Joint Appendix — Environmental Defense v. Duke Energy Corporation

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| _FILE COPY No. 05-848

jn The OFFICE OF THE CLERK |

Supreme Court of the Gnited States

Supreme Court, US

FILED

ENVIRONMENTAL DEFENSE, et ai.,

Petitioners,

DUKE ENERGY CORPORATION, et ai.,

Respondents.

On Writ Of Certiorari To The United States

Court Of Appeals For The Fourth Circuit

JOINT APPENDIX

VOLUME I, Pages 1 to 265

SEAN H. DONAHUE CARTER G. PHILLIPS

Counsel of Record Counsel of Record

2000 L St., NW MarK D. Hopson

Suite 808 KATHRYN B. THOMSON

Washington, DC 20036 STEVEN M. NICKELSBURG

(202) 466-2234 SIDLEY AUSTIN LLP

(202) 315-3582 Fax 1501 K St., NW

Washington, DC 20005

(202) 736-8000

(202) 736-8711 Fax

iH) nsel for Respondent

RECEIVE D uke Energy Corporation

Counsel for Petitioners

JUL 25 2005 PAUL D. CLEMENT

olicitor General

OFFICE OF THE CLEP: Counsel of Record

| St JPR, a Ecc UIT, U. SD partment of Justice

Washington, DC 20530

(202) 514-2217

(202) 514-8844 Fax

Counsel for Respondent

The United States

[Additional Counsel Listed On Inside Cover]

Petition For Certiorari Filed December 28, 2005

Certiorari Granted May 15, 2006

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OR CALL COLLECT (402) 342-2831

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C ‘ounsel For Petitioners:

JE: FFREY M: GL EASON. >

J.: BLANDING HOLMAN; IV:

C Al EB JAFFE |

"LAW Coste R

Counsel: for Respondent ‘}

. “Duke Kriergy Corporation:

Hexky N --Nickes: +%

F. Ww ILLIAM- Bow: Nett

elt 4.

“MAKRANIB. TA XBER™

200 W. Franklin, Suite 330 HUNTON ‘& Wi. L. iaMs S LLP

Chapel Hill, NC 27516.

(434) 967-1450

VICKIE PATTON

ENVIRONMENTAL DEF ENSE,

2334 North Broadway

Boulder; CO 80304 »

(303) 447-7215 ge,

Dav 1p T. GOLDBERG -

99 Hudson St1., 8th Floor |

New York, XY 10013 - -

(212) 334-8813 .

1900 K Street; »NW.-

Washington;: ‘DC. 20006

(202) 955- 1500

» of THOMAS Co’ rTINGHAM, IL

Nasu E. Lone, Ill

‘HUNTON & WILLIAMS ELP

101 South Tryon’Strect, *

* Suite 3500". °. +:

_Charlotte, NC 28280.

(704) 378-4700 -

MARC E. MAN! LY”

"Executive Vice President

“and Chief Legal Officer’ *

CATHARINE S..STEMPIEN ; 3

Associate General’ Counsel

Garry S. RICE °

Associate General Counsel

‘DUKE ENERGY CORPORATION

‘Legal:Department

526 South Church Sireet ;

‘-ECO3T°

Charlotte; NC 28242

(704) 382-8111

‘Dean’ M. Moésser’ :

DUKE: ENERGY CORPORATION

5400 Westheimer. Court

-Houston,.TX 77056 »

(713) 627-5298

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TABLE OF CONTENTS

Page

VOLUME I!

District Court Docket Entries .....-------serensrr 1

Court of Appeals Docket PEntries.....-.s-0-csecnsnenereneserensnersneere® 9

Order Granting Intervention (Sept. 6, 2001) (CR

(District Court Docket Number] 25) ...-----rrrrrrrn 10

Exhibits in Support of Duke’s Motion for Summary

Judgment (Jan. 31, 2003) (CR 129)

Letter from Administrator Lee M. Thomas to

Congressman J ohn D. Dingell (May 9, 1986) (DX

[Defendant's Exhibit Number] 9).-.------sr-rrn 11

Expert Report of Walter C. Barber (August 15,

2002) (pp. 5-10) (DX Se nlecscenensenainnecanenesnnenemer en 16

Memorandum from Edward E. Reich, et al., EPA

to Allyn M. Davis, et al., EPA Region VI (April

21, 1983) (DX 16)..-.--sserrerseeseerensrsererernsnnnrnene TT 23

Letter from Edward E. Reich, Director, Division

of Stationary Source Enforcement, EPA, to Amas-

jit S. Gill, General Electric — Gas Turbine Divi-

sion (June 24, 1981) (DIK 28) ..--0v--nseenseneennensennsensenssenrenns 27

Letter from Edward E. Reich, EPA, to Charles

Whitmore, EPA Region VII (Jan. 22, 1981) (DX

Letter from Administrator Lee M. Thomas to

John W. Boston, Vice President, WEPCO. (Oct.

14, 1988) (DX DOD cexseccocccsenenvsvscsonsscssoonens svensesensensnseneess 38

Memorandum from David Kee, EPA, to Gerald A.

Emison, EPA (Mar. 25, 1988) (DX 31).....---cereerereerenerere® 49

Deposition of Walter Stevenson (Sept. 10, 2002)

(pp. 1, 42-45) 0 ene een occmmmemmmmmsnenets 52

TABLE OF CONTENTS - Continued

Letter from William G. Rosenberg, Assistant

Administrator for Air and Radiation, to John

Boston, President, WEPCO. (June 8, 1990) (DX

FD scocecsenssevensnentnnimesensiichsnniionnpacitedninnbiiveimuiinniidibimeinet

EPA Office of Air Quality Planning and Stan-

dards, Proceedings of Acid Rain Conference, April

8-9, 1990 (Aug. 1980) (DX 36) ............cccceesecceeeeeeeneees

Acid Rain and Nonattainment Issues, Hearing

Before the Senate Subcommittee on Environ-

mental Protection of the Committee on Environ-

ment and Public Works, 100th Congress

(statement of Administrator Lee Thomas) (Apr.

BR, BRIG Ge Be Pecccccnepeeresensscnssresevesecesecceutecsvetsenases

Expert Report of Kenneth Schweers (Aug. 15,

BE GEE Die cccscccciscscrinasivevtensnennicncsnvasnepnsstormesnesuness

1989 EPA Base Case Forecasts, prepared for EPA

by ICF Resources, Inc. (May 1989) (DX 40).............

Letter from Kenneth A. Schweers, ICF, to Robert

A. Beck, Edison Electric Institute (July 26, 1989)

Ge Ge Pecsccsversccepnisnicesessninintesnatorinnasantntinisemipetenctiinonee

Electricity Supply: Older Power Plants’ Impact

on Reliability and Air Quality, GAO Report to the

Chairman, House Subcommittee on Oversight

and Investigations, Committee on Energy and

Commerce (Sept. 1990) (DX 42) .......... ccc ccecceceeeeee eens

Deposition of Steven Tiber (May 15, 2002) (pp. 1,

PEED Ge GR ce cescsvececcccceserenceresecennsenssennpeusepessessceenss

Page

ee rr 7

ill

TABLE OF CONTENTS - Continued

Letter from William G. Rosenberg, EPA to

Congressman John D. Dingell (June 19, 1991)

Billi iciiivissaseneisnsecectvetaiisioinnienmniaéemdbutaiansntsnidireiedutabutasetninins

Declaration of Kris W. Knudsen (Jan. 30, 2003)

i a i a a

Deposition of Ranajit Sahu (Nov. 25, 2002) (DX

SE csicliahhesicesctalsechaiiididaateidipecihneniehipiaiiichtinabaduicesiainladiaienuidintedsneteds

Deposition of David A. Lloyd under Fed. R. Civ. P.

30(b)(6) (Oct. 4, 2001) (DX 72)... cceecececteeeeeeeeeeeeeeeens

Memorandum from Jack R. Farmer, EPA (May

I Ei ealeiciecetneercicnibtibcipieptnesiiianemadiaeaiintaniabdennitidn

Letter from Ronald V. Shearin, Duke Power Co.,

to Robert F. Helms, NCDNR (Aug. 17, 1983) (DX

RRR Ee aaa ee ws EE ELS Ree nO NS See Ree OT

Letter from Ronald V. Shearin, Duke Power Co.,

to Roger E. Davis, SCDHEC (Aug. 17, 1983) (DX

SEES Ao RS TE Sr. ar ower SOUR az aem sn ee Ue SeenON

Letter from William W. Culler, SCDHEC, to

Ronald V. Shearin, Duke Power Co. (Aug. 23,

SERRE SES Aare anes ena wee ane ene Te

Letter from Robert V. Helms, NCDNR, to Ronald

V. Shearin, Duke Power Co (Sept. 15, 1983) (DX

ETA IE I ae eee cr ee a nee ee

Letter from B. Keith Sipe to Ray M. Davis (Apr.

ee NET Gee icicniniecsinsnnintccnionstenatsitipemimeiatniieseiee

Certified Inspection Reports, Air Quality Action

Request, Duke Power Co., Buck Steam Station

Ici I i i i iain

TABLE OF CONTENTS - Continued

Page ;

Exhibits in Support of United States’ Motion for

Partial Summary Judgment (Jan. 31, 2003) (CR

133) 1

Direct Testimony of William S. Lee, Chairman of

the Board and CEO, Duke Power Co., Before

South Carolina Public Service Commission (July

30, 1985) (USX [United States’ Summary Judg- ;

ment Exhibit Number] 13)............cccssessssssssssrssesseseoees 198

Redirect Testimony of William S. Lee, Chairman

of the Board and CEO, Duke Power Co., Before ;

North Carolina Utilities Commission (July 16,

Se IIE: THEI cccccntacecscsiscdsintincatantinimmiteniiiagiteausiainasiitiaies 205

Duke Power Co., Proposed Order Granting Rate

Increase, Before the North Carolina Utilities

Commission (Aug. 27, 1985) (USX 19).................eeeeeee 211

Direct Testimony of William S. Lee, Chairman of

the Board and CEO, Duke Power Co., Before

North Carolina Utilities Commission (Sept. 3,

SOBE) CIEE BE) accceccecccrssscsescseinnsatinnotssdotovcssetsenseagnsienses 223

Memorandum to File re: Fossil Units — Extended

Cold Shutdown (Feb. 1, 1985) (USX 22) .........:..:cccseee 227

Plant Modernization Project, Project Review

(April 24, 1989) (USX 28)................-ccrsssssosssssesseseeseees 229

Memorandum of William O. Parker re: Plant

Modernization Program Strategy Statement

GR. SER, Be Cae MD crnccetctecevintsntnctisciadaintadsninaianl 232

Direct Testimony of William S. Lee, Chairman of

the Board and CEO, Duke Power Co., Before

North Carolina Utilities Commission (April 12,

I GRE GD diicdencddinicnseninaieintiannnnsetiduiduditeiaiiieaiuiata 233

Project Outage Table (USX 40) .0...... eee eeeeeeeeeeee 236

TABLE OF CONTENTS -— Continued

Duke Training and Reference Guide, Fossil

Environmental Compliance, Volume 2 - Air

Quality (Sept/Oct. 1991) (USX 57) .........cccccccccecseeeeees

Memorandum of Don Clay, Acting Assistant

Administrator, EPA, to David Kee, Director of Air

and Radiation Division, EPA Region V (Sept. 9,

RETEST

VOLUME II

Letter from Henry Nickel, Hunton & Williams, to

Polly Gault, U.S. Dept. of Energy (June 5, 1989)

NE EE ee

Memorandum from J.O. Fayssoux to W.O.

Parker, Jr. re: EEI Prime Movers —- WEPCo. (Feb.

5 TE STINET

Memorandum re: NSPS/PSD Implications of

Plant Modifications (USX 93A) ..............cccccceseseeeeeeeees

Letter from Don R. Clay, Acting Administrator

for Air and Radiation, EPA, to John W. Boston

oe rerrnriniichneeeenngtnanttenadeemnanenn

Letter from Francis X. Lyons, Regional Adminis-

trator, EPA Region V, to Henry Nickel, Counsel

for Detroit Edison Co. (May 23, 2000) (USX 101).......

In re Monroe Electric Generating Plant Proposed

Operating Permit, Petition No. 6-99-2 (EPA 1999)

TABLE OF CONTENTS -— C-mtinued

Page

Exhibits in Support of United States’ Response to

Duke’s Motion for Summary Judgment (Mar. 31,

2003) (CR 152)

Deposition of Laura Butler (Dec. 10, 2002) (USX

Siri nccsliietncecseaneneneiasininditriadiitieipctindiiiesittiiatieaatiaaniatasstenaaaslicceatinateds 311

Deposition of Michael Parkin (Dec. 10, 2002)

ey Seer ne nee eRe 314

Deposition of Michael Landis (Dec. 11, 2002)

TE Uae csiieseincapiisitieasiteiashctineiatinenaeindadianpaninniataptiaabitienbaaranaintieaads 338

Deposition of Thomas McManus (Dec. 11, 2002)

PS Sei ciciccicliininrectetencithtriaenbidiestaientatieniadnenanicisinmtineastnsiistteiaiis 353

Memo re: Key Regulations and Issues Impacting

Alternative Fuels, Fuel Additives, and Facility

Modifications (Feb. 13, 1995) (USX 146) .................... 366

Duke Energy 1995 Training Materials (USX 147) .....371

Memo from Bobby McManus re: MSS 3&4 Mill

Replacement and PSD/NSPS Meeting (May 23,

IE Tt ichsiedibeeiinticcinntttniteanegeidinsneineptiiniamteininsitniin 372

Duke Internal Emails (Nov. 1990) (USX 149)............. 375

Deposition of William T. Horton (Dec. 4, 2002)

SPRITES Ut iictnctciactnedbtuniniianinsemetseiitinsnetaiatiiteatitmimatasds 385

Expert Report, Ranajit Sahu (Aug. 1, 2002) (USX

ore ccerenanhtecesliealstniniahtieaiseinintiaabanestaaiacitintaainiaalnian testa intataaasiiiaeaaa 388

Statement of Henry V. Nickel, EPA Docket No. A-

RIT Tartttt cinsihiccepesncetritnsinateiahasitsiaibiaiiilahiniiiaiiidinateaenais 453

vii

TABLE OF CONTENTS - Continued

Supplemental Exhibits in Support of Duke’s Motion

for Summary Judgment (March 31, 2003) (CR

158)

Energy Resource Consultants, Inc., Report to the

Public Staff, North Carolina Public Utilities

Commission - The Duke Power Company’s Plant

Modernization Program and Catawba Unit 2

(Volume II: Analysis of Life Extension) (DX 114)

(pp. internal cover page, II-1-4, []-2-21) ..................... 460

Memorandum from Edward E. Reich, Director,

Stationary Source Compliance Division, EPA

Office of Air Quality Planning and Standards, to

Harley Laing, EPA Region I re: Bridgeport Har-

bor Coal Conversion (July 28, 1983) (DX 129)............ 464

Deposition of Ranajit Sahu (Nov. 26, 2002) (DX

Be cescasstncntnesnnessusrtgnasssnncenmanciermmenemmeneenetiommenttaness 473

Memorandum from Edward A. Reich, Director,

DSSE, to Thomas W. Devine, Chief, Air Branch,

EPA Region I (Feb. 13, 1978) (DX 143)...............000-+++ 477

Deposition of John Hewson, pp. 1, 64-65, 69-70

ee Fe ncertctcerreepaiernesinnmmpeinenctieamenanmmnemenios 484

Memorandum from Gerald A. Emison, EPA, to

William G. Rosenberg, EPA (May 25, 1990) (DX 189)..... 489

Exhibits in Support of United States’ Response to

Duke’s Proposed Supplemental Memorandum in

Support of Its Motion for Reconsideration (Oct. 8,

2003) (CR 240)

Analysis of Potential Cost, Environmental and

Energy Implications of EPA’s Recent WEPCO

and Greenwood Decisions, prepared by ICF Re-

sources for UARG (Jan. 1990) (Exhibit 1) .................. 492

TABLE OF CONTENTS - Continued

Page

Order (Feb. 23, 2004) (CR 294) .0............:ccssssceesseseeeeeenees 499

Stipulations (April 13, 2004) (CR 311)............ccceeeeeeeeees 503

The following opinions, judgments, and orders have been

omitted in printing this Joint Appendix because they

appear on the following pages in the appendix to the

petition for certiorari:

United States District Court for the Middle

District of North Carolina:

Memorandum Opinion (August 26,

SID vacsemmepnesnsssteuscetnssmeneainaniimenecsmenmn Pet. App. 22a-84a

Order and Judgment (August 26,

PIED cosssnansenntacmscnsmensamircenpenseemibecnenss Pet. App. 85a-86a

Order and Final Judgment (April 14,

FEED scvreninndacsaccnpssnnsistapincennegtstnieniottnbouses Pet. App. 87a-95a

United States Court of Appeals for the Fourth

Circuit:

Order Requesting Supplemental! Briefing

yg 8 ee Pet. App. 21a

Opinion (June 15, 2005)......................... Pet. App. la-19a

Order Denying Petitions for Rehearing

and Rehearing En Panc (Aug. 30, 2005)..... Pet. App. 20a

Date

Filed

12/22/00

3/12/01

5/8/01

9/6/01

RELEVANT DOCKET ENTRIES

U.S. District Court

Middle District of North Carolina (Durham)

CIVIL DOCKET FOR CASE

USA v. Duke Energy Corp.

Docket

Entry #

#: 00-CV-1262

Description

Complaint filed. (Entry date: 12/28/00)

Answer to Complaint and Counterclaim

by Duke Energy Corp. (Attorneys

DANIEL W. FOUTS, T. THOMAS

COTTINGHAM IID) against USA;

Answer due on 4/1/2001 for USA

(Entered: 03/13/2001)

Motion by Environmental Def., NC

Sierra Club, NC Public Interest to

Intervene as Plaintiffs (Entered:

05/09/2001)

MEMORANDUM OPINION on appli-

cants’ motion to intervene; applicants

have a statutory right to intervene and

their motion to intervene will be granted

pursuant to Rule 24(aX1) of the

Fed.R.Civ.P.; applicants’ participation in

the litigation will be coordinated with

that of the Plaintiff United States to

ensure the efficient adjudication of this

case; an order in accordance with this

memorandum opinion shall be entered

contemporaneously herewith (signed by

JUDGE FRANK W. BULLOCK JR.)

