public policy advocacy for the professional engineer                                       May 6, 2013

This week’s Legislative Update begins with a humorous look at our Nation’s Infrastructure. Colbert on the ASCE Infrastructure Report Card click here.

HB 857 – Construction Methods/DesignBuild/P3/QBS
Last week, the House Government Committee heard HB 857 (Construction Methods, Design Build/P3/QBS), sponsored by Representative Arp, PE and supported by the design and construction industry.  This fairly complicated bill would give governmental entities the authority to use Design Build, Design Build Bridge and Public Private Partnerships for non-transportation projects using the Quality Based Selection process favored by designers.  Representative Arp was praised by many on the committee for crafting legislation that created a statewide model and one that included such a broad number of stakeholders in the drafting process  (over 13 stakeholders were involved in the bill drafting including Architects, Engineers, NC League of Municipalities, NC Chamber, State Construction, Carolinas AGC, NC Minority Contractors, and more). 

The bill hit a snag, however, when the State Treasurer’s office expressed concerns over the P3 financing proposal believing the bill would authorize state agencies to issue debt without appropriate oversight.  Although the bill sponsor and legislative staff explained that language in the bill provided that the State Treasurer would have to approve all P3 projects, the Treasurer’s office staff recommended a study rather than move forward with the bill. The P3 issue has been studied during the last two interims between sessions and was even the focus of the Institute for Emerging Issues. The bill sponsor rejected the Treasurer’s office recommendation for this reason and pulled the bill, offering to resolve the P3 financing issues and bring the bill back for consideration this week.  The bill is scheduled to be heard again in committee on Thursday.

The AE community has worked hard to develop this bill that, at its core, ensures Quality Based Selection for the design team and open, transparent and fair competition.  Had we not taken this initiative it is certain that Design Build/P3 legislation would have been introduced that would not have included any QBS protection and would have possibly opened the market to large Design Build firms from out of state.  While we understand that Design Build is not supported by everyone, HB 857 provides this process as one of many options for project delivery.  It does not encourage the use of Design Build and actually puts many safeguards in place that would not otherwise exist.   

What this Means for Engineers – The bill provides that QBS be used for the design team selection under all the three models – DB, DB Bridging and P3.  Additionally, it eliminates the exemption that many local governments and school systems use to exempt themselves from the QBS selection process regardless of the construction delivery method used.

ACTION ALERT:  Please contact your legislative representative in the House and ask for their support for HB 857 which will be heard in House Government on Thursday. 

HB 298 and SB 365 - Renewable Energy
Despite a setback state Rep. Mike Hager, vowed not to give up on his bill that would end NC’s renewable energy mandate.

After losing a close vote two weeks ago in a House Committee, Rep. Hager scheduled his bill, HB 298, to be heard again, this time in the House Public Utilities Committee that he Chairs.  Although the bill was calendared, it was not heard – at least not in this Committee.   Instead, its companion bill, SB 365 was heard in the Senate Finance Committee only moments after the Public Utilities committee had adjourned. 

Both the House and Senate bills would freeze the renewable energy portfolio standard at the current rate – 3 percent – through 2023.  In 2023, the requirements would be eliminated.

Once again, overwhelming testimony was given from entrepreneurs, engineers, hog farmers, poultry farmers, environmentalists and others regarding the positive impact renewable projects were having on the state and the jobs that were being created from this new industry.  However, the majority of the committee was not swayed.  The Senate Committee approved the bill that would roll back the renewable requirement – although it was questioned by Democrats after the chair refused to allow a show of hands.  

Approved by lawmakers in 2007, the renewable energy requirements went into effect in 2012. Under the law, they would reach 12.5 percent of supply by 2021. The 2007 law also allowed utilities to finance more construction costs with upfront rate increases on customers. Neither the Senate nor House bills would repeal that part of the law. Prompted by questioning from committee Democrats, State Utilities Commission lawyer Dan Conrad told committee members that residential customers, while paying a 21-cents-per-month rider to pay for the renewables requirement now, would receive a 1-cent credit next year. It did not sway some committee members. "In reality, we are subsidizing an industry," said Sen. Bob Rucho, R-Mecklenburg, a committee co-chair.

