20171559 Ver 3_SEPA INFORMATION_20220107

ROY COOPER
Governor
ELIZABETH S. BISER
Secretary
WILLIAM F. LANE
General Counsel
NORTH CAROLINA
Environmental Quality
To: File
From: DEQ Office of General Counsel
RE: Applicability of the North Carolina Environmental Policy Act to Randolph
County Economic Development Project
Date: January 6, 2022
Introduction
In this memo, we have reviewed whether a State action (such as DEQ's
issuance of a permit or plan approval) related to the Toyota Battery Manufacturing
site in Randolph County, which has been provided public monies through incentives
and appropriations, would require the preparation of an environmental document
under the North Carolina Environmental Policy Act ("SEPA") in Article 1 of
N.C.G.S. Chapter 113A. Under SEPA, if certain criteria are met, environmental
documents are not required. Based on the framework of the Toyota incentives
award and resulting agreements, specific legislation from the General Assembly,
and the four applicable statutory exclusions discussed below, we have determined
that no SEPA-based environmental document would be required for anticipated
DEQ actions related to the Toyota site.
Project Summary
On December 6, 2021 the North Carolina Economic Investment Committee
("EIC") awarded a Transitional Job Development Investment Grant ("JDIG") to
Toyota Battery Manufacturing, North Carolina (the "Company") for a project to be
located at the Greensboro -Randolph Megasite in Randolph County. The North
Carolina General Assembly added the Transitional project classification to the
JDIG program in, and appropriated additional funds for the project through,
Session Law 2021-180 (Senate Bill 105), which was ratified and signed by Governor
Cooper on November 18, 2021. Section 11.19.(b) of the Session Law defines the
project as one for which an agreement requires the business to invest at least one
billion dollars ($1,000,000,000) in private funds and create at least 1,750 eligible
positions, as defined in N.C. Gen. Stat. 143B-437.51.
A JDIG award is governed by a Community Economic Development
Agreement ("CEDA") pursuant to N.C. Gen. Stat. 143B-437.57. For this project, the
CEDA authorizes the cumulative payments to the Company of up to $79.1 million
LD_E
NORTH CAROLINA
Department al Environmental Oual�
North Carolina Department of Environmental Quality I General Counsel
217 West Jones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919.707.8600

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January 6, 2022
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dollars over a period of 20 years if the Company (i) creates and maintains 1,750
eligible positions (see Table 1 below), (ii) makes a new capital investment of at least
$1,144,800,000 in private funds by December 31, 2026 in land, buildings and
fixtures, infrastructure, or machinery and equipment, and (iii) otherwise meets the
terms of the CEDA. The CEDA also requires that the Company create the new jobs
on a specified timetable as outlined below. If the Company creates and maintains
1,750 or more new jobs the grant term will be 20 years, but if the Company only
maintains 1,488 jobs, the grant term will be reduced to twelve years.
TABLE 1. BEGINNING JOB CREATION TARGETS AND MINIMUMS
Grant Year
Total New Jobs for Project Minimum To Avoid Default
Year 1 (2025) 590 502
Year 2 (2026) 1176 1000
Year 3 (2027) 1465 1245
Year 4 (2028) 1745 1483
Year 5 (2029) 1750 1488
For Years 6 through 12 the minimum number of new jobs that must be retained
to avoid default is 1488.
As allowed by N.C. Gen. Stat. 143B-437.51(9c)(b), if the Company increases
the number of jobs and capital investment committed to the project to 3,875 jobs
and $3 billion of investment within 36 months of the award date, the Company will
trigger Phase II of the Transitional JDIG and could then receive up to an estimated
$315 million over the life of the grant, which could expand to run for as many as 39
years. If this option is exercised, the CEDA requires that the additional job creation
and investment must be completed by December 31, 2034.
The potential Phase II payment to the Company is only an estimate at this
point, since the ultimate amount will be calculated based on when the increased
investment and job creation targets are met, as well as the final reported number
and type of jobs that are ultimately created for the project.
Like all grants from the JDIG program, any state payments will only occur
following performance verification each year by the departments of Commerce and
Revenue that the Company has met its incremental job creation and investment
targets.
Session Law 2021-180 provided additional support to help with final site
preparations at the Greensboro -Randolph Megasite. For the project's first phase