(EOD Date 9/6/01).

9/6/01

10/9/01

12/18/02

1/31/03

128

—_ -

ORDER, for the reasons set forth in the

memorandum opinion filed contempo-

raneously herewith, that Applicants

Environmental Defense, North Caro-

lina Sierra Club, and North Carolina

Lobby/Education Funds motion to

untervene [Doc. #5] is GRANTED (signed

by JUDGE FRANK W. BULLOCK JR.)

(EOD Date 9/6/01).

Complaint in Intervention (Entered:

09/06/2001)

ANSWER to Plaintiffs-Intervenors’

Complaint by DUKE ENERGY CORP.

(Entered: 10/11/2001)

MEMORANDUM OPINION re: the

United States’ motion for leave to

amend the complaint; an order in

accordance with this memorandum

opinion shall be entered contempora-

neously herewith (signed by JUDGE

FRANK W. BULLOCK JR.) (EOD

Date 12/18/02).

ORDER, for the reasons set forth in

the memorandum opinion filed

contemporaneously herewith, that

the motion [Doc. #72] of the United

States for leave to file an amended

complaint is DENIED * * * (signed by

JUDGE FRANK W. BULLOCK JR.)

(EOD Date 12/18/02).

MOTION for Summary Judgment on

all of Plaintiff’s and Intervenors’

claims that Duke violated the New

Source Review provision of the Clean

1/31/03

129

130

131

132

152

Air Act and related States Implemen-

tation Plan provision of North and

South Carolina by defendant DUKE

ENERGY CORP. (Entered: 02/03/2003)

Brief, with Appendices in Five (5)

Volumes ... by Duke Energy Corp. in

Support of [128-1] Motion for Sum-

mary Judgment *** (Entered:

02/03/2003)

MOTION for Partial Summary Judg-

ment on Defendant’s Defenses of “Fair

Notice” and JOINDER IN MOTION

for Partial Summary Judgment by the

United States on the applicable legal

test for “routine maintenance”; on

Defendant’s defenses on “routine

maintenance”, emissions calculations

and defendant’s “statute of limitations”

defenses by intervenor-plaintiffs NC

PUBLIC INTEREST, NC SIERRA

CLUB, and ENVIRONMENTAL DEF.

(Entered: 02/03/2003)

Brief, with Exhibits 1-21, by NC

Public Interest, NC Sierra Club,

Environmental Def. in Support of [130-

1] Motion * * * (Entered: 02/03/2003)

MOTION for Partial Summary

Judgment on the applicable legal test

for “routine maintenance,” Defen-

dant’s defenses of “fair notice” and

“routine maintenance”, calculation of

emissions, and defendant’s “statute of

limitations” defenses by plaintiff USA

(Entered: 02/03/2003)

RESPONSE by USA to [128-1] motion

for Summary Judgment on all of

3/31/03

4/25/03

158

159

160

174

Plaintiff’s and Intervenors’ claims

that Duke violated the New Source

Review provision of the Clean Air Act

and related States Implementation

Plan provision of North and South

Carolina by DUKE ENERGY CORP.

(Entered: 04/01/2003)

RESPONSE BRIEF IN OPPOSI-

TION, with Supplemental Appendix

of Exhibits in four (4) Volumes, by

DUKE ENERGY CORP. to [132-1]

motion for Partial Summary Judg-

ment * * * (Entered: 04/01/2003)

BRIEF IN RESPONSE with Exhibits

by ENVIRONMENTAL DEF, NC

SIERRA CLUB, NC PUBLIC INTER-

EST to [128-1] motion for Summary

Judgment * * * (Entered: 04/01/2003)

RESPONSE BRIEF IN OPPOSITION

by DUKE ENERGY CORP. to [130-1]

motion for Partial Summary Judgment

on Defendant's Defenses of “Fair

Notice” by Plaintiff-Intervenors, ENVI-

RONMENTAL DEF, NC SIERRA

CLUB, NC PUBLIC INTEREST

(Entered: 05/12/2003)

AMENDED RESPONSE BRIEF IN

OPPOSITION, with attachments, by

DUKE ENERGY CORP. to Plaintiff's

[132-1] motion for Partial Summary

Judgment on the applicable legal test

for “routine maintenance,” Defendant’s

defenses of “fair notice” and “routine

maintenance”, calculation of emissions,

and defendant’s “statute of limitations”

defenses (Entered: 04/28/2003)

4/30/03

7/18/03

8/13/03

185

186

187

188

189

231

REPLY by DUKE ENERGY CORP to

Plaintiff-Intervenors’ response to

[128-1] motion for Summary Judg-

ment * * * (Entered: 05/01/2003)

REPLY by DUKE ENERGY CORP to

Plaintiff, USA’s response to [128-1]

motion for Summary Judgment * * *

(Entered: 05/01/2003)

SECOND SUPPLEMENTAL APPEN-

DIX OF EXHIBITS in one (1) volume

by DUKE ENERGY CORP. in sup-

port of (128-1) motion for Summary

Judgment * * * (Entered: 05/01/2003)

REPLY, with Exhibits 1 & 2, by

Plaintiff-Intervenors’ NC PUBLIC

INTEREST, NC SIERRA CLUB,

ENVIRONMENTAL DEF. in support

of [130-1] Motion Summary Judg-

ment on Fair Notice (Entered:

05/01/2003)

REPLY, with Appendix A and sup-

porting Exhibits 156-165, by USA to

response to [132-1] motion for Partial

Summary Judgment * * * (Entered:

05/01/2003)

Motion hearing held re: [132-1]

motion for Partial Summary Judg-

ment * * * , {130-1} motion for Partial

Summary Judgment *** , [128-1]

motion for Summary Judgment * * *

held before USDJ Frank W. Bullock,

dr. * * * (Entered: 07/21/2003)

TRANSCRIPT of ORAL ARGU-

MENTS ON MOTIONS FOR SUM-

MARY JUDGMENT filed, held before

8/26/03

234

235

JUDGE FRANiw W. BULLOCK, JR.

* * * (Entered: 08/14/2003)

MEMORANDUM OPINION that, for

the reasons set out, the court will

grant in part and deny in part the

EPAs motion for partial summary

judgment in which Intervenor-Plaintiffs

join; * * * (signed by JUDGE FRANK W.

BULLOCK JR.) (Entered: 08/26/2003)

ORDER AND JUDGMENT, for the

reasons set forth in the memorandum

opinion filed contemporaneously

herewith, that Duke Energy’s motion

for summary judgment [Doc. #128] is

DENIED; further ORDERED that

the United States’ motion for rartial

summary judgment [Doc. #132] on

the applicable legal tests for “routine

maintenance” and calculation of

emissions, and on Duke Energy's

defenses of “fair notice” and “routine

maintenance”, in which Intervenor-

Plaintiffs join (Doc. #130], is DE-

NIED; further ORDERED AND

ADJUDGED that the United States’

motion for partial summary judg-

ment (Doc. #132] on Duke Energy’s

defense that the statute of limita-

tions bars the United States’ claims

arising from activities occurring prior

to December 22, 1995, in which

Intervenor-Plaintiffs join [Doc. #130},

is GRANTED; further ORDERED

that Intervenor-Plaintiffs’ motion for

partial summary judgment ([Doc.

#130] on Duke Energy's defense of

“fair notice” is DENIED; further

12/23/03

12/29/03

2/23/04

268

270

294

ORDERED that Duke Energy’s

motion for partial judgment on the

pleadings [Doc. #37] is DENIED.

Remaining for trial are the issues of

whether Duke Energy’s projects were

routine maintenance, repair, and

replacement as defined relative to the

industrial category and whether

Duke Energy’s projects caused an

increase in annual net emissions,

assuming constant hours and condi-

tions of operation (signed by JUDGE

FRANK W. BULLOCK JR.) (Entered:

08/26/2003)

MOTION by USA for Reconsideration

of [235-1] judgment and [234-1] order

or, in the alternative, to certify orders

for interlocutory appeal and for stay

pending appeal. (Entered: 12/29/2003)

Response by NC Public Interest, NC

Sierra Club, Environmental Def., to

the [268-1] USA’s Motion for Recon-

sideration * * * (Entered: 12/30/2003)

ORDER denying [268-1] motion for

Reconsideration of [235-1] judgment

and [234-1] order or, in the alterna-

tive, to certify orders for interlocutory

appeal and for stay pending appeal.

The court will direct the Clerk to

schedule this case for trial during the

July term and provide proper notice

to the parties; signed by JUDGE

FRANK W. BULLOCK JR. (WJ. Wil-

son) (Entered: 02/23/2004)

~z oe e-

“«

4/13/04

4/14/04

6/10/04

311

313

314

315

STIPULATIONS by all parties in

support of Joint Motion for entry of

final Judgment, to stay consideration

of Rule 72(a) Objections, and to stay

enforcement of discovery Order

(Entered: 04/13/2004)

OKDER AND FINAL JUDGMENT

signed by JUDGE FRANK W. BUL-

LOCK JR., that Summary Judgment

is granted in favor of Defendant

Duke Energy on Plaintiff’s and

Plaintiff-Intervenors’ PSD claims in

this action. * * * (Entered: 04/15/2004)

NOTICE OF APPEAL to USCA 4th

Circuit by NC PUBLIC INTEREST,

NC SIERRA CLUB and ENVIRON-

MENTAL DEFENSE of [313-1] Final

Order and Judgment (Entered:

06/14/2004)

NOTICE OF APPEAL to USCA 4th

Circuit by USA of [313-1] Final Order

and Judgment (Entered: 06/14/2004)

ee a

US Court of Appeals for the Fourth Circuit

GENERAL DOCKET FOR CASE

United States, et al v. Duke Energy Corp.

No. 04-1763

Date Description

6/24/04 Civil Case Docketed.

2/3/05 Oral argument heard. Panel: Honorable

J.M. Luttig, Honorable Diana G. Motz,

Honorable Samuel G. Wilson. [04-1763] (su)

5/2/05 Court Order to file Supplemental Briefs.

6/15/05 Judgment Order filed. Decision: AFFIRMED.

8/1/05 Petition Filed by Appellant Environmental

Defense, NC Sierra Club, Appellant NC

Public Interest for rehearing/ rehearing en

banc

8/1/05 Petition filed by Appellant USA for rehear-

ing * * * and rehearing en banc.

8/30/05 Court Order filed Denying all Motions for

Rehearing; Motions for Rehearing En Banc

9/7/05 Mandate Issued.

| IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

UNITED STATES

OF AMERICA,

Plaintiff, CIVIL NO. 1:000V1262

Vv.

DUKE ENERGY

CORPORATION,

Defendant.

me ee ee ee ee eee ee”

ORDER

(Filed Sep. 6, 2001)

BULLOCK, District Judge

For the reasons set forth in the memorandum opinion

filed contemporaneously herewith,

IT IS ORDERED that Applicants Environmental

Defense, North Carolina Sierra Club, and North Carolina

Public Interest Research Group Citizen Lobby/Education

Fund’s motion to intervene [Doc. #5] is GRANTED.

September 6, 2001

/s/

United States District Judge

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

UNITED STATES

)

OF AMERICA,

ne )

Plaintiff, ) CIVIL NO. 1:00CV1262

. )

)

DUKE ENERGY

CORPORATION,

Defendant.

EXHIBITS IN SUPPORT OF DUKE’S

MOTION FOR SUMMARY JUDGMENT

(Filed Jan. 31, 2003)

* * x

EXHIBIT 9

[LOGO] UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

WASHINGTON, D.C. 20460

MAY 9 1986

THE ADMINISTRATOR

Honorable John D. Dingell

Chairman

Committee on Energy and Commerce

House of Representive

Washington, D.C. 20515

Dear Mr. Chairman:

| On April 14, 1986 you requested that I respond to a

number of questions regarding H.R. 4567, the “Acid

Deposition Control Act of 1986.” Given the seriousness of

both the proposal and its potential consequences over the

next 20 years, I believe deliberate and thorough considera-

tion should be given to your questions and to the impact of

this proposed legislation. We also wish to be timely and

helpful with respect to the Committee’s rapid deliberations

on H.R. 4567. Therefore, the enclosure provides prelimi-

nary answers to questions 1 through 7, 9, 11 through 23,

and 25. We may wish to provide revised answers to these

a,’ questions after more careful review and analysis. Any

i. revised answers and answers to the remaining questions

y will be provided as soon as possible.

x } a I should point out that these answers have not yet

* been reviewed by all Interested Agencies of the Admini-

% ‘stration and, therefore, can be said to reflect only EPA’s

assessment.

Sincerely,

/s/ Lee M. Thomas

Lee M. Thomas

76. Acid Deposition Control Act of 1986 (Part 1): Hearing

on H.R. 4567 Before the Subcomm. on Health and the

Env’t of the House Comm. on Energy and Commerce,

99th Cong., 439, 446-449 (1986) (material submitted

for the record by Environmental Protection Agency,

responses to questions submitted by April 14, 1986,

letter from John D. Dingell). Hearings Volume XVIII

— 4/29/86.

Question 2.a.

According to a March 3, 1986 letter from the Environ-

mental Protection Agency (EPA) to the National Coal

Association (NCA), EPA and NCA apparently have differ-

ences about forecasts of SO, emissions form coal-fired

power plants. Please provide a table showing the EPA and

NCA projections and the assumptions adopted by both.

Please explain how the assumptions may differ and the

significance of the of the differences. Please indicate to

what extent, if any, the recent reduction in the price of all

and other market forces may affect these predictions. We

are providing a copy of this enclosure to the Department of

Energy (DOE) to comment on the forecasts. Please discuss

the implications of these differences to the potential cost

and emission reductions achieved by this bill.

Response:

Attachment 2A is an excerpt from a recent report by

ICF, Inc. which summarizes the differences between EPA

and NCA projections of future SO, emissions.

yt eh me oe ae

\ +45 adied ;

ee “—~- F, 3 “*-.

~~.

3 &

fy :

a “de mS ee 8

We have not yet performed an analysis using current

low oil prices. The environmental implications of lower oil

prices are not obvious because oil would displace lower-

emitting gas as well as higher-emitting coal. Lower oil

prices also could stimulate increased economic activity,

resulting in higher overall electricity growth, and perhaps

even increased coal use and emissions.

If one assumes that oil (and possibly gas) prices will

remain very low for a prolonged period of years, this could

affect both emissions and cost results we have estimated

for H.R. 4567. It is possible that oil and gas could replace

some coal burning in the base case projection. This would

reduce base emissions and emission rates, thus requiring

smaller reductions, at lower cost, to meet the required

targets. Switching to oil and gas is also possibie as a

compliance strategy. With very low fuel prices, this could

reduce compliance costs somewhat.

On the other hand, lower fuel prices could stimulate

higher electricity demands and higher base case emis-

sions. In this case, the implementation of H.R. 4567 might

require larger reductions and higher costs than we have

projected. Also, total emissions after implementation of

the reductions would be higher because the emissions rate

' requirements would be applied to higher total fuel use.

Evaluating the net effect of all if these possible re-

.', $ponses would require a complex analysis. We have asked

ICF to conduct more detailed analysis of this issue which

44» ‘will be incorporated into their final report.

“i

= Gare

Question 2.b.

[You referenced a March 3 letter from EPA to National

Coal Association and then asked us the following ques-

tions.]

What actions has EPA taken or can it take to prevent such

shifts to higher sulfur coal? Please explain the term

“sulfur premiums,” the range of amounts of such premi-

ums, and their impact. Can we expect such premiums

under this legislation if a utility opts to shift to low sulfur

coal or some mixture of such coal? Please discuss the

difficulty caused by these shifts in determining compliance

with the emission caps in the bill.

Response:

There is nothing that EPA can do to prevent a power-

plant which had previously been emitting at a level well

below its SIP limit from increasing its emissions, as long

as it remains below its legally sanctioned ceiling. Under

current law, a state would have to justify any SIP changes

on an ambient basis. However, under a congressionally

mandated acid rain control program, states could tighten

SIP limits to prevent emissions creep.

“Sulfur premiums” are the price differentials between

high and low sulfur coal. They are related to the cost

differences between mining and transporting low vs. high

sulfur coal, as well as the higher demand for low sulfur

coal created by environmental regulations. Sulfur premi-

ums vary greatly. They depend upon such factors as plant

location, competition among coal suppliers, access to

transportation facilities, and the stringency of environ-

mente! requirements. Because coal markets are currently

depressed, current premiums range from $0-5 per ton.

Under our base case forecast, by the year 2000 when coal

market conditions have significantly improved, premiurns

of $4-15 are created. According to our analysis of the

default emission cap in the HR 4567, in the year 2000

sulfur premiums would be somewhat higher than in the

base case, ranging from $5-25.

Any legislation which precipitates large amounts of

coal switching will create sulfur premiums. The creation of

such premiums complicates the achievement of emission

caps for two reasons. First of all, incentives are created for

uncontrolled plants to use cheaper, higher sulfur coals.

Secondly, all other things being equal, lower prices of high

sulfur coal relative to low sulfur coal will encourage the

utilization of high-emitting plants relative to low-emitting

plants. In developing plans to implement a control pro-

gram, States will have to be careful that they take into

account the changes in coal quality and utilization that

would occur, to ensure that they will actually meet re-

quirements of the program.

st >

EXPERT REPORT OF

WALTER C. BARBER

DUKE ENERGY CORPORATION

AUGUST 15, 2002

/s/ Walter C Barber

Walter C. Barber

III. Conclusions and Opinions.

My job duties as Director of OAQPS required me to be

fully aware of the statutory provisions and Congressional

intent that both authorized and guided my office’s activi-

ties. My understanding of the relevant statutory provisions

derived from many sources, including my participation in

discussions within USEPA and my personal review of the

statute and accompanying legislative materials. My

understanding of the topics under OAQPS’s responsibility

reflects the nature and type of understanding common

among policy-level agency personnel who had senior

responsibility for developing regulations authorized by

USEPA’s operating statutes. The ensuing discussion

regarding the CAA, therefore, provides context to this

report and my opinions regarding the development of the

NSR programs and the manner in which USEPA is now

interpreting these programs.

