Emails show close ties between Duke, N.C. regulators

Raleigh, N.C. - Internal emails between staff at North Carolina's environmental agency suggest state regulators were coordinating with Duke Energy (DUK) before intervening in efforts by citizens groups trying to sue the company over groundwater pollution leeching from its coal ash dumps.

The emails were provided Thursday to The Associated Press by the Southern Environmental Law Center, which had filed notice in January 2013 of its intent to sue the nation's largest electricity company under the Clean Water Act.

Within days, the emails show a Duke lobbyist contacted the N.C. Department of Environment and Natural Resources to set up a meeting. The emails suggest the company and regulators were in frequent contact, with a lawyer for Duke even advising the state on legal strategy in an April 30, 2013, email.

At the time, lawyers for the environmental law center were worried that Duke and state regulators would work out a deal without any input from the citizens groups. They told the state that the groups couldn't legally be blocked from participating.

But the emails show that Duke lawyer Charles Case tried to find a case that could be used to convince a judge otherwise.

The email with the attachment was forwarded by Special Deputy Attorney General Kathy Cooper to Lacy Presnell, the top lawyer at the state environmental agency, on May 15. Cooper had been assigned to represent the state in the lawsuit.

"Mr. Presnell asked during our meeting for an example of participation by a intervenor on a non-party basis," Case wrote, adding that he looked forward to speaking with them.

On July 3, a transcript shows Cooper went before Wake County Judge Paul Ridgeway and argued that the citizens groups should be excluded from the legal proceedings.

"They tried to keep us from being full parties in the case," said Frank Holleman, a senior attorney for the law center. "Duke is the lawbreaker. DENR is the law enforcement agency. They are supposed to be protecting the people. Instead, they are working with the lawbreaker to find a way to limit the participation of the citizens groups in the law enforcement proceedings in the way that will benefit the lawbreaker. It's astonishing."

The agency ultimately used its authority to intervene in the lawsuit, quickly negotiating a proposal where the $50 billion company would pay a $99,100 fine to settle environmental violations but be under no requirement to actually clean up its pollution.

Environmentalists have derided the proposal as a "sweetheart deal" by compliant state regulators to shield Duke from far harsher and more expensive penalties the company would have likely faced had the citizens groups been allowed move forward in federal court.

That proposed settlement was tabled last month after a massive spill from a Duke dump in Eden that coated 70 miles of the Dan River in toxic gray sludge. Coal ash contains a witch's brew of dangerous chemicals, including arsenic, lead and selenium.

Duke did not immediately respond to requests for comment.

Federal prosecutors have launched a criminal investigation in the wake of the spill, issuing at least 23 grand jury subpoenas to Duke executives and state officials.

The first batch of subpoenas was issued the day after an AP story raised questions about whether North Carolina regulators had helped shield Duke from a coalition of environmental groups that wanted to sue under the U.S. Clean Water Act to force the company to clean up its coal ash pollution. Among the items subpoenaed are all communications between the state agency and Duke regarding the lawsuits.

State environmental Secretary John Skvarla and Gov. Pat McCrory, a Republican who worked for Duke Energy for more than 28 years before retiring to campaign for the state's highest elected post, have bristled at suggestions they were acting to benefit Duke.

The nonprofit law center first filed notice of intent to sue Duke over groundwater contamination on Jan. 24, 2013. Under federal law, the lawsuit could proceed if the state did not take enforcement action within 60 days.

George Everett, the director of environmental and legislative affairs for Duke Energy, wrote a message the following week to Presnell. Everett says he wants to "preview" a private meeting between Duke and state regulators scheduled for later that month.

Following that Feb. 22 meeting, Cooper emailed a draft copy of the state's enforcement action against Duke to Debra Watts, supervisor of the groundwater protection unit. Cooper tells Watts she needs to check with Presnell about "how Duke wants to be sued" -- referring to her uncertainty about which of the company's corporate names should be on the documents. Duke had merged with its primary in-state rival, Progress Energy, the prior year.

Agency spokesman Jamie Kritzer denied the emails showed evidence of collusion between state officials and Duke. He also pointed out that many of the exchanges included the lawyer from the office of Attorney General Roy Cooper, a Democrat who is expected to run against McCrory for governor in 2016.

"Attorney General Roy Cooper, through special deputy attorneys with his office, filed these actions against Duke Energy only after DENR requested the suits be filed," Kritzer said. "The Attorney General's Office was extensively involved and, with the assistance of technical experts within DENR, played an active role in preparing all of the lawsuits and negotiating the proposed consent order with Duke Energy for two of the lawsuits against the utility."