High Quality
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The John Locke Foundation
is a501(c)(3) nonprot, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyrefect those o the sta or board o the Locke Foundation.
200 W. Morgan, #200Raleigh, NC 27601
phone:
919-828-3876
ax:
919-821-5117www.johnlocke.org
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n 2002 the State o North Carolina passed what was ocially titled “Im-prove Air Quality/Electric Utilities,” which became better known as theClean Smokestacks Bill (CSB). The legislation required that Duke Powerand Progress Energy (Carolina Power and Light, at the time) make dramaticreductions in emissions o Nitrogen Oxide (NOx) and Sulur Dioxide (SO
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) byinstalling expensive scrubbers on the smokestacks o the 14 coal-red powerplants across North Carolina.
No. 383 – March 5, 2010
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key acts:• In 2002 h s o Norh crolin pd wh woill ild “Improv air Quli/elri Uilii,” whih bm brnown h cln smo Bill (csB).• Whn h csB w pd in 2002, i w imd o o $2.3 billion.• In 2009 h csB’ xplii o wr projd o b ovr $3.2 billion. thgur don’ inlud ohr o brough bou b h lgilion, uh Progr enrg’ csB-infund diion o onvr wo ol-rd powrpln o nurl-g ilii, or h highr lrii r onumr will onqun.• a or bn, whil in 2005 h Nc Dprmn o environmn ndNurl Rour (DeNR) bgn o rdi h csB in pr or rduion inhigh ozon d in Nc, DeNR lr nowldgd h hr r no udilining obrvd “dlin” in mog lvl o csB rgulion.• Rigorou nli would hon in on wh ozon lvl in h wouldhv bn i csB wr no in pl. DeNR h no don h.• I h csB wr woring in h w h DeNR pr rl ugg, hnhr hould b n obrvbl improvmn in Nc’ ir-quli prormnrliv o i nighbor’ in h r r 2005 omprd wih h rprior o 2005.•th d how no dirn in Nc’ ir-quli prormn in h vr bor (2000-04) h csB w prumbl hving n imp nd hv r in (2005-09).
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The original estimate o the cost o implementing the regulations was $2.3 billion, and as the title o the legisla-tion states, its purpose was to “improve air quality.” As noted, the CSB regulations are very stringent. None o NorthCarolina’s neighbors have enacted similar legislation.The CSB started out as model legislation written and pushed by Environmental Deense (ED), a letwing environ-mental pressure group.
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In 2000 and 2001 ED was shopping its legislation around to many states, but North Carolina,under the administration o the new governor, Mike Easley, was the only state to show interest. Ultimately, the billwas passed by an overwhelming majority o both parties, substantively unchanged rom the original model legislationpushed by ED. As was noted in a series o John Locke Foundation policy studies and
Carolina Journal
reports, the supporterso the bill, which included environmental groups as well as the power companies
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to be regulated, made extravagantclaims regarding the environmental benets o the legislation.
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No supporters o the legislation — neither the stateDepartment o Environment and Natural Resources (DENR), the legislature, nor even the advocacy group — everproduced any rigorous studies quantiying what those benets would be in terms o either improved air quality orimproved health outcomes.In act, emails between Duke Power, a major supporter o the bill, and North Carolina’s Division o Air Quality thatwere uncovered by a
Carolina Journal
investigative report at the time revealed that even the bill’s supporters knewthere was no evidence to support the claims that they were making.
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Wh’ hppning o o?
A completely unreported story since the passage o the CSB has been the explosion in its costs. The initial costestimate by ED, when the environmental group rst presented the bill in 2001, was under $450 million.
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By the timeit was passed in 2002, the cost had, according to estimates by Duke Power and Progress Energy, skyrocketed to $2.3billion. As o June 2009, according to the most recent annual report to DENR on the status o the CSB,Progress Energy’s [expected] cost o $1.402 billion is $589 million or 72% higher than the origi-nal 2002 cost estimate o $813 million. … Duke Energy’s [expected] cost estimate o $1.827billion is $327 million or 22% higher than the original 2002 cost estimate o $1.5 billion.
