No. 138, Original

IN THE

&uprtntt Court of ttjt Witt') i6tatto

STATE OF SOUTH CAROLINA,

Plaintiff,v.

STATE OF NORTH CAROLINA,

Defendant.

On Bill of Complaint

MOTION FOR LEAVE TO INTERVENE OF THECITY OF CHARLOTTE, NORTH CAROLINA,

AND BRIEF IN SUPPORT OF MOTION

DEWITT F. MCCARLEYCity Attorney

H. MICHAEL BOYDSenior AssistantCity Attorney

OFFICE OF THE CITYATTORNEY

600 East Fourth StreetCharlotte, N.C. 28202(704) 336-2254

*Counsel of Record

JAMES T. BANKSH. CHRISTOPHER BARTOLOMUCCI*HOGAN & HARTSON L.L.P555 Thirteenth Street, N.W.Washington, D.C. 20004(202) 637-5600

PARKER D. THOMSONHOGAN & HARTSON L.L.P.1111 Brickell AvenueSuite 1900Miami, FL 33131(305) 459-6500

Counsel for the City of Charlotte

vlh^sor^ Ems PR1

Co., INC. - (202) 789-0096 - WASHINGTON, D. C. 20002

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES iii

INTRODUCTION 1

STATEMENT 2

CHARLOTTE'S INTER-BASINTRANSFERS AND WATER SUPPLYSERVICES ARE THE PRIMARYTARGETS OF SOUTH CAROLINA'SCOMPLAINT 2

A. Charlotte Is the Largest Muni-cipality and Largest Provider ofWater Supply and WastewaterTreatment Services in theCatawba River Basin 2

B. Charlotte Accounts for the LargeMajority of the Inter-BasinTransfers About Which SouthCarolina Complains 3

CHARLOTTE HAS A SIGNIFICANTINTEREST IN THE NEGOTIATEDCOMPREHENSIVE RELICENSINGAGREEMENT

ARGUMENT 11

CITIES MAY BE AND HAVE BEENPARTIES AND INTERVENORS INORIGINAL ACTIONS 11

II. CHARLOTTE POSSESSES THEAUTHORITY TO CARRY OUT THELARGEST AND MOST SIGNIFI-CANT INTER-BASIN TRANSFERSOF CATAWBA RIVER WATER 12

Page

11

TABLE OF CONTENTS-Continued

III. CHARLOTTE SHOULD NOT BEDENIED PARTY STATUS SIMPLYBECAUSE NORTH CAROLINA IS ADEFENDANT 16

IV. CHARLOTTE'S MOTION TO IN-TERVENE IS TIMELY 20

CONCLUSION 21

EXHIBITS

Exhibit 1: Map of the Catawba River Basin

Exhibit 2: North Carolina EnvironmentalManagement Commission, Certificate Au-thorizing the Charlotte-MecklenburgUtilities to Increase Their Transfer of Wa-ter from the Catawba River basin to theRocky River basin under the Provisions ofG.S. 143-215.221 (Mar. 14, 2002)

Page

111

TABLE OF AUTHORITIES

Cases:

Alabama

v. United States ArmyCorps of Engineers, 229 F.R.D. 669(N.D. Ala. 2005) 19, 21

Georgia v. City of Chattanooga, 264U.S. 472 (1924) 11

Illinois v. City of Milwaukee, 406U.S. 91 (1972) 11

Missouri v.

Illinois,

180

U.S.

208(1901) 14 , 15

New Jersey v. City of New York, 290U.S. 237 (1933) 11

New Jersey v. New York, 280 U.S.528 (1930) 13

New Jersey v. New York, 283 U.S.336 (1931) 13

New Jersey v. New York, 283 U.S.805 (1931) 14

New Jersey v. New York, 344 U.S.932 (1953) 15

New Jersey v. New York, 345 U.S.369 (1953) passim

iv

TABLE OF AUTHORITIES-Continued

Page

S.D. Warren Co. v. Maine Board ofEnvironmental

Protection,

126S. Ct. 1843 (2006) 20

South Dakota v.

Ubbelhohde, 330F.3d 1014 (8th Cir. 2003), cert. de-nied, 541 U.S. 987 (2004) 18, 19

Texas v. Louisiana, 416 U.S. 965(1974) 11

Texas v. Louisiana, 426 U.S. 465(1976) 11

Wisconsin v. City of Duluth, 96 U.S.379 (1877) 11

Statutes:

28 U.S.C. § 1251(b)(3) 11

Clean Water Act, 33 U.S.C. § 1341 19, 20

Federal Power Act, 16 U.S.C. § 797(e) 8

N.C. Gen. Stat. § 143-215.221 (1993)(repealed effective Aug. 31, 2007) 12

Rule:

1S. Ct. R. 17

V

TABLE OF AUTHORITIES-Continued

Page

Other Materials:

Comprehensive Relicensing Agree-ment for the Catawba-WatereeHydro Project, FERC Project No.2232 (Dec. 22, 2006) 8-9, 9, 10, 19, 20

Environmental Assessment forCharlotte-Mecklenburg Utitiliesfor Increase in Inter-Basin Trans-fer from the Catawba River Sub-basin to the Rocky River Subbasin(Prepared for the EnvironmentalManagement Commission byCH2M HILL Apr. 2001) 8

Environmental Management Cam-mis-sion, Certificate Authorizingthe Charlotte-Mecklenburg Utili-ties to Increase Their Transfer ofWater from the Catawba River ba-sin to the Rocky River basin underthe Provisions of G.S. 143-215.221(Mar. 14, 2002) 5, 6, 12

Environmental Management Com-mis-sion, Certificate Authorizingthe Cities of Concord and Kanna-polls to Transfer Water from theCatawba River and Yadkin RiverBasins to the Rocky River basinunder the Provisions of G.S. 143-215.221 (Jan. 10, 2007) 6, 7

IN THE

,upremt Court of t1jr ni

tat

No. 138, Original

STATE OF SOUTH CAROLINA,

Plaintiff,v.

STATE OF NORTH CAROLINA,

Defendant.

