Feds petitioned to probe "bizarre" N.C. dealings with Duke Energy

Did Duke Energy get special -- and potentially illegal -- treatment from clean air regulators in North Carolina?

That's the question the Canary Coalition -- a clean-air advocacy group based in Sylva, N.C. -- wants answered through its request that the U.S. Department of Justice and N.C. Attorney General investigate to determine if "ethical or legal boundaries have been crossed" in N.C. Division of Air Quality actions allowing the company to continue work on its new Cliffside coal-burning power plant in Rutherford County in defiance of federal court rulings. One of the largest electric power holding companies in the United States, Duke Energy is based in Charlotte, N.C. and serves more than 4 million customers in North Carolina, South Carolina, Kentucky, Ohio and Indiana.

The current controversy has roots in a lawsuit brought against the Bush-era Environmental Protection Agency over its exclusion of coal- and oil-burning power plants from the list of hazardous pollution sources subject to the toughest pollution controls under the federal Clean Air Act. That suit led to last year's federal appeals court ruling that air permits for new coal plants like Cliffside must be based on an analysis of the best available technology to control hazardous air pollutants such as mercury -- and that the analysis must be done before construction begins.

But Duke defied the ruling and forged ahead with construction at Cliffside without the required pre-construction analysis. The company later announced that it would "voluntarily" perform an assessment, but a voluntary assessment doesn't offer a chance for public comments or hearings, nor is it enforceable by the government or private citizens.

So last July, a coalition of environmental advocacy groups led by the Southern Environmental Law Center and Natural Resources Defense Council filed suit in federal court to force Duke to halt construction at Cliffside until the regulatory issues were sorted out. In December, federal Judge Lacy Thornburg ruled that the construction permit issued for Cliffside by state regulators failed to meet Clean Air Act requirements, noting that Duke was "simply refusing to comply with the controlling law."

But in what the Canary Coalition calls "a bizarre set of circumstances," Duke Energy attorneys simply revised their estimate of hazardous emissions from Cliffside from 217 tons a year to only 24 tons -- which just so happens to be one ton less than the cutoff point separating major pollution sources required to perform the analysis from minor sources not required to perform it. Nothing in the proposed design of the plant changed.

Despite the suspicious circumstances of the revision, DAQ simply accepted it. The agency is now modifying the construction permit so Duke can continue construction work at Cliffside.

In letters sent last week to U.S. Attorney General Eric Holder and N.C. Attorney General Roy Cooper, Canary Coalition Executive Director Avram Friedman wrote that the state's action "leads to the conclusion there is impropriety in the relationship" between Duke Energy and DAQ and with DAQ's parent agency, the N.C. Department of Natural Resources. The letter accuses DAQ of an effort "to collude with Duke Energy in their effort to evade and violate the federal law" by agreeing to modify the permit.

The Canary Coalition also raises concerns about DAQ's scheduling of public hearings on the permit modification outside of major urban centers and at times most working people would be unable to attend. Despite requests from environmental advocates that hearings be held in major cities including Asheville, Charlotte and Raleigh, DAQ instead provided only two hearings in the small communities of Forest City and Statesville, N.C. near the plant. As the group noted in its letters:

Both of these locations heavily favored a turnout of Duke Energy employees and public officials who are heavily influenced by Duke Energy. As a result, paid Duke Energy staff dominated the time at the hearings, drowning out legitimate independent voices that represent the public interest. These choices of location warrant investigation for illegal collusion between DAQ and Duke Energy because there was no logical reason for their choice other than to eliminate major news media coverage and fair access to those opposed to the permit modification.

The letters also complained about hearing ground rules being ignored in order to allow Duke Energy speakers to address the audience directly, and about DAQ allowing Duke employees and supporters to shout down speakers with the Canary Coalition and Southern Environmental Law Center.

The Canary Coalition's request for an investigation into the relationship between state environmental regulators and Duke Energy comes on the heels of a new report documenting the company's contributions to North Carolina politicians. Prepared by the Civil Society Institute on behalf of the Canary Coalition and three other environmental advocacy groups, the report found that Duke Energy executives and the company's political action committee gave a combined $744,512 to state-level candidates in North Carolina and to party committees between January 2005 and November 2008 -- a critical period during which state officials made decisions on key regulatory issues affecting Duke and Cliffside.

The top three recipients of Duke's money were GOP gubernatorial candidate Pat McCrory, a longtime Duke employee and Charlotte mayor, who received $96,900 (for more on his relationship with Duke, see our 2008 Facing South story, "Is N.C. gubernatorial candidate Pat McCrory too close to Duke Energy?"); Walter Dalton, who was recently sworn in as lieutenant governor and who previously served as a state senator representing the district where the Cliffside plant is located, with $40,830; and Beverly Perdue, the state's new Democratic governor and the official who now oversees DAQ, with $27,347.

A 2007 report [pdf] by the campaign finance watchdog group Democracy North Carolina on influence peddling by Duke Energy and Progress Energy, the state's two biggest electric utilities, found that the companies' PACs consistently rank among the 10 largest in the state and among the five largest sponsored by a single company. It also noted that the companies curry favor through various other means, including their large investments and tax payments as well as gifts to nonprofits and universities.

"Duke Energy has long exerted a disproportionate and inappropriate influence over the political and regulatory processes in North Carolina," said Friedman. Consequently, "energy policies in North Carolina have been directed toward maximizing shareholders' profits rather than toward achieving energy independence, efficiency and a clean, safe and sustainable environment."