, and by 1985 there were over 180 stacks higher than 500 feet and numerous stacks over 1,000 feet. Id.


(30) The National Acid Precipitation Assessment Program (NAPAP) was initiated and funded by Congress in 1978 during the Carter administration. Ellis B. Cowling, The Performance and Legacy of NAPAP, ECOLOGICAL APPLICATIONS 111, 111-112 (1992). Reagan biographer Lou Cannon states that "[a]fter three years of much talk and little action by the United States, Ruckelshaus wanted the administration to make a major budget commitment to reducing the causes of acid rain. His proposal was assailed as wasteful government spending by David Stockman and rejected by Reagan, who questioned the scientific evidence on the causes of acid rain and was reluctant to impose additional restrictions on industry." Lou CANNON, PRESIDENT REAGAN: THE ROLE OFA LIFETIME 470 (1991).

(31) Charles E. McChesney II, Note, The Interstate Ozone Pollution Negotiations: OTAG, EPA, and a Novel Approach to Negotiated Rulemaking, 14 OHIO ST. J. ON DISP. RESOL. 615, 626 (1999).

(32) The acid rain allowance trading program was superseded in 2011 by four separate pollutant trading programs under EPA's CSAPR, discussed below. Clean Air Act, 42 U.S.C. [section] 7651 (2006).

(33) Id [section] 7651(b).

(34) EPA, Acid Rain Program, (last visited Nov. 23, 2013).

(35) Id.

(36) EPA, Acid Rain and Related Programs: 2009 Highlights, (last visited Nov. 23, 2013).

(37) Id

(38) Id. EPA notes that other programs--notably the CAIR (discussed below), compliance with EPA's NO. SIP Call, the Ozone Transport Commission (OTC), and other regional and state N[O.sub.x] emission control programs--also contributed significantly to the N[O.sub.x] reductions that were achieved. Id.

(39) Id.

(40) The other major allowance-importing states were Illinois, Indiana, Kentucky, Ohio, Pennsylvania, and West Virginia; Florida, Michigan, and Virginia also were minor net importer states. Barry D. Solomon, Five Years of Interstate S[O.sub.2] Allowance Trading.. Geographic Patterns and Potential Cost Savings, 11(4) ELECTRICITY J., May 1998, at 58, 65-67, 70.

(41) McChesney, supra note 31, at 630; Clean Air Act, 42 U.S.C. [section][section] 7410(a)(2)(D), 7410(k)(5), 7426(b) (2006).


(43) 42 U.S.C. [section] 7426(b) (2006).

(44) PARKER & BLODGETT, supra note 42, at 14.

(45) 42 U.S.C. [section] 7492 (2006).

(46) Id [section] 7412(c)(6).

(47) Id. [section] 7412 (1988).

(48) Id. [section] 7412(d)(3) (2006).

(49) Id. [section] 7412(d)(3). The MACT "floor" for existing sources was based on the performance of the best 12% of facilities in the affected industry. Id. [section] 7412(d)(3)(A).

(50) A central point of conflict is whether regulating mercury emissions from power plants as a hazardous air pollutant will provide significant additional benefits beyond those that are achieved as an inherent cobenefit of regulations reducing emissions of S[O.sub.2] and particulates (e.g., plant retirements or scrubbers), or will merely add costs for little additional benefit. Karen Palmer et al., The Benefits and Costs of Reducing Emissions From the Electricity Sector, 83 J. ENVTL. MGMT. 115, 117 (2006).

(51) Regulatory Finding on the Emissions of Hazardous Air Pollutants From Electric Utility Steam Generating Units, 65 Fed. Reg. 79,825, 79,830 (Dec. 20, 2000).

(52) Revision of December 2000 Regulatory Finding on the Emissions of Hazardous Air Pollutants From Electric Utility Steam Generating Units and the Removal of Coal-and Oil-Fired Electric Utility Steam Generating Units From the Section 112(c) List, 70 Fed. Reg. 15,994, 16,025 (Mar. 29, 2005) (codified at 40 C.F.R. pt. 63); Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, 70 Fed. Reg. 28,606, 28,606 (May 18, 2005) (codified at 40 C.F.R. pts. 60, 72, and 75). One effect would be to regulate only aggregate mercury emissions, leaving open the possibility of "hot spots" downwind from allowance buyers.

(53) New Jersey v. EPA, 517 F.3d 574, 578 (D.C. Cir. 2008).

(54) National Emission Standards for Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Stem Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units, 76 Fed. Reg. 24,976, 24,977, 25,073 (proposed May 3, 2011) (codified at C.F.R. pts. 60 and 63).

(55) National Ambient Air Quality Standards for Ozone: Proposed Decision, 61 Fed. Reg. 65,716, 65,716 (proposed Dec. 13, 1996) (codified at 40 C.F.R. pt. 50); National Ambient Air Quality Standards for Particulate Matter: Proposed Decision, 61 Fed. Reg. 65,638, 65,638 (proposed Dec. 13, 1996) (codified at 40 C.F.R. pt. 50).


(57) See Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone, 62 Fed. Reg. 60,318, 60,323 (proposed Nov. 7, 1997) (codified at 40 C.F.R. pt. 52).

(58) McChesney, supra note 31, at 615.

(59) National Ambient Air Quality Standards for Ozone, 62 Fed. Reg. 38,421, 38,856 (July 18, 1997) (codified at 40 C.F.R. [section] 50).

(60) McChesney, supra note 31, at 615, 633, 661.

(61) Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport, 64 Fed. Reg. 28,089, 28,252 (May 25, 1999). The 126 Rule was finalized in January 2000, incorporating multiple refinements based on court decisions. 65 Fed. Reg. 2,674 (Jan. 18, 2000) (codified at 40 C.F.R; pts. 52, 97).

(62) Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone, 63 Fed. Reg. 57,356, 57,438 (Oct. 27, 1998) (codified at 40 C.F.R. pts. 51, 72, 75, 96).

(63) Id. at 57,356, 57,456; 40 C.F.R. [section] 96 (1999) (implementing section 110(k)(5) of the Clean Air Act, 42 U.S.C. [section] 7410(k)(5) (2000)).

(64) The SIP Call was challenged in court by North Carolina, as well as by the State of Michigan, the Appalachian Power Company, the American Trucking Association, and others. North Carolina supported EPA's goal of reducing ground level ozone, but argued that EPA's SIP Call should be based on actual ozone violations in downwind states rather than just on its judgment of the affordability of cleanup technologies in upwind states. It also argued that EPA should have allowed each state to propose its own strategies for meeting the new NO, and PM standards rather than imposing its own approach based entirely on "affordable" stationary source controls and not including motor vehicles. Final Brief of Petitioning States at 10-11, Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000) (No. 98-1497); Final Reply Brief of Petitioning States at 2-3, Michigan, 213 F.3d 663 (No. 98-1497). The EPA determination was largely upheld by the D.C. Court of Appeals, as well the Supreme Court in Whitman v. American Trucking Association, 531 U.S. 457, 471, 486 (2001). Michigan, 213 F.3d 663, 695; Appalachian Power Co. v. EPA, 249 F.3d 1032, 1036 (D.C. Cir. 2001).