Strategic Transportation Investments – HB 817
The House Appropriations Committee tomorrow is the third stop for the Governor’s Strategic Mobility Formula bill - HB 817. HB 817 is the Governor’s signature transportation legislation that would put into law the new formula he has proposed for funding transportation projects.  The new formula would allocate funds into three categories: Statewide, Regional and Division – replacing the Equity formula that’s been in place since 1989.  The Statewide and Regional categories each would receive 40% of the funding while the Division Category would receive 20%. The new formula would be heavily data driven, with the best scoring projects being funded rather than letting the funding drive the selection of projects as sometimes happened under the equity formula.

The change is driven by the need to better align scarce transportation resources with projects that can have the most economic impact for the state. And, although it further moves towards taking politics out of transportation, not everyone embraces that philosophy. 

In House Finance last week , the second Committee stop, the bill was given a favorable report but not before an amendment was passed that inserted three long-proposed toll projects – the Mid Currituck Bridge, Garden Parkway and Cape Fear Skyway – into the legislation.  The original version would have deleted those projects from statute, requiring them to compete with other large-scale projects statewide based on a new merit formula under development by the Department of Transportation.

Rep. Paul Tine, D-Dare, the amendment sponsor, said without his amendment, the legislation would remove the Garden Parkway and Mid-Currituck Bridge projects from a "path to immediate completion" and put them into an uncertain DOT formula, despite tens of millions of dollars spent to date. "We're asking to undo these projects right at the finish line and leave them up to a process that we won't find out until after the vote," Tine said, referring to the DOT formula. The Cape Fear Skyway is in the early planning stages.

Rep. William Brawley, R- Mecklenburg, the bill sponsor, opposed the amendment saying for the new process to work, these projects must use the same prioritization system as other projects.  “Leaving these projects in statute would go against the new strategy to fund roads based on merit rather than political power”, Brawley said. "If we do that, we're kind of wasting our time, because we've either got to fix or not fix it, but we can't half fix it," he said.

When asked to give his opinion on the issue, DOT’s Jim Trogdon responded that the DOT supports getting as many projects out of statute as possible, with the understanding that projects with bonds already issued should remain in statute.

Although it is unclear what may happen next, the toll road issue has been a source of controversy between the House and Senate for some time now.  Unfortunately, this issue could derail the bill entirely. 

Water Transfers
With no dissent, a Senate committee has approved legislation that would ease rules for some interbasin water transfers, an issue that formerly created deep divides among lawmakers and their constituents. The Senate Agriculture, Environment and Natural Resources Committee adopted the bill after its sponsor, Sen. Bill Rabon, R-Brunswick, made changes to ensure that the language does not run afoul of a court-approved agreement with South Carolina over water transfers. Interbasin transfers are where water is taken from one river basin and, after usage and treatment, deposited in another river basin. The legislation is primarily aimed at helping create a streamlined process to approve the transfers for coastal counties and nine other counties in the central Coastal Plain. It would also help the town of Cary be more flexible with its transfers and peak usage from Lake Jordan. The lake is the in the Cape Fear River basin, but some treated water is put into the Neuse River basin. South Carolina sued North Carolina over water transfers affecting the Catawba River basin, forcing a settlement that requires North Carolina to notify its southern neighbor about transfers which affect it and to undertake an environmental impact statement for each.(Scott Mooneyham, THE INSIDER, 5/01/13).

Wind Farm
The North Carolina Utilities Commission has renewed a certificate to construct a 20,000-acre wind turbine farm in Pasquotank and Perquimans counties. The Virginian-Pilot of Norfolk, Va., reported that the project remains on hold. The commission order Tuesday says the state requires the certificate be renewed within two years of the first time the project received approval. Pasquotank County officials say Atlantic Wind hasn't signed a contract with a power company to purchase electricity generated by the proposed 150 turbines. The 300-megawatt wind farm is one of three similar projects proposed in northeastern North Carolina under a 2007 state law that mandates power companies offer 12.5 percent of their portfolio in renewable energy by 2021. The Legislature is considering bills that would reduce the renewable energy mandate.(THE ASSOCIATED PRESS, 5/02/13).