On Bill of Complaint

MOTION FOR LEAVE TO INTERVENE OF THECITY OF CHARLOTTE, NORTH CAROLINA,

AND BRIEF IN SUPPORT OF MOTION

Pursuant to this Court's Rule 17, the City of Char-lotte, North Carolina, through its City Attorney,DeWitt F. McCarley, hereby moves for leave tointervene as a party defendant in this action.

INTRODUCTION

The City of Charlotte respectfully requests that itbe granted leave to intervene as it has a substantialinterest in this water rights dispute. Charlotte,which sits on the border between the Carolinas, is byfar the largest municipality on the Catawba Riverand the largest provider of water supply and waste-water treatment services in the Catawba River

2

Basin. Therefore, and not surprisingly, Charlotte isone of the principal stakeholders in the negotiatedComprehensive Relicensing Agreement relating toDuke Energy's hydroelectric power facilities on theCatawba River.

Much of South Carolina's complaint is aimed at theNorth Carolina inter-basin transfer (IBT) statuteand the IBTs from the Catawba River authorizedunder that statute, and this puts Charlotte squarelyin South Carolina's crosshairs. Charlotte is thegovernment entity in North Carolina vested with thelegal authority to carry out the large majority of theIBTs to which South Carolina objects. Charlottepossesses a Certificate issued by the North CarolinaEnvironmental Management Commission authoriz-ing the City to execute IBTs of up to 33 milliongallons per day (MGD) from the Catawba River. AndCharlotte may soon be responsible for another 10MGD of such IBTs. Given its important interestsand its IBT authority, Charlotte should be allowed totake its place as a party defendant in this case.

STATEMENT

CHARLOTTE'S INTER-BASIN TRANSFERSAND WATER SUPPLY SERVICES ARE THEPRIMARY TARGETS OF SOUTH CAROLINA'SCOMPLAINT.

A. Charlotte Is the Largest Municipality andLargest Provider of Water Supply andWastewater Treatment Services in the Ca-tawba River Basin.

Charlotte is the largest of 18 Metropolitan Statisti-cal Areas in the two Carolinas, and is by far thelargest provider of water supply and wastewatertreatment services in the Catawba River Basin.Since 1911, when Charlotte first tapped the Catawba

3

River for water, the breadth of Charlotte's serviceshas grown steadily until, in 2006, Charlotte served apopulation of more than 800,000 in six counties andnine towns in both North Carolina and South Caro-lina. Charlotte also has service connections with theCity of Concord in Cabarrus County, and with UnionCounty, enabling Charlotte to serve these areas onan emergency basis when needed. A cost-effectiveresponse to the water supply and sewage treatmentservices requirements of the metropolitan area'srapid expansion is likely to depend on Charlotte'ssystem.

Charlotte's water supply service accounts forapproximately 53 percent of all municipal usage ofthe water resources of the Catawba River Basin.Among North Carolina users, Charlotte withdraws64 percent of the water taken from the River formunicipal water supplies.

Charlotte's population, as well as its institutional,industrial, and commercial customer base, are grow-ing rapidly. From 1987 through 2006; the populationin Charlotte's service area grew from about 480,000to more than 800,000, and the demand for treatedwater supplies grew from 57 MGD to 110 MGD.Recent studies project that these demands willcontinue to increase at an annual rate of 1.5 percent,resulting in water supply needs of 215 MGD andwastewater treatment needs of 159 MGD by 2050.

B. Charlotte Accounts for the Large Majorityof the Inter-Basin Transfers About WhichSouth Carolina Complains.

Charlotte accounts for the lion's share of the inter-basin transfers of water from the Catawba RiverBasin in North Carolina-the very IBTs thatprompted South Carolina to bring this action. Fur-

4

thermore, Charlotte may in the future account fornearly all of such IBTs.

Charlotte is responsible for public water supplies toall of Mecklenburg County, which lies in the rollingterrain of the Appalachian foothills spanning theRocky/Yadkin/Pee Dee (RYPD) and Catawba RiverBasins. The Catawba River forms the County'swestern boundary. A north-south ridgeline transectsthe County, leaving approximately the eastern one-third portion of the County in the RYPD Basin,which offers far less plentiful and less dependablewater supplies. See Exhibit 1 (map of Catawba RiverBasin). For this reason, Charlotte relies on itsCatawba River intakes and well-established systemof water treatment facilities to service customers inboth basins. After use, treated wastewater in theRYPD Basin is discharged to local streams andrivers rather than being piped back to the CatawbaBasin for discharge. This efficient process for serv-ing all residents of the County results in IBTs.

Since 1990, Charlotte has experienced considerablepopulation growth in the northern and easternportions of its service area within MecklenburgCounty. Much of the increased water demand result-ing from population growth in these areas arises justeast of the ridgeline within the RYPD Basin. SeeExhibit 1 (map). Especially in the northern portionof the service area, these expanding communities arelocated only a few miles from Charlotte's high-capacity water intake at Lake Norman on the Ca-tawba River just west of the ridgeline. These cus-tomers cannot rely on the meager headwaters of thenearby Rocky River, and are located some 20 milesfrom the modest water flows of the upper reaches ofthe Yadkin River to the east.

5

In its complaint, South Carolina focuses its claimsprimarily on the two permits granted by NorthCarolina for IBTs from the Catawba River Basin tothe RYPD River Basin. See Complaint 111 3, 20.Charlotte holds the larger (33 MGD) of these twopermits. The Cities of Concord and Kannapalis holdthe smaller (10 MGD) permit but, as discussedbelow, Charlotte may well be called upon to imple-ment this IBT as well.

On March 14, 2002, the North Carolina Environ-mental Management Commission (EMC) approvedCharlotte's request for an increase in its IBT authority from 16.1 MGD to 33 MGD in order to meet watersupply needs in eastern Mecklenburg Countythrough the year 2030. See Exhibit 2 (Environ-mental Management Commission, Certificate Au-thorizing the Charlotte-Mecklenburg Utilities toIncrease Their Transfer of Water from the CatawbaRiver basin to the Rocky River basin under theProvisions of G.S. 143-215.221 (Mar. 14, 2002))(Charlotte IBT Certificate). The EMC found:

[T]he transfer is necessary to supply water to thegrowing communities of this area. Water fromthe source basin is readily available and within ashort distance from the service area. Thereforethe transfer is a reasonable allocation to thesecommunities. The transfer will greatly benefitthese communities by providing raw water of highquality for residential and industrial purposes.