(65) 1999 N.C. Sess. Laws 1153-54 (providing for ambient air quality improvement).

(66) National Ambient Air Quality Standards for Particulate Matter, 62 Fed. Reg. 38,651, 38,652, (July 18, 1997); 40 C.F.R. [section] 50.7(a)(1) (1998).

(67) Nash & Revesz, supra note 23, at 1687-89.

(68) Id. at 1692-93.

(69) See, e.g., EPA, NEW SOURCE REVIEW: REPORT TO THE PRESIDENT 9 (2002), available at Note that this report was authored by EPA officials of the Bush Administration, and it therefore reflects their perspective rather than that of Clinton's appointees.

(70) Wis. Elec. Power Co. v. Reilly (WEPCO), 893 F.2d 901, 910, 913 (7th Cir. 1990) ("[T]he EPA's consideration of cost, magnitude and nature" of a project to determine whether it constituted "routine maintenance," was not arbitrary or capricious).

(71) Nash & Revesz, supra note 23, at 1694-95.

(72) North Carolina's Duke Energy was the subject of one pivotal NSR case, in which the federal government sued the utility for failing to obtain NSR approval for one of its plants. The district court and subsequently the Fourth Circuit found for Duke, in language that would have adopted an expansive interpretation of routine maintenance when the rate of emissions did not increase even if net emissions did so; the Supreme Court however reversed. United States v. Duke Energy Corp., 278 F. Supp. 2d 619, 640-42 (M.D.N.C. 2003), aff'd. 411 F.3d 539 (4th Cir. 2005), rev'd sub nom. Envtl. Def. v. Duke Energy Corp., 549 U.S. 561 (2007). See Nash & Revesz, supra note 23, at 1696-1707.

(73) Regional Haze Regulations, 64 Fed. Reg. 35,714, 35,746 (July 1, 1999).

(74) Christine L. Shaver, Kathy A. Tonnessen, & Tonnie G. Maniero, Clearing the Air at Great Smoky Mountains National Park, 4 ECOLOGICAL APPLICATIONS 690, 695 (1994).

(75) Id

(76) Id. at 693-95.

(77) See generally S. APPALACHIAN MOUNTAINS INITIATIVE, FINAL REPORT (2002), available at (explaining the region's air quality issues and possible remedies).

(78) 64 Fed. Reg. at 35714, 35722.


(80) V.S. CENSUS BUREAU, STATISTICAL ABSTRACT OF THE UNITED STATES: 2011, tbl. 12 (2011), available at


(82) The remainder includes an area of northeastern North Carolina served by Dominion North Carolina Power Company, all of whose generating units are in Virginia, and a number of small electric membership corporations and municipal-owned electric distribution systems. Duke and Progress merged in 2012, approved by the NCUC after considerable controversy. See U.S. Energy Info. Admin., Merger Of Progress Energy and Duke Energy Created Largest U.S. Electric Utility, (last visited Nov. 23, 2013) (describing the merger between Duke and Progress).

(83) NCUC, Electric Industry, electric.htm (last visited Nov. 23, 2013).

(84) Charles Anderson, North Carolina Clean Smokestacks: A Critical Case Study On The Process Of State-Level Environmental Policy Making 51 (Apr. 2005) (unpublished B.A. Honors Thesis, University of North Carolina at Chapel Hill) (on file with author).



(87) NORTH CAROLINA DIV. AIR QUALITY, North Carolina To Work With EPA On Ozone Reduction Plan, (last visited Nov. 23, 2011); NORTH CAROLINA DIV. OF AIR QUALITY, EIGHT-HOUR OZONE AVERAGES IN NC, IN 1999, available at



(90) Bruce Henderson, EPA Reports Industries' Toxic Releases, CHARLOTTE OBSERVER, May 26, 2002, at 9B.

(91) ABT ASSOC. INC., OUT OF SIGHT: THE SC1ENCE AND ECONOMICS OF VISIBILITY IMPAIRMENT 5, 58, exhs. 3-4, 5-3, 5-4, 7-2, available at

(92) Harrison Metzger, Commission Urged to Fight Acid Rain, HENDERSONVILLE TIMES-NEWS, Sept. 11, 1989, AUYaAAAAIBAJ&sjid=PiQEAAAAIBAJ&pg=6903,2853994 (last visited Nov. 23, 2013). Grandfather Mountain at the time was the only privately owned United Nations World Biosphere Reserve of 324 sites worldwide. After Morton's death, it was preserved as a state park. Blue Ridge Country, Up On Grandfather Mountain, north-carolina/up-on-grandfather-mountain/(last visited Nov. 23, 2013).

(93) See S. APPALACHIAN MOUNTAINS INSTITUTE, FINAL REOPORT (2002), supra note 77 (describing decade long effort to improve air quality in southeastern United States).

(94) Edith Gego et al., Observation-Based Assessment of the Impact of Nitrogen Oxides Emissions Reductions on Ozone Air Quality over the Eastern United States, 46 J. APPLIED METEOROLOGY & CLIMATOLOGY 994, 1002-07 (2007), available at doi/pdf/10.1175/JAM2523.1.

(95) N.C. Div. Air Quality, The Hunt Administration's Plan for Clean Air, (last visited Nov. 23, 2011).

(96) Id.

(97) N.C. Div Air Quality, North Carolina To Work With EPA On Ozone Reduction Plan, (last visited Nov. 23, 2011).

(98) N.C. Div. Air Quality, New Rules To Take Effect Sighting Air Pollution, (last visited Nov. 23, 2011).

(99) Id.

(100) Id. Reductions also would be required at other NO. sources, including large industrial boilers, electric cogeneration plants, and petroleum pipeline compressor stations.


(102) Id.

(103) 15A N.C. ADMIN. CODE 2D. 1416-1417 (repealed 2009); Anderson, supra note 84, at 58; N.C. DIV. AIR QUALITY, N[O.sub.x] BUDGET AND PROGRAM OVERVIEW 2 (2004), available at

(104) Anderson, supra note 84, at 58.

(105) U.S. Energy Info. Admin., North Carolina" State Profile and Energy Estimates, available at (last visited Nov. 23, 2013) (illustrating geography of North Carolina's mountains, which are in the western portion of the state, and geography of North Carolina's coal power plants, which are generally east of those mountains); Nigel Barrella, Comment, North Carolina v. Tennessee Valley Authoritj4, 35 HARV. ENVTL. L. REV. 247, 248 n.2 (2011) (discussing east coast airflow from west to east, and discussing TVA's ownership of upwind plants).