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In other words, the explicit costs o the CSB are now projected to be over $3.2 billion.That number still does not refect the total costs o the legislation, which may be signicantly higher than eventhose revised estimates. Progress Energy has announced that rather than incurring the expense o meeting the CSBrequirements or two o its coal-red acilities, it would convert plants in Wayne County and New Hanover County tonatural gas.
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Progress estimates that the costs o converting those two plants will be $1.5 billion. Those costs are notreportable as costs o complying with the CSB, even though newspaper reports suggest that the two plants are beingconverted to avoid complying with CSB regulations, which are only relevant to coal-red plants.Those plant-conversion costs will be part o upcoming rate hearings or Progress and will likely be translated intohigher utility bills or consumers. That is not the only bad news or consumers, because in 2008 the costs o generatingelectricity rom natural gas were about three times greater than the costs o generating electricity rom coal.
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Whatthat means is that going orward, electricity rates will be higher owing to more electricity generation rom natural gasand less rom coal. These higher costs should also be attributed to the Clean Smokestacks Bill.
I h csB ming dirn?
In 2005 press releases rom DENR began to suggest that improvements in air quality across the state, particularlywhen the state was experiencing reductions in the number o high ozone days, were in part attributable to the CSB
regulations. For example, a DENR press release dated October 3, 2005, ollowing a particularly good ozone season,declaredThe decline in high ozone days goes hand-in-hand with … The Clean Smokestacks Act, adoptedby the legislature and signed by Governor Mike Easley in 2002. … DAQ data show that powerplant emissions are declining signicantly rom new controls being installed.
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Recently, ater NC experienced only 11 Code Orange monitor readings or the entire 2009 season, the DAQ statedthat “contributing to the decline in high ozone days are … actions to reduce ozone orming emissions rom powerplants. … These measures include the NC Clean Smokestacks Act ….”
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None o those press releases cited evidence that would allow the Division o Air Quality to attribute the reductionor change in the number o high ozone monitor readings to the CSB regulations. In other words, the DAQ simply as-serted the relationship. In act, in response to our inquiries, DENR has acknowledged that there are no studies linkingobserved “declines” in smog levels to CSB regulations.
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Ultimately, i DENR is going to continue making such claims, they need to support it with evidence and analysis.The mere act that North Carolina experiences a particularly good ozone season or a reduction in high ozone monitorreadings rom a previous year is not supporting evidence. That is because so many variables can aect ozone — weath-er, temperatures, amounts o rainall, number o cloudy days vs. number o sunny days, etc., in addition to emissionso ozone-orming pollutants. Fundamentally, a truly rigorous analysis would attempt to abstract rom these variables,honing in on what the ozone levels in the state would have been i CSB were not in place. DENR should also perorm
annul chng in High Ozon Monior Rding: iv-s Mdin v. Norh crolin
(Georgia, North Carolina, South Carolina, Tennessee, and Virginia)
(beore the CSB’s presumed eects)(ater the CSB’s presumed eects)
19992000200120022003200420052006200720082009 Five-State Median
—-38%-20%80%-71%-35%90%-4%-5%-61%-93%
North Carolina
— -38%-14%84%-71%-66%233%-48%128%-61%-93%
Annual High Ozone Monitor Readings and Percentage Change rom the Previous Year
(beore the CSB’s presumed eects)(ater the CSB’s presumed eects)
19992000200120022003200420052006200720082009Georgia
75151223938814212222729226210128-32%-53%62%-63%-14%-86%29%-10%-61%-72%
North Carolina
1343836715131537512942922150319713-38%-14%84%-71%-66%233%-48%128%-61%-93%
South Carolina
49431625345582691309685650-36%-20%80%-82%-16%88%-26%-11%-24%-100%
Tennessee
11436723877022147727426242510412-41%-42%81%-70%-64%256%-4%62%-76%-88%
Virginia
6711953386061681102092051941264-71%73%79%-72%-35%90%-2%-5%-35%-97%
Sources: Ozone monitor data provided by EPA and individual states.
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