Joint Appendix — Environmental Defense v. Duke Energy Corporation
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Supreme Court, U S.
FILE COPY 43 FILED
Hts __ No. 05-848 JUL 2 1 2006
SSS SS — In The OFFICE OF THE CLERK |
Supreme Court of the Gnited States
ENVIRONMENTAL DEFENSE, et ai.,
Petitioners,
v.
DUKE ENERGY CORPORATION, et al.,
Respondents.
+
On Writ Of Certiorari To The United States
Court Of Appeals For The Fourth Circuit
+
JOINT APPENDIX
VOLUME II, Pages 266 to 509 = a
° - 25
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SEAN H. DONAHUE CarTeRG. PHLPS = = 3 >
Counsel of Record Counsel of Record [9 "2c
2000 L St., NW Mark D. Hopson SOS
Suite 808 KATHRYN B. THOMSON BD SAH
STEVEN M. NICKELSBUR@; ==
Washington, DC 20036
(202) 466-2234
(202) 315-3582 Fax
SIDLEY AUSTINLLP mm e
1501 K St., NW Pos an
Washington, DC 20005
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ounsel for Petitioners 45) 736-8000
(202) 736-8711 Fax
Counsel for Respondent
Duke Energy Corporation
PAUL D. CLEMENT
Solicitor General
Counsel of Record
Department 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
COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831
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Courisel } For Petitioners:. ik ‘Counset fae Respondentyz* ee
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JEFFREY M. GLEASON: a. es WDuke’ ' Energy) erg ;
J. BLANDING -HOLMAN; IVS LHESWYGV: ICKEL
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‘CALEB JAFFE — Oe Fo * “EPAWILLIABROWSFLIS
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“DEAN M. “MOESSER: :
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BEST AVAILABLE COPY
TABLE OF CONTENTS
VOLUME I
District Court Decknot Eimtries........00cccccccscsisccccccsssccccsescscscees 1
Court of Appeals Docket Entries....................ccccsseeseeeeseeeeees 9
Order Granting Intervention (Sept. 6, 2001) (CR
[District Court Docket Number] 25) ............ccccccceeeeeeeeees
Exhibits in Support of Duke’s Motion for Summary
Judgment (Jan. 31, 2003) (CR 129)
Letter from Administrator Lee M. Thomas to
Congressman John D. Dingell (May 9, 1986) (DX
[Defendant’s Exhibit Number] 9)................ccccceseeeeeeeenees
Expert Report of Walter C. Barber (August 15,
Ne, TE FIED setieteprciiccnatevestinngutipetnteiennwets
Memorandum from Edward E. Reich, et al., EPA
to Allyn M. Davis, et al., EPA Region VI (April
REIS ape eee te ere
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, 1961) (DIX BB) ........cccccccccccscccsesessersesseeses
Letter from Edward E. Reich, EPA, to Charles
Whitmore, EPA Region VII (Jan. 22, 1981) (DX
EY Serine arene: Sed SeaBE ra ALM AE e enene
Letter from Administrator Lee M. Thomas to
John W. Boston, Vice President, WEPCO. (Oct.
REE FRE RNa ney ton Een
Memorandum from David Kee, EPA, to Gerald A.
Emison, EPA (Mar. 25, 1988) (DX 31)....................0.
Deposition of Walter Stevenson (Sept. 10, 2002)
a, Fh Gy Ga i vresccccinnciensisiiontaninneimninsnniitinientsieite
TABLE OF CONTENTS - Continued
Page
Letter from William G. Rosenberg, Assistant
Administrator for Air and Radiation, to John
Boston, President, WEPCO. (June 8, 1990) (DX
RE RR Oe eae eae nee Ts EERE TONS ee ET 57
Affidavit of Gregory B. Foote (Jan. 26, 1990) (DX
EERE A oS Sb PR SD OE OD NT LER OEY He EDO 80
EPA Office of Air Quality Planning and Stan-
dards, Proceedings of Acid Rain Conference, April
8-9, 1990 (Aug. 1980) (DX 36)...............0ccccssersserreseseerees 84
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.
eis. UE IIIS Ei kcniscincsceencinieetetincnaitiiebinibintiapoipiintiinbntiitanebenel 89
Expert Report of Kenneth Schweers (Aug. 15,
TEE Ui iecuintentinsinicbeiadplitasiennatenisenpeepinteatiiitnnsuisitesioiie 96
1989 EPA Base Case Forecasts, prepared for EPA
by ICF Resources, Inc. (May 1989) (DX 40)................ 105
Letter from Kenneth A. Schweers, ICF, to Robert
A. Beck, Edison Electric Institute (July 26, 1989)
RARER enna vr ce COE Re PNT aa nS TO ETO 126
Electricity Supply: Older Power Plants’ Impact
on Reliability and Air Quality, GAO Report to the
Uhairman, House Subcommittee on Oversight
and Investigations, Committee on Energy and
Commerce (Sept. 1990) (DX 42) ...........cecceeseeeeeseeeceneees 130
Deposition of Steven Tiber (May 15, 2002) (pp. 1,
Pe in ssicccnsibscsinnsininanciiighaipaiatdiaginteiinsiniiniednisiniins 141
iii
TABLE OF CONTENTS - Continued
Letter from William G. Rosenberg, EPA to
Congressman John D. Dingell (June 19, 1991)
GERD ccancesascessconcosconsesnstisnnsnnsenesesennanserseqnnenasnassennsasiancnesent
Declaration of Kris W. Knudsen (Jan. 30, 2003)
i le
Deposition of Ranajit Sahu (Nov. 25, 2002) (DX
iii ichicateaheiatishicaieeachpesietiiaeaierisenbitaanttmneteriantdniapinuieddentninetiinien
Deposition of David A. Lloyd under Fed. R. Civ. P.
30(b)(6) (Oct. 4, 2001) (DX 72)...........::cccesserereeserseeeeeess
Memorandum from Jack R. Farmer, EPA (May
10, 1989) (DX 89).......... nsbiidnicntesiniieadahaneneattaitadiianitanedin
Letter from Ronald V. Shearin, Duke Power Co.,
to Robert F. Helms, NCDNR (Aug. 17, 1983) (DX
aici a iia sancaitliliadniciaiaitataidi aint
Letter from Ronald V. Shearin, Duke Power Co.,
to Roger E. Davis, SCDHEC (Aug. 17, 1983) (DX
RRIF SETS ae errr en ee we eo ae Ce
Letter from William W. Culler, SCDHEC, to
Ronald V. Shearin, Duke Power Co. (Aug. 23,
PE, SIE cncasshjusitiechcsipuanthitininenniesingineedeninniedasaninmesiicad
Letter from Robert V. Helms, NCDNR, to Ronald
V. Shearin, Duke Power Co (Sept. 15, 1983) (DX
EES CRS roe eae me Ny CONSE eT EID
Letter from B. Keith Sipe to Ray M. Davis (Apr.
ee, re I SD cenetictsnastrcinriresnccctcneccsascctcscenimansatess
Certified Inspection Reports, Air Quality Action
Request, Duke Power Co., Buck Steam Station
OS , eer
iv
TABLE OF CONTENTS -— Continued
Page
Exhibits in Support of United States’ Motion for
Partial Summary Judgment (Jan. 31, 2003) (CR
133)
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).............:ssccressessssscsssessecesesee
Redirect Testimony of William S. Lee, Chairman
of the Board and CEO, Duke Power Co., Before
North Carolina. Utilities Commission (July 16,
ET GITIIEE TE exiccncescsieijcetiiniasinssadeiuiintdiiisiadiiiinma melee.
Duke Power Co., Proposed Order Granting Rate
Increase, Before the North Carolina Utilities
Commission (Aug. 27, 1985) (USX 19)..........cceeeee cece eee
Direct Testimony of William S. Lee, Chairman of
the Board and CEO, Duke Power Co., Before
North Carolina Utilities Commission (Sept. 3,
ey IIE, TEED ciincciscrctecssectitinicie itisniinaatamianitsnaaiiianieae Nid
Memorandum to File re: Fossil Units — Extended
Cold Shutdown (Feb. 1, 1985) (USX 22) .....................
Plant Modernization Project, Project Review
(Baek SE, TSG GP GD cocacccnninshinnsicermanatiineia
Memorandum of William O. Parker re: Plant
Modernization Program Strategy Statement
ees
Direct Testimony of William S. Lee, Chairman of
the Board and CEO, Duke Power Co., Before
North Carolina Utilities Commission (April 12,
SE Gaeees GED setccnrccecstincadatniissniinivicaniivigiadaiaalaiiaeiian
Project Outage Table (USX 40) ..........cccccessesseeseeeeeeerees
TABLE OF CONTENTS — Continued
Duke Training and Reference Guide, Fossil
Environmental Compliance, Volume 2 —- Air
Quality (Sept/Oct. 1991) (USX 57) ..........cccceeceeeeeees 239
Memorandum of Don Clay, Acting Assistant
Administrator, EPA, to David Kee, Director of Air
and Radiation Division, EPA Region V (Sept. 9,
ERE EST EE SURAT LS ee 245
VOLUME II
Letter from Henry Nickel, Hunton & Williams, to
Polly Gault, U.S. Dept. of Energy (June 5, 1989)
EERIE CES SES SSI To 266
Memorandum from J.O. Fayssoux to W.O.
Parker, Jr. re: EE] Prime Movers — WEPCo. (Feb.