(106) Western North Carolina had a number of highly influential conservationists among its business leaders, some of whom also were board members of NC EDF at the time, such as Hugh Morton (owner of Grandfather Mountain) and a member of the Cecil family (owners of the Biltmore Estate). Tourism is a primary industry in Western North Carolina.

(107) Anderson, supra note 84, at 59.

(108) Brownie Newman, executive director of WNCA and later vice-Mayor of Asheville, took the lead in this effort. Id at 58-59.

(109) Id. at 61 (quoting interview with Senator Basnight's legislative assistant). Basnight reportedly was eager to give a victory to Metcalf as a vulnerable Democratic State Senator in a district otherwise represented by Republicans in both the Federal and State Houses of Representatives.

(110) ENVIRONMENTAL DEFENSE FUND, Supra note 86, at 2. Other coalition members included the Sierra Club, North Carolina Public Interest Research Group (NCPIRG), and grassroots groups such as the Western North Carolina Alliance, Appalachian Voices, Blue Ridge Environmental Defense League, among a dozen member organizations. Id.

(111) Id. at 17.

(112) Id. at 5-7.

(113) Id. at 30. The C[0.sub.2] levels were those called for in the United Nations Framework Convention on Climate Change, which the U.S. Congress had ratified. Id. For an example of the arguments for a four-pollutant strategy at the federal level see U.S. ENERGY INFORMATION ADMIN., SR/OIAF/2001-05, ANALYSIS OF STRATEGIES FOR REDUCING MULTIPLE EMISSIONS FROM ELECTRIC POWER PLANTS WITH ADVANCED TECHNOLOGY SCENARIOS iii (2001).

(114) ENVIRONMENTAL DEFENSE FUND, supra note 86, at 9.

(115) S. 1078, N.C. Gen. Assemb., Sess. 2001 (first version, Apr. 5, 2001).

(116) Senator Foxx also reportedly had a personal friendship with Senator Metcalf, and followed the lead of the widely respected Republican conservationist Senator Hamilton Horton of Winston-Salem in signing on as a cosponsor. NC Public Interest Research Group (NCPIRG) led a major statewide grassroots lobbying campaign to bring citizen pressures on legislators. Anderson, supra note 84, at 59-60.

(117) S. 1078, N.C. Gen. Assemb., Sess. 2001 (first version, Apr. 5, 2001).

(118) Id.

(119) Id.

(120) S. 1078, N.C. Gen. Assemb., 2001 Sess. (as passed Apr. 18, 2001).

(121) Id. 3X.3-4.

(122) Id. at 4.

(123) Id.

(124) Id. at 3-4. EPA's Clean Air Interstate Rule (CAIR), which addressed interstate transmission of sulfur and year-round nitrogen emissions at a federal level, was not promulgated until 2005. Rule To Reduce Interstate Transport of Fine Particulate Matter and Ozone (CAIR), 70 Fed. Reg. 25,162, 25,166-67, 25,172, 25,201 (May 12, 2005).

(125) S. 1078, supra note 120, at 4.

(126) Id. at 4-5.

(127) Id. at 5-6.

(128) Anderson, supra note 84, at 66-67 (discussing interview with Steven Metcalf).

(129) North Carolina General Assembly, Senate Roll-Call Vote History, gascripts/voteHistory/ (last visited Nov. 23, 2013) (providing voting history of the second reading of S. 1078 on Apr. 23, 2001). Interestingly, it was passed by the Senate (and even by the House the following year, where it was far more controversial) without any formal fiscal note attached, a procedure usually demanded by legislators for any bill that might have significant economic impacts. At least three of the five opposing votes were by senators from districts heavily affected by overseas competition and unemployment. Anderson, supra note 84, at 67-72 (detailing the reservations of all the Senators based on interviews).

(130) See Anderson, supra note 84, at 64, 72-73 (discussing the opposition from MCIC and CUCA despite mechanisms meant to assuage them).

(131) See id. at 88, 0.


(133) Anderson, supra note 84, at 62 (discussing the MCIC's concern about the price tag).

(134) Id. at 59-60.

(135) The N.C. Division of Public Health, for instance, estimated that the costs of asthma attacks just to seventh and eighth graders in North Carolina in 2001 were $14 million in hospitalizations and $1.4 million in emergency room visits. The costs to all the state's children could be as high as $100 million, including hospital costs, doctor's visits, prescription medications, and lost wages by parents caring for them. CLAY BALLANTINE, AIR POLLUTION AND HEALTH: MEDICAL EVIDENCE SUMMARY (2001), (on file with author). A similar version of this summary is available at ballantine%20presentationnew.ppt (last visited Nov. 23, 2013).

(136) Anderson, supra note 84, at 31.

(137) Interview with Alan Hirsch, Chief Policy Advisor to Governor Easley (July 25, 2011). Governor Easley was strongly enthusiastic about the proposed legislative mandate to pursue emissions reductions by upwind states and utilities, a cause he himself had championed as Attorney General. Since 1999 the governors of North Carolina, South Carolina, Georgia, and Tennessee had been holding annual Air Quality Summit meetings, and in 2001 they entered into a Southern Air Principles agreement, which recognized that regional air quality problems must be addressed through multipollutant strategies and regional approaches that consider each state's unique qualities and needs. As directed by this agreement, the signatory states were to work together to develop joint multipollutant strategies to address the problems of ozone pollution, acid deposition, and reduced visibility, and to develop transportation and energy policies that would protect and improve air quality in the South. Press Release, N.C. Dep't of Env't & Natural Res., 4th Governors' Air Summit in Charlotte (May 7, 2002) (on file with author).

(138) Anderson, supra note 84, at 85-87. Alan Hirsch and Hawley Truax, with support from staff lawyers of the Attorney General's office, conducted the stakeholder meetings. Another key member of the governor's staff, John MacArthur, took a senior position at Progress Energy during this period.

(139) Anderson, supra note 84, at 52-53. See also NCUC, REPORT OF Grant THORNTON LLP, No. E-7 Sub 722 (filed Oct. 22, 2002) (commissioned Dec. 10, 2001) (reporting independent investigation and accounting review of Duke Power on behalf of the NCUC). The NCUC regulates each utility's rates, and periodically adjusts them based on the utility's capital investments (its "rate base"), operating costs, and a maximum allowable rate of return on investment that the Utility Commission considers appropriate for the company's ability to attract investment, the appropriate dividends to pay on preferred stock, and a fair return on equity. The approved rates of return at the time of the CSA were 12.75% for Duke Power and 12.5% for Progress Energy, set in a 1991 rate case. Anderson, supra note 84, at 51. In 2002-2003 Duke Energy made 14.43%, or about $100 million more than the approved level. David Mildenberg, Duke Sees $100M Excess Profit, CHARLOTTE Bus. J., Oct. 6, 2003, (last visited Nov. 23, 2013). CUCA was concurrently requesting that the Utilities Commission initiate a rate case to reduce Duke's excess earnings. Anna Griffin, Review of Duke's Rates is Sought, Charlotte Observer, July 3, 2002, at ID.

