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• Magnet Schools • Community Colleges Attract Controversy C A R O L I N A On President’s Agenda Durham Impact Fee ‘Winning the Future’ Volume 14, Number 3 A Monthly Journal of News, March 2005 Analysis, and Opinion from JOURNAL the John Locke Foundation www.CarolinaJournal.com www.JohnLocke.org Smokestacks Bill Saved Duke From EPA, Audit of some of their coal-fired power plants. Rate freeze protected EPA also filed an administrative order against the federally owned Tennessee Val- utility from lawsuit, ley Authority for its violations. penalties, and fines Ensuing months and years saw some of the utilities enter settlement agreements with EPA and the USDOJ. The first to reach By PAUL CHESSER an agreement was Tampa Electric Com- Associate Editor pany, which was forced to spend $1 billion RALEIGH to install stronger emissions controls on its ontrary to the stated objectives of coal-fired power plants. The company also its supporters, the 2002 North Caro- agreed to pay a $3.5 million civil penalty C lina Clean Smokestacks law — and to spend $10 million to $11 million on based on controversial environmental as- mitigation projects for its emissions. sumptions used to espouse questionable Other companies later reached costly health benefits — may have been crafted to settlements with the EPA. In April 2003 help protect the state’s two largest electric- Virginia Electric and Power Company ity suppliers from federal lawsuits and fines. agreed to spend $1.2 billion on emissions The plan, signed into law June 2002, controls and to pay a $5.3 million civil pen- was developed by the liberal group Envi- alty and at least $13.9 million on mitigation ronmental Defense, which had joined the projects. Cinergy Corp. of Ohio also agreed federal Environmental Protection Agency to add $1 billion worth of pollution con- in a lawsuit against Duke Energy for al- trols. leged emissions violations at seven coal- In May 2000 EPA issued to Duke Power fired power plants. a Notice of Violations letter for eight of its After EPA filed its lawsuit against Duke Gov. Mike Easley signed the Clean Smokestacks bill into law at the State Capitol in June 2002. coal-fired plants, and the following Decem- for its violations, the company entered into ber added the North Carolina utility to its settlement negotiations with the agency. Asked whether the pending EPA law- were also preserved. Without the Smoke- list of lawsuit defendants. The litigation “We explained the details of what EPA suit influenced Duke’s decision to support stacks law, Duke and Progress Energy was based on a section of the federal Clean and the (U.S.) Department of Justice were the Smokestacks bill, company spokesman would have been subject to a N.C. Utilities Air Act called New Source Review, which looking for,” said Bruce Buckheit, former Thomas Williams said, “Not a bit.” When Commission rate review that would have required utilities to implement the best avail- director of the EPA’s Air Enforcement Divi- informed of Buckheit’s comments, Williams scrutinized all their expenses, including any able emissions reduction technology dur- sion, “then Duke broke off settlement dis- said, “We’re not going to comment on settle- new emissions controls. Had a freeze not ing certain types of upgrades to their plants. cussions while they looked into the Smoke- ment discussions that were going on at been implemented, rates for North Carolin- Progress Energy (then called Carolina stacks legislation.” some point.” ians almost cer- Power & Light) was also under scrutiny by George Givens, a General Assembly Also, as the tainly would have the EPA, and in 1999 and 2000 received analyst who helps write legislation, ac- Smokestacks bill Inside: gone down, per- requests for information by the federal knowledged that the Smokestacks law was passed, Duke Plan Biased, Flawed - P.3 haps significantly. agency about eight of its power plants. Com- helped Duke with its federal difficulties. was under scrutiny “We believe pany spokeswoman Dana Yeganian said “The work required under, and thus from auditors (see Duke Questioned Merits - P. 4 that the goal of the the EPA’s pending litigation against the the cost of compliance with, any federally article, Page 5) Freeze Preceded Audit - P. 5 Clean Smokestacks other utilities did not drive Progress to sup- required upgrade would, at least for the working for utilities Act should be to port the Smokestacks bill. most part, overlap the work required un- regulators in North protect the citizens der, and thus the cost of compliance with Carolina and South Carolina. and the environment, not the excessive prof- Reduce mountain haze [Smokestacks],” Givens wrote in a memo The Charlotte-based power supplier its of Duke,” said Sharon Miller, executive June 8, 2002, just before the bill became law. had been exposed by one of its own accoun- director of the Carolina Utility Customers