In 1970, Congress enacted the CAA to establish

nationwide air quality standards to protect public health

‘and welfare. These national ambient air quality standards

specify the maximum permissible concentration of certain

air pollutants in ambient air required to protect the public

health with an adequate margin of safety. Congress

directed the States to prepare implementation plans to

control emissions of these pollutants to ensure attainment

dards and the state implementation Plans designed to

achieve those Standards are two of the cornerstones of air

pollution contro] in the United States.

sources. In 1977, Congress amended the CAA to expand

the NSPS Program and to add specific PSD and NNSR

programs. The PSD Provisions of the CAA responded to

° .

'd6, not: apply to existing sources, unless an existing source

isichanged to such an extent that it is “modified” within

the m aning of such provisions.

cot

During the development and promulgation of the NSR

programs, OAQPS was keenly aware of the Congressional

distinction between new and existing sources. As Director

of the office, I ensured that OAQPS developed regulations

designed to carry out Congress’ determination both that new

sources should be required to install stringent, technology-

based air pollution controls and that, unless an existing

source was “modified,” existing sources should not be

required to install or be retrofitted with such air pollution

controls. Consistent with the statutory principles and

Congressional intent, OAQPS developed regulations

providing that those existing sources would be addressed,

if needed, through a state’s regulation of existing sources

under its state implementation plan.

As applied to the electrical utility industry, OAQPS

developed regulations primarily addressing new sources.

Existing sources (the vast majority of which at that time

were coal-fired steam generating facilities) were required

to be retrofitted with enhanced air pollution control

devices only when those sources were changed to such an

extent as to render them “modified,” which was something

that was expected to occur only rarely. Three of the critical

bases for this mindset are as follows. First, as I have

discussed above, OAQPS understood that Congress did not

intend to develop regulations that would provide for

extensive retrofitting of existing sources. Second, OAQPS

believed that, in general, requiring existing electric gener-

ating power plants to be retrofitted with new control

technologies would not be cost-effective. Finally, in devel-

oping regulations, OAQPS was always mindful of the

country’s increasing demand for energy, its vulnerability

to foreign sources of energy, and the increasing role coal

car =

< *

<£ not trigger NSPS unless those activities also increased the

‘ capacity of that source to emit pollutants. Thus, if a plant’s

was playing as a relatively affordable and available source

of domestic energy.

When USEPA promulgated implementing regulations

for the NSR programs, it addressed several activities at

existing sources that it determined should not trigger the

NSR programs. One set of these activities is routine

maintenance, repair and replacement at an air pollution

source. Given the relative newness of the PSD and NNSR

regulations during my tenure as Director of OAQPS, most

of our experience regarding what level of activity at an

existing source would be considered a modification and

trigger NSR came from the NSPS program.

During my tenure as Director of OAQPS, to trigger

NSPS, the activity at the source had to be sufficient to

increase the capacity of a source to emit air pollutants or

to emit a new pollutant not previously emitted. If the

source were engaged in activities necessary to maintain

the plant’s current operating conditions or return itself to

its original operating capacity, OAQPS did not consider

those activities to trigger NSPS. For example, if a plant,

which operated at a 100-megawatt capacity when origi-

nally built, declined over time and needs to conduct

repairs or replace parts to return to its original 100-

megawatt operating capacity, absent extraordinary cir-

cumstances, OAQPS did not consider those activities to

trigger NSPS.

.. Another activity that OAQPS generally would not

consider to trigger NSPS was an increase in hours of

operation at an existing plant. It was our belief that

activities that allowed a source to operate more hours did

hours of operation decline because of problems associated

with a key component, such as an economizer or a rehea-

ter, and if such components were replaced or repaired and

the plant increased hours of operation thereafter, this

would not trigger NSPS.

OAQPS carried over into the PSD and NNSR regula-

tions the general mindset regarding the magnitude and

scale needed to trigger a modification developed under

the NSPS program and the specific NSPS definitional

terms of “modification,” “routine maintenance repair and

replacement” and “increased hours of operation” and our

interpretations thereof. Furthermore, as used in the PSD

and NNSR programs, OAQPS gave these terms the same

meaning and intent as in the NSPS program and believed

that the same order of magnitude and scale needed to

trigger NSPS would apply to the PSD and NNSR pro-

grams.

During my tenure as Director of OAQPS, it was both

my own, and I believe USEPA’s intention that relatively

few existing coal-fired power plants would be brought

within the NSR programs through the modification provi-

sions. In fact, it was both our intent and expectation that

very few existing power plants would be required to be

retrofitted with new control technologies. If USEPA is now

interpreting these regulations so that a significant number

of existing power plants would trigger NSR and require

retrofitting of controls, then I believe that such an inter-

pretation is beyond the intent of the controlling statute

and implementing regulations promulgated during my

tenure.

I have reviewed the summary of a census of electric

utility industry maintenance, repair and/or replacement

activities contained in Comments of The Utility Air

Regulatory Group, filed on September 17, 2001 with

USEPA in Docket No. A-2001-19 regarding the New

Source Review 90 Day Review. If USEPA is now interpret-

ing the NSR regulations so that maintenance, repair and

replacement activities such as the commonplace activities

listed in this summary, including replacement of key

boiler components at existing power plants, typically

would cause these plants to fall within the NSR programs

and require retrofitting with updated control technologies,

then I would be surprised at that interpretation and

believe that such an interpretation would be inconsistent

with the intent of the NSR programs as passed by Con-

gress and as promulgated by USEPA.

Furthermore, I believe that applying the modification

provision of the NSR programs in that way during my

tenure at OAQPS would have found little, if any, support

in USEPA or the Carter Administration in general. For

example, the 1978 Electric Utility Steam Generating Units

Background Information Document (July, 1978) confirms

my view, and USEPA’s view at the time, that the replace-

ment of the pulverizer system of an existing coal-fired

unit, a key component of a boiler, with a similar system, or

replacement of component parts of the pulverizer system,

would not be considered a modification (page 5-4.) Indeed,

only a major redesign of key components of a steam

generation system would cause a source to be evaluated

under the modification regulations. In further support of

. this view, the background document states that there was

little possibility that existing boilers would be subject to

the modification and reconstruction provisions of the CAA

: (page 1-83).

waiuwe

‘

Finally, it was neither mine nor USEPA’s intention

that the NSR programs would be used as a vehicle to

require the vast majority of existing coal fired power

plants to be retrofitted with updated control technologies.

If USEPA were to find or be presented with new informa-

tion regarding an underlying assumption used in estab-

lishing the NSR programs, or just wishes to change the

policy decisions contained therein, then the appropriate

course of action would be to return to the rulemaking

process or even the authorizing legislation and seek

amendments based on this new information or desire. In

my opinion, it would be inappropriate to act on such new

information or desires by, in effect, informally changing

long standing regulations and advocating these changes

through enforcement actions.

EXHIBIT 16

{LOGO} UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

WASHINGTON, D.C. 20460

OFFICE OF

AIR, NOISE AND RADIATION

Apr. 21, 1983

MEMORANDUM

SUBJECT: PSD Applicability Determination-

Southwestern Public Service Company

FROM: Director,

Vi. Stationary Source Compliance Division

Office of Air Quality Planning and Standards

Acting Associate General Counsel

ie Air, Noise and Radiation Division

* DO: Allyn M. Davis, Director

ee Air and Waste Management Division, Region VI

7 oe Paul Seals

. ve" Regional Counsel, Region VI

Bog

as BT

: ‘This is in response to your memorandum dated

February 18, 1983 concerning the applicability of PSD to

¢ the.Southwestern Public Service Company’s (SPS) steam

electric generating station in Amarillo, Texas. SPS oper-

ates? a coal-fired steam generating unit subject to the

NSPS requirements of 40 CFR 60 Subpart D. SPS is

proposing to modify its existing air pollution control

( em ‘which consists of two electrostatic precipitators

SP) -with 95 percent control efficiency of particulate

™ bi sr'followed by six wet scrubbers which remove enough

of¢th remaining particulate matter to comply with the

articulate matter emission standard of the NSPS. The

~ 2

scrubbers also provide a significant effect on the SO,

emissions by reducing their amounts by approximately 40

percent. These scrubbers, however, are not necessary in

order for SPS to comply with the SO, requirements of the

NSPS. The control alternative SPS has selected for this

purpose is low sulfur coal.

The modification that SPS is proposing is the removal

of the scrubbers and an upgrading of their ESP which will

maintain their present level of compliance with the par-

ticulate matter NSPS. However, removal of these scrub-

bers will result in an approximate increase of 4400 tons

per year of SO,. The question you raise then is, does this

modification of the control system constitute a major

modification for the purposes of PSD?

Previously it has been determined that this change

would not constitute a modification under the NSPS

program. The NSPS regulations at 40 CFR 60.14(e)

contain a list which exempts certain changes from consid-

eration as modifications. Included in this list is the provi-

sion at 40 CFR 60.14(e)(5) which states:

“The addition or use of any system or device

whose primary function is the reduction of air

pollutants except when an emission control] sys-

tem is removed or is replaced by a system which

the Administrator determines to be less envi-

ronmentally beneficial.”

Under this provision it was determined that SPS’

proposed modification would not be less environmentally

beneficial for NSPS purposes since the change contem-

plated by SPS would still result in compliance with the

NSPS for both particulate matter and SO.,,.

The separate question of PSD applicability arises

because the PSD modification provisions do not specifically

contain an exemption such as that at §60.14(e)(5). After

consultation with the Office of General Counsel, we both

agree with the rationale presented by the Texas Air

Control Board (TACB) in their January 21, 1983 letter to

Dick Whittington. TACB believes that since the NSPS

regulations provide an exemption from the modification

provisions for replacement of control equipment, the PSD

regulations must provide this exemption as well. This is

because the Clean Air Act provides in Section 169(1)(c)

that for PSD purposes the term modification shall be

defined as that term is defined in Section 111(a) of the Act

relating to NSPS. EPA has interpreted this to mean that

for PSD purposes Congress intended the term modification

to include all exemptions included in the NSPS regula-

tions promulgated under Section 111 of the Act prior to

* the date of enactment of Section 169. See 43 FR 26396.

The control equipment exemption was promulgated prior

to Section 169. Therefore, the term modification in the

r PSD regulations inherently encompasses the control

ss equipment exemption.

gs * I wish to add, however, that just because it was

3 ~ determined that the change was not less environmentally

». beneficial under the NSPS program does not mean the

‘same conclusion must be drawn with regard to PSD.

+ Under the PSD program the concern is not solely the

‘ application of best technology, but also impacts on air

"quality from industrial growth. The Region and State

Z ‘mist evaluate this situation to ensure there will be no

nw”

control equipment replacement will not be less environ-

mentally beneficial. If this determination can be made, the

SPS generating station in Amarillo may be exempted from

PSD as a major modification.

If you have any additional questions or comments

concerning this response, please contact Rich Biondi of

SSCD at 382-2831 or Sara Schneeberg of OGC at 382-

7730.

/s/ Edward E. Reich /s/ Wm. F. Pederson

Edward E. Reich William F. Pederson

ce: Peter Wyckoff

Mike Trutna

Tom Diggs

ane ot : ——

EXHIBIT 23

{LOGO} UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

WASHINGTON, D.C. 20460

OFFICE OF ENFORCEMENT

Jun. 24, 1981

Mr. Amasjit S. Gill

General Electric — Gas Turbine Division

One River Road

Schnectady, New York 12345

Dear Mr. Gill:

This is to respond to your letter of May 19, 1981,

requesting a determination of the applicability of NSPS

and PSD to stationary gas turbines converting from

middle distillates to natural gas.

The information presented in your letter indicated

that NO, and So, emissions will decrease after the conver-

sion to natural gas and hydrocarbons, CO and particulate

,* émissions will either remain the same or decrease. As you

2. correctly pointed out in your letter, the NSPS would only

f. apply if there is an increase in emissions of a pollutant to

p-. which the standard applies. The NSPS for gas turbines

a applies only to NO, and So, emissions. Since the conver-

: sidti ‘from middle distillate fuel to natural gas for the

4 turbines in question will cause a decrease in NO, and So,

‘ emissions, it is not considered a modification as defined i in

+40 CFR 60.14(a). The turbines however, could be subject to

4 . the-NSPS if the conversion falls under the definition of

: — (See 40 CFR 60.15).

,PSD review would apply to a proposed modification at

an existing major stationary source if it would cause a

significant net increase in actual emissions of any regu-

lated pollutant. In the case of the gas turbine conversions

outlined in your letter, PSD applicability is determined by

evaluating any change in emissions rates caused by the

conversions. The data contained in your letter indicate

that the emission rates after the conversion will either

remain constant or decrease. Actual emissions could

increase only if there is an increase in the production rate

or hours of operation, both of which are specifically exempt

from PSD review. (See 40 CFR 5221(b)(2)(iii)(f)). There-

fore, since there will not be any increase in emission rates

or any creditable increases in actual emissions, the con-

version of the gas turbines will not be subject to PSD

review.

If you have any questions concerning this determina-

tion please contact Janet Farelia of my staff at 202-755-

2564.

Sincerely yours,

/s/ Edward E. Reich

Edward E. Reich, Director

Division of Stationery

Source Enforcement

cc: Peter Wyckoff

Mike Trutna

GENERAL [LOGO] ELECTRIC | GAS TURBINE

DIVISION

GENERAL ELECTRIC COMPANY OPERATIONAL PLANNING

ONE RIVER ROAD, SCHENECTADY,

NEW YORK 12345

Telephone

(518) 385-4131

May 19, 1981 Copy: Don R. Goodwin, EPA

Research Triangle

Park, NC 27711

Mr. Edward Reich, Director

Division of Stationary Source Enforcement

Environmental Protection Agency

401 M Street, S.W.

Washington, D.C. 20460

Dear Mr. Reich:

Stationary Gas Turbines

Converting from Distillate to Natural Gas

The Economic Regulatory Administration of the Depart-

ment of Energy grants temporary public interest exemp-

,. tions, from the prohibitions of the Fuel Use Act of 1978, to

; burn natural gas where such use displaces the use of

f middle distillates, thereby decreasing our reliance on

> imported oil.

: * Existing gas turbines, which do not have built-in dual-fuel

=. capability, must install new combustion hardware so that

Be they ‘can burn natural gas instead of middle distillates.

t. The concern arises whether such a conversion would be

fe calssified a “modification” or “major modification” and,

therefore, subject the gas turbine to the New Source

Performance Standards (NSPS) or a Prevention of Signifi-

Eant Deterioration (PSD) review.

eS ES | et

AOI ie Ree

MODIFIED

The definition of modification is provided in 40 CFR 60 as:

60.14 (a) “Except as provided under paragraphs

(e) and (f) of this section, any physical

or operational change to any existing

facility which results in an increase in

the emission rate to the atmosphere of

any pollutant to which a standard

applies shall be considered a modifica-

tion within the meaning of Section III

of the Act...”

60.2 “‘Standard’ means a standard of

performance proposed or promulgated

under this part.”

NEW SOURCE PERFORMANCE STANDARDS (NSPS)

Hydrocarbons, carbon monoxide and particulates are

specifically excluded from the NSPS promulgated on Sept.

10, 1979. Justification for the exclusion was provided in

the Oct. 3, 1977 Federal Register on page 53783.

“HC and CO emissions from stationary gas tur-

bines operating at peak load are relatively low

because the higher the percentage of peak load at

which a turbine operates, the more efficient the

combustion of the fuel. Gas turbines normally

operate at 80 to 100 percent of peak load with

HC emissions averaging less than 50 ppm and

CO emissions averaging less than 500 ppm at 15

percent oxygen. HC and CO emissions from sta-

tionary gas turbines, therefore, were not selected

for control by standards of performance.”

“Particulate emissions from stationary gas tur-

bines depend on the ash content of the fuel and

are minimal. Consequently, particulate emis-

sions from stationary gas turbines were not se-

lected for control by standards of performance.”

Since there is no standard for CO, unburned hydrocarbons

and particulates under NSPS for stationary gas turbines,

NSPS would not apply even if there was an increase in the

emission rate of these three pollutants. As shown in the

attached four tables, NO, and SO, decrease, and CO,

unburned hydrocarbons and particulates remain un-

changed or decrease.

PREVENTION OF SIGNIFICANT DETERIORATION (PSD) ~

PSD review would apply if the emissions increase by

amounts greater than de minimis levels. De minimis

levels, shown on page 52709 in the August 7, 1980 Federal

Equivalent lbs/hour

: Tons/Year (8760 hours/year)

Carbon Monoxide 100 22.83

Nitrogen Oxides 40 9.13

Sulfur Ofoxide 40 9.13

Particulates 25 5.70

** Volatile Organic

* :.. Compounds 40 9.13

For those machines which are not restricted to a specific

number of hours of operation per year by an enforceable

‘ ‘permit condition, allowable emissions would be the hourly

-emission rate multiplied by 8760 hours per year. Then, for

| ‘PSD review purposes, net emissions increases should be

= ‘evaluated against these allowable emissions to see if de

" ‘thinimis levels are exceeded.

sh —

PG7101E

FUEL -— NATURAL GAS | DISTILLATE

LOAD - BASE PEAK | BASE PEAK

Output, kW 74,400 80,500 | 72,900 78,800

Heat Rate

(LHV), Btw/kWH /10,690 10,640 | 10,790 10,750

Fuel Consump. (LHV) 10°

Btu/hr 795.3 856.5 | 786.6 417.1

_|NOx as NO2, lbs/hr 450 535 790 §=«©970

*SOx as SO2, Ibs/hr 0 0 254 275

Particulates, Ibs/hr <28 <30 28 30

Hydrocarbons,

(as CH), Ibs/hr <12 <12 12 12

CO, Ibs/hr < 21 < 21 21 21

- wa yur ee wre

*Distillate Fuel with 0.3% Sulfur by Weight,

Natural Gas Fuel Containing no Sulfur.

The results are based on field and combustion laboratory test

data from the same or similar machines and combustion

systems, correlated to provide a coherent body of emissions

data. The data presented are for operation at ISO conditions.