(140) Anderson, supra note 84, at 85-87.

(141) Changes in fuel costs would continue to be passed along directly as they occurred, without rate hearings.

(142) Participants included representatives of the utilities, the key environmental groups, MCIC and CUCA, the N.C. Justice Center (representing low income utility customers), the NCUC, the Department of Environment and Natural Resources and its Division of Air Quality, the Attorney General's office, and several other individual industries. A few members of the General Assembly also sat in.

(143) The attorney general in North Carolina is independently elected, not appointed by the governor. The attorneys involved were James Gulick, Marc Bernstein, and Allen Jernigan.

(144) Anderson, supra note 84, at 87.

(145) Id. at 89, I08-09. At least for Duke Energy, the proposed statute may also have been viewed as an attractive solution to two other legal issues: Its excess profits, which were then being investigated by an independent auditor for the NCUC in response to a lawsuit by its industrial customers, and an EPA lawsuit for noncompliance with NSR. NCUC, supra note 139, at 184; United States v. Duke Energy Corp., 278 F. Supp. 2d 619, 621 (M.D.N.C. 2003), aff'd, 411 F.3d 539 (4th Cir. 2005), vacated, 549 U.S. 561 (2007). See a/so Nash & Revesz, supra note 23, at 1696-1707.

(146) Anderson, supra note 84, at 86-87, 114; Paul Chesser, Duke Doubted Smokestacks" Merits, (last visited Nov. 23, 2013)

(147) Interview with Alan Hirsch, Chief Policy Advisor to Governor Easley (July 25, 2011).

(148) Id.

(149) Id

(150) See Secretary William G. Ross, Jr., Division of Air Quality, North Carolina's Clean Smokestacks Act, http://daq'state'nc'us/newadeg/cleanstacks'shtml (last visited Nov. 23, 2018).

(151) Ross, Jr., supranote 150.

(152) S. APPALACHIAN MOUNTAIN INITIATIVE, FINAL REPORT 2.5-2.8 (2002). The draft findings were released and publicized in Spring 2002. See Pat Brewer, 8. Appalachian Mountains Initiative Observations and Conclusions, Governors' Summit on Air Quality, Charlotte, NC, May 10, 2002 (on file with author).

(153) Ross, Jr., supranote 150.

(154) S. APPALACHIAN MOIYNTAINS INITIATIVE, supranote 152, at ix.

(155) Interview with Alan Hirsch, Chief Policy Advisor to Governor Easley (July 25, 2011).

(156) For instance, they could either be sold on the allowance market for revenue, or could be given back to the utilities at some future time if the utilities needed them to meet tougher federal caps. This agreement was later drafted into S. 1078, N.C. Gen. Assemb., Sess. 2001 (third version, Apr. 5, 2001).

(157) S.B. 1078, Gen. Assembly of N.C., Sess. 2001. (2002); Improve Air Quality/Electric Utilities Act, 2002, N.C. Sess. 2001, Sess. Law 2002-4. The final bill was approved by votes of 111-4 in the House, 45-1 in the Senate, ratified on June 19, 2002, and signed by the governor June 20, 2002. North Carolina General Assembly, Senate BIII 1078/S.L. 2002-4, (last visited Nov. 23, 2013). The surrender of credits was officially stated as "voluntary" to avoid potential lawsuits, but was understood by all .to be an essential element of the agreement and was carried out immediately. Anderson, supra note 84, at 85.

(158) Clean Smokestacks Act, supra note 2, [section] 1 (codified as amended at N.C. GEN. SWAT. ANN. [section] 143-215.107D (2002)).

(159) Id.

(160) Id. [section][section] 1(b)(1)-1(e)(2); N.C. Div. Air Quality, Key Facts about the Clean Smokestacks Act, (last visited Nov. 23, 2013).

(161) Duke Energy emitted more than 75,000 tons of N[O.sub.x] in North Carolina in the year 2000; it was now capped at 35,000 tons of N[O.sub.x] beginning in 2007 and 31,000 tons beginning in 2009. Duke emitted more than 225,000 tons of S[O.sub.2] in 2000; it was now capped at 150,000 tons beginning in 2009 and 80,000 tons in 2013. Progress Energy, which emitted less than Duke's quantities in 2000, was capped at 25,000 tons of NO, by 2007 and 100,000 tons of S[O.sub.2] beginning in 2009, and 50,000 tons of S[O.sub.2] beginning in 2013. Clean Smokestacks Act, supra note 2, [section] 1 (codified as amended at N.C. GEN. SWAT. ANN. [section] 143-215.107D (2002)); Key Facts about the Clean Smokestacks Act, supra note 160; Ross, Jr., supra note 150.

(162) Clean Smokestacks Act, supranote 2, [section] 1(i).

(163) Id. [section] 9.

(164) Id. [section] 1(10).

(165) Id [section] 10.

(166) Id. [section][section] 11-13.

(167) Id. [section] 14.

(168) See EPA, Facility Emissions Report--Criteria Air Pollutants (1996), Carolina&pol=NOX&year=1996&fld=plt_name&fld=county&fld=state&rpp=1112&page=1&sort=a3&fmt= (last visited Nov. 23,. 2013) (showing that Duke Energy facilities emitted 158,172 tons of N[O.sub.x] in 1996); EPA, Facility Emissions Report--Criteria Air Pollutants (2002), http://iaspub.epa-gov/airsdata/adnet.ranking?geotype=st&geocode=NC&geoinfo=st&NC-North+ Carolina&pol=NOX&year=2002&fld=giffo&fld=plt_name&fld=county&fld=state&rpp=1112&page=1&sort=a3&fmt= (last visited Nov. 23, 2013) (showing that Duke Energy facilities emitted 83,992 tons of N[O.sub.x] in 2002).

(169) IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2003, supra note 85, at attach. A-1.

(170) See ld at attach. A-7 to A-8 (showing that the most expensive facilities were Belews Creek 1 and 2, Cliffside 5, and Marshall 3 and 4).


(172) See IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2003, supra note 85, at 7, attach. B 4, B-7, B-11; N.C. Div. Air Quality, North Carolina's Clean Smokestacks Act, (last visited Nov. 23, 2013).

(173) IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2003, supra note 85, at attach. B-5.

(174) Id. at attach. B-9; see generally ld at attach. B-10 (indicating that Progress's most expensive CSA compliance investments were the FGD scrubbers at Mayo 1, Roxboro 2-4, and Sutton 3); id. at attach. B-8 (stating that additional N[O.sub.x] controls specifically to comply with CSA were also planned at Asheville 1, Lee 2 and 3, and Sutton 2. Weatherspoon 1 and 2, two of Progress's smallest and oldest units, were not scheduled for any additional controls).

