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Senate Budget Takes One Step Forward, Two Steps Back with TVA Settlement Money

Last year, North Carolina’s residents received the good news that the Tennessee Valley Authority had agreed to a settlement [1] with the U.S. Environmental Protection Agency to resolve Clean Air Act violations at a number of TVA coal-fired power plants in Tennessee, Alabama, and Kentucky. As part of this settlement, TVA agreed to provide North Carolina $11.2 million over the next five years for environmental damages associated with the pollution from these plants and earmarked the funds for 14 different categories of projects, including energy efficiency, renewable energy, carbon-dioxide reduction, and pollution mitigation, targeted towards the region most affected by the original emissions—Western North Carolina.

In an improvement over the proposed House budget, the Senate budget [2]actually seeks to spend the settlement dollars in line with the stated intent of the agreement—focused on renewable energy projects (the House earmarked the funds for standard forestry projects [3]) and targeted towards the region most affected (by targeting forestry, the House managed to ensure that virtually none of the settlement funds would flow to the West because almost all of the state’s forestry projects exist in other regions) [3]. Specifically, the Senate budget uses this year’s settlement allotment to fund the Biofuels Center of North Carolina [4], a nonprofit economic development entity located in Oxford and geared towards developing a long-term biofuels industry in the state.  Recent studies [5] have demonstrated that biofuels play an important and growing role in the state’s economy, and the Biofuels Center provides critical support in nurturing this future.

If providing the Biofuels Center with settlement funding is indeed a step forward for renewable energy development, the Senate then takes two steps back by proposing a recurring funding cut equal to the $2.25 million in settlement money transferred to the Center this year.

In effect, the Senate budget gives the Biofuels Center a 50% cut to its recurring appropriation, and then fills the resulting hole with one-time money available from the settlement.  Although the General Assembly may well choose to fund the Center using TVA money in future years, there is no guarantee of long-term support, and as a result, this important tool for economic development and entrepreneurship faces a very uncertain future.  Since nascent industries need careful nurturing over the long-term in order to expand, thrive, and profit, the Senate budget puts the biofuels industry on an equally uncertain path into the future.