PG7851

FUEL -— NATURAL GAS | DISTILLATE

LOAD - BASE PEAK | BASE PEAK

Output, kW 61,300 67,700 | 60,000 66,300

Heat Rate Btu/kkWH

(LHV), 11,000 10,920 | 11,130 11,030

Mes CT «

(OM teh. see

Fuel Consump. (LHV) 10°

Btwhr 674.3 739.3 | 667.8 731.3

NOx as NO2, Ibs/hr 325 405 510 640

*SOx as SO2, Ibs/hr 0 0 216 237

Particulates, lbs/hr <24 <26 24 26

Hydrocarbons,

(as CH), Ibs/hr <ll <1l 11 11

co, Ibs/hr <19 <19 19 19

*Distillate Fuel with 0.3% Sulfur by Weight,

Natural Gas Fuel Containing no Sulfur.

, The results are based on field and combustion laboratory test

| data from the same or similar machines and combustion

systems, correlated to provide a coherent body of emissions

i‘ data. The data presented are for operation at ISO conditions.

es PG5341P

Zz NATURAL GAS | DISTILLATE

BASE PEAK | BASE PEAK

24,620 26,600 |24,110 26,050

12,300 12,200 | 12,450 12,340

302.8 324.5] 300.2 321.5

140 155| 200 225

0 0 97 104

<ll <1il ae

<5 <5 5 5

<10 <10 10 §=©10

*Distillate Fuel with 0.3% Sulfur by Weight,

Natural Gas Fuel Containing no Sulfur.

The results are based on field and combustion laboratory

test data from the same or similar machines and combus-

tion systems, correlated to provide a coherent body of

emissions data. The data presented are ‘ © operation at

ISO conditions.

yr ee ey yer re eee ee

PG6441A

FUEL - NATURAL GAS | DISTILLATE

LOAD -— BASE PEAK | BASE PEAK

Output, kW 31,750 34,750 | 31,100 34,000

Heat Rate

(LHV), Btw/kWH /11,280 11,210 | 11,380 11,310

Fuel Consump. (LHV) 10°

Btu/hr 358.1 389.5) 353.9 384.5

NOx as NO2, Ibs/hr 185 220 325 385

*SOx as SO2, Ibs/hr 0 0 115 125

Particulates, Ibs/hr <13 <14 13 14

Hydrocarbons,

(as CH,), Ibs/hr <6 <6 6 6

CO, Ibs/hr <1l <1l 11 11

*Distillate Fuel with 0.3% Sulfur by Weight,

Natural Gas Fuel Containing no Sulfur.

The results are based on field and combustion laboratory test *#

data from the same or similar machines and combustion

systems, correlated to provide a coherent body of emissions

data. The data presented are for operation at ISO conditions.

EXHIBIT 24

[LOGO] UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

WASHINGTON, D.C. 20460

; OFFICE OF ENFORCEMENT

3 Jan. 22, 1981

r MEMORANDUM

‘- SUBJECT: PSD Applicability

" FROM: Director

Division of Stationary Source Enforcement

TO: Charles Whitmore, Chief

Technical Analysis Section, Region VII

3, This is in response to your memo of December 4, 1980,

in-which you requested a PSD applicability determination

é'. for Cargill Inc.’s proposed ethanol plant in Eddyville,

2.’ Iowa.

'4- "“'The proposed plant is to be located in a designated

7 attainment area and will consist in part of wet-milling and

ethanol facilities (collectively, the “ethanol plant”). Steam

¢*and electricity for the plant are to be generated by an on-

#); Site existing power plant, which is to be converted into a

ee. co-generation unit. The addition of the ethanol plant will

cause a large increase in the hours of operation of the

f Power plant and a fuel switch to burn coal exclusively.

be fre) , ; .

’ mg I would like to mention first that the project may be

Sexempt from PSD review through a “grandfather” exemp-

__—— >}

the 1978 PSD regulations, as stayed, and certain other

conditions are met. (See 40 CFR 52.21 (i)(4V)).

If the grandfather exemption does not apply the

addition of the ethanol plant should be considered a

modification to an existing major stationary source. In

order to determine if the modification is major and subject

to preconstruction PSD review, it is first necessary to

determine if there will be a significant net emissions

increase from the modification itself. EPA is interpreting

the term “net emissions increase” as any significant

increase in actual emissions from a physical change or

change in the method of operation at a stationary source

and any other creditable contemporaneous increases or

decreases in actual emissions. A conforming amendment

to this effect will be published in the Federal Register. In

this case there is an expected increase at the ethanol plant

of approximately 15 TPY of TSP, 11 TPY of SO, and less

than 40 TPY VOC. All of these emission rates are de

minimus, (See 40 CFR 52.21(b)(23)) and therefore this

modification would not be subject to PSD review. Regard-

less of whether or not this is determined to be a modifica-

tion any increase in emission will consume increment

provided the baseline has been triggered.

It is also important to note that, in the absence of any

SIP or permit limitations, neither the increase in emis-

sions from the switch to burn coal exclusively nor the

increase in hours of operation at the power plant would be 4

considered a modification (See 40 CFR 52. 21(bX2KitiXe) _

and (f)). :

This determination has been made with the concur-.#

rence of the Office of Air Quality Planning and Standards’§

and the Office of General Counsel. If you have any questions

ne TLL,

regarding this memo, please contact Janet Littlejohn of

my staff at 755-2564.

/s/ Edward E. Reich

Edward E. Reich

cc: Peter Wyckoff, OGC

Mike Trutna, OAQPS

Darry! Tyler, OAQPS

EXHIBIT 29

[LOGO] UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

WASHINGTON, D.C. 20450

Oct. 14, 1988

THE ADMINISTRATOR

Mr. John W. Boston

Vice President

Wisconsin Electric Power Company

Post Office Box 2046

Milwaukee, Wisconsin 52301

Dear Mr. Boston:

As you requested in our meeting on September 15,

1988, I have made fina] determinations regarding the

applicability of the Clean Air Act’s New Source Perform-

ance Standards (NSPS) and Prevention of Significant

Deterioration (PSD) requirements to the proposed life

extension project at the Port Washington steam electric

generating station, which is owned and operated by

Wisconsin Electric Power Company (WEPCO). For the

reasons discussed below, I have determined that, as

proposed, the renovations at Port Washington are subject

to both PSD and NSPS requirements. However, EPA

remains willing to work with you regarding methods of

compliance. As we have discussed, one alternative would

be to reconfigure the project such that no emissions

increases would occur. My staff is ready to meet with you

to discuss these matters at any time.

I. BACKGROUND

On September 12, 1988, David Kee, Director Air and

Radiation Division, EPA Region V, wrote you regarding

PSD and NSPS coverage of the Port Washington renova-

tions. Enclosed with that letter was a memorandum dated

September 9, 1988 from Don R. Clay, Acting Assistant

Administrator, addressing the background of the Port

Washington project, and analyzing at some length the

relevant interpretative issues. For purposes of brevity, I

will not repeat that material here, but rather incorporate

it by reference.

The September documents concluded that the life

extension project, as proposed, likely would be subject to

PSD and NSPS requirements. However, EPA also stated

that final applicability determinations could not be pro-

vided at that time in the absence of certain factual infor-

mation. In our subsequent meeting you requested that

EPA furnish final determinations, and agreed to provide

the necessary additional information. You also asked EPA

to reconsider certain of the conclusions in Don Clay’s

memorandum. These matters are discussed below.

Il. FINAL DETERMINATIONS

Your staff has responded to our requests for addi-

tional information, and I want to thank you for WEPCO’s

continued cooperation in doing so. Based on this, and the

other information in EPA's files, I now make the following

final determinations:

(1) The life extension project, as proposed, will

render WEPCO’s Port Washington plant subject to the

PSD requirements of Part C of the Clean Air Act as a

- Pa

> aay

major modification within the meaning of the Act and the

EPA regulations at 40 C.F.R. § 52.21.

(2) The proposed life extension project will render

each of the five steam generating units at the Port Wash-

ington plant subject to the NSPS requirements of section

111 of the Clean Air Act as modification within the mean-

ing of the Act and the EPA regulations at 40 C.F.R. Part

60.

In reconsidering the memorandum and letter of

September 9 and 12, I have taken a careful look at the

issues you raised in our meeting: whether the renovations

are routine; whether EPA has treated similar projects in a

different fashion; and whether there would be an emis-

sions increase due to a physical or operational change.

However, I find no reason to depart from the reasoning of

the September documents. Accordingly, I conclude that

WEPCO’s life extension project, if carried out as proposed,

will involve a substantial and non-routine renewal of the

Port Washington facilities that will significantly increase

both hourly maximum and annual emissions of air pollut-

ants.

Specifically, regarding the nature of the proposed

work at Port Washington, I find that these renovations

constitute physical changes for PSD purposes within the

meaning of 40 C.F.R. § 52.21(b)(2)(i), and physical and

operational changes for NSPS purposes within the mean-

ing of 40 C.F.R. §60.14(a). I find further that these

changes do not come within the PSD and NSPS exclusions

for routine maintenance, repair, and replacement, nor the

exclusions for increases in production rate or hours of “%

operation. (See 40 C.F.R. §§ 52.21(bX2)(iii) and 60.14(e)).

Regarding the emissions changes from the life exten-

sion project, based upon the emissions data and certain

factual assertions submitted by WEPCO, I find that the

Port Washington renovations will result in a significant

net increase in emissions of several pollutants for PSD

purposes within the meaning of 40 C.F.R. § 52.21(b)(2)(i),

(b)(3), and (b)(21). I find further that the renovations will

result in an increase in the emission rate of several pollut-

: ants at each of units 1-5 for NSPS purposes within the

; meaning of 40 C.F.R. § 60.14(a) and (b).

Enclosures A and B detail the emissions changes

d underlying these findings for PSD and NSPS purposes. As

a indicated above, EPA’s calculations and determinations

2 are based on data supplied by WEPCO. We will use the

é* data in Enclosures A and B in the event you would like to

work with us to establish an acceptable arrangement for

satisfying PSD and NSPS requirements through the

"3 physical capacity restrictions, or, in the case of PSD,

>’ federally enforceable limitations on potential emissions.

i, . °

ill. DISCUSSION

< \~ As you requested, I have reconsidered the question of

’ whether the physical and operational changes at Port

ae Washington are routine, whether applying PSD and NSPS

oR here would be inequitable in light of EPA’s past treatment

“A of renovation projects, and whether the renovations will

_Tesult in emissions increases. These matters are addressed

. « below, as is EPA’s reasoning with respect to the baselines

Fi for: “calculating the PSD and NSPS emissions increases

Reflected i in Enclosures A and B.

a ee ~~. * ¥)

Regarding the question of routineness, the renova-

tions involve the replacement of steam drums, air heaters,

and other major components that are integral to the

continued operation of the source. The work will not

simply maintain the facilities in their current state, but

rather will significantly enhance their present efficiency

and capacity, and substantially extend their useful eco-

nomic life. In addition, the work called for here is rarely, if

ever, performed. Moreover, this work is costly, both in

relative and absolute terms. Based on these and other

factors, I reaffirm Don Clay’s findings on the non-routine

character of the Port Washington changes. The September

9 memorandum contains a complete discussion of EPA’s

reasoning on this issue.

On the related equity question, I find no inconsistency

here with EPA’s prior determinations regarding routine

and non-routine changes. I note initially that PSD and

NSPS applicability determinations are made on a case-by-

case basis. Thus, it is very difficult to analogize to other

projects, which almost inevitably present significant

factual differences. Nevertheless, my staff has reviewed

the additional material you submitted on September 19,

and September 27, 1988 regarding certain other renova-

tion projects, and has informally surveyed EPA Regional

Offices and state agencies.

I have concluded that none of the four steam drum

replacements identified in your September 19 submission

are sufficiently similar to the Port Washington project to

support determinations of nonapplicability in this matter.

The Carolina Power and Light case involved a faulty 7

steam drum replaced prior to the initial start-up of a new .

unit, and would not have increased emissions for PSD or

NSPS purposes. The Great Western Sugar example did not *

involve a utility boiler, and was too small to be affected by

NSPS. The Ashland Oil facility was not at a utility, in-

volved a waste heat boiler that was not fossil-fuel fired,

and hence, was not an emissions unit subject to PSD or

NSPS. The Algoma Steel Co. facility was not a utility

boiler, and not located in the United States.

In addition, the informal survey conducted by the

Office of Air and Radiation disclosed no closely analogous

cases that were ever reviewed by EPA headquarters for

# . purposes of PSD or NSPS applicability. In particular, EPA

Ms found no examples of steam drum replacement at aged

electric generating facilities. Moreover, EPA could find no

: examples in which the Agency had analyzed and issued an

: applicability determination for a “life extension project” for

: any category of major source. Regarding the four utility

5 projects identified in your September 27 submission, I note

f _ that they do not involve steam drum replacement. In

‘,... addition, permit applications were not submitted to the

ey state agencies for the Duke Power and Texas Utilities

-" projects you cite. Consequently, they were not reviewed by

_ any air pollution control agency. The Cincinnati Gas and

_\ Electric project was reviewed by the state, but not EPA.

ad The state determined, and EPA Region II concurred, that

. i the Hydraco Enterprises project was not subject to PSD

_ based on a net decrease in emissions of all pollutants. Our

‘informal survey and review of the projects you identified

¥. reveal that major construction activities undertaken by

bs “Utilities that may be subject to Clean Air Act requirements

* have not been brought to the attention of EPA. The Agency

is considering what steps, may be necessary to address

this ‘situation.

| SO EPA has discovered only two state agency determina-

tions addressing life extension questions in a manner

possibly inconsistent with EPA’s analysis of the Port

Washington project. These instances, which apparently

were not brought to EPA’s attention prior to the states’

determination, do not create an inequity that would justify

a different conclusion by EPA in this case.

As to the question of emissions increases at Port

Washington, I believe that EPA has properly interpreted

the PSD and NSPS regulations as applying to increases in

emissions due to increases in hours of operation or produc-

tion rate, where, as here, such operational or production

increases are closely related to physical or operational

changes. A contrary interpretation would allow even

massive emissions increases stemming from significant

new capital investment — as distinguished from routine

fluctuations in the business cycle — to escape scrutiny

under the Clean Air Act simply because the new invest-

ment did not involve an inherently more polluting produc-

tion process. I do not believe that Congress intended such

a result.

I would like to point out that the figures on emissions

increases in Enclosures A and B reflect my conclusions

regarding the proper points in time from which to calcu-

late emissions changes. For PSD, I have determined under

40 C.FR. § 52.21(b)(21\(ii) that the two-year period of 1983

and 1984 — prior to the source curtailments due to discov-

ery of cracks in the rear steam drums - are more repre-

sentative of normal source operations than the most recent

two-year period. This conclusion is appropriate in light of

WEPCO’s historical operations.

As to NSPS, there is no “representative emissions

concept under that program. Rather, under the circum-

stances presented by this case, the baseline emission rates

for units 1-5 are determined by hourly maximum capacity

just prior to the renovations. At this time, EPA is relying

on the actual operating data you submitted to determine

current maximum capacity. Although EPA is certainly

open to further discussion on this point, the information

contained in your September 27 and October 11, 1988

submissions is inadequate to support WEPCO’s assertions

that higher-than-actual capacities could be achieved on an

economically sustainable basis. For example, you indicate

that operation at higher levels at units 1-4 “could increase

equipment deterioration thus causing further damage.”

Regarding Unit 5, you state that “safety concerns” dictated

the decision to shut down that unit. Based on this infor-

_ Mation, we are unable to rely on WEPCO’s statements as

> to maximum “achievable’ capacity in determining the

_ emissions changes at each of these units. Thus, for exam-

ple, in the case of unit 5, the current capacity must be

regarded as zero.

fue

* IV. CONCLUSION

é¢.°«- In adopting the PSD and NSPS programs, Congress

' :imtended to address the type of long-term capital invest-

oe ments in pollution-emitting facilities at issue in the Port

f Washington life extension project. Thus, as proposed,

f. these renovations would be subject to the requirements of

‘,, both. programs. However, as indicated above, my staff

: remains ready to work closely with WEPCO to discuss

“specific pollution control equipment and permitting

Again, thank you for your cooperation is this matter.

Sincerely,

/s/ Lee M. Thomas

Lee M. Thomas

Enclosures

cc: Senator Robert W. Kasten, Jr.

Representative F. James Sensenbrenner, Jr.

Don Clay, EPA (ANR-445)

David Kee, Air & Radiation Div., Region V

Enclosure A

PSD Applicability

Port Washington Power Plant Renovation Project

(all emissions calculations are in tons per year)

Actual Potential Net Subject

Emissions Emissions EmissionsPSD to, PSD

Pollutant Baseline (1) (2) Increase Level Review

Total

suspended

particulate 170 283 (3) 108 25 yes

Sulfur dioxide 24,234 52,621(3) 28,385 40 yes

Nitrogen

oxides 2,991 8,201 5,210 40 yes

Carbon

monoxide 144 397 253 100 yes ~

Hydrocarbon 17 47 30 46 no

Beryllium 0.0016 0.005 0.0034 0.0004yes

Fluorides 38 98 60 3 yes

NOTE: PSD applicability for the other PSD regulated

pollutants listed at 40 CFR Section 52.21(b)(23)ji)

and (ii) has not been determined at this time.

1) Average emissions for two-year period defined by

calendar years 1983 and 1984.

2) As calculated by WEPCO based on 1992 coal type,

actual emissions after ESP, and an annual capacity

utilization factor of 90%.

3) An EPA estimate of potential emissions, based on

existing federally enforceable limits (i.e., applicable

SIP), may be higher. The indicated PSD applicability

determination would, however, not change.

se Oe

i? Enclosure B

é NSPS Applicability |

y Port Washington Power Plant Renovation Project

is FULL LOAD EMISSIONS AT CURRENT

ct CAPACITY (BEFORE RENOVATION)

a UNIT-1 UNIT-2 UNIT-3 UNIT-4 UNIT-5

¢:. SO,(LBS/HR) 1417 1828 2043 1580 ~ -0-

>. PM(LBS/HR) 15 16 12 12 -0-

.NOx(LBS/HR) 480 352 289 221 -0.

FULL LOAD EMISSIONS AT FUTURE

CAPACITY (AFTER RENOVATION)

UNIT-1 UNIT-2 UNIT-3 UNIT-4 UNIT-5

2 SO,’ (LBS/HR) 2046 2037 2088 2269 2695

17 15

316 369

%<.