(175) Note that since at least 2000, Duke Energy had been contemplating the potential retirement of 298 megawatts at its Riverbend, Buck, and Dan River sites (and others in South Carolina) during the time period of 2006-2009, but these were all small combustion turbines rather than coal-fired units. DUKE POWER ANNUAL PLAN, NCUC DOCKET NO. E-100 Sub 88, at 1617, 20 (filed Sept. 6, 2000) (reconfirmed, DUKE ENERGY LLC NO, AND S[O.sub.2] COMPLIANCE PLAN ANNUAL UPDATE, NCUC DOCKET NO. E-7, Sub 118 attach. A, (filed Mar. 27, 2008). Progress Energy had been contemplating incremental annual additions of combustion turbines and combined cycle gas fired units since at least 2000, but no retirements of its North Carolina units. CAROLINA POWER & LIGHT INTEGRATED RESOURCE PLAN, NCUC DOCKET NO. E-100 Sub 88, at 10-12 (filed Sept. 1, 2000) (reconfirmed, ANNUAL NC CLEAN SMOKESTACKS ACT COMPLIANCE REPORT, NCUC DOCKET NO. E-2, Sub 815, attach. B, (filed Mar. 31, 2008)).

(176) See IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2003, Supra note 85, at attach. A-8, attach. B-8, B-10.

(177) Id. at attach. A-8, attach. B-10.

(178) See DUKE ENERGY CAROLINAS, LLC, N[O.sub.x] AND S[O.sub.2] COMPLIANCE PLAN ANNUAL UPDATE, NCUC DOCKET NO. E-7 Sub 718 (filed Mar. 27, 2008) (commissioned Mar. 27, 2008); ANNUAL NC CLEAN SMOKESTACKS ACT COMPLIANCE REPORT, NCUC DOCKET NO. E-2 Sub 815, at appx. a, attach. 3 (filed Mar. 31, 2008) (commissioned Mar. 31, 2008); see generally N.C. GEN. STAT. [section] 62-133.6(b) (2011) (requiring the utilities to amortize at least 7096 of their estimated compliance costs during these first five years in order to reduce their excess profits).

(179) NCUC PUBLIC STAFF'S REPORT ON COSTS INCURRED & AMORTIZED BY DUKE ENERGY CORP., No. E-7 Sub 718, at 1-2 (filed May 17, 2005) (commissioned May 17, 2005).




(183) IMPLEMENTATION OF THE "CLEAN SMOKESTACKS ACT" 2003, supra note 85, at 3 (stating that total program cost estimates remained at $813 million for Progress and $1.5 billion for Duke as of 2003); IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2005, supra note 180 at 4; N.C. DEPT. OF ENV'T NATURAL RES. & NCUC, IMPLEMENTATION OF THE "CLEAN SMOKESTACKS ACT" 5 (2006), available at [hereinafter IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2006]; N.C. DEPT. OF ENV'T NATURAL RES. & NCUC, IMPLEMENTATION OF THE "CLEAN SMOKESTACKS ACT" 9 (2008), available at [hereinafter IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2008]; N.C. DEPT. OF ENV'T NATURAL RES. & NCUC, IMPLEMENTATION OF THE "CLEAN SMOKESTACKS ACT" 5-6 (2011) available at [hereinafter IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2011].

(184) Cost increases were attributed particularly to the rising cost of steel, and in Progress's case additional to costs of wastewater treatment that had not been included in the initial plan. IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2005, supra note 183, at 4-5; IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2006, supra note 183, at 5.

(185) IMPLEMENTATION OFTHE CLEAN SMOKESTACKS ACT 2008, supra note 183, at 13.

(186) IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2008, supr3 note 183 2-4 & n.1 (2008).

(187) See NCUC, ORDER APPROVING STIPULATION AND DECIDING NON-SETTLED ISSUES, NCUC DOCKET NO. E-7 Sub 828 and 829 (filed Dec. 20, 2007), available at (filed Dec. 20, 2007).

(188) Duke was relieved of further amortization requirements as part of a more complicated multi-party stipulation agreement with CUCA and other customer organizations regarding its environmental compliance costs. Id at paras. 27-29. Progress's argument for relief was that due to the unanticipated increases in costs to comply with the CSA and for unbudgeted operating and maintenance needs at several of its plants, it was unable, to amortize additional CSA compliance costs and still earn a reasonable rate of return. CUCA and other customer stakeholder groups agreed not to oppose this request. See DUKE ENERGY, APPLICATION FOR APPROVAL FOR AN ELECTRIC GENERATION CERTIFICATE TO CONSTRUCT TWO 800 MW STATE OF THE ART COAL UNITS FOR CLIFFSIDE PROJECT IN CLEVELAND/RUTHERFORD COUNTIES, NCUC DOCKET NO. E-7 SUB 790 (filed July 10, 2008) (commissioned July 10, 2008).

(189) IMPLEMENTATION OF THE CLEAN SMOKESTACKS ACT 2008, supra note 186, at 8-9.


(191) In its 2010 Integrated Resource Plan, Progress accelerated all these planned retirement dates to 2018-14. An additional natural gas plant might be proposed in 2014 to replace Sutton, and portions of the Cape Fear and Weatherspoon plants might be converted to run on renewable fuels. PROGRESS ENERGY CAROLINAS, INC. (PEC), PEC'S PLAN TO RETRCE 550 MWS OF COAL GENERATION WITHOUT S[O.sub.2] CONTROLS, NCUC DOCKET NO. E-2 Sub 960 at 1, 9-14 (filed Dec. 1, 2009) (commissioned Dec. 1, 2009) [hereinafter PROGRESS MW RETIREMENT]; PEC, 2010 INTEGRATED RESOURCE PLAN, NCUC DOCKET NO. E-100 Sub 128, at 13-6 (filed Sept. 13, 2010) (commissioned Sept. 13, 2010) [hereinafter PROGRESS 2010 IRP]; PEC, APPLICATION FOR CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY TO CONSTRUCT A 950 MW COMBINED CYCLE NATURAL GAS FUELED ELECTRIC GENERATION FACILITY IN WAYNE COUNTY, NCUC DOCKET NO. E-2 Sub 960, at attach. 2 (filed Aug. 18, 2009) (commissioned Aug. 8, 2009) [hereinafter PROGRESS 950 MW APPLICATION].

(192) 2012 IMPLEMENTATION REPORT, supra note 7, at 19-20.

(193) Id

(194) DUKE ENERGY CAROLINAS, INTEGRATED RESOURCE PLAN, NCUC DOCKET NO. E-100 Sub 118, at 43 (filed Jan. 11, 2010) (announcing plans to close Buck 3-6, Cliffside 1-4, Dan River 1-3, and Riverbend 4-7 plants).

(195) 2012 IMPLEMENTATION REPORT, supra note 7, at 2-3.

(196) Duke's newest coal-fired plant at the time, for instance, was built in 1975. Progress had built one unit in 1984 and one in 1980, but the newest before these was built in 1973, and nine of them before 1960.