EE 276
Memorandum re: NSPS/PSD Implications of
Plant Modifications (USX 93A)...................cccccccceeeeeees 279
Letter from Don R. Clay, Acting Administrator
for Air and Radiation, EPA, to John W. Boston
ceria riaenmriemeenntnonmnaatt 281
Letter from Francis X. Lyons, Regional Adminis-
trator, EPA Region V, to Henry Nickel, Counsel
for Detroit Edison Co. (May 23, 2000) (USX 101)....... 299
In re Monroe Electric Generating Plant Proposed
Operating Permit, Petition No. 6-99-2 (EPA 1999)
EES A en 308
vi
TABLE OF CONTENTS - Continued
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
EP hdeneansteesaiengtiatenainsestddentiniaieiieb aieretaiilanepienidiipsbiiaiibaialitiedaeainbes 311
Deposition of Michael Parkin (Dec. 10, 2002)
PEE Uitte ivanscirsincsiatenbiitnneibatrcatilidattntetinsgaapatetnpaniitinieaiies 314
Deposition of Michael Landis (Dec. 11, 2002)
NE ee iccrsierercicincceinisnitadadnsitnatiatineniicinaninstarinmnionss 338
Deposition of Thomas McManus (Dec. 11, 2002)
STII issstdinteneetuntnintinaiibenetdeineneiepeebenitiaeaeaeen! 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,
EE Stee hcrwreitnincscccteassticindiecbenndtitiannitsniniigiedininnmenhen 372
Duke Internal Emails (Nov. 1990) (USX 149)............. 375
Deposition of William T. Horton (Dec. 4, 2002)
SUITE aan hiicistatiieidpeeinicietiderbdimenaiapiceaininamsnmiammmaitiamantianias 385
Expert Report, Ranajit Sahu (Aug. 1, 2002) (USX
UII ciansallbhicincineenapsanrctnntentanientinnannintinnteniiadiicinaiatantasinn 388
Statement of Henry V. Nickel, EPA Docket No. A-
TEIN SITET ns sesiesienninaitbiemethinndinnniahiniasnieinetameninteeneniatbiis 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, II-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
ere Naan Oe Ee NOE 473
Memorandum from Edward A. Reich, Director,
DSSE, to Thomas W. Devine, Chief, Air Branch,
EPA Region I (Feb. 13, 1978) (DX 143)...................... 477
Deposition of John Hewson, pp. 1, 64-65, 69-70
FN Ce aiecsnnsceninnccenennnnesiinerniatinmmmemminmenmen 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
viii
TABLE OF CONTENTS - Continued
Page
Order (Feb. 23, 2004) (CR 294) .....ccccccccsssssesrseseeseeveeeeeen 499
Stipulations (April 13, 2004) (CR 311).........ccc0ssces0eseees 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,
IEEE conssnycensencqnsnssastenscnagenesmmsmnenssensenanen Pet. App. 22a-84a
Order and Judgment (August 26,
SUITE acisshivinisataiecitiniciaensiuntinpaiabiniapdaeatanidinitiibationets Pet. App. 85a-86a
Order and Final Judgment (April 14,
SEIN ccrenesicaszsasssnstmanseceumamienmnnnaenens Pet. App. 87a-95a
United States Court of Appeals for the Fourth
Circuit:
Order Requesting Supplemental Briefing
ils SIE hrcranscnnsenienumscsepunidenistcimpimeniane Pet. App. 2la
Opinion (June 15, 2005) .................2....06. Pet. App. la-19a
Order Denying Petitions for Rehearing
and Rehearing En Banc (Aug. 30, 2005)..... Pet. App. 20a
266
EXHIBIT 76
HUNTON & WILLIAMS
2000 PENNSYLVANIA AVENUE, N.W.
P.O. Box 19230
WASHINGTON, D.C. 20036
TELEPHONE 202-955-1500
Fax 202-778-2201
[Addresses Omitted In Printing]
June 5, 1989
Ms. Polly Gault
Chief of Staff to the Secretary
United States Department of Energy
1000 Independence Avenue, S.W.
Room 7A257
Washington, D.C. 20585
Dear Polly:
I appreciated the opportunity to meet with you and
discuss the so-called WEPCo case and its progeny. En-
closed is a briefing paper which explains the problem and
outlines how EPA could easily solve it administratively. As
discussed in the enclosure, the consequences of these
decisions are far reaching. Among other things,
1. WEPCo will wholly undermine any “acid
rain” legislation designed to allow reduc-
tions in the most cost-effective way;
2. WEPCo is presently causing utilities to defer
needed major maintenance, repair and re-
placement projects required for maintaining
a reliable electric supply;
3. Utilities and others that want to reduce
emissions by converting to natural gas are
barred from doing so without a PSD new
267
source permit unless they were capable of
burning gas in 1975; and
4. If the WEPCo rationale is not qualified,
utilities face substantial risks in undertak-
ing a “clean coal” demonstration project.
As I mentioned at our meeting, we have asked Admin-
istrator Reilly to reconsider the WEPCo interpretations.
We know that the EPA staff will oppose our request. This
steadfast refusal to back down is best illustrated by a May
5 letter to Detroit Edison where Acting Assistant Adminis-
trator Don Clay stated:
In your March 13 letter, you provided data that
illustrated large decreases in the source’s “poten-
tial to emit” sulfur dioxide, particulate matter
... and NOx as a result of the conversion. [Nev-
ertheless,] [o]ur review of the available informa-
tion suggests that Region V’s conclusion that the
source appears to be subject to PSD review ... is
correct.
We hope the Department and others in the Admini-
stration will urge Administrator Reilly to overrule his staff
on this important issue. I am sending Linda Stuntz, under
separate cover, more detailed information on the WEPCo
case, including an amici brief supporting Wisconsin
Electric in the Seventh circuit litigation. That brief, joined
in by the aluminum, steel, utility, petroleum, and coal
industries, underscores the broad and adverse impact
WEPCo will have on energy policy and on our economy.
If I can provide any additional information, please let
me know. We would appreciate the opportunity to meet
with you and others in the Department within the next
268
few weeks to discuss analyses we are preparing on the
impact of WEPCo on the utility industry.
Sincerely yours,
/s/ Henry
Henry V. Nickel
Enclosure
ce: Linda Stuntz, Esquire (w/enclosure)
Mr. Walker Nolan (w/enclosure)
Ms. Lynn LeMaster (w/enclosure)
June 5, 1989
THE WEPCO, DETROIT EDISON,
AND OHIO EDISON DECISIONS
In October 1988, Administrator Thomas affirmed a
determination of then Acting Assistant Administrator Don
Clay finding that new source performance standards
(NSPS) (i.e., SO2 scrubbers) and prevention of significant
deterioration (PSD) new source permitting requirements
would apply if a maintenance, repair, and replacement
project (called a “life extension” project) planned at a five
unit coal-fired electric generating plant owned by Wiscon-
sin Electric Power Company (WEPCo) went forward.
WEPCo was seeking to replace equipment that posed
safety concerns at four of the units and required shutdown
of one of those units. In addition, replacement of defective
equipment was required at two units to allow those units
to operate again at design capacity. The remainder of the
repairs and replacements in the project were needed to
improve efficiency and reliability without having any
impact on emission rates.
269
On February 15, 1989, Acting Assistant Administrator
Clay resolved additional issues posed by WEPCo. Among
other things, he determined that WEPCo could not avoid
NSPS by switching to as lower sulfur coal, but rather
would need to install scrubbers or similar controls. He also
found that PSD review would be required even though the
units were not increasing their emission rate.
In the Detroit Edison case, EPA Region V determined
that a project to allow natural gas-firing at an oil-fired
plant could not be undertaken without a PSD permit. In a
May 5 letter, Don Clay observed that the project would
substantially reduce emissions, but he nevertheless
tentatively concluded that Region V’s PSD determination
appears to be “correct.
In the Ohio Edison case, EPA determined that remov-
ing a clean coal technology demonstration project after the
demonstration concluded would trigger PSD and NSPS
requirements. Although EPA Acting Assistant Administra-
tor Clay promised “no action” in terms of EPA civil en-
forcement, “clean coal” participants would still potentially
face criminal penalties for “knowing” violations of the
Clean Air Act and would be subject to citizen suits under
the Act. In other words, EPA has made clear that removing
a clean coal demonstration project is unlawful (in EPA’s
view) and has informed those undertaking these demon-
stration projects that, at most, EPA will not initiate a civil
action. Citizens and a local U.S. Attorney can do what they
want.
270
The Utility Air Regulatory Group’ has requested that
Administrator Reilly reconsider these decisions. Detroit
Edison is separately seeking review of the Region V
decision concerning its natural gas project.
EPA’s New Interpretation of
the NS P ireme
New Source Performance Standards (NSPS) require
new sources to meet a 70-90% scrubbing requirement and
other stringent emission limitations. The Prevention of
Significant Deterioration (PSD) permit program imposes
numerous monitoring and modeling requirements on new
sources, as well as technology-based emission limits that
are potentially more stringent than NSPS. Existing
sources are subject to NSPS and PSD if they are “modi-
fied,” that is, if they undergo physical or operational
changes that increase emissions.
The WEPCo, Detroit Edison, and Ohio Edison deci-
sions substantially expand the previous understanding of
what is a “modified” source for NSPS purposes. Under
these decisions, if emissions immediately before a “non-
routine” (as determined by EPA staff) change are greater
than emissions after the change, NSPS is triggered. This
is the case notwithstanding the fact that the emissions
* The Utility Air Regulatory Group (UARG) is a voluntary,
1onprofit, unincorporated, ad hoc group of 65 electric utilities, the
Zdison Electric Institute, the National Rural Electric Cooperative
Association, and the American Public Power Association. UARG’s
purpose is to participate on behalf of its members collectively in federal
air pollution control regulatory activities and in related litigation. Since
1977, UARG has been involved in all major Environmental Protection
Agency Clean Air Act rulemaking and in numerous judicial proceedings
related to these rulemakings.
271
immediately before the change are not representative of
normal source operations.