Reactor Plans
After years of delays and postponements, Duke Energy issued an obituary for a pair of long-planned reactors at the Shearon Harris nuclear plant in Wake County. The Charlotte power company has cancelled plans to add the new reactors to the site, where a single unit has been generating electricity for a quarter-century. Duke told the Nuclear Regulatory Commission that sluggish growth forecasts show new nuclear units won't be needed for at least 15 years. The announcement spells the end of the vaunted nuclear renaissance in the Triangle, a fast-growing region that until the recession had signified the urgent need for nuclear energy. "They kept teasing and talking about it for some time," said Jim Warren, director of NC WARN, a Durham anti-nuclear group. "All these grand plans for building nuclear stations are going by the wayside."

It's the second nuclear project Duke has canceled since acquiring Raleigh-based Progress Energy in December. Earlier this year Duke said it would not repair Progress's idled Crystal River nuclear plant in Florida. The about-face also shows how the nation's rapidly changing energy landscape is playing out in North Carolina. As nuclear development costs have soared, with the price tag for a single reactor exceeding $10 billion, the emergence of fracking and natural gas are supplying the nation with an affordable and relatively clean-burning fuel for electricity generation. However, Duke said that other nuclear plans are still alive. Applications for Duke's proposed Lee plant near Gaffney, S.C., and a site in Levy County, Fla., remain active.(John Murawski, THE NEWS & OBSERVER, 5/03/13).

Senate Budget
There will apparently be no Senate budget plan next week. Sen. Pete Brunstetter, R-Forsyth, the senior budget chair for the Senate Appropriations Committee, said it would likely be mid-May before a budget plan is unveiled. Brunstetter said budget writers still face "many variables," among them new numbers from the McCrory administration projecting that a Medicaid shortfall in the current budget year will now reach $248 million. Those numbers will figure into how much program costs grow in the next fiscal year. Brunstetter said the additional shortfall should not present too many problems, as budget writers have been conservative with Medicaid figures. He said he expected to have a firmer timetable for the budget plan's release soon. "We're getting there," he said.(Scott Mooneyham, THE INSIDER, 5/03/13).

Fracking Rules
The state's fracking board put off voting on a chemical disclosure standard Friday in response to objections from energy conglomerate Halliburton and top officials within the state's environmental agency. The last-minute delay follows disclosures this week that Halliburton had privately expressed concerns to state officials about North Carolina's proposed standard on fracking chemicals. The disclosure of chemicals is considered one of the most important rules governing fracking, which involves pumping water and chemicals underground to break up shale rock and flush out natural gas trapped inside.

The N.C. Mining & Energy Commission had set out to write the nation's strictest safety standards governing shale gas exploration, or fracking. After more than six months of preliminary meetings, the commission was finally set to vote on the chemical rule as the first of more than 120 rules it expects to consider in the coming year. Instead, commission Chairman James Womack sought to assure his fellow commissioners that Halliburton is not running the show here, and added that the commission is committed to protecting public safety. "No company stops what this commission is doing," Womack said. "And no individual in the legislative body does, either.

Womack said he has been involved in private discussions with Halliburton officials, and is confident the commission can deal with the company's concerns without compromising public safety. The commissioners agreed Friday to send the chemical disclosure back for revisions, but only after a soul-searching discussion about their obligations to the public. The commission is one of the state's most closely watched boards as it develops environmental safeguards for fracking, which is currently under moratorium in North Carolina.

Halliburton, which makes fracking fluid for the energy industry, and state environmental regulators are concerned that the standard would have required drilling operators to disclose corporate trade secrets in fracking fluid formulations to the N.C. Department of Environment and Natural Resources, potentially inviting freedom-of-information lawsuits from competitors, critics and others.

The proposed rule also would have required the state legislature to change the law to allow the agency to determine what information qualifies as a trade secret, and to withhold that information from public disclosure. Fracking fluids contain chemicals found in food additives as well as industrial toxins and carcinogens. The chemical cocktails help maintain fluid consistency and prevent well corrosion. Womack said the commission instead will develop a chemical rule that will allow energy companies to disclose ingredients without revealing precise amounts.(John Murawski, THE NEWS & OBSERVER, 5/04/13).