Id. at 4e. The EMC also analyzed the effect of Char-lotte's 33 MGD IBT on the entire Catawba Basin,including water flows and utilization in South Caro-lina, and specifically found that, even with theresulting reductions in flows from Lake Wylie intoSouth Carolina, detrimental effects on the Catawba

6

Basin, would be "insignificant." Id. at 5e. Next, theEMC considered whether communities in easternMecklenburg County could obtain their water fromthe Rocky River, and found that this option would beless feasible than Charlotte's requested IBT becauseit would entail the difficult task of constructing newreservoirs in a rapidly developing urban area. Id. at7e. Finally, the EMC rejected the option of returningwastewater to Charlotte's McAlpine wastewatertreatment plant for discharge into the CatawbaBasin because the South Carolina Department ofHealth and Environmental Control would likelyobject to the increased discharges from that plant.Id. In the final analysis, the EMC concluded that"(1) the benefits of the proposed transfer outweighthe detriments of the proposed transfer, and (2) thedetriments of the proposed transfer will be mitigatedto a reasonable degree." Id. at 9e.

On January 10, 2007, the EMC granted a requestfrom the Cities of Concord and Kannapolis for anIBT of 10 MGD from the Catawba Basin to theRYPD Basin to meet anticipated water needsthrough the year 2035. See Environmental Man-agement Commission, Certificate Authorizing theCities of Concord and Kannapolis to Transfer Waterfrom the Catawba River and Yadkin River Basins tothe Rocky River basin under the Provisions of G.S.143-215.221 (Jan. 10, 2007). This IBT would provideapproximately 15 percent of the necessary maximumdaily demand expected for a population of over400,000 in 2035. See id. at 2. The EMC found:

Based on the record, the Commission finds thatcurrent water supplies are insufficient to supplythe Cities of Concord and Kannapolis and theirrelated service areas on the reasonable planning

7

horizon of the year 2035. Providing water for theanticipated growth of these communities willhave a major beneficial effect. The Commissionprojects that the water supply deficit for these ar-eas will be about 18.32 MGD on a maximum cal-endar day basis in 2035. [Id. at 5.]

As it had for the Charlotte IBT request, the EMCanalyzed the impacts of the ConcordlKannapolisrequest on the entire Catawba River Basin andfound that detrimental effects would be "insignifi-cant." Id. at 21. The EMC also examined severalnon-IBT alternatives and found them not to befeasible. Id. at 24.

While the actual method for transferring 10 MGDfrom Lake Norman to ConcordlKannapolis has notbeen selected, these Cities contemplate that purchas-ing treated water from Charlotte will be among thepreferred options for some or all of this IBT. Id. at 1.Concord's corporate limits and water service area arecontiguous with Charlotte's service area. See Exhibit1 (map). Charlotte already has the required intakecapacity at Lake Norman, and the water treatmentcapacity necessary to meet those Cities' needs can beadded efficiently at Charlotte's Lee S. Dukes, Jr.water treatment plant. Thus, if ConcordlKannapolisselect this option, Charlotte will be responsible forimplementation of all of the 43 MGD of IBTs towhich South Carolina objects in its complaint.

In addition, by seeking an equitable apportionmentof the Catawba River and alleging that existing IBTsalready exceed North Carolina's equitable share ofthe River's flows, see S.C. App. for Prelim. Inj. at 2,5-6, South Carolina necessarily claims that existingand planned consumptive uses within the CatawbaRiver Basin in North Carolina must be curtailed and

8

even reduced. Again, Charlotte is the principaltarget of South Carolina's complaint.

Municipal consumptive uses of water occur due toactivities such as lawn watering, use of septic sys-tems, evaporative cooling and product manufactur-ing. In 2007, Charlotte withdrew an average of 104MGD from the Catawba River for uses within theBasin, and it returned an average of 69 MGDthrough discharges of treated wastewater to theCatawba River or its tributaries. The difference-approximately 35 MGD-represents average con-sumptive uses within the Catawba Basin. By 2030,it is estimated that Charlotte's maximum intra-Basin consumptive uses will be 42.2 MGD, or ap-proximately the same amount as the combined IBTsdiscussed above. See Environmental Assessment forCharlotte-Mecklenburg Utitilies for Increase inInter-Basin Transfer from the Catawba River Sub-basin to the Rocky River Subbasin at Table 7 pre-pared for the EMC by CH2M HILL, Apr. 2001).

II. CHARLOTTE HAS A SIGNIFICANT INTERESTIN THE NEGOTIATED COMPREHENSIVERELICENSING AGREEMENT.

As part of its effort to secure a new license from theFederal Energy Regulatory Commission (FERC)pursuant to the Federal Power Act (FPA), see 16U.S.C. § 797(e), for its 11 hydroelectric power facili-ties on the Catawba River, Duke Energy Carolinascarried out a multi-year negotiation process involv-ing 80 stakeholders in both States to develop aComprehensive Relicensing Agreement. See Com-prehensive Relicensing Agreement for the Catawba-Wateree Hydro Project, FERC Project No. 2232(Dec. 22, 2006) (CRA) (http:I/www.duke-energy.cornIcatawba-wateree-relicensing.asp). Charlotte partici-

9

pated throughout the process, executed the CRAalong with 68 other parties, and holds one of 12 seatson the Final Agreement Committee established bythe signatories. See id. § 26. Among the CRA'ssignatories are some 28 South Carolina cities, or-ganizations, counties, water and sewer districts,businesses, commissions, residents and departmentsof the State of South Carolina. See id., App. B (Up-dated Nov. 2007).

The CRA is a binding contract among the parties toit. See id., Recitals, at 4-5. In their contract, theparties stated that "they are in agreement with theentirety of this Agreement." Id. § 1.1. The partiesthen set forth in great detail all of the river flows,water uses, reservoir levels and other parametersthat should govern Duke's operation of its 11 pro-jects. See id. g 2-15. With respect to water uses,the parties agreed that, based upon their modeling,the amounts of withdrawals and returns set forth inAppendix H would be accommodated if Duke re-leased the specific flow amounts and maintained thespecific reservoir levels for each project, as set forthin the Agreement. See id. § 5.3. Appendix H, inturn, reflects the withdrawals, consumptive uses andIBTs for which Charlotte has authority, as discussedabove. See id., App. H.

