Cement plant draws scrutiny

An international company has plans for a major industrial development that would bring 160 jobs and millions of dollars in tax revenue to an area near the southeastern coast of North Carolina.

But plans by Titan America to build one of the biggest cement factories in the country in Castle Hayne is a gift that some would rather return because the jobs and tax dollars would come with enough poisonous byproducts to be measured by the pound.

So while the state and New Hanover County have offered $4.5 million in incentives to get Titan to set up shop in Castle Hayne, hundreds of others have rallied to kill the plant. Environmental groups are suing to get a thorough review of the plant's potential impact on the air and water around it.

Gov. Bev Perdue, prodded by a government watchdog, has taken a rare step of asking the State Bureau of Investigation to determine whether "undue political pressure" was involved as the company sought permits.

State records show that John Merritt, a former top aide to then-Gov. Mike Easley, worked for Titan behind the scenes, serving as a key contact with state agencies before Titan announced that it had chosen Castle Hayne and that the state and county would give the company money to build there. After he left office, Easley joined the McGuire Woods law and lobbying firm where Merritt works.

The Perdue administration continues to back Titan, and state agency officials say the company has received no special treatment.

"We do support this project," state Commerce Secretary Keith Crisco said. "We didn't do anything special for Titan. This is an established process that has worked well for other companies."

A lot rides on air permit

At issue are the permits that Titan needs to operate a cement plant. The state is considering whether to grant Titan an air permit, the first in a series of state and federal environmental permits the company will seek.

This first step is critical. With a state air permit in hand, the company would be able to build a kiln, the super-hot, coal-fired furnace that turns raw materials into a substance called clinker. Powdered clinker is the main ingredient in cement.

Private environmental lawyers fear that if Titan is allowed to build the kiln it will set the boundaries around which all other aspects of the development would be considered, possibly eliminating options that would be best for the environment. And the debate about whether the company should be allowed at all would be over.

Duke University's environmental law and policy clinic and the Southern Environmental Law Center represent coastal groups in a lawsuit aimed at forcing the state to require a comprehensive environmental review - one that would consider the plant's effects on air, water, transportation and the community - before it grants any permits.

For example, the air permit doesn't consider the effects of mercury coming out of the smokestack that lands in nearby waters, where it poses a greater danger to wildlife and people, Titan opponents said. The plant will also emit ozone-producing and cancer-causing chemicals.

"They did not look at the impact on wildlife and the surrounding ecosystem," said Dr. Robert Parr of Wilmington, who is active in a local group, Stop Titan. "It's the basis of our seafood heritage."

The company says the comprehensive state review is unnecessary because a required federal review will serve the same ends.

"It just doesn't serve any practical purpose," Titan spokeswoman Kate McClain said.

Perdue did not go along with a request by government watchdog Joe Sinsheimer for a three-month freeze on the permitting work on Titan.

Perdue spokeswoman Chrissy Pearson said the governor thought it inappropriate to step into a permitting matter unless the SBI gave her a reason.

But Titan has suspended work on the environmental report required for the federal review and permits.

McClain said the company is focusing on the state air permit.

E-mail with Merritt

Titan has been extensively involved with two state agencies, the state Department of Environment and Natural Resources, which is responsible for granting the company permits, and the state Department of Commerce, which offered Titan incentives to build at the site of an old cement plant that closed in 1982.

E-mail between Merritt, Titan officials, the commerce officials and environmental regulators indicates that the company fought the notion of a comprehensive state review (commonly referred to asSEPA, for State Environmental Policy Act).

State law details three conditions that must be met to trigger such a review, one of those being the expenditure of public money on a project. With Titan in line for state and county money, Titan officials were worried that the project would trigger the state review.

In a July 22, 2008, e-mail to economic development officials and Merritt, Marino Papazoglou, director of business development for Titan, wanted to know "why we were not made aware of the link between SEPA and incentives" and whether they could approach environmental assistant secretary Robin Smith for help.

Merritt replied via e-mail that he planned to call then-Commerce Secretary Jim Fain about it. "Please, no one make contact on this matter until you hear back from me," Merritt wrote.

Merritt advised McClain on ways to respond to early questions about the company's plans so as not to raise suspicions that Titan didn't qualify for a state grant. The premise of the One North Carolina grant is that the company would go elsewhere unless it got state money, he wrote.

"It is very important that the company not do anything that suggests that this is the only site you are looking at," Merritt wrote to McClain in an e-mail on April 8, 2008.

McClain said in an interview that the company was considering other sites, but said she could not reveal them because the company considers the information confidential.

"It might be some place we'd be considering pursuing in the future," she said.

The company said in its state incentives application that it was considering sites in Florida, Virginia and Kentucky, and in other countries.

Merritt did not return telephone calls seeking comment.

Decision: No SEPA

E-mail shows that company representatives were worried that Smith was going to decide the project needed a SEPA review if it took government grants.

In an e-mail dated July 22, 2008, Smith told agency staff members to handle the permits in compliance with SEPA rules. They could review Titan applications but couldn't issue any permits until the environmental review was done.

In an interview, Smith said she determined after the agency got its questions about the incentives answered that aSEPA review was not required. Having a former Easley aide working on behalf of the company did not influence the outcome, Smith said.

"No," she said. "We make these kinds of decisions all the time."

Merritt is an old college friend of Easley's who worked in his administration during the first 18 months of Easley's first term. Merritt's primary job under Easley was economic development. Merritt left his full-time job in the administration in mid-2003 but continued to advise Easley on economic development matters.

Sinsheimer, a government watchdog, asked Perdue for the SBI investigation and the permit freeze last fall. In a letter, Sinsheimer said the 2008 bribery conviction of a former state employee who promised a company a smooth permitting process and testimony at a Board of Election's hearing that a developer was asked by Easley's fundraiser for a donation while a top Easley official was helping with the developer's permit "have diminished public confidence in the state's environmental permitting process."

But the state Department of Administration agreed with the environmental agency that SEPA does not apply to Titan. That led to a lawsuit by the private environmental lawyers that is pending in Wake County Superior Court.

Wilmington-area business people and economic developers have fought back against the Titan opponents, forming their own group. They call the lawsuit a stall tactic.

Bills stymied

When coastal-area legislators tried to delay the Titan permits last year with proposed new laws, it became clear that support for the company continued in the Perdue administration. Both Perdue and Easley are Democrats.

State Sen. Julia Boseman, a New Hanover Democrat, had her bill delaying the permits smothered by intensive lobbying by the state Commerce Department and Titan. Merritt also lobbied against the bill.

State Rep. Carolyn Justice, a Hampstead Republican, couldn't get a vote on a proposal she said would help to straighten out confusion over SEPA and when it's required.

After meetings that included Merritt, Crisco, Perdue's senior adviser Al Delia and a Perdue policy adviser who specializes in environmental issues, Justice said it was clear that her proposal faced overwhelming resistance.

"The commerce secretary told me if my bill passed, it would shut down industry coming to North Carolina," Justice said.

State officials say there's a misunderstanding of the state environmental law and its intent. The state law was aimed at making sure government projects, community sewer plants for example, meet environmental regulations.

"If it's extended to everybody, that would add a great amount of time," Crisco said, saying that other states are streamlining their processes.

In an era of heightened competition, he said, "that would be a major detriment to economic development."

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