EPA similarly expanded the “modification” require-
ments that apply to the PSD program. Under these deci-
sions, if EPA finds a change to be “non-routine,” EPA will
always conclude that the change causes an emissions
increase since EPA compares actual annual emissions
before the change with the emissions projected from
operating 100 percent of the time, at 100 percent capacity,
for 365 days. This approach, which allows projects an
emission increase, conflicts with the plain language of
EPA’s rules.
EPA’s decisions acknowledge that “routine” repairs
and replacements are not subject to the NSPS and PSD
modification rules. However, the Agency has arbitrarily
redefined what repair and replacement activities are
“routine,” such that “routine” activities include only those
that (1) are frequently done at that plant, (2) involve no
major equipment, (3) are inexpensive, and (4) do not
extend the life of a plant. This new interpretation is vastly
different from past implementation of the “routine” rule,
which included any repair and replacement activity that is
normal business practice. It gives EPA staff virtually
unlimited discretion to find that any major repair or
replacement project is “non-routine.”
Direct Impacts of the WEPCo,
Detroit Edison, and Ohio Edison Decisions
Under these decisions:
1. A unit that discovers safety problems due to an
unanticipated defect in equipment and shuts down
pending repairs cannot resume operations without
272
meeting stringent new source standards and receiv-
ing a new source prevention of significant deteriora-
tion (“PSD”) permit. This occurs whenever EPA
determines the repair or replacement is not “routine.”
WEPCo, Port Washington Unit 5, October 14 letter.
A unit, under the WEPCo decision, cannot repair or
replace deteriorated or defective equipment needed to
return to past maximum operating levels, unless the
repairs or replacements are “routine.” WEPCo.
A unit cannot avoid an emissions increase that would
trigger new source standards by switching to a lower
sulfur coal oil, or to natural gas. It must install con-
trol technology (e.g., scrubbers). WEPCo, February 15
letter.
A utility experiencing increased forced outages at its
units due to equipment problems cannot undertake
repairs needed to avoid serious electric reliability
problems without applying for and receiving a PSD
permit, even though these repairs will only improve
reliability and efficiency and will not increase the
emission rate of the units. This occurs whenever EPA
determines these “emissions neutral” or even “emis-
sions beneficial” repairs or replacements are not “rou-
tine.” WEPCo, Detroit Edison.
A unit that was not able to burn a lower polluting fuel
(e.g., natural gas) in the past cannot be converted to
burn that fuel without first applying for and receiving
a PSD permit. Detroit Edison.
A unit that has undertaken a “clean coal” demonstra-
tion project must meet new source standards and ob-
tain a PSD permit if it wishes to remove the
experimental technology at the end of the demonstra-
tion period. EPA may issue a “no action” assurance to
such a project. Ohio Edison. A“no action” assurance is
a promise by the EPA signato~y — (in the case of Ohio
273
Edison, an Acting Assistant Administrator) that EPA
will not bring a civil enforcement action. This does not
insulate the company from a “citizen suit” under the
Clean Air Act. Also, as the attachment to the EPA
Ohio Edison letter makes clear, a U.S. Attorney can
still bring-a criminal prosecution.
Broader Consequences of the WEPCo,
Detroit Edison Ohi ison isio
WEPCo will wholly undermine any “acid rain” legisla-
tion designed to allow reductions in the most cost-
effective way. For example, it subjects many older,
smaller units to scrubbers when these units are the
logical candidates for fuel switching.
WEPCo is presently causing utilities to defer needed
major maintenance, repair and replacement projects
required for electric system reliability. The conse-
quence of such deferrals is that utilities must risk in-
terruption of service in the very near future or costly
expenditures on short-term solutions (e.g., unplanned
installation of combustion turbines). Given the time
required to obtain a PSD permit to undertake a repair
program at an existing unit or to install a new com-
bustion turbine, a substantial deterioration in electric
reliability in the near future — with serious health
and environmental consquences — is likely unless
WEPCo is revisited.
For other industries, WEPCo says: you may not
undertake major repairs or replacements that restore
a plant to its past levels of production unless someone
in an EPA region or EPA headquarters finds that the
project is “routine.” Given EPA’s restrictive interpre-
tation of “routine,” the WEPCo decision means that
such projects cannot be undertaken without assuming
274
substantial risks or seeking a determination from
EPA that could take 6 to 12 months.
4. Even more troublesome is the WEPCo determination
that major repairs and replacements that improve
“reliability” and “efficiency” but do not increase (and
may even reduce) emission rates can require a PSD
permit unless EPA determines that the project is
“routine. This aspect of the WEPCo decision is hostile
to improving the productivity of our basic industries.
5 Utilities and others that want to reduce emissions by
converting to natural gas are barred from doing so
without a PSD permit unless they were capable of
burning gas in 1975. This will cause companies to
abandon such conversions in many cases and delay
them (due to PSU permitting requirements) whenever
a company decides to proceed.
6. If the WEPCo rationale is not qualified, utilities face
substantial risks undertaking a “clean coal” demon-
stration project. If new source requirements apply
upon removal of the experimental controls, a unit will
have to be shut down or, face very costly retrofit con-
trols. The price may be too great for many companies,
thereby discouraging participation in the program.
Adminsitrative Solution to the WEPCo,
Detroit Edison, and Ohio Edison Cases
In the WEPCo, Detroit Edison, and Ohio Edison
decisions, EPA interpreted its new source performance
standards (NSPS) and prevention of significant deteriora-
tion (PSD) requirements in an unprecedented manner.
While the rules governing these EPA programs are com-
plex, the EPA determinations in these cases could be easily
overcome with the follawinge internretations’
275
For NSPS purposes; EPA can, and should, recognize
that, in determining an emissions increase, represen-
tative operations of the unit should be used in com-
paring past emissions to future emissions after a
change. Nothing on the face of EPA’s regulations or
their regulatory history precludes such a declaration
by the new EPA Administrator. Such a “clarification”
would mean that “clean coal” technologies could be
removed at the end of the demonstration period,
without triggering NSPS. It would also allow utilities
and other industries to make necessary repairs to re-
turn plants to past maximum production levels.
For PSD purposes, EPA can, and should, recognize
that any emission increase predicted to occur as a re-
sult of an increase in hours of operation or production
rate up to original design capacity (unless limited by
a federally enforceable restriction on production or
hours) is an exempt emission increase, as
§ 52.21(b)(2)iii)(f) of EPA’s rules explicitly and unam-
bigiously provides. This reconsideration of the
WEPCo, Detroit Edison, and Ohio Edison decisions
would allow “clean coal” projects to proceed without
having to receive a PSD permit. It would also allow
industry to convert to lower-emitting natural gas
without a PSD permit.
276
EXHIBIT 82
February 9, 1989
W. O. Parker, Jr.
Subject: EEI Prime Movers - WEPCO
The following is a summation of the discussion with
WEPCO and other utilities about the WEPCO case.
I have shared this information with the review committee
and FPD GO managers. We may want to add this to the
managers’ meeting agenda as a 30 minute update item.
Feel free to use this report as you see fit in updating
others in management about what we learned.
Major points from the WEPCO discussion:
o WEPCO must send a letter notifying thier commis-
sion of plans to do work costing more than $1,000,000.
o WEPCO must get a certificate from the commission
for any work over $2,000,000.
o WEPCO filed for certificate with the Commission to
do $71,000,000 of repair and upgrade work.
© Commission ask State environmental group to review
work in relationship to PSD and NSPS standards.
© Wisconsin like NC has a state operated program
approved by EPA.
o W.E.C. requested EPA Region 5 to review.
o Region 5 responded that PSD was triggered and
NSPS applied because modification work:
© Increased efficiency (rebuilt preheater).
o Increased capacity (corrected drum).
277
o Increased emission above the level emitted for
the prior two years.
© Resulted in significant spending, $71 M or 20%
of replacement generation cost.
WEPCO requested review by Washington.
Washington supported Region 5 decision.
WEPCO has filed suit against EPA.
Lawyers estimate 11 to 23 months.
Florida Power Corporation — Port Everglades plant is
under going similiar work.
AEP - Has taken no units out but is doing the same
type of work that we are doing.
Court case should clear interpretation of cost (50% vs.
less) and increased emissions time frame (prior 2
years) standard.
NC Environmental Air is acting like they are not
aware of WEPCO.
WEPCO Recommended that others SHOULD NOT:
+
a
*
Derateunits.
Remove from servicefor extended periods.
Do large major repairs as one project (WEPCO less
the $1 M increments)
Project retirement datesfor units as this establishes
the useful end point or life of a particular unit.
278
J. O. Fayssoux
Fossil Production Department
JOF:mmp
279
EXHIBIT 93A
NSPS/PSD Implications of Plant Modifications
New Source Performance Standards: [For Boiler Only]
Apply to new facilities or modifications to existing facili-
ties.
For NSPS, modification is defined as:
* any physical or operational change which:
* results in an increase in maximum hourly emis-
sions.
Maximum hourly emissions are determined by the maxi-
mum which can be demonstrated over the past five years.
This should be compared to what the maiximum emissions
will be after the change.
NSPS does not apply to any action which can be classified
as routine maintenance, repair, or replacement, or to work
which can be accomplished without a capital investment.
The federal court ruled in WEPCO that EPA was correct
in saying that WEPCO’s decision to forego repairs and
allow the unit to deteriorate over a long period of time was
evidence that the planned work was not routine. Based on
that ruling, the five year test was put into the regulation.
Prevention of Significant Deterioration: [Total emissions
over a year]
Similar criteria to NSPS, but considers emissions over an
annual period and applies whether or not the project is a
capital expense. Increased production which could not
otherwise be achieved without the modification will trigger
PSD requirements.