The CRA parties expressly set forth their "desireand expectation that the FERC will approve theAgreement * * * and issue a New License for theProject that incorporates, without material modifica-tion, the proposed License Articles in Appendix A,"which reflect the substance of the CRA. Id. § 18.1.Giving concrete effect to this intent, the partiesagreed that, with certain limited exceptions:

10

[N]o Party may request or advocate, during theperiod of this relicensing prior to the FERC's is-suance of the New License and the closure of allrehearing and administrative challenge periods,by any activity * * * any New License require-ments that would, if adopted by the FERC, be anInconsistent Act. [Id. § 20.1.2.]

An Inconsistent Act is defined as "any action by aJurisdictional Body that increases the burden uponor cost or risk to a Party substantially beyond theburden, cost, or risk assumed by the Party in thisAgreement, or deprives a Party of a substantialbenefit promised by another Party in this Agreement* * * ." Id., App. E., Definition 23. A JurisdictionalBody is defined as "any governmental body whichhas the authority to prevent implementation of, or torequire that specific steps be followed prior to im-plementing any part of this Agreement or to requireactivities that result in an Inconsistent Act." Id.,App. E, Definition 24.

South Carolina has brought this action in parenspatriae, and therefore represents all of the 28 SouthCarolina parties to the CRA. In its complaint, SouthCarolina and those parties seek an order that wouldreduce the amounts of consumptive uses and IBTsreflected in the CRA, and thereby increase Char-lotte's burden and cost, and deprive Charlotte ofsubstantial benefits promised by those parties.

ARGUMENT

CITIES MAY BE AND HAVE BEEN PARTIESAND INTERVENORS IN ORIGINAL ACTIONS.

The City of Charlotte may properly be made aparty in this case. As this Court's cases reflect, citiesmay be and have been parties in original actions

11

commenced by States. See, e.g., New Jersey v. City ofNew York, 290 U.S. 237 (1933) (enjoining New YorkCity from polluting the waters off the coast of NewJersey); Georgia v. City of Chattanooga, 264 U.S. 472(1924) (granting leave to file bill of complaint seekingto enjoin Chattanooga from appropriating landowned by Georgia); Wisconsin v. City of Duluth, 96U.S. 379 (1877) (rejecting on the merits Wisconsin'sbill in chancery seeking to enjoin Duluth's diversionof the St. Louis River through a federally-fundedcanal); see also Illinois v. City of Milwaukee, 406 U.S.91, 97 (1972) (concluding, in action brought by Illi-nois against four Wisconsin cities, that "while, underappropriate pleadings, Wisconsin could be joined as adefendant in the present controversy, it is not man-datory that it be made one"). 1

Furthermore, in a prior original action brought byone State against another State, this Court granted acity's motion to intervene. See Texas v. Louisiana,426 U.S. 465, 466 (1976) (noting that the City of"Port Arthur, Tex., was permitted to intervene forpurposes of protecting its interests in the islandclaims of the United States"); see also Texas v. Lou-isiana, 416 U.S. 965 (1974) (order granting PortArthur's motion). For the reasons that follow, thisCourt should grant the City of Charlotte leave tointervene as a party defendant in this action.

1 The Court in Illinois v. City of Milwaukee observed thatnon-exclusive original jurisdiction under 28 U.S.C. § 1251(b)(3)extends to a suit by a State against the "political subdivisions ofa State." 406 U.S. at 98.

12IL CHARLOTTE POSSESSES THE AUTHORITY

TO CARRY OUT THE LARGEST AND MOSTSIGNIFICANT INTER-BASIN TRANSFERS OFCATAWBA RIVER WATER.

1. The City of Charlotte should be a party to thisoriginal action, first and foremost, because it is theentity vested with the legal authority to carry out thelargest and most significant IBTs from the CatawbaRiver that are the focus of South Carolina's com-plaint. Thus, Charlotte has a major interest indefending the current IBT regime.

Charlotte possesses a Certificate, issued in 2002 bythe North Carolina Environmental ManagementCommission, authorizing the City to execute IBTsfrom the Catawba River of 33 million gallons per day(MGD) on a maximum day basis. See Exhibit 2(Charlotte IBT Certificate). The IBT Certificate wasissued under the authority of North Carolina'sformer IBT statute. See N.C. Gen. Stat. § 143-215.221(1993) (repealed effective Aug. 31, 2007).

South Carolina's Complaint focuses upon the 48MGD of water authorized by North Carolina law andthe EMC to be transferred from the Catawba RiverBasin. See Complaint TIT 3, 20. Charlotte is author-ized to carry out 33 MGD of the 48 MGD at issue andsoon may be responsible for an additional 10 MGDauthorization. Indeed, South Carolina specificallycomplains about Charlotte's IBT Certificate authoriz-ing "the Charlotte-Mecklenburg Utilities to transferup to 33 million gallons per day from the CatawbaRiver Basin to Rocky River Basin, more than doublethe 16 million gallons per day limit that had previ-ously applied." Id. 20(a). See also S.C. Br. in Supp.of Mot. for Leave to File Compl. at 7.

13

Accordingly, Charlotte has a direct and significantstake in the present controversy. As the publicwater supplier providing over half of the municipalwater supply withdrawn from the Catawba River,Charlotte has an enormous responsibility to providesafe and adequate service, and a critical interest indefending its authority under its IBT Certificate.Charlotte's public responsibilities would be jeopard-ized if South Carolina's claim for equitable appor-tionment resulted in an injunction that would pre-vent Charlotte from carrying out the IBTs that itsCertificate authorizes. See S.C. Complaint, Prayerfor Relief, ¶2 (seeking injunctive relief).

That Charlotte should be a party to this action isstrongly supported by New York City's party statusin New Jersey v. New York, 283 U.S. 336 (1931) (NewYork). In that original action, New Jersey sued theState and City of New York in 1929 to enjoin aproposed diversion of water from the Delaware River"in order to increase the water supply of the City ofNew York." Id. at 342. 2 New York City was presentin the case, this Court explained, "since she was theauthorized agent for the execution of the sovereignpolicy which threatened injury to the citizens of NewJersey." New Jersey v. New York, 345 U.S. 369, 375(1953) (per curiam). "New Jersey joined the City ofNew York as a defendant, because the City, actingunder State authority, was planning the actualdiversion of the water for its use." ld. at 370-371.