(197) In its 2010 Integrated Resource Plan, for instance, Progress itemized a lengthy list of anticipated EPA regulations that it expected to add significantly to the costs of coal-fired generation: the CAIR (later revised and renamed as the CSAPR), the federal Clean Air Visibility Rule and Clean Air Mercury Rule, a further tightening of the national N[O.sub.x] standards, and the possibility of federal greenhouse gas legislation or regulations. PROGRESS 2010 IRP, supra note 191, at F-1 to F-2. Some of these potential federal regulations were anticipated to require S[O.sub.2] and N[O.sub.x] controls on each individual generating unit, in contrast to the CSA which required each utility only to meet overall caps. Substituting a gas plant for the Lee units would thus help Progress to comply more cost-effectively not only with the Clean Smokestacks Act but also with the North Carolina and expected federal mercury rules, and would reduce the utility's greenhouse gas emissions by about 1.1 million TPY. See PROGRESS 950 MW APPLICATION, supra note 191, at 7-8.

(198) 2012 IMPLEMENTATION REPORT, supra note 7, at 6.

(199) HOPPOCK ET AL., supra note 132, at 20.

(200) Id. at 18-19.

(201) Approval and Promulgation of Air Quality Implementation Plans, 76 Fed. Reg. 59,250, (59,251-52) (Sept. 26, 2011) (codified at 40 C.F.R. [section] 52.1781).

(202) Id.

(203) Id.

(204) Press Release, Kathleen Sullivan, S. Envtl. Law Ctr., Agreement Cuts Pollution by Retiring Dirty, Old Coal Plants in Carolinas (Sept. 17, 2012), etiring_dirty_old_coal_plants_in_carolinas/.

(205) For comparison, these retirements totaled just over twice the capacity of the new Cliffside 6 coal-fired generating unit, which Duke received permission to build in 2008. The new unit includes state of the art technology for minimizing emissions of conventional air pollutants " such as S[O.sub.2] and N[O.sub.x] (and implicitly, of particulates and mercury). NC. Waste Awareness & Reduction Network v. N.C. Dep't of Env't & Natural Res., Div. of Air Quality, N.C. Office of Administrative Hearings, 08 EHR 0771, 0835 & 0836, (2008) and 09 EHR 3102, 3174, & 3176 (2009) (consolidated); Sullivan, supra note 204.

(206) 2002 N.C. Sess. Laws 79.

(207) Final Brief of Petitioner at 2, North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008) (No. 05-1244).

(208) Tenn. Valley Auth. v. Alabama, 615 F.3d 291 (4th Cir. 2010); Elizabeth Shogren, North Carolina Sues TVA to Clean Up Pollution, NPR, Nov. 1, 2006, (last visited Nov. 23, 2013).

(209) Press Release, North Carolina Department of Environmental and Natural Resources, North Carolina Air Quality Chief Comments on EPA Particulate Matter Designation (Dec. 17, 2004), available at

(210) Rulemaking on Section 126 Petition from North Carolina to Reduce Interstate Transport of Fine Particulate Matter and Ozone; Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone; Revisions to the Clean Air Interstate Rule, Revisions to the Acid Rain Program, 71 Fed. Reg. 25,328, 25,337-38 (Apr. 28, 2006); Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Interstate Air Quality Rule), 69 Fed.Reg. 4,566 (Jan. 30, 2004); Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the N[O.sub.x] SIP Call, 70 Fed.Reg. 25162 (May 12, 2005).

(211) 71 Fed. Reg. at 25,328, 25,330, 25,333-34.

(212) North Carolina v. EPA, 531 F.3d 896, 905-06 (D.C. Cir. 2008).

(213) Id at 908.

(214) Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Fed. Reg. 48,208, 48,211 (Aug. 8, 2011).

(215) 76 Fed. Reg. at 48,208.

(216) On a 2-1 vote, the court held that the CSAPR exceeded EPA's authority under the Clean Air Act, in that it would require some states to reduce emissions by more than what was required to avoid significant contributions to downwind states' noncompliance, and also that it imposed FIPs to mandate upwind emissions reductions rather than leaving it. to each state to decide how to do so. In essence, EPA had calculated the excess emissions from each upwind state, but then used modeling of costs per ton to project compliance assuming that each state would clean, up all facilities below a specified cost per ton. The outcome would be an arguably efficient result, but would compel some states to clean up more than their Share of the actual excess pollutants. Each state, the court argued, was responsible for reducing its own significant burden on downwind states, but not for cleaning up additional air pollution simply because it was cheaper to clean up in that state than in another upwind state. Whether or not it was good policy, the court majority argued, it was not what the language of the Clean Air Act required. EME Homer City Generation, L.P. v. EPA, 696 F.3d 7, 12 (D.C. Cir. 2012).

(217) Sierra Club & Env't N.C. v. EPA, 313 F. App'x. 331 (D.C. Cir. 2009); NC withdrew its petition with respect to TVA and to the State of Maryland, both of which had adopted emission control measures sufficient to satisfy North Carolina's complaints. 2012 IMPLEMENTATION REPORT, supra note 7, at 11.

(218) North Carolina ex tel. Cooper v. Tenn. Valley Auth., 439 F. Supp. 2d 486 (D.N.C. 2006) (holding that North Carolina's challenge was a justiciable nuisance law challenge).

(219) EPA had previously failed in attempts to penalize TVA for evasion of the NSR requirements of the Clean Air Act. See generally, Tenn. Valley Auth. v. Whitman, 336 F.3d 1236 (11th Cir. 2003).

(220) EPA, Air Markets Program Data, visited Nov. 23, 2013).

(221) North Carolina ex re]. Cooper, 593 F. Supp. 2d at 832. TVA plants within 100 miles of North Carolina included Bull Run 1, Kingston 1-9, John Sevier 1-4, and Widows Creek (AL) 1-8. Id at 825.

(222) Id. at 816.

(223) The court also held that Judge Thornburg had "improperly applied home state law" (the Clean Smokestacks Act) beyond North Carolina's borders, and that TVA was in fact already in compliance with EPA's NAAQS and SIP requirements, which it claimed were more stringent than state public nuisance laws required. The decision appeared to claim that the Clean Air Act in effect preempted state nuisance law, and that the Clean Air Act permit program shielded the permittee from nuisance claims. North Carolina ex rel. Cooper, 615 F.3d at 296.

(224) Petition for Writ of Certiorari, North Carolina ex tel. Cooper, 615 F.3d 291 (4th Cir. 2010) (No. 10-997); Int'l Paper Co. v. Ouellette, 479 U.S. 481, 497 (1987). See also Barrella, supra note 105, at 248, 252 (written prior to the settlement agreement).

