News: CJ Exclusives

Delays could scuttle some VW settlement money to N.C. vehicle owners

Cooper in danger of missing deadlines while some lawmakers claim he wants to spend settlement money in unconstitutional manner

North Carolina already trails Virginia in claiming more than $92 million from a lawsuit settlement involving automaker Volkswagen. A constitutional separation-of-powers lawsuit filed by Gov. Roy Cooper against the General Assembly could add to the delays.

With application deadlines looming, members of the Joint Legislative Commission on Energy Policy debated Wednesday over North Carolina’s share of the $2.7 billion mitigation fund for clean air violations linked to many VW vehicles. The company entered into a consent decree after illegally rigging emissions equipment to help its vehicles meet federal clean-air standards.

“In all honesty, I didn’t know we had that big of a problem,” Rep. John Szoka, R-Cumberland, one of the commission’s co-chairmen, told Carolina Journal. He noted both a Dec. 1 deadline for Cooper to name a lead state agency to manage the $92 million settlement, and a Jan. 30 date for the state to identify the recipients.

“I don’t see a conflict between identifying the agency in charge, and that lawsuit,” Szoka said. But the process could be jeopardized if the governor doesn’t provide information to the Delaware-based settlement trustee Wilmington Trust for approval. Several lawmakers also noted the governor’s preferred way to distribute some of the settlement money may violate the state constitution.

Mike Abraczinskas, director of the state Department of Environmental Quality’s Division of Air Quality, told lawmakers he thinks Cooper will name DEQ as the lead agency.

The settlement funds must be spent to reduce nitrogen oxide vehicle emissions. Abraczinskas said state officials have met with a number of parties to decide how to parcel out the money.

The trustee has to approve the state’s proposed mitigation plan. The state’s next step is to gather information from interested parties, evaluate different uses for the money, and set priorities, Abraczinskas said. Focusing on the areas most harmed by air pollution might be one factor.

“We’re very early in the process,” Abraczinskas said.

Kathleen Staples, renewable energy program manager with Dominion Power, which has operations in Virginia and North Carolina, told panel members Virginia’s share of the VW settlement is about $94 million.

The Virginia Department of Environmental Quality issued its request for information in April. It generated 35 project ideas. Staples said states can use up to 15 percent of mitigation funds to install electric car charging stations. Virginia plans to use its full allotment for that purpose, and in late September sent out requests for proposals.

“I was shocked at how much farther ahead Virginia is than we are,” Sen. Paul Newton, R-Cabarrus, a commission co-chairman, told CJ. “That was stark, the contrast.”

He could not explain North Carolina’s tardiness.

“That’s a question for Gov. Cooper and his office. He should care more about ensuring North Carolina secures its portion of the funds [to reduce vehicle emissions] than who has control or final say over the distribution of those funds,” Newton said. Despite problems with the process, Newton said he thinks the governor will meet the deadlines.

Control over the settlement sparked lively debate. Much of it centered around the Cooper v. Berger lawsuit. In it, the governor contends a 2014 statute is unconstitutional because it bars a state agency from transferring or spending money received through a settlement or other court order without the General Assembly’s approval. The lawsuit says the law — putting all settlement money in the state treasury — prevents the governor from faithfully executing the laws and administering the state budget, as the constitution requires.

General Assembly staff attorney Jennifer McGinnis told lawmakers after the state budget was passed, on Aug. 8 Cooper filed an amended complaint adding the VW settlement money to Cooper v. Berger. The lawsuit remains stuck in court.

Abraczinskas said the Cooper administration may contract with the trustee, channeling funds directly from the trustee to the vendor for greater efficiency.

Sen. Jerry Tillman, R-Randolph, backed that approach so VW owners could get their engines fixed or buy new vehicles more quickly.

Putting all the settlement money in the state treasury would lead to needless red tape and endless budget adjustments, Tillman said.

But Rep. Dean Arp, R-Union, questioned the legality of that approach. The state constitution says no money can be taken from the state treasury without the legislature’s approval. State law requires settlements to be distributed through the appropriations process.

Abraczinskas said the state could meet the emissions reductions the settlement requires several ways, including:

  • Replacing engines or vehicles used locally to haul cargo to and from ports or intermodal railroads; for waste haulers, dump trucks, and concrete mixers; for school, shuttle, and transit buses; and forklifts and port cargo-handling equipment.
  • Replacing engines on locomotives used to move freight cars around in a railyard, ferries and tugs equipped with older, high-emitting marine engines.