2 The Commonwealth of Pennsylvania promptly moved forleave to intervene, and this Court granted the motion inJanuary 1930. See New Jersey v. New York, 280 U.S. 528(1930) (order).

14

So too here. Charlotte is the dominant "authorizedagent for the execution of the sovereign policy" atissue, i.e., the inter-basin transfers of Catawba Riverwater, and it is Charlotte that, "acting under Stateauthority," is responsible for the largest and mostsignificant "actual diversions of water" (current andplanned) that South Carolina claims are injurious.

In New York, New Jersey sought to prevent diver-sions of water from the Delaware River to New YorkCity. It would have made little sense for that actionto proceed without New York City as a party defen-dant. In this action, South Carolina seeks to preventinter-basin transfers of water from the CatawbaRiver-transfers predominately carried out by theCity of Charlotte. It makes little sense for this actionto proceed without Charlotte as a party defendant. 3

To be sure, New York City, unlike Charlotte, "wasforcibly joined as a defendant to the original action."Id. at 375. But that does not answer the questionwhether Charlotte should be permitted to join theaction as a willing defendant. The instant action isincomplete without Charlotte.

Missouri v. Illinois, 180 U.S. 208 (1901), providesfurther support for affording Charlotte party status.In that original action, Missouri filed a bill of com-plaint against Illinois and the Sanitary District ofthe City of Chicago seeking to enjoin those twodefendants from discharging sewage into the Missis-sippi River. Ruling on a demurrer to the bill, this

3 The decree entered by the Court in 1931 restrained NewYork City as well as New York State. See New Jersey v. NewYork, 283 U.S. 805 (1931). If any decree entered in this actionis to bind the City of Charlotte, as a practical matter the Cityshould be a party to the litigation.

15

Court deemed both Illinois and the Chicago SanitaryDistrict to be proper party defendants. With respectto the Chicago Sanitary District, this Court com-mented that it "is an agency of the state to do thevery things which, according to the theory of thecomplainant's case, will result in the mischief to beapprehended." Id. at 242. Exactly the same can besaid here of the City of Charlotte.

2. It is true that this Court, in 1953, denied theCity of Philadelphia's motion to intervene in NewYork. See id. at 372-375. 4 But the Court had com-pelling reasons to deny Philadelphia's motion tointervene that do not apply to Charlotte.

First, Philadelphia, unlike New York City, was not"the authorized agent for the execution of the sover-eign policy which threatened injury." Id. at 375.Charlotte is. This Court recognized the distinction,and based on it rejected Philadelphia's argumentthat New York City's presence in the case was areason to allow Philadelphia to intervene. See id. at374-375. Here, Charlotte's "position in the case," id.at 375, is close to the position of New York City, notPhiladelphia.

Second, Philadelphia sought to intervene morethan twenty years too late. New Jersey filed suitagainst the New York defendants in 1929, Pennsyl-vania intervened in 1930, and this Court entered its

4 Although the Court denied Philadelphia's motion to inter-vene, the issue presented by the motion was sufficientlyimportant and close that the Court scheduled oral argument onthe motion. See New Jersey v. New York, 344 U.S. 932 (1953)(order). Two Justices dissented from the Court's decision todeny intervention. See 345 U.S. at 375-376 (Jackson, J.,dissenting).

16

original decree in 1931. Philadelphia did not move tointervene until 1952-more than two decades aftereach of these events. See id. at 370-374. 5 Here, thisCourt granted South Carolina leave to file its bill ofcomplaint on October 1, 2007, and appointed aSpecial Master on January 15, 2008. Thus, Char-lotte's motion to intervene is timely. See Part IV,infra.

III. CHARLOTTE SHOULD NOT BE DENIEDPARTY STATUS SIMPY BECAUSE NORTHCAROLINA IS A DEFENDANT.

In New York, this Court stated that lain interve-nor whose state is already a party should have theburden of showing some compelling interest in hisown right, apart from his interest in a class with allother citizens and creatures of the state, whichinterest is not properly represented by the state."345 U.S. at 373. In this case, the City of Charlotteshould not be barred from joining this litigation as aparty defendant merely because the State of NorthCarolina is already such a party.

To begin with, the force of the New York principle(it cannot be called a rule) is not strong. New Yorkitself proves as much. The Court could have re-quired New York City to show cause why it shouldnot be dismissed from the case due to the presence ofNew York State in the litigation. It did not do so.

Furthermore, the Court has not always applied theNew York principle or required an intervenor city to

5 Philadelphia filed its motion to intervene on December 13,1952, eight months after New York City, supported by NewYork State, had moved on April 1, 1952, to modify in certainrespects the 1931 decree.

17

make the showing suggested in New York. In Texasv. Louisiana, supra, this Court permitted the City ofPort Arthur, Texas, to intervene even though Texaswas already a party. See supra at 11. Port Arthurdid not attempt to make the showing suggested inNew York, and this Court granted Port Arthur'smotion to intervene without asking it to do so.

In any event, Charlotte has "a compelling interestin [her] own right, apart from [her] interest in a classwith all other citizens and creatures of the state."New York, 345 U.S. at 373. As shown above, Char-lotte is not only the largest municipality and pro-vider of water supply services in the Catawba RiverBasin but holds the IBT certificate authorizing thelargest and most significant inter-basin transfers ofthe Catawba River. As such, Charlotte clearly is not"in a class with all other citizens and creatures of thestate." There are other municipalities along theCatawba River, but Charlotte's size and IBT Certifi-cate place her in a class by herself.

Finally, Charlotte's interest is not a carbon copy ofNorth Carolina's. Cf. New York, 345 U.S. at 374(Philadelphia was "unable to point out a singleconcrete consideration in respect to which the Com-monwealth's position does not represent Philadel-phia's interests."). There are two material differ-ences between Charlotte's interest and North Caro-lina's.

