Throughout the year-and-a-half that North Carolina’s Clean Smokestacks Bill was being crafted and voted on in 2001 and 2002, a strange alliance of environmental groups and the alleged-to-be polluting utility companies, worked together to support the legislation.
Unlikely as this may seem at first glance, it is not uncommon. Clemson economics professor Bruce Yandle explains it with his “bootleggers and Baptists theory.” In the classic case, Baptists favor restrictions on the sale of alcohol because they are morally opposed to drinking. Bootleggers favor these same laws because the more restrictions, the better their business and the higher their profits.
The Baptists, in the case of the Clean Smokestacks Bill, were environmental advocacy groups spearheaded by Environmental Defense, that authored the plan on which the legislation was based. ED and others visibly promoted the bill and, of course, their motives were considered as pure as a fresh winter snow falling through soot-free air. After all, the bill was about protecting the sensitive lungs of children and restoring “visibility” to North Carolina’s mountains. Despite that these claims could not be supported, environmentalists’ motives, like the Baptists in Yandle’s theory, were considered beyond reproach.
Then there were the bootleggers, North Carolina’s two largest electric utility companies and owners of 14 coal-fired power plants. The passage of the Clean Smokestacks Bill forced the companies to retrofit their plants with more than $2 billion in emission-abatement equipment. Why did they support the bill? It wasn’t because of the environmental or health benefits asserted by Environmental Defense.
In an email from Duke Power’s George Everett, vice president for environmental and public policy, to N.C. Division of Air Quality Director Alan Klimek, quoted in a recent series of stories by reporter Paul Chesser of Carolina Journal, it was stated that Duke did “not know of any data to assess the improvements in air quality as a result of [Smokestack’s] emissions reductions.” DAQ agreed with this claim. The real reason was that Duke and potentially Progress Energy (CP&L at the time), like the bootleggers, could benefit monetarily from the legislation.
When the Clean Smokestacks Bill was proposed to Gov. Mike Easley by Environmental Defense, Duke Power was being sued by the EPA for violations of the federal Clean Air Act. There seemed to be a good chance that Progress Energy would face similar charges. As noted by one General Assembly analyst in a memo written just before the law was passed, “The work required under, and thus the cost of compliance with, any federally required upgrade would,…for the most part, overlap the work required under, and thus the cost of compliance with [Smokestacks].”
This was the bottom line for the smokestacks bootleggers. The “eco-Baptists” supported legislation that would allow Duke and Progress Energy to avoid a utilities commission rate hearing, which they would face if hit with an adverse ruling from the EPA. The Clean Smokestacks Bill allowed the utilities to recover the costs from North Carolina electricity customers; without a hearing and with none of the costs absorbed by shareholders or out-of-state customers.
A now-former EPA official told Carolina Journal that “we set out our demands and Duke…popped up with a bill that very nearly met our demands and had a mechanism where the pollution controls would be paid for.” As one Duke spokesman put it “we’re happy because we got very healthy cost recovery.”
Environmental regulation has had a long history of bootleggers and Baptists coalitions. The 1977 Clean Air Act benefited and was supported by the West Virginia Coal producers. The early 1990s ban on Freon benefited and was supported by the refrigerant’s primary producer, Dupont Chemical. The U.N. global warming treaty was supported by and would have benefited Enron Corporation. It is no great honor for North Carolina to be upholding this unseemly tradition.
Dr. Roy Cordato is vice president for research and resident scholar at the John Locke Foundation in Raleigh.