280
‘Last (five) 5 years maximum hourly emission routine
naint. (capacity) replacement
Gross MW
1. 5%
\P42 calculated emissions based on fuel input allow 3 ID.
“an — max capacity test]
281
EXHIBIT 98
[SEAL]
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON D C 20460
Mr. John W. Boston
Vice President 2
Wisconsin Electric Power Company
Post Office Box 2046
Milwaukee, Wisconsin 52301
Dear Mr. Boston:
This is a revised final determination, on reconsidera-
tion, regarding the applicability of the Clean Air Act’s New
Source Performance Standards (NSPS) and Prevention of
Significant Deterioration (PSD) provisions 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). This
determination supplements the determination set forth in
an October 14, 1988 letter to you from Lee M. Thomas,
which in turn incorporated my September 9, 1988 memo-
randum. I find it necessary to reconsider EPA’s original
determination and issue this revised determination in part
to address matters raised by, and new information submit-
ted by, WEPCO representatives since, the October 14
letter. WEPCO believes that these new aspects call into
question the accuracy of EPA’s prior determination.
For the following reasons, EPA today reaffirms, with
limited exceptions detailed below, its earlier findings
regarding the Port Washington life extension project. I
hereby incorporate by reference the October 14 letter and
282
the September 9 memorandum. and reaffirm the findings
and conclusions in those two documents except where they
are specifically superseded below.
This action constitutes final agency action for pur-
poses of judicial review under section 307(b) of the Clean
Air Act, 42 U.S.C. § 7607(b),
I. CAPITAL EXPENDITURE
EPA explained in its earlier determination that under
the General Provisions of the NSPS regulations, a physical
or operational change which increases emissions at an
affected facility is a modification subject to NSPS. See 40
CFR 60.14(a). However, 40 CFR 60.14(e) provides certain
exceptions to that general rule. In particular, section
60.14(e)(2) provides that an increase in production rate, at
an affected facility would not, by itself, be considered a
modification if that increase is accomplished without a
capital expenditure.
As has been discussed in recent meetings between
WEPCO and EPA, the October 14, 1988 letter from Lee M.
Thomas was based in part on information supplied by
WEPCO in a letter dated October 11, 1988 which indicated
that the increase in Production rate at each of the five
units would be accomplished with a capital expenditure.
On October 13, 1988, and November 22, 1988 WEPCO
submitted revised capital expenditure calculations. EPA has
C y reconsidered its earlier determination based on
those two additional submissions.’ However, as explained
» * The October 13, 1988 submission was not received in time to be
‘Onsidered in issuing EPA's letter of October 14, 1988.
BEST AVAILABLE COPY
283
below, they provide no grounds on which to alter EPA’s
earlier finding on capital expenditure.
The modification provisions are designed in part to
subject to NSPS these emissions increases caused by an
increase in production rate that is in turn attributable to a
significant investment in improvements to the capital
stock. Consistent with this intent capital expenditure
calculations employ the total, as opposed to annual, cost of
a given project at each affected facility.
Thus, the December 16, 1975 preamble to the promul-
gated definition of capital expenditure states that “... the
total cost of increasing the production or operating rate
must be determined. A// expenditures necessary to in-
creasing the facility's operating rate must be included in
this total” (40 FR 58416) (emphasis added). The total cost
of the planned work at each facility is then compared to
the product of the existing facility’s basis and the annual
asset guideline repair allowance percentage used by the
Internal Revenue Service for taxation purposes. If the
total project cost for each facility exceeds the product of
the basis and repair percentage for each facility, there is a
capital expenditure at that facility. See 40 CFR 60.2.
It is appropriate to accumulate, for capital expendi-
ture purposes, the cost of the renovations necessary to
increase the facility's production rate, because the overall
work necessary to increase a facilitys production rate
pursuant to a particular renovation project is the same
whether the work is performed in one calendar year or
during two (or more) years. The use of annual costs could
encourage sources to distort normal business planning by
artificially stretching out costs over time as a means of
284
evading a finding of capital expenditure and consequent
NSPS coverage.”
Rather, the purpose of the exemption in 40 CFR
60.14(e)(2) is to exclude from NSPS coverage increases in
production rate that are accomplished without “an expen-
diture for long-term additions or improvement.” See 39 FR
36948 (preamble to proposed NSPS regulations). Where
the economic realities of the case are that increased
production and, hence, emissions, are due to normal
fluctuations in the business cycle rather than a considered
decision to invest in substantial capital improvements, the
NSPS do not apply.
The letter submitted on October 13 from Neil Chil-
dress of your staff to Gary McCutchen of EPA presented
updated basis figures (determined by multiplying the
original capital investment in the facility by a coefficient
representing the inflation in construction costs between
the year of the investment and the year in which the
capital expenditure calculation is made) for each of the
emissions units at Port Washington. These figures in-
cluded costs of repair or replacement of equipment, such
as steam turbines, that is not part of the existing affected
* Indeed, it appears that WEPCO may have extended the planned
length of the Port Washington life extension project for precisely this
purpose after being informed by EPA in the October 14, 1988 letter that
there would be a capital expenditure using the original schedule. The
unit 1 renovations have been extended from four years to five; unit 2
has been extended from four years to six; unit 3 has been extended from
three years to six; unit 4 has been extended from two years to four.
(Compare Telecopier Transmission, Neil Childress, WEPCO, to Gary
Question No. 4) with Letter, Neil Childress, WEPCO, to Walt Steven-
son, EPA, November 22, 1988, at page 2.)
285
facility for NSPS purposes. Since applicability determina-
tions under the NSPS modification provisions are based on
the existing affecting facility, capital expenditure determi-
nations likewise are limited to costs associated with the
affected facility. For NSPS Subpart Da, the affected
facility is the steam generating unit as defined at 40 CFR
60.40a. Therefore, EPA staff requested WEPCO to limit
the basis figures to the steam generating unit.
The November 22, 1988 letter from Neil Childress to
Walt Stevenson of EPA presented revised cost figures on
the renovation work on steam generating units 1 - 4
related to the capital expenditure calculations. These
November 22 basis figures are understood to be limited to
costs associated with the affected facility. The November
22 letter also presented a revised and extended schedule
for the renovation work, under which the costs of repairs
in any one year would not exceed the product of the
annual asset guideline repair allowance percentage, which
is 5% for electric utility steam generating units, and the
basis of each unit. Mr. Childress’ letter concluded that
since 5% of each unit’s updated basis is not exceeded by
the cost of renovation werk in any one year, there would
not be a capital expenditure at any of the units. The
revised figures also show that the total costs for each unit
over the entire renovation period would exceed the 5%
basis figure by 50% to 325%.
As explained above, it is the total cost, not the annual
cost of a renovation project that determines whether a
capital expenditure has occurred. Accordingly, based on
the calculations and total project costs in WEPCO’s No-
vember 22, 1988 letter, the proposed project would result
in a capital expenditure at each of the five Port Washington
units, and those units would not qualify for the exemption in
286
the NSPS modification provisions at 40 CFR 60.14(e)(2).°
As to unit 5, WEPCO did not submit cost data limited to
the affected facility. Thus, I have no reason to alter EPA’s
original determination that WEPCO has not demonstrated
that the increase in production rate at unit 5 can be
accomplished without a capital expenditure.
In addition, I have determined that it is more appro-
priate to utilize the original basis of each affected facility
(as adjusted to reflect past capital improvements), ex-
pressed in nominal dollars, rather that the updated basis,
expressed in current dollars, in determining NSPS appli-
cability. Thus, even if WEPCO were correct that annual
renovation costs, rather than total costs, should be used in
capital expenditure calculations, in this case a comparison
of annual renovation costs and the (adjusted) original
basis of each affected facility shows that a capital expendi-
ture would still occur.*
* WEPCO has argued that since the definition of capital expendi-
ture at 40 CFR 60.2 refers to the IRS “annual asset guideline repair
allowance percentage” (emphasis added), EPA is bound by the literal
language of its own regulations to use annual rather than total project
costs in making capital expenditure calculations. However, the regula-
tions do not dictate such a result. Instead, on their face they call for a
comparison between total renovation costs and the annual asset
guideline. Had EPA intended the result suggested by WEPCO, it would
have explicitly called for comparison of annual costs of the change for
projects exceeding one year with the annual asset guideline. This it did
not do. In addition, as indicated above, the purpose of the capital
expenditure provision would not be served by annualizing project costs
for capital expenditure purposes.
_ * It is worth noting in this regard that if EPA were to adhere to a
literal reading of IRS guidelines as urged by WEPCO, it would have no
- choice but to use original basis as well as annualized costs in making
capital expenditure calculations for Port Washington. Using this
(Continued on following page)
287
In making a more detailed inquiry into the capital
expenditure matter in response to WEPCO’s request, I
have found that neither the NSPS General Provisions nor
the preamble thereto contain any discussion of the matter
of original versus updated basis, and that EPA has rarely
been called upon to address this issue. However, upon
review of EPA’s past practice in this area. I have found
that in developing performance standards for particular
industries, EPA has provided the regulated community a
mechanism to calculate the original basis in making
capital expenditure calculations. See, e.g., “Equipment
Leaks of VOC in Petroleum Refining Industry — Back-
ground Information for Promulgated Standards,” EPA-
450/3-81-015b, December 7, 1983.° This suggests that EPA
intended the original basis to be utilized to determine
whether a capital expenditure is going to be made.
Moreover, I believe that the use of original basis is
consistent with the overall purpose of the NSPS modifica-
tion regulations in general, and the capital expenditure
provisions in particular. The effect of using original basis
is that the greater the age of an affected facility, the more
likely it is that a given investment resulting in increased
production will be deemed a capital expenditure and
trigger NSPS. This is consistent with Congress’ intent in
adopting new source performance standards. Older facili-
ties are most likely to use outdated equipment which does
formula, WEPCO would exceed the repair allowance percentage at
units 1 — 5 for most years, and NSPS would still apply.