1. North Carolina as parens patriae must repre-sent the interests of all water users in the Statealong the Catawba River, including municipal usersupstream of Charlotte whose interests may not bealigned with Charlotte's interests. Charlotte's inter-

18

est, meanwhile, is exclusively that of a downstream

water user.

The Eighth Circuit in South Dakota v. Ubbelhohde,330 F.3d 1014 (8th Cir. 2003) (South Dakota), cert.denied, 541 U.S. 987 (2004), addressed a very similar

situation. There, the State of South Dakota sued theU.S. Army Corps of Engineers over the Corps' deci-sions with respect to the release of water from reser-voirs on the Missouri River. The State of Nebraskamoved to intervene, but the District Court denied themotion. Relying on the parens patriae principle, theDistrict Court ruled that Nebraska's interests wereadequately represented by the Corps.

The Eighth Circuit reversed and held that Ne-braska was entitled to intervene as a matter of right.Addressing parens patriae, the Eighth Circuit ob-served that "[t]he Corps is charged with managingthe Missouri River system as a whole -a charge thatrequires it to balance the interests of upstream anddownstream users. The proposed intervenors, on theother hand, wish to represent exclusively down-stream interests." 330 F.3d at 1025. In light of theCorps' charge to represent both upstream and down-stream users, the Eighth Circuit reasoned that theparens patriae principle was not a bar to Nebraska'sintervention. As the Eighth Circuit stated:

South Dakota asks this Court to hold that theCorps will adequately represent downstream us-

ers. We decline to do so. Given that the Corps isasked to balance multiple interests, we concludethat it cannot adequately represent the interestsof downstream users in this case. The parens pa-triae presumption, therefore does not present anobstacle to intervention. [Id.]

19

See also Alabama v. U.S. Army Corps of Eng'rs, 229F.R.D. 669, 675 (N.D. Ala. 2005) (Alabama) (follow-ing South Dakota and permitting the City of Mont-gomery, Alabama, water board to intervene in waterrights litigation despite the objection that the Stateof Alabama stood in a parens patriae relationship tothe intervenor).

South Dakota and Alabama illustrate one cleardifference between Charlotte's interest and NorthCarolina's. Charlotte sits on the border betweenNorth Carolina and South Carolina, and the City'sservice area extends downstream of all other NorthCarolina users of the Catawba River. North Caro-lina-like the Corps in South Dakota-must "balance[the] multiple interests" of all "upstream and down-stream users" of the River in the State whereasCharlotte's interests are "exclusively downstream."South Dakota, 330 F.3d at 1025.

2. Charlotte has a strong interest in securing thebenefits promised by the 28 South Carolina partiesthat signed the CRA. So too does the State of NorthCarolina. Unlike Charlotte, however, North Caro-lina has duties under Section 401 of the Clean WaterAct, 33 U.S.C. § 1341, that kept North Carolina fromassenting to the precise magnitude and timing ofuses and IBTs delineated in the CRA for the benefitof Charlotte and its water supply customers.

Section 401 requires States to certify that federallicenses for activities resulting in discharges intonavigable waters-such as the FPA license for whichDuke has applied-"will not violate certain waterquality standards, including those set by the State'sown laws." S.D. Warren Co. v. Maine Bd. of Envtl.Prot., 126 S. Ct. 1843, 1846 (2006). In recognition of

20

North Carolina's Section 401 duties, the CRA pro-vides that nothing in it shall affect or limit NorthCarolina's authority "pursuant to 33 U.S.C. § 1341,and related state statutes and rules, to issue a waterquality certification, or to alter its water qualitycertification, with whatever conditions the State ofNorth Carolina * * * determine[s] should be in-cluded." CRA § 19.3. The CRA also provides that,for purposes of discharging its "rights, duties andresponsibilities under 33 U.S.C. § 1341, the State ofNorth Carolina * * * do[es] not assent to any fact,opinion, approach, methodology, and principle,expressly identified or otherwise implied in thisAgreement." CRA § 19.3. Charlotte is not con-strained in this fashion by the CRA or Section 401.Accordingly, Charlotte's interest in defending andsecuring the full range of benefits under the CRA isnot subject to duties imposed by Section 401.

IV. CHARLOTTE'S MOTION TO INTERVENE ISTIMELY.

Charlotte's motion to intervene is timely becausethis original action is still at a preliminary stage. OnOctober 1, 2007, the Court granted South Carolina'smotion for leave to file a bill of complaint. On No-vember 30, 2007, Duke Energy Carolinas, LLC, andthe Catawba River Water Supply Project filed mo-tions to intervene; those motions remain pending.On January 15, 2008, the Court appointed a SpecialMaster and referred to her the pending motions tointervene. Given the limited proceedings that havetaken place to this point, Charlotte's motion istimely. Cf. Alabama, 229 F.R.D. at 672 (motions tointervene were timely, even though "the case beforethe court is fifteen years old," because "[t]tle courthas not yet conducted proceedings on the merits of

21

the case, and the movants' intervention will notdelay the proceedings").

CONCLUSION

For the foregoing reasons, the City of Charlotte'smotion for leave to intervene should be referred tothe Special Master and should be granted.

Respectfully submitted,

DEWITT F. MCCARLEYCity Attorney

H. MICHAEL BOYDSenior AssistantCity Attorney

OFFICE OF THE CITYATTORNEY

600 East Fourth StreetCharlotte, N.C. 28202(704) 336-2254

*Counsel of Record

FEBRUARY 2008

JAMES T. BANKSH. CHRISTOPHER BARTOLOMUCCI*HOGAN & HARTSON L.L.P555 Thirteenth Street, N.W.Washington, D.C. 20004(202) 637-5600

PARKER D. THOMSONHOGAN & HARTSON L.L.P.1111 Brickell AvenueSuite 1900Miami, FL 33131(305) 459-6500