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(Section 11.19.(b)), $135 million has been appropriated to the Department of
Commerce, which will be used by the North Carolina Department of Transportation
for road, highway interchange, and other site improvements in Randolph County
($35 million) and at the megasite ($100 million). The $135 million in funds is
contingent on the award of the JDIG grant by the EIC. Should the Company
exercise its option to trigger Phase II of the Transitional JDIG, then an additional
$185 million in site development funds would become available. If the job creation
requirements established under the CEDA are not met (1,750 for Phase I and 3,875
for Phase II) in accordance with the specified timetable, the Site Work Agreement
between the State and Toyota will require the Company to repay an amount of the
$185 million and the $100 million proportional to the failure to meet the job
creation targets set forth in the CEDA.
Analysis of North Carolina Environmental Policy Act Exemptions
In its current form, the North Carolina Environmental Policy Act of 1971
requires that State agencies prepare an environmental document for any action
"involving significant expenditure of public moneys or use of public land for projects
and programs significantly affecting the quality of the environment of this State[.]"
N.C. Gen. Stat. 113A-4(2). Despite this statement of general applicability, the
General Assembly has set forth specific provisions under which no environmental
document is required, including four that are applicable to this project.
Section 401 Certification Exemption
In N.C. Gen. Stat. 113A-12(2)(i), the General Assembly has exempted from
SEPA an action approved under "A certification issued by the Division of Water
Resources of the Department of Environmental Quality under the authority granted
to the Environmental Management Commission by G.S. 143B-282(a)(1)u." This
provision refers to the issuance by DEQ of a Section 401 Water Quality Certification
in conjunction with the issuance of a federal license or permit, such as a Section 404
Permit under the Clean Water Act.
It is our understanding there is a pending individual Section 404 Permit
application with the United States Army Corps of Engineers ("USACE") and a
pending application for an individual Section 401 Certification with DEQ for the
project. It is also our understanding that the USACE has defined the scope of the
proposed project to include the entire megasite property and the offsite utility and
transportation improvements. Thus, the geographic scope of the Section 404 permit
and the incorporated Section 401 certification would, upon issuance, include all

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areas where work would be performed pursuant to the Phase I appropriation of
$135 million ($100 million for site work and $35 million for road work) and the
Phase II appropriation of $185 million.
Therefore, the project as described in the 404 permit would be exempt from
SEPA through the issuance of the 401 Certification.
National Environmental Policy Act (NEPA') Exemption
Under N.C. Gen. Stat. 113A-10, the General Assembly has stated:
In those instances where a State agency is required to prepare an
environmental document or to comment on an environmental
document under provisions of federal law, no separate environmental
document shall be required to be prepared or published under this
Article so long as the environmental document or comment meets the
provisions of this Article.
According to DOT, all aspects of the project within the scope of the aforementioned
404 permit will be subject to the NEPA process and the accompanying federal
environmental document that is being prepared by the USACE.
Therefore, the project as described in the 404 permit would be exempt from
SEPA due to the concurrent NEPA evaluation.
Incentives Projects Exemption
In N.C. Gen. Stat. 113A-12(5), the General Assembly has provided specific
criteria for excluding from the SEPA document requirements a State action
associated with a state -funded incentives -based project:
Any State action in connection with a project for which public lands are
used and/or public monies are expended if the land or expenditure is
provided as an incentive for the project pursuant to an agreement that
makes the incentives contingent on prior completion of the project or
activity, or completion on a specified timetable, and a specified level of
job creation or new capital investment.
This exemption establishes five criteria to be fulfilled in order for an activity to be
exempt from the SEPA requirement to prepare environmental documents:

