State Departments, Institutions and Agencies; Environmental Policy Act

Subject:

State Departments, Institutions and Agencies; Environmental Policy Act;G.S. 113A-1, et seq.

Requested By:

Dr. Jay Langfelder Assistant Secretary for Natural Resources Department of Natural Resources and Community Development

Questions:

(1)

Do the forms of financial assistance, separately or collectively, that the United States Synthetic Fuels Corporation has agreed or intends to provide to the partnership developing the peat-to-methanol project proposed in this State involve the "expenditure of public moneys" for the project as that phrase is meant in G.S. 113A-4(2)?

(2)

Does the possibility that one or more of the project partners may be entitled to or may take the credits against state income tax allowed under G.S. 105-130.27A involve the "expenditure of public moneys" for the project as that phrase is meant in G.S. 113A-4(2)?

Conclusions:

(1)

No, the commitment of federal funds by the United States Synfuels Corporation does not involve the expenditure of "public moneys", as that phrase is meant in G.S. 113A-4(2), since the project is neither supported by nor involves any state or local moneys and the federal funds are not subject to North Carolina control in any way.

(2)

No, within the generally understood meaning of a "tax credit" such a possible benefit would not constitute the "expenditure" of public moneys, as that term is meant in G.S. 113A-4(2).

The North Carolina Environmental Policy Act (NCEPA) requires inter alia, that:

Any State agency shall include in every recommendation or report on proposals for legislation and actions involving expenditure of public moneys for projects and programs significantly affecting the quality of the environment of this State, a detailed [environmental impact] statement by the responsible official. . . . (emphasis added) G.S. 113A-4(2).

There are three primary requirements which must be met before an environmental impact statement (EIS) is required: (1) a State action; (2) the expenditure of public moneys for the project or program subject to the State action; and (3) a significant effect on the quality of the environment. Your questions concern only the interpretation of the phrase "expenditure of public moneys", as the proposed project is believed to meet the other criteria.

As you have described the project, a general partnership proposes to build a peat-to-methanol synthetic fuel plant near Creswell, North Carolina, and to supply the plant by the mining of peat from a surrounding 15,000 acre tract of land. The financial arrangements for the project include various forms of assistance from the United States Synthetic Fuels Corporation, and the possibility of state income tax credits. The United States Synthetic Fuels Corporation is "an independent Federal entity of limited duration which will provide additional financial assistance in conjunction with private sources of capital . . ." [42 U.S.C. § 8701(a)(4)] for the development of synthetic fuel production. The types of federal financial assistance available for the project include cost-sharing for design (which will be repaid if the project proceeds to construction) loan guarantees and price guarantees; but there are no state or local funds involved nor is there any type of control over these funding arrangements vested in any state agency.

The crucial inquiry is whether the commitment of only federal funds for the project involves the "expenditure of public moneys" and trigger an EIS requirement in the absence of any state or local funds involvement. To determine the answer, one must look at recognized methods of statutory construction and the purposes for which the NCEPA was enacted.

. . . [T]he words of a statute are to be construed with reference to its subject matter and the objects sought to be attained . . . as well as the legislative purpose in enacting it; and its language should receive that construction which will render it harmonious with that purpose, rather than that which will defeat it. Manley v. Abernathy, 167 N.C. 220, 221-222 (1914).

See also In Re Hardy, 294 N.C. 90 (1978). "The practical inquiry . . . is usually to determine what a particular provision, clause or word means. To answer it one must proceed as he would with any other composition — construe it with reference to the leading idea or purpose of the whole instrument." 2A Sutherland Statutory Construction (4th ed. Text and Commentary), §

46.05. One of the leading purposes of NCEPA is "to require agencies of the State to consider and report upon environmental aspects and consequences of their actions involving the expenditure of public moneys. . . ." G.S. 113A-2. Generally, the purposes of the EIS is to explore and weigh alternatives over the decision-maker has some control, and the absence of any North Carolina control over the funding of this project militates against its inclusion within NCEPA. On the other hand, projects funded by federal grants which are channeled through, and subject to the control of a state or local agency would be included. The Department of Administration, in its rules and regulations adopted under NCEPA, has consistently posited the theory that the Act has reference to the agencies and moneys of this state. See, e.g., 1 NCACA 25.0104; .0205 and .0206(a). While this project deserves the closest possible scrutiny under the necessary state permitting processes we cannot conclude that the General Assembly intended to generally require an EIS for projects funded by public moneys over which there was no state or local control. Even local funding for a project does not meet the criteria for an EIS except "in those instances where programs, projects and actions of local governmental units or bodies are subject to review, approval or licensing by State agencies. . . ." G.S. 113A-9(3). This latter situation has received judicial scrutiny in In Re Environmental Management Commission, 53 N.C. App. 135 (1981). That case, however, may not be read for the proposition that the type of federally-funded projects at issue would meet the "public moneys" criterion.

"Public" on many occasions may be used in reference to state or national affairs or both. However, as used in the laws of this state, the word "public" is a term having general reference to North Carolina. See, e.g., Article V, § 7 of the Constitution of North Carolina — Drawing Public Money. Had the legislature intended to include federal funds within the coverage of NCEPA, it would have been easy to expressly so provide.

Because of the conclusion reached — that a project receiving federal funds over which there is no state or local control, but receiving no state or local moneys, is not subject to the NCEPA requirements — the distinctions between cost-sharing agreements, loan guarantees and price guarantees to which you refer need not be examined.

Your final question concerns the possibility that one or more of the project partners may be entitled to, or may take the tax credits provided for in G.S. 105-130.27A. The use of the word "expenditure" in G.S. 113A-4(2) connotes the actual distribution or outlay of moneys. See, Boneno v. State, 54 N.C. App. 690 (1981). Therefore, the availability of a tax credit would not be an "expenditure" as that term is commonly understood and used in NCEPA.

In summary, it is the opinion of this Office that the EIS requirement of the NCEPA is not triggered by a project which receives federal financial assistance, but no state or local moneys, and the federal funds are in no way subject to North Carolina control. The availability of a tax credit against state income taxes does not involve an expenditure of public moneys, and likewise does not trigger an EIS requirement. We are confident, however, that all environmental factors will be carefully considered through the Department’s various permitting programs.

RUFUS L. EDMISTEN Attorney General

Daniel C. Oakley Special Deputy Attorney General