Counsel for the City of Charlotte

E-00.4

0-4W

W

Charlotte Mecklenburg Utilities Service Area

jy^ RidgelineRidgelirie

Water Intakes

EXHIBIT 2

ENVIRONMENTAL MANAGEMENT COMMISSION

Certificate Authorizing the Charlotte-MecklenburgUtilities to Increase Their Transfer of Water fromthe Catawba River basin to the Rocky River basin

under the Provisions of G.S. 143-215.221

In August 2001, the Charlotte-MecklenburgUtilities (CMU) petitioned the EnvironmentalManagement Commission (EMC) for an increase ininterbasin transfer (IBT) from the Catawba RiverBasin to the Rocky River Basin. CMU requested anincrease from the grandfathered IBT of 16.1 milliongallons per day (mgd) to 33 mgd (maximum daybasis). The proposed IBT is based on additionalwater withdrawals from Lake Norman and MountainIsland Lake in the source basin (Catawba RiverBasin). The IBT will increase due to transfer of thewater to the receiving basin (Rocky River Basin) viaconsumptive use in eastern Mecklenburg County andexisting discharges at Mallard Creek WastewaterTreatment Plant [WWTP] and Water and SewerAuthority of Cabarrus County's [WSACC] RockyRiver Regional (RRR) WWTP. CMU requested anincrease to 33 mgd, will allow CMUD to meetprojected water supply demands through the year2030 in eastern Mecklenburg County. This IBT doesnot include transfers associated with water orwastewater service provided to the Goose Creekwatershed in the Town of Mint Hill in MecklenburgCounty. Public hearings on the proposed transferincrease were held in Huntersville on December 11,2001 pursuant to G.S. 143-215.221.

The EMC considered the petitioner's request at itsregular meeting on March 14, 2002. According to

2e

G.S. 143-215.221 (g), the EMC shall issue a transfercertificate only if the benefits of the proposedtransfer outweigh the detriments of the proposedtransfer, and the detriments have been or will bemitigated to a reasonable degree.

The EMC may grant the petition in whole or inpart, or deny it, and may require mitigationmeasures to minimize detrimental effects. Inmaking this determination, the EMC shallspecifically consider:

1. The necessity, reasonableness, and beneficialeffects of the transfer.

2. Detrimental effects on the source river basin.

2a. The cumulative effect on the source major riverbasin of any water transfer or consumptivewater use.

3. Detrimental effects on the receiving basin.

4. Reasonable alternatives to the proposedtransfer.

5. Use of impounded storage.

6. Purposes and water storage allocations in a USArmy Corps of Engineers multipurpose reservoir.

7. Any other facts or circumstances necessary tocarry out the law.

In addition, the certificate may require a droughtmanagement plan. The plan will describe theactions a certificate holder will take to protect thesource basin during drought conditions.

The members of the EMC reviewed and consideredthe complete record which included the hearingofficer's report, staff recommendations, theapplicant's petition, the Final Environmental

3e

Assessment, the public comments relating to theproposed interbasin transfer, and all of the criteriaspecified above. Based on that record, theCommission makes the following findings of fact.

Finding of Fact

THE COMMISSION FINDS:

(1) Necessity, Reasonableness, and Benefits ofthe Transfer

The proposed transfer will provide water toMecklenburg County, City of Charlotte, and othercommunities in the county. The current populationserved is about 636,000 with a maximum day wateruse of about 154 million gallons per day (mgd).Projections assume a 2.6 percent annual increasethrough 2010 decreasing to 1.3 percent by 2030. Theprojected 2030 serve population is 1,101,000 with amaximum day water use of about 245 mgd.

The western boundary of Mecklenburg countyincludes Lake Norman and Mountain Island Lakewhich are CMU's two water sources. CMU's currentcombined withdrawal capacity from both lakes isadequate to meet average day demands until about2020. CMU has requested an increase from theFederal Energy Regulatory Commission (FERC) toincrease their Mountain Island Lake withdrawalcapacity. The requested increase from 165 mgd to330 mgd (instantaneous maximum) will meetprojected 2030 demands and add pumping flexibility.

The transfer of water will benefit the MecklenburgCounty region by guaranteeing water to support theeconomic development and associated populationgrowth that has occurred and projected to occur inthis region of the State.

4e

Based on the record the Commission finds thetransfer is necessary to supply water to the growingcommunities of this area. Water from the sourcebasin is readily available and within a short distancefrom the service area. Therefore the transfer is areasonable allocation to these communities. Thetransfer will greatly benefit these communities byproviding raw water of high quality for residentialand industrial purposes.(2) Detrimental Effects on the Source Basin

In order to assess the direct impacts of theproposed transfer on the source basin, the petitionersutilized Duke Energy's Hydro-Electric Operationsand Planning Model of the Catawba-Wateree Project.The Catawba-Wateree model simulates reservoiroperations and withdrawals from Lake James inNorth Carolina to Lake Wateree in South Carolina(see the following figure the Catawba-Wateree RiverSystem). Details of the modeling analysis areincluded in this report Part V ApplicantSupplemental Information.

[IMAGE OMITTED]

As required under G.S. 143-215.221(0(2), localwater supply plans were considered in developingthe model. In addition, industrial and agriculturalwithdrawals were model inputs. Model runs wereevaluated for present conditions, 2030 CMU waterdemands, and cumulative 2030 water demands.

As seen in the following table, a summary of dailyreleases from Lake Wylie, the transfer will haveminimal impact on low flows. Similarly the modelresults show minimal impacts to both lake levels andhydropower generation.

[TABLE OMITTED]

5e

Based on the modeling results the Commissionfinds that the detrimental effects on the source basindescribed in G.S. §143-215.22I(f)(2) will beinsignificant.

(2a) Cumulative effect on Source Basin of anytransfers or consumptive water useprojected in local water supply plans

Local water supply plan data, including currentand projected water use and water transfers, wereused to develop the input data sets for the modeldiscussed in Finding Number 2. The model was usedto evaluate current and future scenarios of basinwater use.

The safe yield of the reservoir system has not beendetermined. Duke Power does not have a policy onreallocation of power pool storage to water supply,for example unlike the Corps of Engineers. However,based on two 2030 model scenarios and currentdrought operations, the safe yield is at least as largeor larger than the cumulative 2030 scenario of 624mgd.

Based on the modeling discussed in Finding No. 2,the Commission finds the cumulative effects of thisand other future water transfers or consumptive usesas described in G.S. §1 43-215.22I(f)(2a) will beinsignificant.

(3) Detrimental Effects on the Receiving Basin

The proposed transfer will utilize existingpermitted wastewater discharges to the Rocky Riverbasins; therefore no additional permitted capacitieswill be required. Previous studies for the existingplant indicated no significant direct water quality orwastewater assimilation on the receiving stream.Additional growth and development in the receiving

6e

basin may impact water quality, stormwater runoff,frequency and intensity of flooding, and land use.