Tax Collections
North Carolina's tax coffers received a bump thanks to April 15 collections -- an uptick that's still caused analysts to lower revenue projections for the next two years. The General Assembly's top staff economist and Gov. Pat McCrory's budget office now expect the state to collect $406 million more in revenue than originally anticipated by the fiscal year's end June 30, according to an email obtained by The Associated Press. Overcollections were $110 million through March, but economist Barry Boardman told lawmakers in the email that growth was higher than anticipated because more taxpayers decided to report income in 2012 for fear of higher federal taxes in 2013 and future years. Congress approved higher tax rates for top wage earners early this year. The legislature can now expect $20.4 billion in revenues for the current fiscal year, or 2 percent higher than the $20 billion used to fashion this year's budget, Boardman wrote. But he cautioned that the forecast is more volatile than usual because the state has had little experience calculating the use of a relatively new state tax break on the first $50,000 of a taxpayer's business income. The April 15 results, according to Boardman, have lowered expectations for tax revenue for the 2013-14 and 2014-15 years because there may now be less income, capital gains and dividends to report and be taxed. Executive and legislative branch staffers now predict revenue growth will be $101 million less than anticipated in the next fiscal year starting July 1 and $126 million less for 2014-15. The information is important as legislators draw up the next state government budget. The Senate expects to unveil its spending plan later this month. Sen. Pete Brunstetter, R-Forsyth and a chief budget-writer in the chamber, said Friday he envisions placing unanticipated additional funds this year in next year's budget in the savings reserve or toward one-time repairs and renovations or capital projects. That's because legislators know they can't count on a similar increase next year. Once the Senate passes a two-year budget, the House will approve its own version. GOP leaders in the two chambers then will negotiate a final two-year plan to present to McCrory -- also a Republican -- that they hope he will sign.(Gary D. Robertson, THE ASSOCIATED PRESS, 5/03/13).

Airport Development
To understand why the fight over control of Charlotte Douglas International Airport is about more than politics, look to the west. Across Interstate 485 from the airport sits about 5,000 acres of largely undeveloped land dotted with forests and creeks. Developers and the city call it one of Charlotte's last frontiers. Some of the city's most familiar real estate names have an interest in the area, known as Dixie Berryhill. Adding to the interest in the land: Norfolk Southern plans to open a $92-million intermodal rail yard at the airport next year. It will transfer cargo between trucks and trains, and is expected to generate demand for warehouses, distribution centers, manufacturing and office space.

The prospect of massive development has led some to charge that money -- not policy -- is behind the push to take Charlotte Douglas from city control and give it to a regional, unelected authority. Charlotte Mayor Anthony Foxx told the Observer in March he suspects local business people may be looking to profit from the authority, as it influences how the area west of the airport is developed. "No one has made the case that this is about good governance," Foxx said. "Which leads me to believe there are economic interests involved."

Whoever runs the airport – Charlotte or a new, independent authority – will have a deep interest in how the surrounding land develops. Charlotte City Council has overseen the airport since 1935. City leaders say Charlotte must grow its tax base as annexation opportunities dry up. Charlotte has already been trying to prime the area for development. The city's capital improvement plan calls for spending $43 million building new roads through Dixie Berryhill, as well as widening, connecting, and straightening routes through the area. But the capital improvement plan was held up last year when Foxx and the Charlotte City Council couldn't agree whether to pass it with a $119-million streetcar project included. Although the plan appears to be back on track this year -- minus the streetcar -- City Council has yet to pass the plan. An airport authority could build those roads if the city doesn't. The airport has bought entire neighborhoods and is buying still more land as it continues $1 billion worth of expansion projects. Charlotte Douglas owns more than 6,000 acres, mostly on the east side of I-485. The airport also owns almost 100 acres west of I-485, and plans call for Charlotte Douglas to acquire several hundred more acres in Dixie Berryhill to use for stormwater drainage.