PM(LBS/HR) 16 16 12

NOx(LBS/HR) 696 392 297

SUBJECT TO NSPS

(AFTER RENOVATION)

UNIT-1 UNIT-2 UNIT-3 UNIT-4 UNIT-5

SO, (LBS/HR) YES (a) YES (a) YES(a) YES(a) YES

PM (LBS/HR) YES(b) NO NO YES(b) YES

NOx (LBS/HR) YES (c) YES (c) YES (c) YES (c) YES (c)

Notes:

(a) With less add-on control than NSPS requirement,

emissions (lb/hr) would not increase and NSPS would

not apply.

(b) Because of planned ESP upgrade, PM emissions

(lb/MM Btu) after renovation are expected to be less

than NSPS requirement. However, NSPS would re-

quire CEMS for opacity.

ton, current NOx emissions (lb/MM Btu) are expected

to be less than NSPS requirements. However, NSPS

would require a CEMS for NOx.

EXHIBIT 31

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

REGION V

DATE: MAR. 25, 1988

SUBJECT: PSD Applicability for a Power Plant

Life Extension Project

FROM: David Kee, Director

Air and Radiation Division

TO: Gerald A. Emison, Director

Office of Air Quality Planning and Standards

I am requesting guidance on a Prevention of Significant

*. Deterioration (PSD) applicability determination. Wiscon-

‘gin Electric Power Company (WEPCO) intends to renovate

t its Port Washington plant. The Wisconsin Department of

®% Natural Resources (WDNR) has asked if the United States

?;° Environmental Protection Agency (USEPA) considers

these renovations subject to the requirements for a “major

modification” in the Federal PSD regulations in 40 CFR

~ §2.21. A physical change or change in the method of

. Operation of a major stationary source is subject to PSD.

: : However, an increase in the hours of operation or the pro-

: ‘ duction rate is not considered a physical change or change in

i. the method of operation [see 40 CFR 52.21(bX2)iiiXf).

. WEPCO believes the renovation project is merely an

<increase in production which is not subject to PSD regula-

‘tions.

PCO operates five coal-fired boilers at the Port Wash-

ington plant. One boiler has been shut down for 3 years

due 49,8 cracked steam drum. The others have not been

le to operate at full capacity due to degradation. Some of

the boilers have suffered more degradation than others as

illustrated below:

Generator 1986 Summer Year of

Nameplate Capability* Initial

(megawatts) (megawatts) operation

Unit 1 80 49.0 1935

Unit 2 80 69.0 1943

Unit 3 80 78.0 1948

Unit 4 80 57.0 1949

Unit 5 80 75.0 1950

*From Inventory of Power Plants in the United States

1986. Energy Information Administration

The renovations are intended to restore the boilers to their

nameplate capacities and to allow them to operate until

2010. Plantwide capacity would increase about 40 percent

above current levels to 400 megawatts. Net emission

increases of sulfur dioxide, particulate matter, and possi-

bly other pollutants would be “significant.” Capital expen-

ditures will be required to restore the lost capacity because

major boiler components will be replaced.

We are requesting concurrence with our determination that

the WEPCO renovations are not exempt from PSD regula-

tions under the provisions of 40 CFR 52.21(bX2\iii(f). We

consider this exemption to be only for increases up to the

production rate that the source can operate at without alter-

ing equipment. In other words, an increase in production rate

is exempt but a renovation that increases the production rate

is not even though the renovation restores lost capacity.

Although the Port Washington plant may have been able

to operate at 400 megawatts in the past, degradation has

caused operational limitations that have restricted their

potential to emit. Our understanding is that an increase in

actual emissions up to the potential to emit would be

exempt under 40 CFR 52.21(b)(2)(iii)(f) but an increase in

the potential to emit would not.

I have attached letters from Mr. Dale Ziege of WDNR

dated November 9, 1987, and February 5, 1988, and from

Mr. Mark Steinberg of WEPCO dated March 17, 1988.

These letters comprise the State and company’s request

for an app! -ability determination.

We reque. your consideration of this applicability issue

because boiler life extension projects appear to be on the

increase nationwide and your determination here may

impact numerous other projects. If you have any ques-

tions, please contact me or Bill MacDowell of my staff at

FTS 886-6043.

IN THE UNITED STATES DISTRICT COURT

: FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

Civil Action No. 1:00 CV 1262

UNITED STATES OF AMERICA,

Plaintiff,

Vv.

)

ENVIRONMENTAL DEFENSE,

NORTH CAROLINA SIERRA )

CLUB, NORTH CAROLINA )

)

PUBLIC INTEREST RESEARCH

GROUP

Plaintiff-Intervenors

Vv.

DUKE ENERGY CORPORATION

Defendant.

VIDEOTAPED I -

DEPOSITION OF WALTER STEVENSON

(Taken on behalf of the Defendant)

Durham, North Carolina

September 10, 2002

* * *

(42) [Q.)] ...Can you tell us whether you put to

gether this Exhibit 175 before May 10, 1989?

A. Do you have that particular list with you so I can

be sure? I believe I know what you're referring to. I just

want to be sure I don’t misstate.

MR. BECKHARD: While you're looking for that,

can I ask for a short break? Comfort break.

VIDEOGRAPHER: We’re off the record at 1:15.

VIDEOGRAPHER: Weare on the record at 1:24.

BY MR. COTTINGHAM:

Q. Mr. Stevenson, before we took a break you said

you wanted to look at what we call the Farmer memoran-

dum which we looked at a number of times in other

depositions. It is Exhibit 121 and 177. And I was asking

you specifically about whether your list that you put

together that’s Exhibit 175 you put together before or after

Mr. Farmer’s memorandum dated May 10, 1989 which has

an Attachment 3, a list of potential utility boiler life

extension projects?

A. My list would have been put together prior to this

list.

" Q. So okay. Let’s go back to your list, Exhibit 175

which is entitled “Known/Suspected Utility Life Extension/

. Repowering Projects.” When you use the term “life exten-

: sion” on that list, first on the title and in the column type

where [43] you use it, at least nine times, what did you

3 mean by that, by life extension?

% A. Inthe title or in the type?

Q. Either way, both.

A. The “type” is what the magazine article or who-

ever I read this, the term they used. I had no idea of what

it necessarily meant. To the extent it was so common I just

picked up whatever the most common and typed this up as

just a working list. But again, that’s why these terms - I

just listed whatever was in the particular article subject.

‘rs ©

Q. What did you mean in the title?

A. Up top it says “known/suspected/utility life

extension repowering.” What all that would mean come

sometime in the future, I don’t know for sure what they

were even, the projects. This was the terminology used in

these various articles I ran across. I don’t know what they

necessarily mean.

Q. And you didn’t know what it meant when you

wrote it at the top or typed it at the top of this document?

A. No. It was some of the more common terms. I

think you see “life extension” “repowering” probably the

two most common terms used in these articles so I just put

it in there. I just typed this up.

Q. Why did you put this together?

A. Just working on projects over many years it just

[44] seemed if the WEPCO determination had come up, it

seemed like at some point somebody was going to ask

should a study be done or how common it was. And to the

extent I was running across these as I read things, I just

typed up a list. I figured sometime in the future somebody

could use it for something; but it was no particular, nobody

asked me to put it together or anything. It was just a list I

put together for efficiency.

Q. And you think you put it together sometime

between September of 1988 when you and Sallie Harmon

did the survey on life extension and May of 1989 when Mr.

Farmer wrote his memorandum?

A. Yeah.

Q. What was happening during that time that 4

related to life extension that would cause you to put 3

together this memorandum? y

i 55

¢*

A. Well, the sequence of events were that a determi-

nation was to be made on WEPCO, they made an applica-

- tion, they — so Sallie and I did a very quick survey to see if

- any determinations had been requested before and so

ce. forth. We continued to have discussions and meetings with

4 WEPCO. They continued to submit data. We’d evaluate it

and look at it in context of the NSPS program, and along

that process reading these articles, like I say, these names

started appearing. I put a list together. Ultimately the [45]

Court made the decision all the briefs were filed and

everything and the litigation was determined, the deter-

mination was made first, and then the litigation occurred.

And then after the NSPS decision was completed, which

again was one, that was that. We just went on to other

projects.

'«

Q. What did you do with this Exhibit 175 list after

you put it together?

MR. BECKHARD: Objection. Outside the scope.

You may answer in your personal capacity.

THE WITNESS: It just was put in my files, you

know the WEPCO folder, just put it in there. Nobody

particularly asked for it, but whether it was circulated I'd

-'. have to speculate, you know, somebody ask me for a copy

-< about WEPCO. Nobody particularly asked me for this and

4 5; it ‘wasn't intentionally distributed to anybody. It just went

4 in my files. We share a lot of data in our groups so every-

be is pretty much aware of what was going on.

“7.Q. Other people in your group were probably aware

hist you put together this list?

Feet).

Pv,

ee ee ee

A. Ihave to speculate. It wouldn’t surprise me either

way. I don’t remember distributing it to anybody. Don't

remember anybody asking for it. I would expect, yeah.

* * *

& fer

Ea.

EXHIBIT 33

[LOGO] UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

WASHINGTON, D.C. 20460

Jun. 8, 1990

Mr. John Boston

President

Wisconsin Electric Power Company

Post Office Box 2046

Milwaukee, Wisconsin 52301

Dear

Mr. Boston:

On January 19, 1990, the United States Court of

Appeals for the Seventh Circuit in Wisconsin Electric

- should be used to calculate emissions increases for PSD

Purposes in this case. Consequently, the Seventh Circuit

vacated and remanded the PSD determination to EPA for

er action consistent with the court’s decision.

As you know, EPA decided to acquiesce in the court’s

holding rather than seek rehearing. This letter constitutes

EPA’s revised PSD applicability determination in re-

sponses to the court’s remand order.

The Agency believes that the court’s principal instruc-

tion ~ that EPA consider past operating conditions at the

plant when addressing modifications that involve “like-

kind replacements” — can be reasonably accommodated

within the present regulatory framework without further

litigation in this case. The net result of the court’s ruling is

the recognition of a subcategory of “like-kind replace-

ments” under the “major modification” definition of EPA’s

new source review provisions.

As explained below, EPA will employ an “actual-to-

ictual” method to calculate emissions increases for

WEPCO’s proposed renovations to its Port Washington

power plant. The outcome in this case is that WEPCO will

not be subject to PSD review for sulfur dioxide (SO,),

particulate matter (PM), carbon monoxide, or hydrocar-

bons. However, there will be a significant net increase in

actual emissions of nitrogen oxides (NOx), and WEPCO

must obtain a PSD permit for that pollutant.

I. BACKGROUND

A. Factual Background.

The WEPCO owns and operates five coal-fired, steam-

generating units at its Port Washington facility near

Milwaukee. All units had an original design capacity of 80

megawatts when they were placed in service between 1935

and 1950. However, due to age-related deterioration and

loss of efficiency, both the physical capability and actual

utilization of the plant have declined over time. Unit 5 was

shut down completely due to a cracked rear steam drum.

Consequently, by 1987, WEPCO-was faced with removing

the units from Service as they reached their planned

retirement dates beginning in the early 1990’s, unless it

undertook a costly “life extension” program to restore the

physical and economic viability of the units and extend

their useful life for approximately 20 years. The WEPCO

series of applicability determinations in 1988

and 1989, EPA ruled that the renovations planned under

WEPCO’S life extension program would constitute a

“modification” for purposes of the NSPS Provisions of the

Clean Air Act (Act), and a “major modification” under the

PSD provisions of the Act. Thus, WEPCO would have had

to install some level of control equipment or physical

capacity restriction to avoid NSPS coverage for three of

the five units Proposed to be renovated. As to PSD, the

Wa:

“DONT.

. 60

B. The Court’s Decision.

1. Physical Change.

The court unequivocally agreed with EPA that the

replacement of steam drums, air heaters, and other major

components was a nonroutine “physical change,” and thus

met the first of two tests for a modification under NSPS

and PSD. The Agency found that the renovations proposed

by WEPCO were exactly the type of industrial changes

that were meant to be addressed by the NSPS and PSD

progress. In upholding EPA’s finding that a physical

change would occur, the court strongly endorsed EPA’s

reading of the basic congressional intent in adopting the

modification provisions of the NSPS and PSD programs,

because to rule otherwise “would open vistas of indefinite

immunity from the provisions of NSPS and PSD” (slip op.

at 11). The court also relied on the reasonableness of

EPA’s consideration of the magnitude, purpose, frequency,

and cost of the work in upholding EPA’s finding that the

renovations are not “routine” (slip op. at 14-18). In addi-

tion, the court rejected WEPCO’s argument that the

renovations could not be deemed a modification for NSPS

purposes because they did not constitute a “reconstruc-

tion” under 40 CFR 60.15 (slip op. at 18-20).

2. NSPS Emissions Increase.

The court upheld EPA’S decision that there would be an

increase in hourly emissions at three of the units, and thus

for those three units, WEPCO met the second test for NSPS

applicability. The Agency had argued that the regulations

require NSPS emissions increases to be determined by

comparing the current (pre-change) hourly emissions capac-

ity of each affected facility with the post-renovation hourly

emissions capacity of each unit. The Seventh Circuit

agreed, and rejected WEPCO’s argument that original

design capacity or past “representative” capacity no longer

achievable at the plant should be used for the baseline

emissions rate (slip op. at 20-25).

3. PSD Emissions Increase.

The regulatory preamble to the PSD regulations

provides that the set of emissions units that have “not

begun normal operations” includes both “new or modified”

units (45 FR 52676, 52677, 52718) (1980). Consequently,

EPA used the “actual-to-potential” calculus in evaluating

WEPCO’s life extension project. The court rejected this

methodology in the case of WEPCO’s “like-kind replace-

ment,” asserting that EPA’s reasoning was circular (slip

op. at 28). (In addition, the court held (slip op. at 27 n.11)

that the exemption in 40 CFR 52.21(b)(2)(iii)f) for emis-

sions increases due to expanded operations did not apply

because WEPCO’s increased operations were directly tied

to the life extension project.] Instead, the court ruled that

EPA should recalculate post-change emissions considering

past operating conditions where it is possible to make a

more realistic assessment of future emissions (slip op. at

29-31). Alternatively, the court stated that EPA could

conduct new rulemaking to explicitly apply the “actual-to-

potential” calculus to “like-kind replacements” (slip op. at

30).

Il. E WEPCO DECISION IN THE CONTEXT OF

THE PSD PROVISIONS

. The Seventh Circuit held that EPA could not wholly

disregard past operating history and automatically apply

the actual-to-potential methodology for determining PSD

applicability to WEPCO’s “like-kind replacements.” In

describing the WEPCO changes as “like-kind replace-

ments” and limiting its decision to such changes, the court

did not dispute the correctness of EPA’s application of the

actual-to-potential test to the full spectrum of new and

modified sources not covered by this subcategory of

change. The recent decision ir Puerto Rican Cement Co. v.

EPA, 889 F.2d 292 (1st Cir. 1989), explicitly upheld EPA’s

position that the actual-to-potential concept should be

applied to “modified” emissions units. The First Circuit

case involved the modernization and reconfiguration of

existing emissions units [see 889 F.2d at 293 (company

planned to “convert kiln No. 6 from a ‘wet’ to a ‘dry’ ce-

ment-making process, and to combine that with Kiln No.

3”)]. A key issue was whether EPA properly held that the

“modified” units had “not begun normal operation” and

therefore the actual-to-potential concept applied in calcu-

lating emissions increases. The First Circuit affirmed

EPA’s position that the actual-to-potential concept should

be applied to the company’s “modified” units. Puerto Rican

Cement, 889 F.2d at 297. Consequently, the court found

that both the language and expressed purpose of the

regulations indicate that EPA applied the regulations

properly in using the actual-to-potential test for a pro-

posed modification. The Seventh Circuit in WEPCO did

not dispute the correctness of EPA’s application of the

actual-to-potential test to the full spectrum of changes not

covered by the subcategory of changes (like-kind replace-

ments) created by the court.’ Therefore, in the case of

' BPA will leave to future case by case applicability determinations

what is a “like-kind replacement.” But for guidance of the parties, EPA

presently considers that only for projects that are genuine “like-kind

(Continued on following page)

nonroutine physical or operational changes at an existing

major source which are not specifically “like-kind replace-

ments” in nature, EPA will continue to apply the actual-to-

potential test for PSD applicability purposes.

reconstruction) of an existing emissions unit with an identica] new one

add-on control systems would, under certain circumstances, be exempt

from new source review. See Letter to Timothy J. Method, Assistant

Ow Pte a

Ill. THE AGENCY’S RESPONSE TO THE COURT’S

REMAND ORDER

A. The PSD Baseline Emissions.

Determining the “baseline” level of actual emissions

before a physical or operational change is a necessary first

step to determine if emissions increase as a result of the

physical change. The Agency’s regulations define the

baseline for PSD purposes, as follows:

In general, actual emissions as of a particular

date shall equal the average rate, in tons-per-

year (tpy), at which the unit actually emitted the

pollutant during a 2-year period which precedes

the particular date and which is representative of

normal source operation. The Administrator

shall allow the use of a different time period

upon a determination that it is more representa-

tive of normal source operation. Actual emissions

shall be calculated using the unit’s actual operat-

ing hours, production rates, and types of materi-

als processed, stored, or combusted during the

selected time period [see 40 CFR 52.21(b)(21)(ii)).

The purpose of the definition is to establish a baseline

that is “representative” of “normal” source operations prior

to the change. The Agency historically has followed a

presumption that the most recent 2 years should be used,

but has allowed another period where the source demon-

strates that recent operations are abnormal [see 40 CFR

52.21(b)(21)(ii); see also 45 FR 52676, 52718 (1980)]. The

WEPCO baseline period is an example of this. In this

instance, plant utilization was disrupted by physical

problems that led to nonroutine physical changes to

remedy those problems. Consequently, EPA determined

that a period prior to the onset of such problems was

representative of normal operations, and as required by its

> |

‘

eS ee

regulations, used this period to establish the baseline. The

period used was also within the contemporaneous period

specified in 40 CFR 52.21(b\(3)(ii). It should be empha-

sized that, in the WEPCO case, the parties and the court

agreed that 1983-84 (prior to discovery of steam drum

cracks) should be the basel'ne years (slip op. at 26); these

years had an average 29 percent utilization rate. We

continue to believe this is the appropriate baseline period

for the Port Washington renovation.