The Goose Creek watershed in MecklenburgCounty was removed from the area to be served bythis transfer certificate until the impacts ofadditional urban growth on Federally listedendangered mussel specifies are fully evaluated.

Based on the record the Commission finds thetransfer will support continued population growthand the attendant impacts of that growth. Theseimpacts include effects on wastewater assimilation,fish and wildlife habitat, and water quality.However, these impacts will be minimal. Reasonablemitigation includes:

1. Require the County to evaluate the feasibility ofeach element of the Surface Water Improvementand Management Program (SWIM) on anannual basis.

2. Require the County and the Town of Mint Hill toconsider the conclusions of Wildlife ResourcesCommission's Goose Creek watershed study whencomplete.

3. Require Mecklenburg County and the City ofCharlotte to continue the stakeholder process toinvestigate water quantity control from single-family development and water quality control forall development.

4. The Goose Creek subbasin in MecklenburgCounty is removed from the area to be served bythe IBT. A moratorium on the installation ofnew IBT water lines into Goose Creek subbasin isin effect until the impacts of additional growthurban growth on the endangered specifies arefully evaluated.

7e

(4) Alternatives to Proposed Transfer

The petitioners evaluated three alternatives to theproposed transfer. The alternatives consideredincluded:

1. No Action - Growth would be served byindividual wells and septic tanks. The region isalready experiencing water quality problemsrelated septic tanks and package sewage plants.Also, a number of individual wells in this regionhave both low yields and poor water quality.

2. Obtain Water from the Rocky River - Newreservoir project. Development of newimpoundments for water supply in rapidlydeveloping urban area face significantregulatory requirements and considerable publiccontroversy.

3. Return wastewater discharge to the Catawba -Return wastewater to the McAlpine WWTP.Returning water to the Catawba would increaseMcAlpine's discharge by 17 mgd. SC DHECconsiders the McAlpine plant to be a significantcontributor to phosphorus in the Catawba basinalready at it's current discharge level.

4. Proposed Action. The proposed action of usingthe Mallard Creek WTTP and the RockyRegional WTTP increases the existing dischargeof 8 mgd to 18 mgd by 2030 into the Rocky River.

Based on the information provided in the EA andthe petition, the Commission finds that the proposedalternative is the most feasible means of meeting thepetitioners' long-term water supply needs whileminimizing overall impacts and cost.

8e

(5) Impoundment Storage

This criterion is not applicable, as the petitionersdo not have an impoundment.

(6) The water to be withdrawn or transferredis stored in a multipurpose reservoirconstructed by the United States ArmyCorps of Engineers

This criterion is not applicable, as the petitionersare using storage in Duke Power reservoirs.

(7) Other Considerations

The Commission finds that to protect the sourcebasin during drought conditions, to mitigate thefuture need for allocations of the limited resources ofthis basin, and as authorized by G.S. § 143-215.22I(h), a drought management plan isappropriate. The plan should describe the actionsthat the Charlotte-Mecklenburg Utilities will take toprotect the Catawba River Basin during droughtconditions.

The Commission notes that future developmentsmay prove the projections and predictions in the EISto be incorrect and new information may becomeavailable that shows that there are substantialenvironmental impacts associated with this transfer.Therefore, to protect water quality and availabilityand associated benefits, modification of the terms andconditions of the certificate may be necessary at alater date.

Decision

Based on the hearing record and therecommendation of the hearing officers, theCommission, on March 14, 2002 by duly mademotions concludes that by a preponderance of the

9e

evidence based upon the Findings of Fact statedabove that (1) the benefits of the proposed transferoutweigh the detriments of the proposed transfer,and (2) the detriments of the proposed transfer willbe mitigated to a reasonable degree. Therefore, andby duly made motions, the Commission grants thepetition of the Charlotte-Mecklenburg Utilities (withconditions) to increase their transfer of water fromthe Catawba River basin to the Rocky River basin.The permitted transfer amount shall be 33 milliongallons per day (mgd) on a maximum day basis fromthe effective date.

This certificate is effectiveimmediately. The certificate is subject to thefollowing conditions, imposed under the authority ofG.S. § 143-215.221:

1. Require Mecklenburg County to summarizeprogress in implementation of watershedmanagement approaches of the Surface WaterImprovement and Management Program (SWIM)on an annual basis. The Division of WaterResources shall have the authority to approvemodifications to and need for continuedreporting as necessary.

9. Require Mecklenburg County and the City of-Charlotte to continue the stakeholder process toinvestigate water quantity control from single-family development and water quality control forall development until completed. To accomplishthis end, the stakeholder group should considerevaluating the feasibility of single-familydetention and recommending ordinancerevisions based on technical, political, long-termmaintenance, cost, and benefits related to theproposed ordinance changes.

10e

3. The Goose Creek subbasin in MecklenburgCounty is removed from the area to be served bythe IBT. A moratorium on the installation ofnew interbasin transfer water lines (water linescrossing the ridgeline) into Goose Creeksubbasin is in effect until the impacts ofadditional growth urban growth on theendangered species are fully evaluated. Thismoratorium will not impact Charlotte-Mecklenburg Utility's ability to fully utilizeexisting water lines. The Division of WaterResources shall have the authority to grantexemptions for reasons of public health andsafety for dwellings existing on or before March14, 2002.

4. If either the EA is found at a later date to beincorrect or new information becomes availablesuch that the environmental impacts associatedwith this transfer are substantially differentfrom those projected impacts that formed thebasis for the above Findings of Fact and thiscertificate, the Commission may reopen thecertificate to adjust the existing conditions orrequire new conditions to ensure that thedetriments continue to be mitigated to areasonable degree.

5. Require the applicant to develop a complianceand monitoring plan for reporting maximumdaily transfer amounts, compliance withcertificate conditions, progress on mitigationmeasures, and drought management activities.The Division of Water Resources shall have theauthority to approve modifications to thecompliance and monitoring plan and droughtmanagement plan as necessary.

Ile

This is the 14th day of March, 2002.

ls/DAVID H. MOREAU

David H. Moreau, Chairman