* This Background Information Document provides an alternative
to the method prescribed in the General Provision when it is difficult to
determine original costs. The formula uses replacement costs and an
inflation index to “approximate the original cost basis of the affected
facility.”
288
not reduce pollution to the extent more current technology
does. Congress included modified sources within the new
source performance standards of section 111 to ensure the
use of new technology on such sources. See CAA
§§ 111(a)(2), 111(a)(4).
II. AIR HEATER RENOVATIONS AT UNIT 1
In January 1989, WEPCO asked EPA to determine
whether replacement of the heat transfer surface elements
on the unit 1 air heater would trigger PSD or NSPS
applicability. However, in a letter dated February 3, 1989,
WEPCO withdrew this request, asserting that it could not
receive approval in the time necessary, while reserving the
right to renew it at a later time as to unit 1 or any other
unit at Port Washington. Because this issue may arise
again, and because | believe it bears upon the project as a
whole, I find it appropriate to address the matter of air
heater element replacement. Based on the information
enh ‘tted regarding this new plan, as well as the earlier
tation submitted regarding air heater replacement
I conclude that if WEPCO were to proceed under its
i and now withdrawn plan, it would not alter EPA’s
finding that PSD and NSPS would apply. In order
ain this finding, it is useful to first summarize the
it facts.
iginally, WEPCO advised EPA that it planned to
the air heaters at unit 1 — 4 in their entirety. As
) explained:
Air heaters are subject to the erosive and
rosive effects of the flue gas passing through
m and require regular maintenance of the
it transfer surfaces.
289
The plate-type air heaters on Units 1 - 4 do
not lend themselves to replacement of the indi-
vidual elements. Worn sections have been
patched and blocked, where accessible, over the
years. Now, however overall corrosion and perfo-
ration has passed beyond the practical point of
repair, and replacement of the air heaters is the
economical way to maintain the air preheater
system.
The air heaters on Port Washington Unit 5
and the other units on the Wisconsin Electric
System [other than Port Washington units 1 — 4]
are of the Ljungstrom basket design, which al-
lows the heat transfer surfaces (baskets) to be
replaced easily ***
See, e.g., List of Port Washington Projects, p. 6 (Attach-
ment to April 22, 1988) Letter from John W. Boston,
WEPCO, to Gary McCutchen , EPA.
On January 11, 1989, WEPCO informed the State of
Wisconsin that it was considering replacing all the plate
elements at unit 1. In a letter to the State of Wisconsin,
WEPCO described this project as routine repair work,
“necessary to halt the continuing decrease in the capabil-
ity of Unit 1,” and submitted a list of 40 generating units
where significant portions of the air heater have been
replaced. See Letter, with attachment, from Mark P.
Steinberg, WEPCO, to Dale Ziege, Wisconsin Department
of Natural Resources, January 11, 1989.
In a telephone conversation with EPA staff the next
day, WEPCO indicated that it desired to perform the unit
1 plate replacement work during a current unit outage;
that intended to replace only half, not all, of the elements,
at a cost of approximately $500,000; that it intended to
290
later scrap this work and replace the entire air heater as
described in the original scope of work at a cost of
$2,600,000; and that it was considering performing the
same work at unit 4 also. See Record of Telephone Conver-
sation between David Schulz, EPA, and Mark Steinberg,
Neil Childress, and Walter Woelfle, WEPCO, January 12,
1939.
In a meeting on January 17, 1989, WEPCO related
that if it replaced half of the plate elements now, it proba-
bly would replace the remainder as part of the total
renovation project at a later date and not replace the air
heater in whole. WEPCO also related that complete
replacement of the plate elements should increase unit 1’s
capability to the original design capacity. Finally, WEPCO
stated in response to questions from EPA staff. that none
of the air heaters or plate elements at units 1-4 had ever
been replaced in the past. See Memorandum, Meeting
with WEPCO regarding the Port Washington Generating
Station, from David Schulz, EPA, to Files, January 27,
1989.
In addition to the above information, I note that
WEPCO’s list of 40 units at which air heater element
replacements have occurred include no units containing
plate elements such as those on units 1-4 at Port Washing-
ton: Instead, all of the examples submitted are of the
Ljungstrom basket type or the tubular type. I conclude
that those examples are too dissimilar to the plate-type
elements in use at units 1-4 to support WEPCO’s conten-
tion that the work in question is routine.‘
; . Further, even the list of air heater replacement work submitted
by WEPCO did not establish this as routine repair work. Those 40 units
(Continued on following page)
291
Based on all of the foregoing, I find no reason to
depart from EPA's earlier conclusion that PSD and NSPS
would apply to the air heater work on unit 1. It appears
that despite WEPCO’s recent recharacterization of this
work as a separate project, it is properly viewed as an
integral part of the overall Port Washington life extension
project. WEPCO cannot evade PSD and NSPS applicabil-
ity by carving out, and seeking separate treatment of
significant portions of an otherwise integrated renovation
Program. Such piecemeal! actions, if allowed to go unchal-
lenged, could readily eviscerate the clear intent of the
Clean Air Act’s new source provisions. Accordingly, if seen
as part of WEPCO’s previously proposed renovation
project, the recent recharacterization of the unit 1 air
heater work does nothing to alter the factors determina-
tive of PSD and NSPS coverage.
Ill. CAPACTY TESTING FOR UNITS 1-4
A. Impact of Test Results on NSPS Applicability.
In Lee Thomas’ October 14, 1988 letter, EPA stated
that baseline emissions for NSPS purposes are determined
by hourly maximum capacity just prior to the renovations.
EPA relied on actual operating data to determine that
current maximum capacity at units 1-4 has significantly
deteriorated, such that the restoration of original design
capacity through the lift extension project would result in
corresponding emissions increases. As to unit 5, EPA
stated that current capacity at unit 5 is zero because it is
comprise only a small fraction of total operating utility units, and even
at the 40 units, air heater repair or replacement appears to have been a
one-time occurrence, not routine repair.
292
physically inoperable. EPA rejected WEPCO’s unsupported
assertions that all five units could be operated at high
capacities, but held open the possibility of further discus-
sions on that point. Subsequently, in November and
December of 1988, following discussions with EPA,
WEPCO conducted capacity tests to determine current
actual capacity.
Based on its review and analysis of the test data, EPA
finds that the tests adequately. demonstrate that units 2
and 3 can be operated at their original design capacity on
a sustained basis. Accordingly, I hereby supersede EPA’s
earlier determination and find that NSPS would not apply
to units 2 and 3 by virtue of the proposed renovations so
long as the capacity of these units after completion of the
work is no higher than demonstrated in the recent tests
(694,000 and 690,000 pounds of steam per hour, respec-
tively). As discussed in more detail below, this revised
NSPS determination does not affect our determination
that the PSD provisions would be applicable to the pro-
posed work on these two units.
During the tests on units 1 and 4, WEPCO was able to
operate these units at 497,000 and 586,000 pounds of
steam per hour, respectively, representing 72% and 89% of
these units’ respective original design capacities. These
tests are adequate to confirm EPA’s original determination
that units 1 and 4 are not capable of operating at their
original design capacities, and that restoration of the lost
capacity through the life extension will trigger NSPS
coverage. EPA today also determines that these tests are
not adequate to show that current actual capacity for
- purposes of establishing the NSPS baseline is as high as
‘the levels achieved during the recent tests. Rather, I
reaffirm that baseline for those units is determined by the
293
lower capacities reflected in recent actual operating data
as set forth in Lee Thomas’ October 14 letter. EPA must
reject the tests for purposes of establishing actual NSPS
baselines because during the testing discussed above,
there were significant mezsured exceedances of the appli-
cable particulate mass emission limit and several meas-
ured exceedances of the applicable opacity limit contained
in the Wisconsin State Implementation Plan. One of the
purposes of these tests was to determine the maximum
actual capacity of the Port Washington units that can be
achieved in a lawful manner. As a consequence of the
measured exceedances, WEPCO’s tests cannot be relied on
to demonstrate that the company could lawfully sustain
the levels achieved during the testing.
Regarding unit 5, I find that by declining to conduct or
schedule capacity tests, WEPCO has effectively conceded
that unit 5 is at present inoperable. Therefore, I reaffirm
that its baseline for NSPS purposes is zero.
B. Impact of Test Results on PSD Applicability.
In its February 3, 1989 letter, WEPCO asserted that
EPA’s October 14, 1988 determination assumed that the
emission rate of each unit would increase following the
renovations. Thus, WEPCO claims, EPA did not address
the question whether units that are not increasing their
emission rates following renovation can be deemed to
trigger PSD. WEPCO is incorrect on both counts.
EPA’s prior determination explained that under the
PSD program, unlike NSPS, baseline emissions are
determined by representative actual emissions prior to the
physical or operational change. Accordingly, the results of
testing conducted by WEPCO, intended to determine’
294
current maximum hourly capacity, have no impact on the
existence of a significant net emissions increase for PSD
purposes. Hence, those test results provide no reason to
alter EPA’s prior determination regarding PSD applicabil-
ity.
Actual emissions are the product of the emission rate
(amount of pollution per unit of production or throughout,
e.g., pounds of sulfur dioxide per ton of coal combusted),
the production «ate or capacity utilization (amount of
production or th.. oughout per hour, e.g., tons of coal com-
busted per hour), and the hours of operation (e.g., hours
per year). In its prior determination, EPA explained that
an increase in any one of these three factors, if attribut-
able to a physical or operational change, can trigger an
emissions increase for PSD purposes, and rejected
WEPCO’s contention that only increases in the emission
rate were determinative. In so doing, EPA explicitly
assumed that emissions increases at Port Washington
‘would come not from an increase in emission rate, but
rather from increases in production rate or hours of
,Operation. See Memorandum from Don R. Clay, September
“. yanee at 8.
