Under the Dome

McCrory’s Duke Energy ties, and coal ash response, become a campaign issue

Gov. Pat McCrory during an interview at the executive mansion in March.
Gov. Pat McCrory during an interview at the executive mansion in March. Bloomberg

When Pat McCrory ran for governor in 2012, his opponent’s claim that the former Charlotte mayor had favored his longtime employer, Duke Energy, focused on one incident: McCrory didn’t recuse himself from a city council vote 18 years earlier.

That changed a year after McCrory became governor, when a Duke coal ash pond dumped 39,000 tons of ash into the Dan River. Political ties to Duke, where McCrory worked for 28 years, became as potentially toxic as its ash.

Within days, a narrative took root that McCrory’s administration had done more to mollify Duke than police it. That thread has continued into the final days of his reelection campaign, with Democratic opponent Roy Cooper repeating accusations by state scientists that the administration misled the public on water contamination near Duke’s power plants.

The Duke claims are part of what advocates say is the administration’s dismal overall environmental record. State regulators have treated regulated companies as “customers,” with staffing and fines sharply lower under McCrory and the Republican-led General Assembly. But while the governor and his appointees have taken positions that benefited Duke, they’ve also vexed the $50 billion company.

Much of the critics’ case against McCrory is circumstantial, a point illustrated by the governor’s private dinner with Duke CEO Lynn Good last year. Was its purpose to discuss McCrory’s plan to veto coal ash legislation that Duke supported, as the governor said Tuesday night? Or to lay the groundwork for rescinding drinking-water advisories that Duke had protested, as Cooper suggests?

Ford Porter, a Cooper spokesman, said McCrory has “consistently put the profit margin and needs of his former employer ahead of North Carolina families.” A Cooper ad labeled McCrory “the Duke Energy governor.”

Cooper accuses McCrory of stacking the Utilities Commission to approve Duke rate hikes, repeating an accusation from the 2012 campaign. He blames the governor for opposing legislation to stop Duke from passing cleanup costs of the Dan River ash spill to customers, and for not accurately reporting the sale of his Duke stock.

“Time and again, Gov. McCrory has proven that he can’t be trusted to stand up to Duke Energy when utility rates and the safety of drinking water are on the line,” Porter said. “North Carolina families deserve a governor who will.”

McCrory’s camp blames coal ash problems on Cooper and previous administrations, saying he had 30 years as a legislator and attorney general to take action before the Dan River spill.

As attorney general, at the behest of legislators, Cooper sued the Tennessee Valley Authority over air pollution. But he took no similar initiative against pollution caused by Duke’s mountains of ash, even after a massive ash spill by TVA in 2008.

“The truth is the governor was the first to sue Duke Energy and has taken the most aggressive action of any governor to clean up coal ash once and for all,” said McCrory campaign spokesman Ricky Diaz.

The claims and counter-claims aren’t just campaign rhetoric.

Federal prosecutors in Raleigh convened a grand jury after the Dan River spill to probe Duke’s ash practices, including its ties to state environmental regulators. The year-long investigation resulted in criminal charges only for water-quality violations that Duke paid $102 million to settle.

Legislation that McCrory signed this summer illustrates the double-sided nature of much of the coal ash debate.

The measure requires Duke to hook hundreds of power plant neighbors with polluted wells to city water lines. But it scraps an oversight commission that McCrory opposed and may also let Duke avoid digging up ash at half its 14 coal-fired power plants in the state. McCrory’s Department of Environmental Quality had recommended that Duke dig up all its ash, although federal regulators allow covering it in place.

“What can’t be lost here is that the governor pushed for and secured alternative water supplies at Duke’s expense,” Diaz said.

Duke, whose PACs gave McCrory’s 2012 campaign $12,000 but hasn’t contributed to McCrory or Cooper in the current cycle, says its goal is to “find a constructive regulatory path forward” in closing ponds that hold 111 million tons of ash.

“It is regrettable that election-year politics, and willful distortions of the truth by campaign surrogates, misrepresent our company and disparage the 16,000 men and women who are Duke Energy in North Carolina,” spokeswoman Paige Sheehan said.