B. Calculating Post-Change Emissions Under PSD.

The court concluded that “EPA’s reliance on an

assumed continuous operation as a basis for finding an

emissions increase is not properly supported” (slip op. at

30). Although the court held that EPA cannot, in this case,

wholly disregard past operating conditions at the plant, it

also held that EPA could not reasonably rely on the

company’s own unenforceable projection of operating

conditions (slip op at 29). The court remanded the question

of PSD applicability to EPA for further proceedings not

inconsistent with its decision.

Before the court remanded EPA’s determination, it

attempted to ascertain whether, in fact, the proposed

project would be a major modification even using the

assumptions least likely to result in an emissions increase.

The court felt (and we agree) that such a “best” case

scenario for WEPCO would assume that the “present

hours and conditions” would not change at all following

the renovations (despite, of course, WEPCO’s own esti-

mates of at least tripling of utilization over current levels)

(slip op. at 31, n. 14). The court, however, lacked the data

to make this calculation, as it could not determine whether

yoo

arated te

<. +

ad s

a major modification would result using a set of assump-

tions most favorable to WEPCO. Therefore, the court

remanded the determination to EPA for further considera-

tion.

A conceivable interpretation of the court’s opinion is

that EPA must calculate WEPCO’s post-modification

emissions increases based on “present hours and condi-

tions.” However, for the reasons discussed below, EPA

believes that this interpretation is incorrect. Under such

an interpretation, EPA would determineWEPCO’s post-

renovation annual emissions in tons per year (tpy) by

simply projecting into the future the hours of operation

and conditions (i.e., hourly emissions rate) that existed

just before the renovations. This is the interpretation

urged by WEPCO in a February 9, 1990 letter to EPA.

Such a calculus will always result in exactly the same

level of emissions before and after the physical change,

and thus would always exempt “like-kind replacements”

from PSD review. In addition, calculating emissions

increases using this assumption would flatly contradict

the record in this case. The WEPCO has stated that it will

greatly increase capacity utilization over both current

levels and the baseline levels used in the previous deter-

minations. Capacity utilization in terms of heat input to

the plant (based on nameplate capacity) during 1978-1979

was about 40 percent (Record item 7.4, WEPCO Submis-

sion, April 19, 1988 meeting with EPA). During the 1983-

1984 baseline period, it was approximately 27 percent. Jd.

It has since declined to less than 10 percent (1988-1989

data). Id. The WEPCO has advised the State of Wisconsin

that it intends to return to a forecasted 42 percent utiliza-

tion level in the years following renovation with an upper

maximum forecast of 50 percent [Letter from Walter

Woelfle, WEPCO, to Dale Zeige, Wisconsin Department of

Natural Resources, March 29, 1990, Table 7 (enclosed)}. It

would be wrong to assume that unit 5 would not be oper-

ated at all in the future when an explicit purpose of the

renovation is to bring the unit back on line at its original

design capacity; moreover, unit 5 is presently inoperative.

Most importantly, this methodology is not fairly discerni-

ble from any reading of the current regulations. In addi-

tion, using “present hours and conditions” would disregard

planned changes at WEPCO that will affect the post-

renovation hourly emissions rate [e.g., increased capacity,

lowering of sulfur content, and enhancement of the elec-

trostatic precipitators (ESP).

The court upheld EPA’s position that increased

utilization in the future that is linked to construction or

modification activity should not be excluded in determin-

ing post-renovation emissions. Nevertheless, the court told

EPA not to automatically assume 100 percent utilization

in the future when historical data are available. The

; WEPCO has definite plans to return the plant to historical

: levels of utuilization that are well above baseline levels of

utilization, and which could not be physically or economi-

é ts cally attained but for the renovation project. Accordingly,

. EPA believes it is consistent with the court decision for

4 EPA to base its remand decision on these facts and not

rely on the present hours and conditions as conclusive of

post-renovation emissions. After a thorough review of the

possibilities, EPA has concluded that the court intended

that estimates of future emissions for WEPCO’s “like-kind

replacements” should consider historic pre-renovation

operating hours and production rates, as well as other

relevant factors, in estimating future utilization levels,

and should also consider the increased capacity, switching

eS ae ee eee

to lower-sulfur fuel, and other changes affecting the hourly

emissions rate for PSD purposes. Consequently, for

WEPCO’s “like-kind replacements,” EPA will compare

representative actual emissions for the baseline period to

estimated future actual emissions based on all the avail-

able facts in the record. Specifically, in calculating post-

renovation actual emissions, this approach takes into

account 1) physical changes and operational restrictions

that would affect the hourly emissions rate following the

renovation, 2) WEPCO’s pre-renovation capacity utiliza-

tion, and 3) factors affecting WEPCO’s likely post-

renovation capacity utilization.

To quantify WEPCO’s estimated future actual emis-

sions after the proposed changes EPA relied heavily on

projected and historical operational data (e.g., fuel con-

sumption, MMBTU consumed) representative of the

source. Specifically, the Agency considered available

information regarding (1) projected post-change capacity

utilization filed with public utility commissions; (2) Fed-

eral and State regulatory filings; (3) the source's own

representations; and (4) the source’s historical operating

data. As described below, EPA determined an appropriate

utilization factor for future operations and combined this

with post-charge emissions factors (to the extent they are

or wil] be made federally enforceable) to estimate a future

level of annual emissions for the purpose of determining

whether the proposed physical and operational changes

would be considered a major modification for PSD pur-

poses. Where a significant emissions increase is projected

to occur, WEPCO could voluntarily agree to federally-

enforceable limits on any aspect of its future operation

(including physical capacity and hours of operation) to

ensure that no significant emissions increase will occur.

IV. THE AGENCY’S REVISED PSD APPLICABILITY

DETERMINATION

A. Estimated Future Actual Emissions.

The Agency has revised its October 14, 1989 PSD

applicability determination for WEPCO’s proposed Port

Washington renovation based on a “representative actual”

to “estimated future actual emissions” comparison (as

outlined above). As previously discussed, estimated future

actual emissions projections take into account the likeli-

hood that the plant will operate in the future as it has in

the past.

The stated purpose of WEPCO’s renovations is to

refurbish the power plant units to an “as-new” condition in

terms of their capacity, efficiency, and availability. Conse-

quently, EPA has used actual, historical, operational data

representative of the planet’s past operations, approximat-

ing an “as-new” configuration, to calculate “estimated

future actual emissions.” The Agency has verified these

data by comparison to WEPCO’s own projections of post-

renovation capacity utilization and industry averages.

As to the emissions factors used to calculate future

emissions, EPA has used WEPCO’s own emissions factors

for future hourly emissions rates. These emissions factors

are based on WEPCO’s own assumptions regarding future

sulfur in fuel and control technology performance levels.

However, since these assumptions go beyond current State

implementation plan (SIP) requirements, they must be

made federally enforceable for EPA to continue to consider

them for PSD applicability purposes.

Operational data (i.e., heat input) from the years

1978-1979 show a capacity utilization factor of 42 percent.

These data points represent the closest projection of

WEPCO’s operational characteristics, approximating an

“as-new” state, as currently available to EPA. The data

currently available to us regarding WEPCO’s past opera-

tional levels are limited to a 10-year period. The Agency

believes that these historical levels of operation are

representative of the plant’s past operations in an “as-

new” condition. In addition, the 1978-79 data points

appear consistent with WEPCO’s own projection of future

operations for the year 2010 (as submitted to the Wiscon-

sin Department of Natural Resources on March 29, 1990)

and common capacity levels for the utility industry, in

general, for new units. However, by this letter, EPA is

requesting that WEPCO submit operational data from

previous years (i.e., pre-1978), if such data show heat

input levels notably higher than the 1978-1979 levels.

As previously mentioned, to calculate future emissions

levels for each pollutant, EPA assumed that the amount of

future coal consumed in terms of heat input to the plant

would be comparable to WEPCO’s annual average 1978-

1979 coal-consumption figure. On March 29, 1990,

WEPCO submitted to the Wisconsin Department of

Natural Resources information which contained estimates

of future emissions for different levels of coal and heat

input to the plant. The Agency used these estimates to

establish future emissions based on 1978-1979 heat-input

values. Again, it is important to note tht EPA’s calculation

of “estimated future actual emissions” is based on

WEPCO’s projection of control technology performance

levels and/or fuel sulfur content for post-renovation

operations. Consequently, EPA’s PSD applicability deter-

mination is valid only to the extent that the emissions

factors (based on control technology performance levels

and sulfur in fuel) used to calculate future emissions are

made federally enforceable. Otherwise, the calculation of

estimated future actual emissions for each pollutant will

need to be revised by EPA based on existing federally-

enforceable limits (i.e., applicable SIP, NSPS). The use of

current, federally-enforceable emissions in the current SIP

would result in higher projected future emissions than

assumed in EPA’s calculations and, consequently, could

affect the indicated PSD applicability finding.

B. Revised Finding

In sum, EPA has considered past operations at

WEPCO’s Port Washington plant in estimating future

actual emissions. Specifically, EPA has relied on the 42

percent utilization level (in terms of heat input) during

1978-1979. The Agency believes this is a reliable indicator

of future utilization because it is consistent both ~vith

WEPCO’s own projections of post-renovation operations

and typical industry usage. The Agency has also consid-

ered post-renovation emissions rates on the assumption

that they will be made federally enforceable. Compared to

the 1983-1984 baseline period, those hourly rates are

lower for SO, and PM, and unchanged for NOx. The 42

percent estimated post renovation capacity utilization is

substantially higher than the 29 percent utilization level

during the baseline period. However, in calculating total

annual actual emissions, that increased usage is offset for

SO, and PM by the decreased hourly emissions rates

resulting from improvements to control systems and the

use of low sulfur coal. Consequently, WEPCO is not

subject to PSD review for those pollutants.

In the case of NOx, there will be a direct correlation

between increased utilization resulting from the renovations

and increased actual emissions. Hence, WEPCO is subject

to review for that pollutant and must obtain a PSD permit.

The company should contact the Wisconsin Department of

Natural Resources regarding the processing of a permit

application for NOx. Due to insufficient source-specific

information regarding emissions factors, PSD applicability

for PM-10, lead, and noncriteria pollutants listed at 40

CFR 52.21 (b)(23)(i) and (ii) cannot be determined at this

time. The PSD applicability for these pollutants should

also be based on the “actual-to-actual” emissions test

described herein.

This PSD applicability determination applies to

WEPCO’s currently planned renovations to units 1-5 (see

Enclosure A), or, if WEPCO no longer wishes to proceed

with renovating unit 5, only the renovation of units 1-4

(see Enclosure B). However, a decision to cancel the

currently planned renovations to unit 5 could result in a

PSD review for that unit should WEPCO reconsider

renovating it some time in the future.

It is our understanding that WEPCO proposes to

avoid triggering NSPS for SO, and PM at units 1 and 4 by

using dry sorbent injection and improving the existing

ESP’s to offset the potential emissions increases of these

pollutants. To the extent that the controls are federally

enforceable, and no increase in hourly emissions would

occur at maximum capacity, WEPCO can use these options

to avoid triggering NSPS for PM and SO, at units 1 and 4.

However, the two units are still subject to the NSPS

requirements for NOx. Unit 5 cannot, however, avoid

triggering NSPS for any pollutant and, therefore, is

subject to the NSPS requirements for NOx, SO,, and PM.

Sincerely,

/s/ William G. Rosenberg

William G. Rosenberg

Assistant Administrator

for Air and Radiation

3 Enclosures

Table 7 03/29/90

PORT WASHINGTON

POWER PLANT

MAY 1989 FORECAST

Units 1-5

FUEL

CONSUMPTION

MEGAWATT COAL (13200

HOURS CAPACITY Btw/lb)

YEAR GENERATED FACTOR BURNED TONS

1995 825,288 0.24 365,548

1996 941,779 0.27 415,332

1997 1,081,002 0.31 475,624

1998 1,114,313 0.32 490,868

1999 1,247,296 0.36 546,546

2000 1,349,329 0.38 589,569

2001 1,391,882 0.40 608,621

2002 1,481,464 0.42 646,617

2003 1,420,120 0.41 620,153

2004 1,432,122 0.41 625,174

2005 1,431,412 0.41 624,904

2006 1,460,471 0.42 637,519

2007 1,488,124 0.42 649,133

2008 1,481,423 0.42 646,909

2009 1,463,981 0.42 638,750

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

PORT WASHINGTON

POWER PLANT

UPPER MAXIMUM FORECAST

Units 1-5

FUEL

CONSUMPTION

MEGAWATT COAL (13200

HOURS CAPACITY Btw/lb)

YEAR GENERATED FACTOR BURNED TONS

1,074,957 0.31 473,981

1,202,460 0.34 528,838

1,341,074 0.38 587,412

1,390,470 0.40 609,237

1,501,584 0.43 654,718

1,600,500 0.46 696,483

1,651,930 0.47 718,252

1,748,046 0.50 760,000

1,690,000 0.48 735,000

1,690,000 0.48 734,000

1,710,000 0.49 741,000

1,720,000 0.49 748,000

1,720,000 0.49 747,000

1,695,000 0.48 737,000

2009

& 4 eos ye, a

Sn a ee

- ao ~enag ~

a oe OS ’

Se ee es

en 0 Nanay

;

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r .

f,*

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‘3

Nis

Enclosure A

Revised PSO Applicability Determination

Port Washington Power Plant Renovation of Units 1-5

(all emissions calculations are in tons per year)

Actual Estimated

Emissions Future Actual

Pollutant Baseline (1) Emissions (2)

Particulate 328 323

matter (4) (5)

Sulfur dioxide (4) 24,236 15,919

Nitrogen oxides (5) 2,592 3,405

Carbon monoxide 144 217

Hydrocarbon 17 25

PSD Subject

Net Significance to PSD

Emissions Change Level Review (3)

-5 25 no

-8,317 40 no

813 40 yes

73 100 no

9 40 no

Other Regulated Pollutants: Due to insufficient source-

specific information regarding emission factors, PSD

applicability for PM-10, lead and noncriteria pollutants

listed at 40 CFR Section 52.21 (b)(23)(i) and (ii) cannot be

determined at this time.

1) Average actual emissions for 2-year period defined by

calendar years 1983 and 1984.

ee ne

2) Calculated by EPA based on the following information

submitted by WEPCO.

a. The average historic firing rate (approxi-

mately 17x10° per year) for the 2-year period

defined by calendar years 1978 and 1979.

b. The emissions estimates for the renovated

units based on future coal characteristics

(e.g., sulfur and heat content) and actual

emissions after pollution controls for par-

ticulate.

c. Sulfur dioxide controls applied to units 5 at

75 percent sulfur dioxide removal to comply

with NSPS Subpart No. Sulfur dioxide re-

moval of 22 and 13 percent at units 1 and 4,

respectively, to exclude these units from

NSPS requirements for greater control of

sulfur dioxide.

3) If new data indicate that annual, historic-firing rates

at the Port Washington facility exceeded historic 1978 and

1979 levels, the indicated applicability determination

could change.

4) The calculation of estimated, future, actual emissions

for this pollutant is based on WEPCO’s projection of

annual technology performance levels and/or fuel sulfur

content for post-renovation operations. Consequently,

EPA’s PSD applicability determination is valid only to the

extent that the specific particulate and sulfur dioxide

emissions factors used for units I-5 to calculate future

emissions (based on particulate and 50, control technology

performance levels and fuel sulfur and heat content) are

made federally enforceable. Otherwise, the calculation of

estimated, future, actual emissions for this pollutant will

be revised by EPA, based on existing federally-enforceable

limits (i.e., applicable SIP, NSPS). The use of current,

federally-enforceable emissions factors would result in

higher, projected, future emissions and, consequently,

could affect the indicated PSD applicability finding.

5) Baseline emissions (actual emissions for 2-year period

defined by calendar years 1983 and 1984) have been

revised based on additional information submitted by

WEPCO.

Enclosure B

Revised PSD Applicability Determination

Port Washington Power Plant Renovation of Units 1-4

(all emissions calculations are in tons per year)

Actual Estimated

Emissions Future Actual

Pollutant Baseline (1) Emissions (2)

Particulate 328 339

matter (4) (5)

Sulfur dioxide (4) 24,236 18,505

Nitrogen oxides (5) 2,592 3,396

Carbon monoxide 144 217

Hydrocarbon 17 25

PSD Subject

Net Significance to PSD

Emissions Change Level Review (3)

11 25 no

-5,731 40 no

804 40 yes

‘

AED ee

yer Ss TOs wre

Ee RC ET i cc

;

73 100 no 4

9 40 no |

Other Regulated Pollutants: Due to insufficient source g

specific information regarding emission factors, PSD 4

applicability for PM-10, lead and noncriteria pollutants a

listed at 40 CFR Section 52.21 (b)(23)(i) and (ii) cannot be .

1) Average actual emissions for 2-year period defined by

determined at this time. Z |

calendar years 1983 and 1984. |

2) Calculated by EPA based on the following information

submitted by WEPCO:

a. The average, historic-firing rate (approxi-

mately 17 x 10° per year) for the 2-year pe-

riod defined by calendar years 1978 and

1979.

b. The emissions estimates for the renovated

units based on future coal characterization

(e.g., sulfur and heat content) and actual rf

emissions after pollution controls for par- *,

ticulate.

c. Unit 5 inoperative. Sulfur dioxide removal of

22 and 13 percent at units 1 and 4, respec-

tively, to exclude these units from NSPS re-

quirements for greater control of sulfur

dioxide. %

3) If new data indicate that annual, historic-firing rates

at the Port Washington facility exceeded historic 1978 and

1979 levels, the indicated applicability determination

could change.

4) The calculation of estimated, future, actual emissions

for this pollutant is based on WEPCO’s projection of

control technology performance levels and/or fuel sulfur

content for port renovation operations. Consequently,

EPA's PSD applicability determination is valid only to the

extent that the specific particulate and sulfur dioxide

emission factors used for units 1-4 to calculate future

emissions (based on particulate and SO, control technology

performance levels and fuel sulfur and heat content) are

made federally-enforceable. Otherwise, the calculation of

estimated, future, actual emissions for this pollutant will

be revised by EPA, based on existing federally-enforceable

limits (i.e., applicable SIP, NSPS). The use of current,

federally-enforceable emissions factors would result in

higher, projected, future emissions and, consequently,

could affect the indicated PSD applicability finding.

5) Baseline emissions (actual emissions for 2-year period

defined by calendar years 1983 and 1984) have been

revised based on additional information submitted by

WEPCO.

