Fracking, Tax Reform and Budget All Fast Tracked
Last week was a whirlwind of activity as the legislature quickly passed bills that would move up the timetable on fracking in NC, continue tax reform and amend the budget for FY 2014-15. After the Senate completed its budget rollout in less than a week, with no committee hearings, the House is expected to begin their budget deliberations this week with budget committee hearings to start today.
While the major items included in the Senate budget, like teacher raises, were expected, other items such as the creation of a new state agency for Medicaid were somewhat of a surprise. There was never a doubt that there would be changes to the Medicaid program but the creation of a new state agency outside of the control of DHHS, shows that the Senate, at least, does not have confidence in the current administration’s ability to manage this program.
Most of the major money changes to the second year of the biennial budget occurred in DHHS and the Department of Education. For education, proposed teacher raises were funded from other reductions within the department, including the elimination of over 7,000 teacher assistant positions. The Department of Public Instruction also took a big administrative reduction.
The Senate’s Environmental budget closely aligns with two major pieces of legislation. The NCDENR budget proposal adds another $1.1 million for natural gas exploration and marketing. New appropriations of $1.75 million and 25 FTEs for coal ash remediation and management were also added to the department and are contingent on the passage of the legislation that has been introduced.
Other items of interest to Professional Engineers include:
- Provides technical corrections for the CWMTF related to purpose and use of funds
- Transfers the On-site water protection unit from DHHS to NCDENR
- Appropriates $2 million for agriculture water resource development projects
- Provides $15 million for the Outer Banks Land management fund
- Reduces Drinking Water State Revolving fund due to decrease in federal capitalization grant
- Establishes a special fund for Expanded Gas Products Service for Agriculture
- Transfers the Geodetic Survey Unit from Public Safety, Emergency Management to the State chief information officer
- Reduces funding for Public Transportation by $6.7 million
- Establishes a pavement preservation program
- Further increases outsourcing of preconstruction activity
- Requires NCDOT to review staffing levels in Division of Highways and Preconstruction and implement a plan for staffing changes and efficiencies
- Requires Board of Transportation to study how fees, sponsorships and privatization might reduce the use of public funds for services provided by NCDOT
- $23.2 Million Capital Improvements – General Fund
- $8.4 Million Water Resource Development Projects (state match for $9.7 federal)
- $5.8 million Water Resource Development Projects carry forward balance
- $39.3 Million Non-General Fund Capital Improvement Authorizations
- $1.8 Million for Repair and Renovation of Juvenile Facilities
- Use of Certain Funds Carried Forward by UNC for Capital Projects
- Prohibits “revolving door” policy. Prohibits state employees who participated personally or substantially in the award of a contract or in making a regulatory or licensing decision that directly applied for working for the affected private sector entity. This appears to simply be a codification of a previous Executive Order.
Fast Tracking Fracking - SB 786
In one of the busiest days at the legislature, the House took up the fracking bill in committee last Thursday morning and by the afternoon it was given final approval on a 64-50 vote. Even though Democrats tried frantically to amend the bill to add provisions on air emissions, drilling, disposal of fracking waste and public disclosure of chemicals, only technical amendments offered by Rep. Hager were accepted. The Senate agreed to the House changes sending the bill to Governor McCrory where he is expected to sign it.
The bill, most notably, speeds up the timetable on fracking in NC allowing the state to start issuing permits 61 days after the rules are approved. Final rules are expected this fall after the public hearing process.
PENC had been given approval by House leadership to amend the bill to require that all oil and gas exploration and development activities involving the practice of engineering where the safety of the public is directly involved be performed by or under the direct supervision of a PE. However, because the bill was being hastened through with no substantive amendments allowed, the amendment was not introduced but will be considered in the interim. Additionally, PENC’s Resource Stewardship Action Committee is currently reviewing the draft rules to ensure provisions are included that require Professional Engineers be used in situations where the practice of engineering is involved.
Also, last Thursday, Governor McCrory signed tax legislation that would make more changes to the tax code. The most controversial provision would restrict cities’ ability to continue collection of a privilege tax on business. Cities may still collect the tax for 2014-2015 but, after July 1, 2015, they would no longer have that authority. While both House and Senate leaders pledge to work with the cities to provide other revenue options, municipal leaders are afraid of a “fiscal cliff” if something could not be worked out in the interim. Over 300 cities and towns currently levy this tax which is estimated to bring in over $62 million statewide. The tax bill also includes a provision that requires private residences being rented for 15 days or less to be subject to the sales and occupancy tax – just in time for the U.S. Open next week.
Reform Agency Review of Engineering Work – HB 1081/SB 765
HB 1081, Reform Agency Review of Engineering Work, unanimously passed both the House Regulatory Reform and Environment Committees last week and has been placed on the House Calendar for today. Once approved in the House, it will be referred to the Senate for committee deliberations and a full vote by that chamber.