(225) Compare Complaint at 3, North Carolina ex. tel. Cooper, 593 F. Supp. 2d 812 (W.D.N.C. Jan. 30, 2006) (No. 1:06CV20) (requesting injunctive relief regarding emissions at eleven coal-fired electric generating units located in Tennessee, Alabama, and Kentucky), with Consent Decree at 9, North Carolina ex rel. Cooper, Nos. 3:11-cv-00170 & 3:11-cv-00171 (D.T.N. June 16, 2011), available at (establishing aggregate emissions caps for TVA's fifty-nine coal-fired units). The consent decree gave North Carolina everything it had asked for and more, but left unchallenged the Fourth Circuit's decision overturning its nuisance claim. As several case comments have noted, this decision rested on arguments suggesting that the Clean Air Act preempted state nuisance law and that its emissions permitting process shield the permit-tee from nuisance claims, both of which are at odds with other Supreme Court holdings and questionable on their merits, but which accordingly created new uncertainties to be resolved in later cases. See, e.g., Barrella, supra note 106, at 248, 252; Emily Sangi, Note, The Gap-Filling Role of Nuisance in Interstate Air Pollution, 38 ECOLOGY L.Q. 479 (2011); Erin Dewey, Comment, Dust in the Wind: Is TVA 's Permit Shield a Death Knell for Interstate Public Nuisance Claims?, 52 E. SUPP B.C.L. REV. 43, 46 (2011).

(226) Consent Decree, supra note 225, at 9.

(227) Id. at 51.

(228) TENN. VALLEY AUTH., OUR VISION: ONE OF THE NATION'S LEADING PROVIDERS OF LOW-COST AND CLEANER ENERGY BY 2020 (2011), available at TVA was facing North Carolina's Supreme Court petition as well as the prospects of EPA's CAIR and other tighter regulations affecting the operating costs of its coal plants and coal suppliers (particulate matter, ozone, mountaintop mining, ash disposal, and others). It also faced rapidly declining costs both for natural gas and for some forms of renewable energy. TVA apparently decided to seek a comprehensive solution to this entire suite of problems in a substantially revised integrated resources plan for its future.


(230) EPA, EPA Air Markets Program Data, (last visited Nov. 23, 2013).

(231) Id

(232) Press Release, TVA, TVA Board Sets Path for Environmental Future (Apr. 14, 2011), available at

(233) Id TVA's plans included retiring two units at John Sevier by 2012; idling the other two units at John Sevier by 2012 and either controlling or retiring them by 2015; and retiring Widows Creek 1-6, two each year in 2013, 2014, and 2015. These estimates assume that all four Sevier units are retired. All these retirements were specified in the Settlement Agreement.

(234) Consent Decree, supra note 225, at 22-24, 31-33.

(235) EPA Air Markets Program Data, supra note 230.

(236) In its Integrated Resource Plan filed with the N.C. Utilities Commission in 2012, Duke stated that by 2013 it would achieve a 75% reduction in S[O.sub.2] emissions from its levels in 2000, specifically attributable to compliance with the CSA, and an overall N[O.sub.x] reduction of 80% from 1997 to 2009, attributable to both CSA and federal requirements. DUKE ENERGY, DUKE ENERGY CAROLINAS INTEGRATED RESOURCE PLAN ANNUAL REPORT 74 (2012), available at This reflects some additional increase in S[O.sub.2] emissions from their low point in 2012, but still within the CSA cap. Progress Energy's 2012 IRP projects that from 2000 to 2013 it will have reduced its S[O.sub.2] emissions by 93% and its N[O.sub.x] emissions by 88%. PEC, PROGRESS ENERGY CAROLINAS INTEGRATED RESEARCH PLAN, NCUC DOCKET NO. E-100, SUB 137, at F-1 (filed Sep. 4, 2012) (commissioned Mar. 29, 2012).

(237) For data showing the dominant influence of power plant S[O.sub.2] emissions on visibility in most national parks and wilderness areas in North Carolina, see generally N.C. DIV. AIR QUALITY, REGIONAL HAZE STATE IMPLEMENTATION PLAN FOR NORTH CAROLINA CLASS I AREAS 62-65 (2007), available at [hereinafter REGIONAL HAZE SIP].


(239) See generally HPPPOCK ET AL., supra note 132,

(240) Cordato & Nikolaev, supra note 238, at 1, 3-4.

(241) ENVIRONMENTAL DEFENSE FUND, supra note 86.

(242) DAVID HOPPOCK ET AL., supra note 132, at 7; Joint Motion to Enter Consent Decree, State of Alabama v. Tenn. Valley Auth., (E.D. Tenn. 2011) (No. 3:11-cv-00171).

(243) HOPPOCK ET AL., supra note 132, at 3, 5, 12.

(244) Id at 19, 21.

(245) Id at 3, 21.

(246) Id. at 6.

(247) Nash & Revesz, supra note 23, at 1678.

(248) The CAIR was proposed in 2004 (Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Interstate Air Quality Rule), 69 Fed. Reg. 4,566, 4,566 (Jan. 30, 2004)), and issued in 2005 (CAIR; Revisions to Acid Rain Program; Revisions to the [No.sub.x] SIP Call, 70 Fed. Reg. 25,162, 25,162 (May 12, 2005)) but then remanded for refinement by the courts in 2008 (North Carolina v. EPA, 531 F.3d 896 (2008); North Carolina v:. EPA, 550 F.3d 1176 (2008)), resulting in the CSAPR (Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Fed. Reg. 48,208, 48,208 (Aug. 8, 2011)), which in turn was overturned by the courts in 2012, leaving the CAIR still in place pending further refinement (EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir 2012)). With respect to mercury, EPA under the Clinton administration had issued a determination in 2000 that proposed to regulate mercury emissions as a hazardous air pollutant under section 112 of the Clean Air Act (Regulatory on the Emissions of Hazardous Air Pollutants from Electric Utility Steam Generating Units, 65 Fed. Reg. 79,825, 79,825-79,826 (Dec. 20 2000)), but the Bush administration opposed this approach, and in 2004 proposed instead to regulate it under a cap and trade program entitled the Clean Air Mercury Rule (Proposed National Emission Standards for Hazardous Air Pollutants; and, in the Alternative, Proposed Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, 69 Fed. Reg. 4,652, 4,652 (Jan. 30, 2004)). This mercury rule was overturned as too weak by a federal appeals court in 2008 (New Jersey v. EPA, 517 F.3d 574, 577, 583-584 (D.C. Cir. 2008)) and a revised version issued by the Obama administration EPA in 2012 (National Emission Standards for Hazardous Air Pollutants from Coal and Off-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, 77 Fed. Reg. 9,304, 9,304 (Feb. 16, 2012)). But even this version was then partially put on hold by the EPA Administrator until November 2012 (77 Fed. Reg. at 45,967, 45,967).

(249) Tenn. Valley Auth. v. Whitman, 336 F.3d 1236, 1239--40, 1260 (11th Cir. 2003).


(251) Approval and Promulgation of Air Quality Implementation Plans; North Carolina; Clean Smokestacks Act, 76 Fed. Reg. 59,250, 59,250 (Sept. 26, 2011) (codified at 40 C.F.R. pt. 52).