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1. The State action must be made in connection with a project where public
lands are used and/or public monies are expended.
In Session Law 2021-180, Sections 11.19.(b) and (c), the General Assembly
appropriated $320,000,000 to the Department of Commerce, allocating
$135,000,000 to be transferred to the Department of Transportation for
Phase I improvements at and around the project site and $185,000,000 to
reimburse the manufacturer for Phase II project costs related to site work,
roadwork and wetlands mitigation. Further, the EIC awarded a transitional
JDIG grant to the project currently valued at $79,100,000, with the potential
to be expanded up to $315,000,000. The appropriation/grant processes result
in the expenditure of public monies and thus this element of the exemption is
satisfied.
2. The land used or monies expended are provided as an incentive for the
project.
The CEDA agreement with the manufacturer authorizes JDIG payments to
the Company if the Company meets targeted levels of job creation and capital
investment. In addition, the Session Law 2021-180 appropriations provide
further incentives: the $135 million in Section 11.19.(b) is contingent on the
award of a JDIG grant and the $185 million in Section 11.19.(c) would be
used to reimburse the qualifying manufacturer if it increases its investment
such that it qualifies as a Phase II transitional project. These incentives
meet the second element of the exemption.
3. The incentives are memorialized in an agreement.
The JDIG provisions are memorialized in the CEDA agreement. The
provisions related to the $100 million for Phase I DOT site work and $185
million in Phase II site work reimbursements will be memorialized in the
Site Work Agreement. The CEDA agreement and Site Work Agreement meet
the third element of the exemption.
4. The agreement makes the incentives contingent on prior completion of the
project or activity or completion on a specified timetable.
The CEDA agreement incorporates the requirements of a Transitional project
established in N.C. Gen. Stat. 143B-437.51(9c)(b) and codified in Section
11.19.(e) of Session Law 2021-180. Those requirements include making the

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incentives contingent upon the manufacturer reaching targeted levels of job
creation and capital investment according to a defined schedule. The
agreement makes the incentives contingent on either prior completion of the
project or activity or completion on a specified timetable and thus meets the
fourth element of the exemption. Additionally, in accordance with Section
11.19.(d) of Session Law 2021-180, the Site Work Agreement will make the
$100 million and $185 million appropriations contingent on either prior
completion of the project or completion on a specified timetable.
5. The agreement makes the incentives contingent on a specified level of job
creation or new capital investment.
As stated in item 4 above, the CEDA agreement and the Site Work
Agreement will make the incentives contingent on both a specified level of job
creation and a specified amount of new capital investment and thus meet the
fifth element of the exemption.
Therefore, because the incentives -based project and related agreements meet
all elements of the statutory exemption, the $79.1 million (or more) of JDIG
funding, the $100 million of Phase I site work funding and the $185 million of Phase
II site work funding do not trigger SEPA environmental document requirements.
Exemption for Projects Required or Authorized by the General Assembly
In N.C. Gen. Stat. 113A-12(10), the General Assembly has exempted "Any
project or facility specifically required or authorized by an act of the General
Assembly." Although the scope of this exemption may not be definitive, it may still
have some relation to this project. In this case, under the heading "Economic
Development Project Appropriation," the General Assembly took multiple budgetary
steps to provide public investment for the project. First, the legislature made
specific findings in Section 11.19.(a) of the budget bill to justify the site
improvement expenditures. Further, it appears that the General Assembly has
"authorized" the aspects of the project contained in the $135 million appropriation.
Additionally, the General Assembly has specifically appropriated $185 million to
reimburse the manufacturer for costs required at the project site.
Therefore, it is arguable that the project should be exempt from SEPA due to
the specific action and involvement by the General Assembly.

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Conclusion
Based on the framework of the Toyota incentives award and resulting
agreements, legislation from the General Assembly, and the four statutory
exclusions discussed above, we have determined that no SEPA-based environmental
document would be required for anticipated DEQ actions related to the Toyota site.