This bill is PENC’s signature piece of legislation that should streamline the regulatory review process by ensuring that state and local agencies standardize their review and comments, provide for an informal review process when innovative design is being proposed and conducts a pilot study for the PERCS wastewater collection system and stormwater permitting program to determine the work activities that constitute engineers and ensure these activities have the proper oversight. Additionally, the bill restricts the use of the working title “Engineer” to only those persons who are Professional Engineers.
Engineers, Architects and Contractors Promote Infrastructure Needs
Last week, legislators heard from over 150 Engineers, Architects and General Contractors during our Legislative Lobby Day sponsored by PENC, ACEC/NC, Carolinas AGC and AIA. The focus of the joint effort was to call attention to the dire condition of our state’s public buildings – universities, state office buildings, public schools and community colleges. Currently, the Office of State construction estimates the need for $3.9 billion in repair and renovation needs for our state facilities. An analysis by some of PENC’s own Professional Engineers, Bill Smith, Roger Woods and Matt Parker, reveals that it costs the state 40% more annually for neglected buildings that are not adequately repaired and renovated – costing the state over $1.4 billion each year for “doing nothing”.
While the focus of the Coalition was to create awareness of the need for upgrading public buildings, legislators were urged to create a comprehensive interim study committee that would identify and prioritize all infrastructure needs across the state and suggested that recently enacted transportation strategic mobility formula can serve as a model for vertical and utility infrastructure funding.
Encouraging remarks from Lt. Governor Dan Forest, Speaker of the House Thom Tillis, Representative Mike Hager and Rep. Dean Arp confirmed their support for an infrastructure study to assess the need, identify funding sources, and prioritize projects based on the most critical needs for the state. The Lt. Governor even referred to the possibility of a bond referendum that might be considered in the long session.
Rep. Dean Arp, PE, the sponsor of the successful Design Build/P3/QBS legislation last year, has drafted study committee language to be incorporated into another bill. If enacted, this study committee could bring proposals forward for consideration in the long session next year.
Engineers, architects and construction company officials lobbying for state infrastructure funding made their case unwittingly Wednesday. About 150 of them, all wearing badges warning that improperly maintained state infrastructure drives up operational costs by $1.4 billion, were headed to the Senate chamber. As Dave Simpson of Carolinas AGC recounted the event, a half-dozen got on the second-floor elevator for the short ride to the gallery. But they didn't arrive. (Paul T. O'Connor, THE INSIDER, 5/29/14).
State environmental officials plan to test for the presence of significant natural gas deposits in seven Western North Carolina counties, a development that alarms environmentalists over the possibility of fracking in the mountains. Geologists with the N.C. Department of Environmental and Natural Resources will collect rock samples along a formation called the Precambrian Rift starting in late summer or early fall, spokesman Jamie Kritzer said. (Clarke Morrison, ASHEVILLE CITIZEN-TIMES).
President Barack Obama will announce plans Monday to impose the nation's first limits on pollution from power plants, a move that is sure to intensify the discussion about global warming in North Carolina's U.S. Senate race. Democratic U.S. Sen. Kay Hagan is criticizing her Republican rival Thom Tillis' stance on the issue. She said last week that North Carolina needs a "senator who believes climate change exists," although she expresses caution about how to address it. Tillis, the House speaker, accuses Hagan of "doublespeak" on the issue, suggesting she supports policies that will hurt the economy, even as he remains coy about his position on climate change. (John Frank, THE NEWS & OBSERVER, and Renee Schoof, MCCLATCHY)
Dominion Resources Inc. has proposed building a 450-mile pipeline to bring natural gas from the Appalachian Basin to markets in Virginia and North Carolina. The proposed Dominion Southeast Reliability Project would run from an interconnection with a Dominion Transmission Inc. pipeline in north central West Virginia through Virginia to Lumberton. (THE ASSOCIATED PRESS, 5/28/14).
Wilmington will receive $400,000 in grant money from the federal Environmental Protection Agency to continue its efforts to clean and redevelop contaminated properties. Wilmington is among 171 communities nationwide to receive 264 grants totaling $67 million, and one of only eight North Carolina communities to receive assessment grants. (Kate Elizabeth Queram, WILMINGTON STAR-NEWS, 5/28/14).
A shift in the political conversation on climate change will come from engaging communities seeking solutions to the problems they're experiencing, the Environmental Protection Agency's regional administrator for the Southeast said Wednesday. Some politicians remain skeptical or silent on the issue, but communities understand the effects because they see them in increased energy costs, crop production hit by rising temperatures, extreme weather, rising sea levels and smaller fish catches, Heather McTeer Toney said before touring a South Florida plant that processes waste into energy. (Jennifer Kay, THE ASSOCIATED PRESS, 5/28/14).
Charlotte Douglas International Airport has said it doesn't want coal ash under a runway or anywhere else that might support airplanes -– a position that appears to have hampered a proposal by Duke Energy to move the ash onto airport property. But in an interview Tuesday, Charlotte Mayor Dan Clodfelter wouldn't rule out the airport taking the ash. (Steve Harrison, THE CHARLOTTE OBSERVER, 5/27/14).