IN THE UNITED STATES COURT OF APPEALS

;

EXHIBIT 35

FOR THE SEVENTH CIRCUIT

Nos. 88-3264

89-1339

WISCONSIN ELECTRIC POWER COMPANY,

Petitioner,

Vv.

WILLIAM K. REILLY, Administrator

United States Environmental

Protection Agency, et al.,

Respondents.

ON PETITIONS TO REVIEW FINAL ACTION

OF THE UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY

AFFIDAVIT IN SUPPORT OF RESPONDENTS’

MOTION FOR EXTENSION OF TIME

AFFIDAVIT OF GREGORY B. FOOTE

1. My name is Gregory B. Foote. I am a staff attor-

ney in the Office of General Counsel at the U.S. Environ-

mental Protection Agency (“EPA”) in Washington, D.C. I

have held this position since 1985. In this capacity I have

primary responsibility within the Office of General Counsel

for advising and representing EPA in matters involving

the prevention of significant deterioration (“PED”) provi-

sions of the Clean Air Act, 42 U.S.C. §7470-7479.

2. This affidavit is filed in support of Respondents’

Motion For Extension of Time.

3. Iam assigned prin.ary responsibility in the above

captioned case.

4. EPA and the United States Department of Justice

presently intend to file a Petition for Rehearing in connec-

tion with the decision issued by this Court on January 19,

1990.

5. The matter under review is so complex that an

adequate brief in support of the Petition for Rehearing

cannot reasonably be prepared during the fourteen-day

period allowed under Circuit Rule 40(d) for the following

reasons:

(a) The Court’s decision of January 19, 1990 largely

upheld EPA’s applicability determinations ruling that an

extensive renovation project at the Port Washington power

plant owned and operated by petitioner Wisconsin Electric

Co. (““WEPCO”) would be subject to new source require-

ments under the Clean Air Act, 42 U.S.C. § 7401, et seq.

However, the court vacated EPA’s determination that the

calculation of future increases in “actual emissions” for

purposes of determining applicability of the PSD provi-

sions of the Act should be made using the “potential to

emit” concept in 40 C.F.R. § 52.21(b)(21\iv). Slip op. at 28-

31. The Court also rejected WEPCO’s proffered view that

emissions increases following the renovations should be

calculated based on the company’s own unenforceable

estimates of emissions. Jd. at 29. The Court remanded the

6 a Ss bee ee

PSD applicability determination to EPA for further pro-

ceedings not inconsistent with its opinion. Jd. at 33. The

Court further appeared to suggest that EPA could, on

remand, calculate future emissions based on “whether the

renovated plant would cause a significant net emissions

increase if it were operated under present hours and

conditions.” Jd. at 31 n. 14.

(b) EPA has tentatively concluded that the analysis

employed by the court in deciding to vacate EPA’s PSD

applicability determination is faulty, and for this reason,

EPA presently intends to file a petition for rehearing in

which it will ask the Court to reinstate EPA’s applicability

determination. In addition, EPA presently expects that its

petition for rehearing will, in the alternative, seek clarifi-

cation of the Court’s January 19 decision. However, as

explained in paragraph (c) below, EPA at present is

unclear as to the meaning or impact of the Court’s deci-

sion.

Court’s decision, including the suggestion on page 31 n. 14

for EPA action on remand. At this juncture, it appears

that the Court’s suggestion may not comport with any

known method of calculating emissions increases under

EPA’s regulations. Consequently, EPA has not yet come to

any conclusion as to the meaning or impact of the Court’s

decision on either the WEPCO project or the many other

similarly situated sources which may be affected by that

decision. I anticipate that several days of review and

analysis will be necessary before EPA staff are able to

present to EPA management their views as to the mean-

ing and impact of this decision on the exceedingly complex

PSD program. Only at that point will EPA be in a position

to determine whether further clarification of the Court’s

decision is appropriate and, if so, what clarifying order

would be sought.

. Pursuant to 28 U.S.C. 1746, I declare under penalty of

pe perjury that the foregoing is true and correct to the best of

my knowledge and belief.

Executed this 26th day of January 1990 at Washing-

ton, D.C.

/s/ Gregory B. Foote

Gregory B. Foote

-—- —— oe

CAE aes ee ere ne

<= SA OS A ee —

EXHIBIT 36

PROCEEDINGS

OF THE

ACID RAIN CONFER =NCE

Springfield, Virginia

April 8-9,1980

Prepared by:

Office of Air Quality Planning and Standards

Research Triangle Park, North Carolina 27711

August 1980

CONTENTS

Speaker Page

First Day

Dr. Stephen J. Gage ...........cccscsssceesseeeereessesenensnenssneesetenenenees 1

Mr. Douglas M. Costle...........:::cccesecssseesneseensenenneseensesenssenees 3

Dr. James N. Galloway............cccccccsosscsssssssssersesseesersereseeoners 9

Dr. Ellis B. Cowling................cccssssessssesrorererersssssennsoesessvsees 27

Mr. Ray Robinson .............ccccccseseeesreeeeeresesenssseeasenensaseneesees 81

Die Era BimnBABa...cccccecocccccccscccsoscsccsescccssonevesssescosvessssnscoses 90

Dr. Walter A. La One ............ccccccescerscssseesessccerererssssssssrsosees 100

Dr. Kenneth Demerjian. ................0:::ceseeceeseeenennennenseneneens 112

Dr. Steven R. Reanekk .........ccccccccccrrsrescesescsessssssssscoosenseess 130

Question and Answer Period .................:csseesessssereerensens 149

Second Day

Mir. David R. Hawking............:.0ccccccssccccssscccrssessessesererereees 183

Mr. Walter C. Barber.......ccccccccccsssccrscscccsccsosccccossesessorsesees 197

;

Commissioner Jerry English......................cccecessecseeseeeeees 198

Be it HI ecnccscccsscnnsenedscpooenicnveneiensonmuesatnes 211

ee es SD csnncenscacvencentesermnssceranmnebeneneeesnapenetedi 241

Be ee ee eID snrepenscnesetscnssesincscssninseoniestnggicnninns 264

Bn TIENT winscuicecipaniosgntesaserensecccannsuneneipniebmesupeionnnatn 270

en Cs ND cnccrvtscoseshocissnsennepeqntseqsetsneboconnseenses 326

Dr. Gage: Ladies and Gentlemen, I would like to call this

session to order. I am Steve Gage the Assistant Adminis-

trator for Research and Development. I am very pleased to

welcome you here to this historic meeting on acid rain.

During the next two days, we hope that all of us will gain

a much better insight into the acid rain problem and learn

more about what can be done to lessen its impacts.

As many of you are aware, this meeting follows, by

less than a month, an important scientific meeting which

was held in Norway. From that meeting we know that our

state-of-the-knowledge remains incomplete, but that our

state-of-the-knowledge is indeed changing very rapidly.

There are now hundreds of scientists in Sweden, Norway,

Canada, England, Germany, the United States, and other

countries working on this problem. I am convinced that

during the next few years we will see a dramatic advance

in our understanding of the acid rain problem. I am also

convinced from what we have learned, that the problem

we will be discussing for the next twenty-four hours is not

just a passing fad — it will occupy our attention well

beyond this day and probably for most of the decade of the

1980s.

The impacts of acid precipitation affect wide geo-

graphical areas in virtually the entire aquatic and terres-

trial ecosystem. Acid rain has the potential to cause severe

economic damages which can only become more costly

should we delay in recognizing its full scope. Most impor-

tantly, it is not clear, at this time, whether the impacts of

acid rain are, for all practical purposes, reversible. So it is

very important that we begin today to establish a dialogue

about this problem, and I invite you to join with us in

seeking the best approaches for its solution.

* * *

As a practical matter, the only way to reduce acid

deposition is to reduce the emissions of sulfur and nitrogen

oxides, the pollutants that cause the problem. Among the

major sources of these pollutants are utilites and power

plants. Last year we set emission standards for new power

plants which will prevent them from contributing signifi-

cantly to the problem of acid deposition, however, there

are hundreds of older plants that are either uncontrolled

or poorly controlled. Any effective plan to reduce acid

deposition will of necessity require reducing emissions

from these older plants.

As the Nation backs away from oil and returns to coal

for its energy needs, reducing total regional emissions will

not be easy but it can be done. I wholeheartedly support

coal conversion, it is essential that this Nation reduce its

dependence on imported oil. I strongly believe, and have

consistently stated publicly, that we can switch to coal and

at the same time protect against environmental degrada-

tion. As we do so, we must realize that the distribution of

coal reserves in this country precludes us from relying

simply on low sulfur coal. The welfare of our miners and

the economies of our Eastern and Midwestern coal-

producing States require that we find ways to use all our

coal. The new source performance standards for coal fired

+ power plants allows for just that.

I know many of you are also concerned with the

economic effects of being down wind of interstate transport

of air pollutants. In reality all States import and export air

pollution. When one State is forced to clamp down on

sources within its borders to compensate for pollution

coming from a neighboring State, its industry unfairly

may bear an

* * x

Moving to another possibility, and that is the defini-

tion of modification or reconstruction. It may be possible to

modify the definition so that activities at a plant which

tend to extend the useful life of that plant or tend to

increase the total emissions generated over the total life of

that plant could be legally defined as a reconstruction or

modification which would, if those activities were under-

taken, then cause the plant to be governed by the new

source performance standards. Now, the positive aspect of

that is that some of our current existing sources which are

subject to relatively high emission limits, if they were to

extend their useful life substantially, might be brought

into the new source performance standards system. That

' » regulatory requirement might cause one of two effects, it

’ might cause a retirement of that facility rather than an

/@: extension of its life, or it might cause the retrofit of a

-; source in order to meet the new source performance

= standard emission limit. The negative side is that there

* would likely be litigation over any modification of our

4 __, definition, enforcement might be difficult, the activities

: that tend to extend useful life are largely a function of

what the utility or other source is saying about the effects

of those modifications. It might be fairly easy to get into

arguments with the sources about these particular physi-

cal changes and whether they would have the effect of

extending the useful life. If we define the cutpoints, the

type of activity that shifts you from one gain to the other

too strictly, then you you could wind up imposing some

very costly retrofits.

Well there are a number of other items which I would

like to identify; that are things that the States may be able

to do under their current legal authority, at least some

States certainly can do some of these

* * *

EXHIBIT 37

ACID RAIN AND NONATTAINMENT ISSUES

HEARING

BEFORE THE

SUBCOMMITTEE ON ENVIRONMENTAL PROTECTION

OF THE

COMMITTEE ON

ENVIRONMENT AND PUBLIC WORKS

UNITED STATES SENATE

ONE HUNDREDTH CONGRESS

FIRST SESSION

TO HEAR FROM HON. LEE THOMAS, ADMINISTRA-

TOR, ENVIRONMENTAL PROTECTION AGENCY ON

{

% THE SUBJECT OF ACID RAIN AND NONATTAINMENT

‘ ISSUES

APRIL 22, 1987

Printed for the use of the Committee on

Environment and Public Works

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1987

For sale by the Superintendent of Documents,

Congressional! Sales Office

,U.S. Government Printing Office, Washington, DC 20402

Senator BURDICK. Mr. Thomas, side-by-side compari-

sons of emission reductions by the United States and

Canada are difficult because of differences in governmen-

tal forms and regulatory regimes. I understand that the

eastern provinces of Canada, in an effort to reduce acid

rain, have committed themselves to a 50 percent reduction

in emissions by 1994. Do you understand that to be cor-

rect?

Mr. THOMAS. They have, Senator. Theyre in the

process now of moving forward with implementation. That

commitment was made a couple of years ago. They’ve still

got a couple of provinces that have not yet implemented

that commitment, but they're moving forward with that

kind of commitment.

Senator BURDICK. I discovered something else re-

cently, that as you move farther west in Canada through

the provinces, that percentages go down. I understand

that in Saskatchewan it isn’t 50 percent, it’s 25 percent,

and it feathers out until you hit the Pacific coast. Is that

correct?

ir. THOMAS. Senator, let me say first, we are in the

process of reviewing with Canada how they are imple-

menting their control program. We are doing that because

of our interest in learning more about how they’re imple-

menting it. We're also doing it in response to detailed

questions we've received from the House Energy and

Commerce Committee.

The Canadians have a different approach than we do.

They don't have the strong Federa! standard-setting

authority that I have, for instance. That is largely an

authority that the provinces have, so they work through

an arrangement with the provinces to implement their

- standard-setting process. They don’t have the 15-year

x reduction history we’ve got from strong Federal standards

e on sulphur dioxide, as an example.

Now, within that they also have different ways of

looking at, what do you consider a violation? Is a violation

the kind of violation that we’ve got, or do you accommo-

date violations by production cutbacks as far as plant

operations are concerned? So is it an ambient violation

close to the plant that we’re controlling, or is it an overall

loadings violation that may be controlled through a pro-

duction cutback over a year’s period of time?

Looking at those issues and working with the Canadi-

ans to find out more about how they control their emis-

sions is one of the things we’re doing right now. I must say,

though, that the kind of commitment that the Canadians

made two years ago, that they’re working through to

implement, I commend them for. My friend, Tom

McMillan, who is the Environment Minister in Canada,

and I have had numerous discussions about the difficulty

of implementing that and the difficulty that we have in the

United States of implementing our control programs, and

we're working closely to understand exactly how each of us

implements our laws.

Senator Burpick. Well, I’m asking this question

because, after all, thin matter of air pollution is continen-

tal. It isn’t only the United States; it’s a continental

matter. We are well aware that Canada doesn’t have

scrubbers on any of their powerplants. We understand

‘that. They are trying to use clean coal technology and so

‘forth, they talk about a 50 percent reduction, and as you

: go west they feather down to 25 percent and to nothing. I

~ wonder if they’re making a real effort, that’s all.

Mr. THOMAS. There’s a real question about that in a

number of people’s minds, and we’re working that, issue.

Senator BURDICK. What is your opinion? Should any

acid rain bill that we enact after 1987 require scrubbers in

the midwest in the future?

Mr. THOMAS. Senator, first, I don’t feel we’re at a point

where acid rain legislation should be enacted by Congress.

I do not feel like a requirement for emissions reductions

beyond those that we have ongoing under the Clean Air

Act is evident today that would require acid rain controls.

Given that position, if you decide to move forward

with an acid rain control bill, I feel that legislation should

be one that looks at an approach that builds in flexibility.

It’s aimed at total loadings reductions, but it builds in the

most cost-effective way to go about getting that, which in

many cases, I think, will result in not having scrubbers.

But I think that it will allow — should allow — the States to

clearly interplay with their utilities in determining how

those total loadings should be reduced. It should include

emissions trading. It should include flexibility in making

that decision between coal switching, new clean coal

technology, or scrubbers. I do not feel that those things

should be mandated.

Senator BURDICK. You don’t think the future bill after

1987 should require scrubbers?

Mr. THOMAS. No, sir, I don’t. I don’t think you should

have a mandated scrubber technology.

Senator BURDICK. Aren’t we slipping backwards a bit?

Mr. THOMAS. No, sir. Under new sources — the issue on

acid rain is, are you going to mandate scrubbers on existing

ata ae

—s—“—SS—S

sources? All new sources in the United States, as you

know, have scrubbers. We’ve got 150 of them with scrub-

bers now and 50 more on order, more than any other

country in this world.

The issue is, are you going to go back and require

retrofitting of your existing utilities? I don’t think the

concept of mandating retrofitting of scrubbers on existing

utilities is the way to go at all.

Senator BURDICK. What do we do?

Mr. THOMAS. I think that if you decide to go forward,

which I don’t think you should do — if you decide to go

forward and mandate additional reductions from those

existing powerplants, I think you should build in the

flexibility for the most cost-effective way to get those

reductions, which includes the concept of switching fuels,

the concept of new technology, the concept of scrubbers,

the concept of conservation, all built in so that you have

environmental and cost built in together in an effective

way to ,et reductions in loadings.

BR.

3 >

Senator BURDICK. Well, I understand you, Mr. Tho-

mas, but pardon me if I say it looks like we're retreating a

bit if we’re not going to be as firm as we have been in the

past.

Mr. THOMAS. Retreating from what, Senator?

Senator BURDICK. Well, the requirement for scrubbers,

for example.

Mr. THOMAS. But the requirement for scrubbers has

always been on new sources.

Senator MITCHELL. Thank you, Senator Burdick.

Senator Chafee?

Senator CHAFEE. Thank you, Mr. Chairman.

Briefly — and I just want to get this quickly from you

because I want to move on to something else — the problem

we've got is that the new source performance standards

obviously impose stiff requirements on new, sources, so

therefore what’s happening in our country is that we’re not

having new sources, that they are keeping the old plants

going because there is less expense in so doing.

Many of us feel that we ought to be in a situation

where we should be requiring the new source performance

standards on the older plants because the theory was that

the older plants eventually would expire, and then you

would get new and more efficient plants — efficient as

regards the release of pollutants. That’s not happening.

What are you suggesting we ought to do? Why

shouldn’t we impose these new source performance stan-

dards on the old plants?

Mr. THOMAS. Well, first, Senator, I don’t think you

should impose them on the old plants because I don’t think

there’s a scientific rationale for requiring that kind of

emission reduction that you’d get from a new source

performance standard, either as far as total loadings is

concerned, as it relates to environmental damage, or the

kind of specific definition that you would give to one

location receiving damage from a particular plant. I don’t

think that there’s a rationale for suggesting that you've

got to have those new source standards on those old plants

today or next year.

The problem you've got is as you stated. This country

has decided not to go forward with the nuclear option,

—_s—“—

which was one we were pursuing aggressively a number of

years ago. A lot of the new sources, as far as utilities were

concerned, were nuclear at that point in time.

We also, now, are looking at how we can go forward

and extend the life of our existing sources. We have found

through technology development a number of ways to do

that cost-effectively, repowering ways, retrofitting ways to

extend those lifetimes. So in fact, we have to deal with, is

that going to be an environmental issue for us or a public

health issue? I don’t think it’s going to be a public health

issue; there’s debate on that. I don’t think it’s going to be

an environmental issue; there’s debate on that. I may

change my mind on that, but today I don’t think you've got

the basis to go in and suggest that all of those old sources

should put on very stringent contro] requirements that we

impose on the new source performance standards.