9 WEPCO further implies in its February 3, 1989 letter
| that’ the demonstration that units 2 and 3 can operate now
at it-maximum design capacity means that there will be no
increase in production rate for PSD purposes following the
renovations. This is not the case because PSD baseline
issions are determined by representative actual emis-
Tate, production rate, and hours of operation prior to
> Physical change. Representative actual emissions are
ined by examining “the actual emissions during a
ntative two year period, (See 40 CFR 52.21(b)(21)(ii))
‘in this case the Administrator determined to be
BEST AVAILABLE COPY
295
1983 and 1984 (See Lee Thomas’ Oct. 14 letter, at 5). The
hourly capacity demonstration for NSPS purposes is not
relevant to the PSD analysis.
IV. NSPS OPERATIONAL LIMITATIONS
In my September 9, 1988 memorandum, I pointed out
that an affected facility cannot avoid NSPS applicability
by offsetting, through the use of fuel with a lower sulfur
content, an increase in the emission rate that would
otherwise occur due to a physical or operational change. As
I explained at that time, 40 CFR 60.14(e) provides that use
of an alternative fuel or raw material — such as higher-
sulfur coal - which an existing facility was designed to
accommodate before a physical or operational change does
not constitute a modification for NSPS purposes. It follows
that the facility cannot avoid NSPS by switching to lower-
sulfur fuel to counteract a prospective increase in emission
rate because, under the regulations, the facility would
always have to option to switch back to a higher-sulfur
fuel at a later date without triggering NSPS.
Subsequent to the issuance of EPA’s October 14, 1988
letter, WEPCO inquired whether it might be able to utilize
lower-sulfur coal to avoid NSPS at Port Washington,
notwithstanding the regulatory provision explained above,
by agreeing to federally enforceable permit conditions that
would bar the company from switching back to higher
sulfur coal in the future. Restrictions of this nature are
acceptable for netting transactions under the Act’s PSD
provisions. However, the statute reflects a basic political
decision that fossil fuel-fired sources not rely only on
natural occurring less-polluting fuels to comply with the
NSPS. Instead, Congress declared that compliance must
296
depend in part upon the application of flue gas treatment
or other pollution control technologies. Thus, section
111(a)(1XA)(ii) defines “standard of performance” for fossil
fuel-fired sources as
requiring the achievement of a percentage reduc-
tion in the emissions from such category of
sources from the emissions which would have re-
sulted from the use of fuels which are not subject
to treatment prior to combustion... .
Congress further clarified this point in a later paragraph
of section 111(a) by adding:
For the purpose of subparagraph (1)(A\ii), any
cleaning of the fuel or reduction in the pollution
characteristics of the fuel after extraction and
prior to combustion may be credited ... to @
source which burns such fuel.
This core policy judgment is reflected as well in the
legislative history of the 1977 Clean Air Act amendments.
For example, the Conference Report states:
The Senate concurs in the House provision
with minor amendments. The agreement re-
quires (1) that the standards of performance for
fossil fuel-fired boilers be substantially upgraded
to require the use of the best technological sys-
tem of continuous emission reduction and to pre-
clude use of untreated low sulfur coal alone as 4
means of compliance; .. . (3) that for fossil fuel-
fired sources, the new source performance stan-
dards must be comprised of both a standard of
performance for emissions and an enforceable
requirement for a percentage reduction in pollu-
. tion from untreated fuel.
LR. Rep. No. 95-564, 95th Cong., ist Sess. 130.
297
Because the will of Congress is so clear that lower-
sulfur fuels alone will not suffice to comply with NSPS, it
would be inconsistent with the legislative intent for EPA to
allow sources to use lower-sulfur fuel to avoid coverage of
NSPS in the first instance in the manner suggested by
WEPCO. If EPA were to follow such a course, numerous
modifications to existing facilities could escape coverage in
a manner contrary to the statutory purpose.
V. O I N
In discussions with EPA, WEPCO has challenged, on
grounds of timing, EPA’s position on baseline emissions for
NSPS purposes. In its prior determination, EPA explained
that under the NSPS regulations, baseline emissions are
determined by hourly maximum capacity just prior to the
renovations. Thus, the baseline for unit 5 at Port Washing-
ton is zero because the unit has been shut down for several
years due to safety concerns. In response, WEPCO has
presented the hypothetical question whether EPA would
still have found a zero baseline if unit 5 had been shut
down on a Friday due to some unexpected or catastrophic
failure of a major component previously in good working
order, and WEPCO had sougt to replace that component
on the following Monday. WEPCO asserts that in such
circumstances, EPA should have established baseline
emissions using the emissions rate just prior to the break-
down.
I. find it unnecessary to engage in speculation by
addressing the hypothetical situation presented by
WEPCO, because it is far removed from the true circum-
stances surrounding the proposed Port Washington life
extension project. In fact, unit 5 has been shut down for
298
over four years, not a weekend, and that is the foundation
of EPA’s analysis and determination.
In conclusion, with limited exceptions, EPA today
reaffirms the decisions reached in the October 14 determi-
nation. In addition, EPA has concluded that the work on
each unit constitutes a capital expenditure and that the
proposed air heater plate replacement work on unit 1.
would trigger PSD and NSPS. As a result of the capacity
test demonstration, however, I find that units 2 and 3 at
Port Washington can be operated at their design capacity
on a sustained basis. Therefore EPA’s earlier determina-
tion with respect to NSPS applicability is superseded and
NSPS would not apply to units 2 and 3 by virtue of the
proposed renovations so long as the capacity of these units
after the completion of this work is no higher than demon-
strated in the recent tests. This determination does not
affect PSD applicability for these two units. If you should
have any questions about the foregoing, please feel free to
contact me. Thank you for your cooperation in this matter.
Sincerely,
/s/
Don R. Clay
Acting Assistant Administrator
for Air & Radiation
299
EXHIBIT 101
[LOGO] UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY
REGION 5
77 WEST JACKSON BOULEVARD
CHICAGO, IL 60604-3590
MAY 23 2000
REPLY TO THE ATTENTION OF
R-19J
Henry Nickel
Counsel for the Detroit Edison Company
Hunton & Williams
1900 K Street, N.W.
Washington D.C. 20006-1109
Dear Mr. Nickel:
I am responding to your request on behalf of the Detroit
Edison Company for an applicability determination
regarding the proposed replacement and reconfiguration of
the high pressure section of two steam turbines at the
company’s Monroe Power Plant, referred to as the Dense
Pack project. Specifically, you requested that the United
States Environmental Protection Agency (EPA) determine
whether the Dense Pack project at the Monroe Power
Plant would be considered a major modification that would
subject the project to pollution control requirements under
the Prevention of Significant Deterioration (PSD) pro-
gram.
We have reviewed your original request, dated June 8,
1999, and the supplemental information you submitted on
December 10, 1999, and March 16, 2000. We provisionally
conclude that the Dense Pack project would not be a major
modification. Thus, Detroit Edison may proceed with the
300
project without first obtaining a PSD permit. Although the
Dense Pack project would constitute a nonroutine physical
change to the facility that might well result in a signifi-
cant increase in air pollution, Detroit Edison asserts that
emissions will not in fact increase due to the construction
activity, and EPA has no information to dispute that
assertion.
As you know, nonroutine changes of any type, purpose, or
magnitude at an electric utility steam generating unit —
ranging from projects to increase productions efficiency to
even the complete replacement of entire major components
~ are excluded from PSD coverage as long as they do not
significantly increase emissions from the source. Thus,
Detroit Edison has been free to proceed at any time with
the Dense Pack project without first obtaining a PSD
permit as long as it adheres to its stated intention to not
increase emissions as a result of the project. Indeed, EPA
encourages the company to proceed with the project on
this basis, since it appears to both reduce emissions per
unit of output and not increase actual air pollution.
As you are also aware, under the applicable new source
review regulations, in determining if a physical change
will result in a significant emissions increase at an electric
utility plant, companies may use an “actual” to “represen-
tative actual annual emissions” test for emissions from the
électric utility steam generating unit, under which a
calculation of baseline emissions and a projection of future
emissions after the change is needed. Our determination
of ‘nonapplicability is provisional because Detroit Edison
has not, to our knowledge, provided a calculation of
baseline emissions or projected future emissions to the
permitting agency, and this should be done prior to the
Start: of construction. The basis for this determination is
301
summarized below and is set forth in full in the enclosed
detailed analysis.
In determining whether an activity triggers PSD, the
Clean Air Act and EPA’s regulations specify a two-step
test. The first step is to dete iine if such activity is a
physical or operational change, and if it is, the second step
is to determine whether emissions will increase because of
the change. The statute admits of no exception from its
sweeping scope, but EPA’s regulations contain some
narrow exceptions to the definition of physical or opera-
tional change. In particular, Detroit Edison claims that the
Dense Pack project is eligible for the exclusion for routine
maintenance, repair, and replacement. The determination
of whether a proposed physical change is “routine” is a
case-specific determination which takes into consideration
the nature, extent, purpose, frequency, and cost of the
work, as well as other relevant factors. After carefully
reviewing all the information you submitted in light of the
relevant factors, EPA has determined that the proposed
project is not “routine.”
The purpose of the Dense Pack project, to significantly
enhance the present efficiency of the high pressure section
of the steam turbine, signifies that the project is not
routine. An upgrade of this nature is markedly different
from the frequent, inexpensive, necessary, and incre-
mental maintenance and replacement of deteriorated
blades that is commonly practiced in the utility industry.