(252) Press Release, N.C. Dep't of Env't & Natural Res., New Federal Ozone Designations Show Air Improvements in N.C. (May 3, 2012), available at

(253) Press Release, N.C. Dep't of Env't & Natural Res., Air Quality Accomplishments 2011 (2011), available at

(254) Id

(255) See Id; New Federal Ozone Designations Show Air Improvements in N.C., supra note 252.

(256) 2012 IMPLEMENTATION REPORT, Supra note 7, at 1, 12-14.


(258) Id. at vi.

(259) DIV. OF Am QUALITY, MERCURY EMISSIONS AND MERCURY CONTROLS FOR COAL-FIRED ELECTRICAL UTILITY BOILERS: FINAL REPORT, 1-3, III-1 (2005), available at; see 15A N.C. ADMIN. CODE 02D.2511 (2007); see also FINAL REPORT ON CONTROL OF MERCURY EMISSIONS, supra note 257, at 11-4 (stating that only 15% of the atmospheric deposition of mercury in North Carolina originates with North Carolina sources, so that despite the benefits of these reductions, they do not contribute equally to the actual reduction of mercury levels in North Carolina's vegetation and fish populations.).


(261) Id.

(262) Id

(263) Id

(264) REGIONAL HAZE SIP, supra note 237, at ii.

(265) Id

(266) Id. at iv.

(267) See supra Table 2 & Figure 2.

(268) Paul Chesser, Smokestacks Bill Helped Utilities, CAROLINA JOURNAL ONLINE, Mar. 7, 2004, (last visited Nov. 23, 2013). Carolina Journal Online is a publication of the John Locke Foundation, a conservative think-tank.

(269) Cordato, supra note 238.

(270) 2012 IMPLEMENTATION REPORT, supra note 7, at 6.

(271) Id. at 18-19.

(272) Senator Metcalf estimated that the additional costs would amount to a 3-5% surcharge on residential users per thousand kilowatt-hour per month, which would amount to $2.79 to $4.65 per 1000 kilowatt-hour at 2012 rates. Anderson, supra note 84, at 66.

(273) Id at 113.

(274) The utilities' customers may also have gained an additional economic benefit unnoticed even by the utilities at the time: Under the CSA the utilities were allowed to recover direct compliance costs from their customers up to the amounts specified in the five-year rate freeze, but not the additional rate of return for their shareholders that they would also have been allowed to recover had they waited to comply with federal regulations.

(275) Anderson, supranote 84, at 114-15.


(277) DUKE 2013 APPLICATION FOR ADJUSTMENT OF RATES, supra note 276, at 4. Some of the most expensive costs also were hotly contested: Environmental and consumer groups strongly opposed Duke's decision to build the expensive new Cliffside 6 coal-fired plant, arguing that even with advanced emission control technology it was a far more costly and less environmentally beneficial investment than an equivalent reduction in energy demand by energy efficiency investments (or natural gas or renewable energy investments) would have been. SOUTHERN ENVIRONMENTAL LAW CENTER, NCUC DOCKET NO. E-7, Sub 790, at 9-10, 27-28 (filed Feb. 7, 2007) (commissioned Feb. 28, 2007).

(278) DUKE 2013 APPLICATION FOR ADJUSTMENT OF RATES, supra note 276, at 4.


(280) John Murawski, Progress Energy Agrees to Halve Rate Hike, NEWS & OBSERVER, Feb. 25, 2013, (last visited Nov. 23, 2013).


(282) Cf. U.S. Energy Information Administration, 27 Gigawatts of Coal Fired Capacity to Retire Over Next Five Years, (last visited Nov. 23, 2013); U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-12-635, EPA REGULATIONS AND ELECTRICITY: BETTER MONITORING BY AGENCIES COULD STRENGTHEN EFFORTS TO ADDRESS POTENTIAL CHALLENGES (2012).

(283) Paul Newton, Duke Energy Meeting Electricity Needs More Cleanly,, Efficiently, RALEIGH NEWS & OBSERVER, Nov. 5, 2013, at 9A.

(284) The broadest based business lobby organization, North Carolina Citizens for Business and Industry, was divided and therefore neutral, with tourism and mountain businesses favoring the bill. Anderson, supra note 84, at 83-84.

(285) Id. at 90-91, 114-15.

(286) Id.

RICHARD N. L. ANDREWS, Professor, Department of Public Policy and Department of Environmental Sciences & Engineering, University of North Carolina at Chapel Hill, Chapel Hill, NC 27599-3435, Special thanks to the many participants in the history of the Clean Smokestacks Act who shared their time and knowledge so generously in interviews; to staff of North Carolina's Division of Air Quality, for data; to Charles Anderson for his excellent honors thesis research; to Mary A.A. Cooper, who provided research assistance in some of the data collection; to Dr. Ann Wolverton, who provided valuable comments on an early version of the paper; and to the UNC Institute for the Environment, which provided partial support through a Progress Energy Faculty Fellowship and more generally.

Table 1: Emissions reductions by Duke and Progress Energy attributable
to CSA, 2002-2011.

2011 (ton)                Duke NOX    Progress NOx         Total

Baseline                     72,744          21,505        94,249
CAIR                         31,630          23,619        55,249
CAS                          31,000          25,000        56,000
Actuals                      20,474          18,810        39,285
Reduction                    52,269           2,695        54,964
Percentage reduction            72%             13%           59%

Cost ($000)                 $92,981         $40,044     $133,025

2011 (tons)               Duke S02    progress S02         Total

Baseline                    250,983         138,654       389,637
CAIR (affected units)       149,574       107,1.56        256,730
CSA                         150,000         100,000       250,000
Actuals                      22,038          51,420        73,458
Reduction                   229,945          97,234       316,179
Percent reductio                91%             63%           81%

Cost ($000)             $1,747,072       $1,014,497    $2,761,569


Baseline = estimated emissions without CSA, based on unit-specific
emissions rate in year prior to control technology multiplied by
its 2011 beat rate. CAJB, CSA = limits set by each requirement on
the affected utility. AB inputs calculated from heat input and
tons of emissions reported to EPA's Clean Air Markets Division's
(CAMD) dates

Table 2: Entjssions reductions by TVA attributable to
CSA-driven settlement.

TVA Projected Emission Reductions      SO2       NOx

Baseline (2001) emissions (tons):     221,497   81,313

Actual 2011(tons):                     47,610    7,362

Tons reduced (2001-2011):             173,888   25,298

% reduction due to added                  79%      91%
controls, idling & use reduction:

Projected emissions 2015 after         32,218    4,220
planned retirements (tons):

% additional reduction 2011-2015:         32%      43%

% overall reduction 2001-2014:            85%      95%
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Title Annotation:IV. Implementation: N.C. Utilities B. Plant Retirements and Replacements through VII. Conclusions and Lessons, with footnotes, p. 910-939
Author:Andrews, Richard N.L.
Publication:Environmental Law
Date:Sep 22, 2013
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