Senator CHAFEE. Well, Mr. Thomas, what’s the prob-

7 lem here? Is it your belief that the current emissions in

4 the United States are not causing enough damage to cause

: you to enact stronger restrictions than currently exist? I

mean, no one knows more about the damage that has

taken place in Europe. You've seen it. You've seen the lakes

in Sweden. You’ve seen the forests in Switzerland and

West Germany, and, in your mind, you just are not con-

vinced that that damage is taking place in the United

States. Is that the problem?

Mr. THOMAS. That damage, connected with the emis-

sions levels that we’ve got in the United States? That's

correct.

EXHIBIT 38

EXPERT REPORT OF

KENNETH SCHWEERS

DUKE ENERGY CORPORATION

AUGUST 15, 2002

/s/ Kenneth A. Schweers

Kenneth Schweers

I. INTRODUCTION

I am Kenneth Schweers, and I have just recently

resigned as Chief Operating Officer of Development

Alternatives, Inc. I have been asked by Duke Energy

Corporation to provide an expert report in connection with

this litigation. This report describes the assumptions made

by the United States Environmental Protection Agency

(“EPA”) in the studies I did for the consulting firm ICF

Incorporated on behalf of EPA evaluating the economic

impact of environmental legislation and regulations,

including EPA’s New Source Performance Standards

(“NSPS”), Prevention of Significant Deterioration (“PSD”)

and Non-Attainment New Source Review (“NNSR”)

regulations. I will refer to these regulations collectively as

the “New Source Review” or “NSR” regulations or pro-

grams. In my opinion, from the mid-1970s through the

1980s, EPA believed the

¢ the focus of the NSR programs was to regulate

emissions from new plants, not existing plants;

e the NSR requirements would not be triggered by

existing coal-fired plants that operated at their

original capacity and took actions necessary to

maintain that capacity; and

a ee

* significant emissions reductions from existing

coal-fired power plants would not be achieved

through the application of the NSR programs

and that new and additional legislative and regu-

latory programs were necessary to achieve reduc-

tions from existing plants, such as the “Acid

Rain” regulations adopted in the Clean Air Act

Amendments of 1990.

‘. II. Summary of Qualifications and Preparation of

gE this Report

I am an industrial and nuclear engineer and economic

analyst by training. I received a Bachelor of Science in

Industrial Engineering from Stanford University (1969).

After graduation, I worked as a project manager for the

U.S. Navy, where I assisted in directing the work of

contractors in the design of reactor cores for submarines

and heavy reactor equipment

* * *

The ICF studies used the aforementioned computer

model that simulated the dynamics of the electric utility

sector and the coal industry to estimate the economic and

environmental impact of various legislative and regulatory

proposals. The studies evaluated the economic impact by:

(1) establishing a “base case” that assumed the pre-

existing regulatory requirements with no new environ-

mental requirements; (2) identifying the additional envi-

ronmental requirements imposed by the legislative or

regulatory proposals being evaluated; and (3) forecasting

the incremental impact on the utility and energy produc-

ing sectors by adding the proposed environmental re-

’ quirements to the pre-existing regulatory regime. The

assumptions used in the base case and the proposed

requirements were either provided or approved by EPA.

NSPS Studies

In 1977 and 1978, ICF conducted economic impact

studies under contract to EPA evaluating amendments to

the NSPS regulations to implement the Clean Air Act

Amendments of 1977. These studies, which I conducted,

were designed to assist EPA in its review of proposed

additions to the then existing NSPS regulations and to

support its final rulemaking amending the NSPS.

The base cases for these studies incorporated various

understandings and assumptions about how coal-fired

plants were operating and being regulated. These under-

standings were either communicated by EPA to ICF, or

suggested by ICF and approved by EPA. For the base case,

EPA understood and assumed that existing plants were

complying or would comply with then current Federal

regulations (e.g., NSPS) and the State Implementation

Plans (SIPs). We then modeled the potential impact of

various alternative amended NSPS, each of which in-

cluded its own set of understandings and assumptions that

were approved by EPA. Both the base cases and the

proposed alternatives shared a common understanding

and assumption adopted by EPA: that existing coal-fired

power plants would continue to operate at original capac-

ity without being required to retrofit scrubbers.’ EPA

’ By “original capacity,” I mean the design net dependable capacity

that is available to the electrical power grid. This accounts for the

energy needs of the plant itself to operate, and is differerit from what is

often referred to as nameplate or gross capacity.

‘ recognized that existing coal-fired power plants would be

required to meet only the emission limits that had been

established in the SIPs for existing plants.

The ICF analysis included estimates of operation &

maintenance (O&M) costs. EPA did not direct ICF to

assume that these O&M expenditures that allowed the

plants to operate at their original capacity would trigger

NSR requirements and the attendant cost of retrofitting

pollution control equipment. Had EPA instructed ICF to

assume that O&M expenditures would trigger NSR, ICF

, would have included such costs in the model’s assump-

tions. For example, when modeling the costs of complying

with SIPs, ICF evaluated the costs associated with SIP

compliance options such as switching to low-sulfur coal or

installing scrubbers. For purposes of the NSPS studies,

EPA never asked ICF, however, to calculate what would

have been the additional cost under NSR of retrofitting

scrubbers to existing plants that operated within original

capacity and were already in compliance with the SIPs.

: The NSPS studies focused on the costs associated with

*- designing and operating new facilities under a variety of

| regulatory scenarios. The impact of regulatory proposals

on new plants could be accurately evaluated by relying on

accepted engineering assumptions. The NSPS studies did

not evaluate the costs of regulatory proposals on existing

‘ plants, which is a substantially different exercise that has

¢ to'take into account a number of factors reflecting the

range of financial, physical, technical and geographical

constraints on existing plants. It was in the context of the

2 acid rain initiative that EPA asked ICF to conduct eco-

“nomic evaluations of significant legislative or regulatory

_ : options for reducing emissions from existing plants.

+. 8

Ws o--

Acid Rain Studies

After EPA promulgated the NSPS and PSD regula-

tions in 1979-1980, ICF conducted a number of studies for

FPA in the 1980s addressing the issue of acid rain. “Acid

rain” is acidic precipitation resulting from accumulated

atmospheric loadings of SO, and NOx. The ICF acid rain

studies supported the efforts of various governmental

agencies, including EPA, to evaluate regulatory and

legislative proposals to reduce total SO, and NOx emis-

sions, primarily from existing coal-fired power plants.

While at ICF, I conducted or oversaw the conduct of these

studies.

The “base cases” for these acid rain studies projected

emissions based on the understanding that the then

current environmental regulatory regime remained

unchanged. EPA believed that SO, and NOx emissions

from existing coal-fired power plants would be relatively

constant under existing law. This assumption was based

on plants operating at their original capacity at their

allowable emissions level. EPA did not request ICF to

study, whether under existing law, SO, emissions from +

existing coal-fired plants would decrease because of the

application of NSR and the attendant retrofitting of —

pollution control equipment. EPA also did not direct ICF to **

assume that variations in actual operating or emissions .

levels, such as periodic decreases associated with mainte-. +

nance followed by increases back to original capacity;

would trigger NSR. In other words, EPA believed that:

existing coal-fired power plants would continue to operate:

without triggering NSR. :

The focus of the acid rain proposals we evaluated on’

behalf of EPA and other government agencies was reducing

101

the SO, and NOx emissions from existing sources. EPA

believed that new regulations and the legislative programs

would be needed to achieve these reductions and that

significant SO, and NOx reductions would not be achieved

by retrofitting scrubbers or other pollution control equip-

ment on existing plants through the application of NSR.

EPA believed that SO, and NOx emissions at existing

plants would remain relatively constant absent a change

in environmental legislation or regulation. The emission-

reduction options ICF evaluated in various acid rain

studies conducted for EPA in the 1980s included, among

numerous others:

° a30% reduction of SO, and NOx emissions;

a 2.0 lb./mmbtu SO, limit;

a tax on utility emissions of $0.15 per pound of

SO, emitted;

the Waxman-Sikorski bill (H.R. 3400), which pro-

posed a 9.5 million ton SO, reduction for existing

utility plants;

the Acid Deposition Control Act of 1986 (HR.

4567) which would require a 2.0 lb. SO/mmbtu

limit, to be followed by a 1.2 limit; and

an option EPA considered to require existing

plants to meet NSPS when they reached 30 years

of service.

102

Beginning in 1985, EPA believed that existing plants

would operate for 60 years. EPA also understood that

utilities would have to repair or replace components as

required to continue to operate to this longer lifetime. ICF

recognized that these costs occurred throughout the life of

the plant and that it was not possible to establish precisely

when these replacements or repairs had occurred (or

would occur). For modeling and study reporting purposes,

however, we assumed that these repairs or replacements

would occur at 30 years of the plant’s useful operating life

and would be referred to as “refurbishment.” This mid-life

refurbishment was part of the maintenance that the ICF

studies assumed would occur at existing coal-fired power

plants to allow them to continue to operate at their orizi-

nal capacity and close to their design efficiency. The 1985

and subsequent studies ICF conducted on behalf of EPA all

assumed, as EPA directed, that the O&M necessary to

keep the plants operating, including the refurbishment at

the 30-year mark, would not trigger NSR or scrubber

retrofits for those existing plants.

I do not recall any discussion that I had with EPA

about the assumptions in these models in which the

Agency stated that mid-life refurbishments would trigger

NSR and require the existing plants to retrofit scrubbers.

Had it been EPA’s view that the NSR programs, beginning

in 1979-1980, would have achieved significant SO, reduc-

tions, [CF would have reflected that belief in the acid rain

studies we conducted on EPA’s behalf. EPA’s understand-

ing that NSR would not significantly reduce SO, emissions

from existing coal-fired plants was further reflected in one

of the regulatory proposals EPA asked ICF to evaluate. .,

EPA was considering the automatic imposition of NSPS

requirements on existing coal-fired power plants when 4

103

they reached the 30-year mark as an alternative regula-

tory approach to address acid rain. This EPA proposal

demonstrates EPA’s belief that existing plants would not

be subject to widespread retrofitting of scrubbers absent a

change in the law.

Most of the acid rain proposals we evaluated for EPA

included the option for large-scale retrofitting of scrubbers

at existing plants. ICF did not include the retrofitting

analyses in the base case because EPA did not view the

widespread installation of scrubbers on existing plants to

be required under the existing CAA regulatory regime. To

project the costs of retrofitting, we had to better under-

stand the specific characteristics of the various types of

existing plants. This is because, unlike projecting scrubber

costs for new “greenfleld” plants which can be estimated

rather accurately in a generic manner based on engineer-

ing estimates, retrofit costs are dependent on a number of

historical and site-specific factors. These factors include the

type, location and capacity of the plant, the design of the

plant (e.g., types of coal likely to be burned and whether the

plant had physical space for scrubbers), and how the plant

was intended to be used in the power grid. ICF did not

include this type of site-specific analysis, which is neces-

sary to understand retrofitting costs, in its studies for the

NSPS rulemakings in 1978-1979, since those rule-makings

focused on regulatory proposals applicable to new plants.

ae a “oe in a

—

;

Our studies projected that a regulatory program that

. forced the retrofitting of scrubbers at existing power

|. plants would be very expensive. For example, the study

* that evaluated the option considered by EPA to impose

_NSPS on coal-fired plants when they reached 30 years in

age projected that by 1995, utilities would incur an incre-

mental annual cost of $3.9 billion in 1985 dollars (this

104

would be $6.6 billion in 2002 dollars). By the year 2010 the

incremental annual cost of retrofitting would increase to

$9.4 billion in 1985 dollars (this would be $15.8 billion in

2002 dollars). This incremental annual cost of retrofitting

scrubbers included the annual capital charge for the costs

for additional equipment (e.g., the scrubbers themselves)

installation, incremental increases in O&M costs and any

additional fuel costs resulting from the use of additional

pollution control equipment. EPA’s option to impose NSPS

on coal-fired plants when they reached 30 years in age

would have required the utility industry to invest by 1995

about $29.8 billion in 1985 dollars (it would be $50 billion

in 2002 dollars).

Overall, if EPA’s proposal to impose NSPS on coal-

fired plants at the 30-year point in their life had been

adopted, the utility industry would have been required to

invest approximately $69.5 billion between 1990 and 2010

in 1985 dollars (this would be approximately $117 billion

in 2002 dollars). Further, these studies noted that there

were other uncertainties and constraints associated with

retrofitting that would have likely increased the projected

costs above those reported in the ICF study. Though our

model attempted to take site-specific constraints associ-

ated with plant design or location into account, it was able

to do so only in the most general way.

* * *

te 105

a % EXHIBIT 40

7 1989 EPA BASE CASE FORECASTS

} | Prepared For

| The U.S. Environmental Protection Agency

ICF Resources Incorporated

May 1989

TABLE OF CONTENTS

INTRODUCTION

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FORECASTS FROM 1989 EPA BASE CASES:

HIGH AND LOW EMISSIONS CASES. .................... 4

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Utility Fuel Consumption ...................cccceseeeeneeeenes 11

“Coal Production. .............:ccsceeseeeseeeensees scamaataaniienth 13

*- COMPARISON WITH 1987 EPA BASE CASE........... 16

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ie Renewable and Non-Traditional Capacity and

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106

Emissions Rates and Limits....................ccceeeeeeeess 29

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Nuclear Capacity and Capacity Factors ................ 30

AppendixA Forecasts From 1989 EPA Base: High

Case

Appendix B__‘ Forecasts From 1989 EPA Base: Low Case

Appendix C Base Case Assumptions

INTRODUCTION

This report presents new EPA Base Reference Case

forecasts through 2010 of future trends in utility air

emissions, utility capacity and generation levels; utility

fuel consumption, and regional coal production. These

trends were recently re-examined in order to provide up-

to-date bases from which economic and emissions impacts

under alternative environmental control proposals can be

assessed. Two Base Reference Case scenarios (referred to

as the High and Low Emissions Cases) were analyzed to

present a reasonable possible range of electric utility air

emissions over the next two decades.

This report is organized into three sections with three

appendices. The first section presents the forecasted

trends from the two new EPA Base Cases, as well as a

brief analysis of the factors underlying these trends. The

second section presents these forecasts in comparison to

the previous (1987) EPA Base Case forecasts. The final

section presents some of the key assumptions and uncer-

tainties that underlie these forecasts. Appendices A and B

present forecasts from the High and Low Emissions Cases,

respectively, while Appendix C presents a detailed list of

the 1989 EPA Base Case assumptions.

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107

In the High Emissions Case utility sulfur dioxide

(SO,) and nitrogen oxide (NO_) emissions are forecasted to

rise moderately from recent historical levels in the near-

term with continued growth in the long-term. In the Low

Emissions Case, emissions remain flat in the near term,

grow slightly through 2000, but decline thereafter. Gas-

fired capacity options (e.g., combined cycles and turbines)

are expected to be chosen for most new, currently un-

planned capacity requirements through 2000 in both

cases, while a significant amount of new coal capacity is

forecasted to come on-line after 2000. National utility gas

consumption in the High Emissions Case is expected to

rise only moderately from current levels while gas loses

market share to oil in many existing utility steam plant

markets. In contrast, in the Low Emissions Case, gas

gains considerable market share from oil in the near-term.

National coal production levels are \orecasted to increase

steadily, with most regions experiencing some growth from

1985 levels in both cases.

Many important assumptions underlie these forecasts.

Several of these assumptions have been substantially

revised since the 1987 EPA Base Case analysis (which was

based on assumptions developed in late 1986), reflecting

important changes in the energy markets. Some key

assumptions were varied between the two reference cases

to reveal the sensitivity of the emissions and fuel use

forecasts to these factors. The most important of these

assumptions are presented in the table on the following

page.

In general, the assumptions used in the Low Case

contribute to lower forecasted emissions growth than in

the High Case. In particular:

108

¢ Lower electricity demand results in lower

coal powerplant utilization.

¢ Shorter fossil steam powerplant lifetimes

result in earlier retirements of higher-

emitting existing coal units, which are

1989 EPA Base:

Reference Case

Assumption High Low

Crude Oil Prices 1995 18.00 25.00

(1988$/bbl)

2000 22.00 29.00

2005 25.00

2010 29.50

Electricity 1988-2000 2.8

Demand Growth 2001-2010 2.3

(% per year)

Steam Powerplant Coal/Oil/Gas> 50Mw 65

Lifetimes (years) Coal/Oil/Gas> 50Mw 45

Nuclear 35

Cogeneration 1995 175

(billions of 2000 208

kilowatt hours) 2005 255

2010 313

New Non-Fossil

Capacity 2005 0

(gigawatts) 2010 0

Repowered Coal 2000

Capacity*

(gigawatts) 2005 6

2010 10

PS tee.

Apr *

dk PARE ot eee

VER eke od

Xs.

109

New Unplanned 2000 2005

Coal Powerplants

Allowed By

* Includes 50% increase in capacity due to repowering.

generally replaced by new lower-emitting

gas or scrubbed coal capacity.

¢ More repowering with clean coal technolo-

gies reduces SO, and NO, emissions rates at

repowered plants.

* More non-fossil capacity and cogeneration

reduces the amount of higher-emitting coal-

fired capacity operated and built.

A more detailed discussion of the assumptions, cave-

ats, and uncertainties pertaining to this 1989 EPA Base

Case analysis is presented in the final section of this

report.

- *x *

KEY ASSUMPTIONS

A number of assumptions have important effects on

projections of future levels of utility emissions, utility

is , generation and capacity, utility fuel consumption, and coal

production. A short list of some of the key assumptions

used in the two reference cases is shown on page 2, while a

detailed list of the assumptions is presented in Appendix

; .C.:Several of the more important assumptions incorpo-

rated in this Base Case analysis, and their effects on the

forecasts presented herein, are discussed below.

110

Oil and Gas Prices

Oil and gas prices have a very important effect on the

amount of turbine/combined cycle versus coal capacity

built. In turn, relative oil and gas prices affect the amount

of gas versus oil consumption at existing oil/gas steam

powerplants. Accordingly, the level of oil and gas prices

have important effects on utility SO, emissions.

World oil prices are very uncertain because the world

oil market is fundamentally unstable: the lowest cost

producer (Saudi Arabia) is also the marginal producer

(largely for political reasons). Therefore, it is difficult to

define within a narrow range the full spectrum of potential

future oil prices. Howe

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