Proposed $95M Cleveland County reservoir makes political waves

rchristensen@newsobserver.comSeptember 28, 2013 

— The proposed $95 million John Cline Reservoir is still nothing more than some lines on a map in rural Cleveland County, an hour west of Charlotte.

But it has created some powerful political waves in Raleigh, where it has received special attention in the legislature and in the Department of Environment and Natural Resources.

In some cases, lawmakers have had a personal interest. One powerful lawmaker is an attorney for the water authority pushing the project, while another has done work for a real estate company that hopes to benefit from the lake.

The proposed reservoir has become one of the first major environmental test cases since Republicans won control of state government in January. For environmentalists, the reservoir project is an example of Republicans using political pressure to bend the rules to try to build an unneeded dam that could benefit real estate development interests.

For reservoir backers, the fight is about trying to move forward on a much-needed project that has been stymied for years by government regulators and environmentalists.

The case is being closely watched – not only because it involves some of the most powerful political players in the state – but because of the implications it might have for future dam and reservoir projects across North Carolina.

The reservoir has been proposed since at least 2000, although the idea has been talked about since at least 1988. It is being put forward by a local government entity called Cleveland County Water, a water authority that serves 57,000 mainly rural residential customers in four counties in North Carolina and South Carolina. The authority wants to dam the First Broad River, covering 1,400 acres of forest and farmland and destroying 24 miles of stream, six acres of wetland and roughly 10 homes.

The authority has pushed for the reservoir, noting that the region has suffered from drought conditions that prompted mandatory water restrictions in 2002.

The project has attracted land developers, who have bought up options for possible construction of lakeshore homes if the reservoir is ever built.

The project must be approved by the Army Corps of Engineers and by DENR, which oversees the Clean Water Act for the federal government. The Corps is the lead agency in analyzing an environmental impact statement and in selecting “the least environmentally damaging practical alternative” to provide water supplies.

Both federal and state regulators have voiced skepticism about whether the reservoir is needed. A consultant’s study prepared in August 2011 for both the Corps and Cleveland County Water found there were far cheaper alternatives, including purchasing water from the towns of Forest City, Kings Mountain or Shelby. The Forest City alternative would cost $51.2 million; the Shelby alternative would cost $45.3 million.

Environmentalists also say that the Cline Reservoir is not needed for water and that the dam is being driven by economic-development interests.

“The fundamental problem with this project is it is unnecessary,” said D.J. Gerken of Asheville, a senior attorney for the Southern Environmental Law Center, which opposes the reservoir. “It is really an economic-development project disguised as a water-supply project. ... I think there is an aspiration that it will be the next Lake Norman.”

Backers of the project – having already spent $1.7 million on studies – are frustrated. They argue a reservoir is the best way to help provide a stable water supply and ensure the future of a county that has seen a lot of hard times. The region has never recovered from the closing of numerous textile mills and has a 10.4 percent unemployment rate.

“Trust me, we don’t want to take on an $80 million to $100 million debt,” said Clyde “Butch” Smith, manager of Cleveland County Water. “If there was an alternative to come out cheaper, we would.”

Smith argues that water purchased from other towns would be unreliable during a drought and that a reservoir is the only long-term solution to the county’s needs.

“We feel if we had a reservoir it would secure Cleveland County for the next 100 years,” Smith said. But he said trying to get approval has “been a nightmare.”

Legislative connections

With the rise in the fortunes of the Republican Party, reservoir supporters have tried to use their connections to get the project approved.

Smith was appointed to the state Environmental Management Commission by House Speaker Thom Tillis in 2011. The body oversees and adopts rules for DENR. Smith has met with lawmakers and pushed bills that would affect reservoirs, according to various email messages obtained by the Southern Environmental Law Center.

In 2011, the newly elected GOP legislature moved to revamp how DENR handles water projects. The bill (HB 609), which is now law, encourages DENR to “become a co-applicant for all required federal approvals” for water supply projects such as reservoirs. It allows DENR to dip into the Clean Water Management Trust Fund, which was set up to protect watersheds, to help finance reservoir projects. Among the bill’s sponsors: Rep. Tim Moore, a Republican from Kings Mountain and the powerful House Rules Committee chairman, who is also legal counsel to Cleveland County Water; and Mitch Gillespie, now assistant DENR secretary but then a state representative.