For instance, past blade maintenance and replacement oi
only the deteriorated blades at Detroit Edison has never
increased efficiency over the original design. Accordingly,
because increasing turbine efficiency by a total redesign of
a major component is a defining feature of the proposed
Dense Pack project, it clearly goes significantly beyond
302
both historic turbine work at Detroit Edison, and what
would otherwise be considered a regular, customary, or
standard undertaking for the purpose of maintaining the
existing steam turbine units. The project also goes well
beyond routine turbine maintenance, repair, and replace-
ment activities for the utility industry in general.
The nature and extent of the work in question — replace-
ment of the entire high pressure sections of the steam
turbines for Units 1 and 4 at Monroe — suggests that the
Dense Pack project is not routine. It would result in
greater efficiency above the level that can be reached by
simply replacing deteriorated blades with ones of the same
design and, in addition, will substantially increase effi-
ciency over the original design. Specifically, the Dense
Pack upgrade would not only restore the 7 percent of the
efficiency rating lost over the years at each unit but would
improve the unit’s efficiency by an additional 5 percent
over its original design capacity. Accordingly, the proposed
project represents a significant and major redesign and
replacement of the entire high pressure sections of the
steam turbines at Units 1 and 4 at the Monroe facility.
The frequency with which utilities have undertaken
turbine upgrades like the Dense Pack project also indi-
_ cates the nonroutine nature of the changes. The informa-
_ tion provided by Detroit Edison, regarding past history at
the Monroe facility, describes what is characterized as
* Mecessary maintenance, repair, and replacement of dete-
‘ riorated turbine blades approximately every 4 years.
_ During these overhaul periods, it is not uncommon for the
company to replace up to several turbine blades at one
time: ‘It is common among other utilities to also perform
4 similar turbine maintenance. However, Detroit Edison has
not’provided any information to suggest that a complete
303
replacement and redesign of the high pressure section of a
steam turbine is conducted frequently at Monroe or at any
other individual utility. Instead, Detroit Edison relies on
its claim that projects “similar” to the Dense Pack project
have been performed at a number of utilities. This infor-
mation does not indicate that the replacement of the high
pressure section of the steam turbine is frequent at the
typical utility source; to the contrary, the only available
information reflects that projects like the Dense Pack
project have been performed only one time, if ever, at
individual sources.
The cost of the Dense Pack project is significant and tends
to indicate that this project is nonroutine. Detroit Edison
expects the Dense Pack replacement to cost approximately
$6 million for each turbine unit, for a total of $12 million.
The EPA has rejected claims of routineness in past cases
where the cost was substantially less than this figure.
Moreover, Detroit Edison intends to capitalize the entire
cost of this project, and EPA believes that a $12 million
project that is 100 percent capital improvement indicates
that it is a major undertaking.
Beyond the clearly significant absolute cost of this project,
available information suggests that this expenditure far
exceeds the cost typically associated with turbine blade
maintenance activity. Detroit Edison provided only a
summary of the total project costs for past maintenance
and inspections at the facility, the total costs of which
ranged from less than $1 million to a little more than $6
million. Although Detroit Edison did not provide any detail
regarding what specific activities comprise these aggre-
gated amounts, it acknowledges that it spent only $18,700,
$33,100, and $7,900 to replace high-pressure rotors in
three turbine projects in 1981 and 1982. Further, the
304
project is significantly more costly than simply replacing
deteriorated blades today; Detroit Edison acknowledges
that the Dense Pack upgrade would cost three times more
than its alternative blade repair and replacement project.
Accordingly, it appears that the costs associated with the
Dense Pack project greatly exceed the amounts spent
previously by Detroit Edison or that it would spend pres-
ently for the replacement of deteriorated turbine blades or
rotors.
For the reasons delineated above, we conclude that the
changes proposed by Detroit Edison are not routine.
Detroit Edison’s submissions do not demonstrate that
project such as the Dense Pack project are frequent,
inexpensive, or done for the purpose of maintaining the
facility in its present condition. Instead, the source relies
on two principal arguments: (1) It claims that this project
is less significant in scope than was the activity in ques-
tion in the 1988 applicability determination for the Wis-
consin Electric Power Company (WEPCO); and (2) it
alleges that EPA has interpreted the exclusion for routine
activity expansively to exempt all projects that do not
increase a unit’s emission rate. EPA rejects both of these
arguments, the former because both EPA and the U.S.
Court of Appeals for the Seventh Circuit viewed WEPCO’s
activity as “far from” routine and thus this attempted
comparison to WEPCO is unsuitable, and the latter
because it is demonstrably incorrect. The attached analy-
sis addresses these points in significant detail.
by .
When nonroutine physical or operational changes signifi-
cantly: increase emissions to the atmosphere, they are
properly characterized as major modifications and are
sup to the PSD program. In general, a physical change
in the’ ature af the Denece Pack nrniart which nravidec far
BEST AVAILABLE COPY
305
the more economical production of electricity, would be
expected to result in the increased utilization of the
affected units, and thus, increased emissions. Notwith-
standing the fact the Monroe units may be high on the
dispatch order, the Dense Pack project would allow Detroit
Edison to produce electricity more cheaply per unit of
output, thereby creating an incentive to run Units 1 and 4
above current levels. Even a small increase over current
normal levels in the utilization of the affected units would
result in a significant increase in actual emissions of
criteria pollutants. For example, in 1997, at the Monroe
facility Unit 1 emitted approximately 14,000 tons of
nitrogen oxides (NO,.) and 41,000 tons of sulfur dioxide
(SO,), and Unit 2 emitted 12,000 tons of NO, and 35,000
tons of SO,. Based on this information, if a one to five
percent increase in operation were to result from the
Dense Pack project, increases on the order of 160-800 tons
of NO, and 400-2000 tons of SO, would occur.
Detroit Edison, however, maintains that emissions will not
increase as a result of the Dense Pack project. Specifically,
the company contends that representative actual annual
emissions following the change will not be greater than its
pre-change actual emissions, because the Dense Pack
upgrade will not result in increased utilization of the
units. As you are aware, the PSD regulations (under the
provisions commonly known as the “WEPCO rule”) allow a
source undertaking a nonroutine change that could affect
emissions at an electric utility steam generating unit to
lawfully avoid the major source permitting process by
using the unit’s representative actual annual emissions to
calculate emissions following the change if the source
submits information for 5 years following the change to
confirm its pre-change projection. In projecting post-change
306
emissions, Detroit Edison does not have to include that
portion of the unit’s emissions which could have been
accommodated before the change and is unrelated to the
change, such as demand growth.
Under the WEPCO rule, Detroit Edison must compute
baseline actual emissions and must project the future
actual emissions from the modified unit for the 2-year
period after the physical change (or another 2-year period
that is more representative of normal operation in the
unit’s modified state). As noted above, Detroit Edison has
ro provided these figures to verify its projection of no
increase in actual emissions, and should submit them to
the Michigan Department of Environmental Quality prior
to beginning construction. In addition, Detroit Edison
must maintain and submit to the permitting agency on an
annual basis for a period of at least 5 years (or a longer
period not to exceed 10 years, if such a period is more
representative of the modified unit’s normal post-change
operations) from the date the units at the Monroe Plant
‘ resume regular operation, information demonstrating that
the renovation did not result in a significant emissions
increase. If Detroit Edison fails to comply with the report-
ing requirements of the WEPCO rule or if the submitted
‘information indicates that emissions have increased as a
consequence of the change, it will be required to obtain a
“PSD permit for the Dense Pack project.
Finally, regardless of whether PSD review is triggered due
‘te the Dense Pack project, Detroit Edison must meet all
other applicable federal, state, and local air pollution
‘Teauirements.
‘This determination will be final in 30 days unless, during
‘tat time, Detroit Edison seeks to confer with or appeal to
307
the Administrator or her designee regarding it. If you have
any questions regarding this determination, please contact
Laura Hartman, Environmental Engineer, at (312) 353-
5703, or Jane Woolums, Associate Regional Counsel, at
(312) 886-6720.
Sincerely,
/s/ original signed by
Francis X. Lyons
Francis X. Lyons
Regional Administrator
Enclosure
308
EXHIBIT 116
BEFORE THE ADMINISTRATOR
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY
IN THE MATTER OF )
MONROE ELECTRIC ) PETITION NO. 6-99-2
GENERATING PLANT ORDER RESPONDING
ENTERGY LOUISIANA, INC. ) TO PETITIONER'S
PROPOSED OPERATING REQUEST THAT THE
PERMIT ADMINISTRATOR
, OBJECT TO ISSUANCE
Proposed by the Louisiana ) OF A STATE
Department of Environmental ) OPERATING PERMIT
Quality
ORDER PARTIALLY GRANTING AND PARTIALLY
DENYING PETITION FOR OBJECTION TO PERMIT
On February 9, 1999, Ms. Merrijane Yerger, Managing
Director of the Citizens for Clean Air & Water (“CCAW” or
“Petitioner”), petitioned the Environmental Protection
Agency (“EPA”), pursuant to section 505(b) of the Clean
Air Act (““CAA” or “the Act”), to object to issuance of a
proposed State operating permit to Entergy Louisiana,
_Inc.’s Monroe Electric Generating Plant in Monroe, Lou-
-isiana (“Monroe plant”). The proposed operating permit for
_the Monroe plant was proposed for issuance by the Louisi-
ana Department of Environmental Quality (“LDEQ”)
‘,pursuant to title V of the Act, CAA §§ 501-507, the federal
, implementing regulations, 40 CFR Part 70, and the State
+ of Louisiana regulations, Louisiana Administrative Code
Se, A.C.”), Title 33, Part III, Chapter 5, sections 507 et seq.