Concurrently North Carolina residents, A last-minute change in the law said tants for under-reporting its earnings, be- Association, which represents industrial especially in the mountains, and environ- that if the EPA required stronger controls cause Duke was allowed only a 12.5 percent and other customers in the state. mentalist groups pressured lawmakers and than the Smokestacks bill, which was highly return on its equity by the North Carolina utilities to address their complaints about unlikely, then the costs wouldn’t be recov- Utilities Commission. The audit found that EPA files lawsuits increasingly poor air quality. Throughout erable under the new state law. Duke officials made illegal accounting ad- 2000 the groups campaigned for stronger “The intent of this change is to encour- justments in order to hide their excessive In November 1999 the EPA and the U.S. emissions controls on the smokestacks of age rather than discourage settlement of earnings. Department of Justice announced a new the 14 coal-fired power plants in the state any litigation,” Givens wrote, “ensure that What Duke got, as well as Progress enforcement initiative against some South- owned by CP&L and Duke, and crafted an the utilities get the ‘benefit of their bargain’ Energy, out of the Smokestacks law was a ern and Midwestern electric utilities. Attor- effective postcard campaign from citizens under [Smokestacks], and ensure that any promised five-year “rate freeze” from state ney General Janet Reno filed seven lawsuits who begged for the controls. costs that may be incurred beyond [Smoke- lawmakers and regulators, which funded on behalf of the EPA against the utilities stacks] for a violation of federal law will not the costs of the expected $2.3 billion pollu- because of their failure to properly upgrade be covered by [Smokestacks].” tion controls. Duke’s excessive earnings emissions technology on the smokestacks Continued as “No clear health…,” Page 3 $1 Billion for Triangle Rail? The John Locke Foundation NONPROFIT ORG. Contents 200 W. Morgan St., # 200 U.S. POSTAGE Good Investment 27% Raleigh, NC 27601 PAID Not Good Investment 59% RALEIGH NC PERMIT NO. 1766 Not Sure 14% Calendar 2 Education 6 Higher Education 10 Local Government 14 Books & the Arts 18 Opinion 20 Parting Shot 24 % of Wake County Voters in January 2004 JLF Poll C A R O L I N A Contents ON THE COVER • In 2000, as Aaron Johnson began his • North Carolina’s second highest court, in JOURNAL fourth frustrating year in the public school a ruling Jan. 18, clarified under what cir- • Contrary to the stated objectives of its system, a school employee gave his mom a cumstances a city or town can engage in ac- supporters, the 2002 North Carolina Clean piece of advice she believes rescued her son tivities that private business ordinarily pro- Smokestacks law — based on controversial from a disastrous future: consider home- vide. Page 15 environmental assumptions used to es- schooling. Page 7 pouse questionable health benefits — may THE LEARNING CURVE Richard Wagner have been crafted to help protect the state’s • Lindalyn Kakadelis writes that frustration Editor two largest electricity suppliers from fed- with bureaucratic ineptitude in public edu- • A review of Newt Gingrich’s Winning the eral lawsuits and fines. Page 1 cation is fueling an abundance of parental Future: A 21st Century Contract With America. activism across North Carolina. Page 7 Page 18 Paul Chesser, Michael Lowrey NORTH CAROLINA Donna Martinez • The North Carolina Department of Pub- • Reviews of Abuse of Power: How the Gov- Associate Editors • The North Carolina Clean Smokestacks lic Instruction announced that the dropout ernment Misuses Eminent Domain by Steven Plan, the report on which the state’s land- rate for grades nine to 12 is up from 4.78 Greenhut, and The Not So Wild, Wild West: Karen Palasek, Jon Sanders mark 2002 legislation was built, was writ- percent in 2002-03, to 4.86 percent in 2003- Property Rights on the Frontier by Terry L. Assistant Editors ten by a leftist environmental group and 04. Page 8 Anderson and Peter J. Hill. Page 19 contained several assumptions based on what some call “junk science.” Page 3 HIGHER EDUCATION OPINION Chad Adams, Shannon Blosser, Andrew Cline, Roy Cordato, •When the North Carolina Clean Smoke- • While North Carolina may soon consider • Michael Walden wonders, as the dollar Charles Davenport, Ian Drake, stacks Plan was first presented to the De- possible increases in general fund appro- falls against foreign currencies, are we eco- Tom Fetzer, Bob Fliss, partment of Natural Resources staff, sev- priations for the University of North Caro- nomic hostages to foreigners? Page 22 Nat Fullwood, John Gizzi, eral environmentalist groups and the state’s lina system, Virginia is considering a plan David Hartgen, Summer Hood, Lindalyn Kakadelis, George Leef, two investor-owned electric utilities already that would grant institutions more au- • Dr.