In an email to four Republican lawmakers in December 2011, Smith said the new law would help overcome opposition by environmental regulators to building dams and reservoirs.

“This bill has got the attention of the federal agencies,” Smith wrote. “If NC issues the (state) permit for the John Cline Reservoir this will put the Feds in a bind to go against the wishes of the state. Keep up the good work.”

Moore said he has been careful not to mix his legal duties and his legislative responsibilities. He said HB 609 set statewide public policy and that he sought advice over whether there would be a conflict before agreeing to be a co-sponsor.

Even if he were not legal counsel, Moore said as a citizen he would strongly support the reservoir because it is badly needed. Moore earns about $20,000 annually as the Cleveland County water authority’s part-time attorney and worked for the board for the past four to five years, Smith said.

“During the drought, it got so bad in 2002, that you could walk across the Broad River and never get your feet wet,” Moore said. “Schools were talking about shutting down. That could happen again tomorrow.”

John Skvarla, the DENR secretary, said despite the new laws, “there has been no shift in department policy regarding drinking water reservoirs due to leadership changes, reorganization or recent legislation.” As a result of HB 609, Skvarla said DENR can help local governments plan their water needs, but he said that doesn’t necessarily mean reservoirs .

“There is no favorite child,” Skvarla said, “but it should be noted that due to the cost and time required, reservoirs are often not the best choice. And steering communities toward reservoir-building when other options are available would be folly anyway, since the Corps of Engineers would never approve a reservoir unless it were the best alternative.”

While backers were pushing pro-reservoir legislation through the General Assembly, lawmakers were also trying to pressure the town of Forest City to withdraw its offer to provide water to Cleveland County.

In March 2012, Rep. Mike Hager of Rutherfordton located in the next county over from Cleveland appeared before the Forest City council and told members that if they proceeded with their offer, a bill would be introduced in the legislature to block the move. Hager, a backer of the reservoir project, is House majority whip and earlier this month was named by Tillis as co-chairman of the Environmental Review Commission, which evaluates the actions of all state agencies and boards relating to the environment and makes recommendations regarding reorganization and consolidation of environmental regulatory agencies. He is also vice chairman of the House Environment Committee.

According to Forest City council minutes, Hager said that “legislation is being proposed that would prohibit all water supply alternatives other than a reservoir for Cleveland County” and asked for the board’s feedback about the proposed “local bill to force the Army Corps of Engineers to decide about a reservoir.”

The Forest City Town Council responded with a letter reiterating that it is in the “perfect position to partner with with Cleveland County Water” to provide water. At the meeting, one town commissioner, Dee Dee Bright, labeled the proposed reservoir “a political lake,” according to the minutes.

Hager, in an interview, said he had been approached by then-state Sen. Wes Westmoreland of Shelby, who was considering introducing such a bill. He said the legislation was aimed at “trying to force the hand of the Corps of Engineers” but that it was never introduced.

On his 2012 economic disclosure statement, Hager reported receiving in excess of $5,000 from a real estate venture, John Cline Res. LLC.

Hager, a former engineer for Duke Energy who now does some consulting work for the construction business, said he did some limited consulting work for John Cline Res., checking on rainfall and river flow in the area for the Delaware company.

In the months after Cleveland County Water applied for a permit to build a reservoir, four real estate ventures began snapping up land around the proposed lake. John Cline Res. bought up 374.37 acres; McCarthy First Broad River, managed by Ohio developer Devin F. McCarthy, bought 162.15 acres; Country Blue Water of Hendersonville purchased 66.75 acres; and Cherry Mountain Investments of Forest City bought 169.9 acres, according to records compiled by the Southern Environmental Law Center.

Smith, the Cleveland County Water manager, kept some of the real estate interests up to date on regulatory and legislative developments, according to emails obtained by the environmental group.

There was also a proposal in 2009 for a senior living development in the reservoir area, which then-state Sen. Debbie Clary was helping to market, according to her quotes in The Shelby Star.