Regulating ‘customers’

When he took office in 2013, with Republicans in control of the legislature, McCrory promised to instill “a culture of customer service” in state government.

The Department of Environmental Quality has seen some of the nation’s deepest regulatory cuts, losing a third of its staff between 2008 and 2014, the Center for Public Integrity reported this month. Air-related penalties by DEQ dropped 93 percent from 2011 to 2014, it reported.

“It’s not just Duke. We’re not just regulating Duke poorly, we’re regulating all our major polluters poorly,” said Amy Adams, a former DEQ supervisor who now works for the advocacy group Appalachian Voices.

Staff cuts and the softer regulatory approach under McCrory drove DEQ staff to spend more time issuing permits than looking for violations, Adams said. Duke’s large lobbying presence in Raleigh, where its business can be affected by legislators, the Utilities Commission and rulemaking boards, only heightened its relationships with regulators, she said.

“Action on coal ash has been largely driven by public pressure to respond to a historic coal ash spill, Justice Department investigations, citizen lawsuits and federal law – not by the governor’s office,” added Molly Diggins, state director of the Sierra Club.

Rep. Chuck McGrady of Hendersonville, an environmental leader among House Republicans, said he has often puzzled over DEQ’s positions on coal ash. But he doesn’t agree that McCrory’s administration has protected Duke.

“I have not seen them go out of their way to help Duke. In fact, I’ve seen them do things that were very distressing to Duke at the time,” he said, such as risk classifications that would have required all ash to be excavated. “I read the press coverage that DEQ is cozy with Duke and I just don’t see it. Any number of times they’ve caused Duke headaches.”

Dinner with Duke

McCrory brought a number of former Duke colleagues to Raleigh after his election. He named his former boss, Tony Almeida, his top economic adviser. One former Duke executive, Sharon Decker, became commerce secretary and another, Neal Alexander, became director of state personnel.

Dan Crawford, lobbyist for the North Carolina League of Conservation Voters, points to McCrory’s 2015 dinner with CEO Lynn Good and other Duke executives as evidence that the relationship continued.

“As an environmental lobbyist, I’ve never been invited to the governor’s mansion,” Crawford said. “The administration was not able to provide examples of similar sitdowns, and that says a lot to me. Twenty-eight years with a company, that says a lot to me.”

The June dinner came three months after DEQ fined Duke $25.1 million for groundwater pollution at a power plant near Wilmington and three months before Duke settled it and groundwater claims at all its power plants for $7 million. DEQ said a policy established during the administration of Democratic Gov. Bev Perdue, with Cooper’s assent, undermined its ability to levy heavy fines in the cases.

McCrory, who has said he “constantly” meets with corporate CEOs, said in a Tuesday night debate with Cooper that he discussed at the meeting his intention to veto pending coal-ash legislation that Duke supported. Good told the Observer in January only that a range of issues were discussed.

“We meet with leaders around the state all the time, whether it’s important stakeholders in the environmental community, whether it’s legislators, regulators or the governor,” she said.

The state Ethics Commission dismissed a complaint about the meeting that was filed by the Blue Ridge Environmental Defense League.

State scientist ‘lied’

Cooper’s campaign links the dinner to a debate over state tests of private wells near Duke’s ash stockpiles that erupted this summer.

The tests found contaminants including cancer-causing hexavalent chromium in nearly 400 wells. The state issued advisories last year warning well owners not to use their water as workers continued to learn whether the contaminants came from coal ash.

The advisories confused well owners by warning them about their water, but also saying it met federal drinking water standards. Many continue to drink bottled water as a precaution.

Duke has insisted that ash is not the source and that the testing benchmarks were too stringent.

In March the state rescinded most of the advisories. The Department of Health and Human Services said the testing standards were more conservative than those used in most other states and that hexavalent chromium is commonly found in municipal water.

Two ranking DHHS officials, in sworn depositions taken for a state lawsuit against Duke, criticized that position. Both also said McCrory’s staff was involved in deciding how test results were depicted to well owners.

The state epidemiologist, Dr. Megan Davies, said McCrory’s office intervened on the wording of warning letters sent to well owners in 2015. Davies said Duke later met with the health and environment secretaries to challenge the advisories.