Ownership of all the airport's property, along with anything on it, would transfer from the city to the new airport authority if the authority proposal passes. The city is trying to stop the bill, but it has already passed the N.C. Senate and awaits only a vote in the state House before becoming law. A major toll road project, the Garden Parkway, would connect I-85 in Gaston County to I-485 at the southern end of the airport, building what developers say is another crucial link through Dixie Berryhill. That project gained an unexpected legislative boost last week, when a House committee added it to the governor's transportation bill.(Ely Portillo, THE CHARLOTTE OBSERVER, 5/04/13).

Asheville Water
Asheville officials will hold a special meeting Tuesday to consider suing over a bill that would take the Asheville water system away from the city. The state House concurred Wednesday with Senate changes to the bill and sent it to Gov. Pat McCrory for consideration. McCrory has 10 days to either sign the bill, veto it or allow it to become law without his signature. The bill, which would transfer the system to the Metropolitan Sewerage District May 15, passed both the House and Senate by margins that would be sufficient to override a gubernatorial veto.(ASHEVILLE CITIZEN-TIMES, 5/02/13).

Alcoa
A New Hampshire investment firm is challenging Alcoa Inc.'s bid for a new federal license to operate dams along one of North Carolina's largest rivers, demanding that federal regulators recognize circumstances have changed since the relicensing process started more than a decade ago. New Energy Capital Partners filed a petition last week with the Federal Energy Regulatory Commission arguing that Alcoa closed the smelter where nearly 1,000 people once worked after a 2006 deadline to compete for the license passed. Alcoa said in 2010 its smelter along the Yadkin River powered by the four dams would close for good, though aluminum production shut down years earlier. Since then, Alcoa has sold the electricity produced on the wholesale market and kept any profits. Former Govs. Mike Easley and Beverly Perdue resisted Alcoa's quest for a new operating license of up to 50 years. Perdue's administration said the licensing battle was about the need to control a key water source for one of the country's largest and fastest-growing states and the chance to attract companies to one of North Carolina's job-scarce regions by offering low-cost electricity. New Gov. Pat McCrory hasn't taken a stand on the issue.(Emery P. Dalesio, THE ASSOCIATED PRESS, 5/03/13).

Anti-LEED Bill
An N.C. legislative proposal that would restrict the use of national green building rating programs on public projects is slated for discussion Tuesday by the state House Committee on Agriculture in Raleigh. House Bill 628 would insert new language in a section of state law that calls for energy- and water-use standards for major public facility construction and renovation projects. N.C. Reps. Michele Presnell, R-Haywood, and Rick Catlin, R-New Hanover, are the primary sponsors of the bill, filed April 9. The bill — titled Protect/Promote NC Lumber — says those projects may use a "nationally recognized high performance environmental building rating system" if that green building program doesn't use a credit system "disadvantaging materials or products manufactured or produced" in North Carolina. And the bill requires the rating program to award points to wood certified under the Sustainable Forestry Initiative and the American Tree Farm System. The Leadership in Energy and Environmental Design rating system is considered the gold standard in green building.(Susan Stabley, CHARLOTTE BUSINESS JOURNAL, 5/03/13).

Offshore Drilling
Gov. Pat McCrory will be in Houston today to participate in a panel of Outer-Continental Shelf governors on the need to expand offshore energy exploration. McCrory thinks that opening up the Atlantic shores to energy exploration could create up to 140,000 new jobs during the next 20 years. He is pushing the Obama administration to expand offshore leasing off the coasts of North Carolina, South Carolina and Virginia.(Dome, THE NEWS & OBSERVER, 5/03/13).

Duke Energy
Duke Energy Progress will ask customers in the Carolinas to pay the $70 million the utility has spent planning for a $9.3 billion expansion of the Shearon Harris, which has now been shelved. Duke Energy Corp. CEO Jim Rogers, speaking to analysts on Duke's earnings call Friday, said the company remains interested in nuclear construction.(John Downey, CHARLOTTE BUSINESS JOURNAL, 5/03/13).

 


If there are questions or you need additional information, please feel free to contact me at bbailey@penc.org or phone 919-834-1144, ext. 1.


Sincerely,

Betsy Bailey
Professional Engineers of North Carolina


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