Clary, who resigned from the legislature in January 2012, was asked by Smith in several emails to keep track of a bill that would make it easier to get approval to build reservoirs, even though she was not a registered lobbyist for Cleveland County Water in 2012. Smith reports that Debbie Clary and Tim Moore “have come through” on the bill, according to an April 29, 2012, email obtained by the Southern Environmental Law Center.

State permit waived

Even with the passage of pro-reservoir legislation, the Cline reservoir still did not have its permits from either the Corps of Engineers or from DENR.

Backers said that Dee Freeman, DENR secretary under Democratic Gov. Bev Perdue, opposed the project.

“If you are looking at it from the standpoint of the taxpayer, there are less costly alternatives to building the lake,” Freeman said in a recent interview. “And from the environmental point of view, there are more preferred alternatives than to destroy the stream beds and wetlands and all that comes from flooding.”

The reservoir backers hoped the November elections would provide them with the political punch they needed in Raleigh and in Washington to get the project approved.

“We feel like this election in November, NC is going Republican and if that’s the case we will get the 401 (DENR) permit,” wrote Smith in an Aug. 6, 2012, memo. “When (Mitt) Romney takes office in January, I hope this will change the Corp, EPA and others their way of thinking.”

Although GOP presidential candidate Mitt Romney did not win, Pat McCrory was elected governor, and Republicans took control of DENR.

On May 2, Cleveland County Water submitted its application for the Cline Reservoir project. Shortly after, DENR’s staff concluded that the application was incomplete, did not identify mitigation for stream and wetland impacts, did not list streams or creeks impacted by construction and did not include an environmental impact statement.

But in July, DENR informed Cleveland Water that it would waive its requirement for a state permit. That meant the only thing the project backers need is approval from the U.S. Army Corps of Engineers.

Freeman, the former DENR secretary, called the waiver “quite extraordinary.” Jennifer Frye, special projects manager for the Corps in Wilmington, said she had never heard of it being done previously.

Thomas Reeder, director of DENR’s division of water resources, said while the waiver may be unprecedented for a project of this size, it was both a reasonable move and a legal option under the Clean Water Act.

Reeder said the project has already cost the ratepayers of Cleveland County $1.7 million and will probably cost them an additional $500,000 to $1 million to complete an environmental impact statement for the Corps. Reeder said it is a near-certainty, based on numerous meetings with the various parties, that the Corps will reject the Cline Reservoir and that Cleveland Water will then take the Corps to court.

“This thing is going to drag out I would say another five to 10 years, at the very least, before it’s resolved one way or the other,” he said.

Reeder said he got together with his boss, Gillespie, and told him, “I don’t see any value added for the state to get involved in the middle of this whole process.”

Reeder said he had never received any pressure from the legislature or from Smith to grant the waiver and that he would have made the same recommendation with a different set of players involving different political parties.

An appeal to the EPA

The Southern Environmental Law Center has appealed to the acting regional EPA administrator in Atlanta, writing that “in response to undue political pressures, the Division of Water Quality has completely abrogated its responsibilities under section 401 of the Clean Water Act to evaluate whether the proposed reservoir is consistent with state quality standards.”

The law center has also appealed the decision by DENR to the state Office of Administrative Hearings.

Reeder was quizzed about whether there was any political pressure involved in the decision at a meeting of the Environmental Management Commission held this month in Raleigh. Among other things, he was asked whether Smith, the EMC member and the general manager of Cleveland County Water, had applied any pressure. Reeder said no.

Smith, too, said the charges of political pressure have been blown out of proportion. He said he has only met Hager once in his life. He said Moore “stayed out of it.”

“If I was in a lineup,” Smith said, “Thom Tillis couldn’t pick me out of it.’

But Ron McCollum, a land owner in northern Cleveland County who has been fighting the project for years, remains skeptical. When he looks out at the edge of his property, he doesn’t see any water but says he does see plenty of political intrigue.

“It’s become obvious to us that this is not about water in Cleveland County,” McCollum said.

Christensen: 919-829-4532

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