State toxicologist Kenneth Rudo, in his deposition, called the advisories “scientifically untrue” because they told well owners their water met federal standards when he and other health experts viewed it as unsafe.

Rudo, a 27-year state employee who said he voted for McCrory in 2012, testified that he talked briefly by telephone with the governor and at greater length with aide Josh Ellis, who “had a concern about what we were telling these folks on the forms.”

McCrory’s office and other state officials, in depositions, denied Rudo’s exchange with the governor took place. McCrory’s administration followed that with an op-ed that blamed Rudo for his “unprofessional approach” to the well-testing.

Davies, his boss, resigned the next day. “I cannot work for a department and administration that deliberately misleads the public,” she wrote in her resignation letter.

In a third deposition, made public this week, DHHS communications director Kendra Gerlach said the governor’s communications office added a sentence to health risk evaluations sent to well owners. It said the well water met the standards of the federal Safe Drinking Water Act, which has no separate standard for hexavalent chromium.

Rudo, the toxicologist, said Friday he was stunned by the admission.

“What they changed on the form was changing the nature of our evaluations, because they were downplaying the significance of science-based risk,” he said. “They were interpreting our science, and that’s something they in the press office don’t have the knowledge or experience to do.”

McCrory has called the controversy “a disagreement among scientists.”

“One group of scientists, which I support, believe the public ought to get all the information about the water, not limited information and one opinion,” he told reporters in August.

Bruce Henderson: 704-358-5051, @bhender

A coal ash timeline

2013: Gov. Pat McCrory’s environment agency sues Duke Energy over ash-related pollution at all 14 of its North Carolina coal-fired power plants. The state filed its actions only after environmental advocates gave notice they would sue Duke on their own.

The Department of Environmental Quality, as it is now called, proposes to settle the first of the state lawsuits, involving two power plants, for $99,000, despite the protests of nearly 5,000 people during a public comment period. DEQ rescinds the settlement days after the Dan River spill.

2014: A ruptured storm drain dumps 39,000 tons of ash into the Dan River. A month later, a crack forms in a coal ash dam at a second power plant. McCrory demands that Duke move its ash away from water sources. He later appears on “60 Minutes” to criticize Duke’s “quite poor” record on ash.

McCrory lets legislation that orders Duke to close all its North Carolina coal ash ponds become law without his signature. In 2016, DEQ releases risk classifications that would force Duke to excavate ash from all ponds, an expense the company has estimated at up to $10 billion and wants to pass to customers.

Raleigh’s News & Observer reports that McCrory failed to disclose his ownership of Duke stock in two state ethics filings. McCrory’s lawyer says the filings were mistakes based on a misunderstanding of the time frame they covered. The governor sold the stock, a spokesman says, “to stop the constant, unfounded challenges of the governor’s character.”

2015: McCrory and top members of his administration host Duke CEO Lynn Good and other executives for dinner at the governor’s mansion, Raleigh’s WRAL reports. Neither the administration nor Duke will say what was discussed.

DEQ fines Duke $25.1 million for groundwater pollution at a power plant near Wilmington. Duke appeals and in 2016 settles groundwater claims at all its power plants for $7 million. DEQ says a policy established during the administration of Democratic Gov. Bev Perdue undermined its ability to levy heavy fines.

McCrory disbands a coal ash oversight commission, created by legislators and supported by Duke, after the state Supreme Court rules in favor of his constitutional challenge of appointments to the panel. The move leaves key decisions on ash solely with the governor’s administration.

2016: The Department of Health and Human Services rescinds advisories, issued a year earlier, that warned nearly 400 power plant neighbors not to drink their well water because of contaminants that might come from ash. Two state health officials criticize the move in court depositions, leading one to be labeled a liar by McCrory’s administration and the other to resign in protest.

McCrory vetoes a coal ash bill that would revive the oversight commission, saying it would weaken environmental protections, violate the state constitution and delay connecting well owners to municipal water lines. He later signs a bill that orders Duke to supply alternative water but deletes the commission and could let Duke avoid excavating much of its ash.

DEQ fines Duke $6.6 million for the Dan River spill. Duke later agrees to pay $6 million. Bruce Henderson