- - Wednesday, April 1, 2015


Recent news accounts of fines brought against Duke Energy in North Carolina for serious pollution from coal ash spills on the Dan River and ash storage issues are largely ignoring another development - a pattern that could lead to hidden, unnecessary burdens on energy consumers.

There is no mincing words here. What happened on the Dan River was a major environmental accident, the third-largest spill in our nation’s history.

Duke has settled with the U.S. Department of Justice for a $102 million fine, pending court approval. But the real issue for citizens concerned about smart regulatory and economic policy is how this $102 million will be divided. According to preliminary details of the settlement, some $34 million has been set aside for generic “community service.”

Thus, the Department of Justice (DOJ) will apparently have the authority to demand that Duke Energy make tens of millions in “contributions” to various organizations - perhaps even ultra-liberal groups with controversial environmental agendas or (ironically) axes to grind against Duke. Even if the loot comes with strings attached forbidding overt activities like these, money is fungible: the proceeds from the fine will free up more dollars for politicking that the groups originally raised for other purposes.

And this isn’t the first time that the DOJ has created the “community service” carve-out as part of a fine against a public company. In August 2014, Investor’s Business Daily reported that the DOJ earmarked a portion of a fine against Bank of America: “Buried in the fine print of the deal, which includes $7 billion in soft-dollar consumer relief, are a raft of political payoffs to Obama constituency groups. In effect, the government has ordered the nation’s largest bank to create a massive slush fund for Democrat special interests.”

The citizen group Judicial Watch called the DOJ’s move against Bank of America a “wealth redistribution scheme disguised as a lawsuit.”

Sometimes government agencies themselves can get in on that “redistribution.” The Federal Trade Commission (FTC) has become infamous in recent years for extracting costly and lengthy consent decrees from tech companies. One example is Apple, which was forced last year to cough up a minimum of $32.5 million in refunds in connection with unauthorized music downloads on iPads. Although the company issued many refunds on its own and settled a private lawsuit, Apple’s CEO said the firm decided to pay the government to, and accept what “smacked of double jeopardy” so as to avoid “a long and distracting legal fight.” One part of the story that is rarely told: the FTC gets to keep any leftover funds from the settlement.

Now some states are taking a more proactive stance on fines. The North Carolina Department of Environment and Natural Resources (DENR) announced it was levying Duke Energy with a $25 million fine for coal ash seepage from one of its retired power plants. By comparison, the federal government-chartered Tennessee Valley Authority’s coal-ash spill of 2008, much more devastating than Duke‘s, resulted in a fine less than half as large.

Duke Energy has decided to contest the $25 million fine, vowing to demonstrate “specific instances” of how the state “acted contrary to law” and calling the state’s action “regulatory overreach.” Business leaders are chiming in with concerns too. The state Chamber of Commerce recently told its members, “We worry that this approach by DENR discourages transparency, as opposed to working openly with businesses to correct problems. And if regulators are perceived as unpredictable will such a climate drive businesses out of North Carolina?”

State officials had the foresight to implement a solid tax reform plan; setting the fiscal policy tone through fines, on the other hand, could take the state backward if that tone sounds the wrong notes.

When businesses cause environmental mishaps they should be held accountable, but these fines should be used only for the benefit of the general public - not to help fund organizations that have no real involvement in these matters.

Pete Sepp is President of the National Taxpayers Union and works to educate elected officials and the public on issues of tax relief, tax reform, lower and less wasteful spending, individual liberty, and free enterprise.

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