Petitioner has requested that EPA review, investigate,
‘and make an administrative determination on the entire
309
matter of the proposed operating permit and planned
restart of the Monroe plant, pursuant to section 505(b) of
the Act and 40 CFR § 70.8(c). Petitioner alleges that the
proposed operating permit is not in compliance with
applicable requirements of the Act including Prevention of
Significant Deterioration (“PSD”) permitting requirements
and New Source Performance Standards (“NSPS”). Peti-
tioner also alleges that Entergy’s operating permit appli-
cation fails to adequately demonstrate compliance with
hazardous waste disposal requirements under the Re-
source Conservation and Recovery Act (“RCRA”).
* * cd
condition which was established after January 6, 1975,
pursuant to 40 CFR 52.21 or under regulations approved
pursuant to 40 CFR subpart I or 40 CFR 51.166.” 40 CFR
§ 51.166(b)(2)(iii)(); see also L.A.C. 33:I11.509(B).
The purpose of this “increase in hours” exception was
to avoid undue disruption by allowing routine increases in
production during the normal course of business in order
to respond to market conditions. In the preamble to the
PSD rulemaking, EPA explained:
While EPA has concluded that as a general rule
Congress intended any significant net increase in
such emissions to undergo PSD or nonattain-
ment review, it is also convinced that Congress
could not have intended a company to have to get
an NSR permit before it could lawfully change
hours or rate of operation. Plainly, such a re-
quirement would severely and unduly hamper
the ability of any company to take advantage of
favorable market conditions.
310
45 Fed. Reg. 52676, 52704 (Aug. 7, 1980). The court in
WEPCO explained further, “This exclusion ...was pro-
vided to allow facilities to take advantage of fluctuating
market conditions, not construction or modification.” 893
F. 2d at 916 n. 11.
Analysis of whether restart of a facility constitutes a
mere increase in the hours of operation or production rate
must consider whether the proposed activity is of the kind
intended to be covered by the provision. Specifically, EPA
will look at whether the proposed change requires en-
hanced flexibility to avoid hampering a company’s ability
to respond to market fluctuations. In general, reactivation
after long periods of shutdown, though obviously moti-
_ vated by long-term changes in the market, is not a re-
sponse to the same type of market fluctuations and does
“not merit the same permitting flexibility envisioned by the
‘regulations.
Restart of a long-dormant facility also may not be
; entitled to coverage under the “increase in hours” exemp-
_ tion if it would disturb a prior assessment of the environ-
‘mental impact of the source. In the preamble for the 1980
* PSD rulemaking, after expressing its belief that Congress
_ intended to allow certain facilities flexibility to respond to
market fluctuations, EPA
* * *
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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
UNITED STATES
OF AMERICA,
)
)
Plaintiff,
v. ) CIVIL NO. 1:00CV1262
)
)
)
)
DUKE ENERGY
CORPORATION,
Defendant.
EXHIBITS IN SUPPORT OF UNITED STATES
RESPONSE TO DUKE’S MOTION FOR
SUMMARY JUDGMENT
(Filed Mar. 31, 2003)
* * *
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311
EXHIBIT 139
USA, et al. vs. Duke Energy Corporation 1:00 CV 1262
Laura Butler 12/10/2002
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,
v.
ENVIRONMENTAL DEFENSE, NORTH
CAROLINA SIERRA CLUB, NORTH CAROLINA
PUBLIC INTEREST RESEARCH GROUP
Plaintiff-Intervenors
v.
DUKE ENERGY CORPORATION
Defendant.
i i i i
DEPOSITION OF LAURA BUTLER
(Taken on behalf of the Plaintiff)
Raleigh, North Carolina
December 10, 2002
* * *
[15] Q. Is it something that you actively encourage?
Trying to get a sense of your working relationship with the
sources.
, A. Well, we have a good relationship with the
sources, but I don’t know how to answer your question. We
don’t advertise that we encourage it, but we do have
conversations with somebody representing them.
312
Q. So in general if - strike that. Whepewe were
speaking before about a modification for PSD purposes,
what sorts of things are you talking about when you say a
modification for PSD purposes?
A. Basically I don’t want to be —- really would be
better to look at the documents that define it, because I
wouldn’t want to be misquoted or misquote the documents.
There are books that talk about this.
Q. Generally?
A. Changes that would basically increase emissions
or change in a method of operation. Now the technical
staff can give much more detail than that, and that would
be preferable.
Q. Is it the sources’ responsibility to come in for a
permit or is the burden on Air Quality section to identify
modifications?
A. The facility should be — would be required to get a
permit modification if one has occurred, if a modification
(16] has occurred that would trigger a permit action.
Q. Is it Air Quality section’s burden to go out and
identify those types of modification or does the Air Quality
section rely on the facilities?
MR. COTTINGHAM: Object to the form. You
can go ahead.
THE WITNESS: Could you repeat that?
Q. Is the burden on - sorry. Is it the responsibility of
the Air Quality section to go out and affirmatively identify
those modifications?
313
MR. COTTINGHAM: Object to the form.
THE WITNESS: We don’t have the manpower to
do that.
314
EXHIBIT 140
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,
v.
ENVIRONMENTAL DEFENSE, NORTH
CAROLINA SIERRA CLUB, NORTH CAROLINA
PUBLIC INTEREST RESEARCH GROUP
Plaintiff-Intervenors
v.
DUKE ENERGY CORPORATION
Defendant.
mee eee eee ee”
DEPOSITION OF MICHAEL PARKIN
(Taken on behalf of the Plaintiff)
Raleigh, North Carolina
December 10, 2002
* * *
{9} Q. During that time period did you ever receive
PSD applications for changes being made to existing
sources?
A. At the time I was environmental Engineer I, I
don’t recall ever reviewing actually a PSD permit applica-
tion.
Q. I'm going to have you walk me through a typical
inspection. When would the first contact with the facility
315
be made? Would it be made before the inspection or the
day of the inspection?
A. At that time I would say I would show up with no
prior contact.
Q. Where would you go when you got to the facility?
A. Usually to a reception office and then ask for the
« ct at that point.
Q. Once you met up with the contact, what would
you to next?
A. I would inform the contact the reason I was there,
I would show them a copy of the air permit and say I want
to go through and look at the sources on your air permit.
Q. How would you look at the sources su the air
permit, what would you do? Would you physically go see
them?
_ A. Yeah, we would walk through the facility, look at
the sources and associated control equipment as well.
Q. What were you looking for? What would you be
looking for when you walk through a facility?
A. Some things would be operating data that had —
just [10] looking to see if everything appeared to be func-
tioning properly, also if there were any new sources that
weren't on the permit as we walked through the facility.
Q. Anything else?
A. That would be pretty much the extent of it.
316
Q. Okay. The first thing you said is you would look
for operating data I believe. What did you mean by operat-
ing data?
A. Well, with Duke, for example, it would be precipi-
tator data, voltages, spark rates, that kind of thing. The
other operating data may include, I don’t recall, but
generally speaking what boilers are operating at and what
their output steam load, for example. They have passivity
monitors. We check that type of data.
Q. You also said that at the inspection you made
sure that the units were functioning properly; is that
right, is that what you said? Okay. What did you mean by
that?
A. One might be as simple as looking at the stack
and see visually if you see any visible emissions that could
be control devices or just see if there’s physical problems
such as dust leaking out of places or things like that.
Q. And you also said you would look to see if there’s
new sources?
A. Yes.
Q. And could you explain what you meant by that?
{11} A. Just going through a plant and if there's
something shows up there that I see that’s essentially not
on the air permit, if it is not described on the air permit
then I would look to see what it was and see if it might
Q. And what are some examples of what would be a
new source at a utility that would strike that kind of
questioning from you?
317
A. Perhaps, well, a boiler for example, or even
storage silo or a bag filter or something like that that they
might put up, something of that nature.
Q. If there was a new piece of equipment put inside
the boiler, would that raise those types of questions for you
all during the inspection?
MR. COTTINGHAM: Object to the form. You
can answer that if you can.
THE WITNESS: A new piece of equipment
inside the boiler. I would have to, I mean it might be hard
for me to detect a new piece of equipment inside the boiler
so I don’t know.
Q. After you walk around through the facility, what
would you do next for an inspection?
A. After done normally have an exit interview,
perhaps an inspection, some type of file review or if there’s
any paperwork to look at.
[12] Q. What's involved with the exit interview? You
said perhaps, so I wasn’t sure if that’s a normal but if you
could just explain if there is an exit interview, what would
be involved?
A. If there were any problems I found I would
discuss that with them or if I had intended on issuing
some sort of notice of violation I would discuss that with
them. If I didn’t intend on it, I would say okay, that’s it.
toi: Q. You said sometimes you do a file review. What
‘would that involve?
318
A. It is a little — I can answer it more too to the
extent how I do it now verses. I mean this is of course
many years ago.
Q. Right.
A. Obviously much more paperwork involved in
what I. do now.
Q. How about when you were an Environmental
Engineer I? What did you do?
A. The only thing I can, with utility perhaps looking
at the — discussing, have some discussion of their malfunc-
tion abatement plan and coal sampling or whatever they
use to show compliance with say sulphur standards or
something like that.
Q. Back to when you’re walking through the facility,
if a unit is shut down, how would that affect your [13]
inspection?
A. I would say at that time if it was shut down
pretty much moved on to the operating units.
Q. As part of this inspection, did you ever back when
you were an Environmental Engineer I, did you ever ask
about all the work that had been done to the facility since
last inspection?
MR. COTTINGHAM: Object to the form.
THE WITNESS: No.
Q. Would sources ever provide you documentation of
all the work that had been performed at the facility since
last inspection when you were an Environmental Engineer
I?
319
A. No.
Q. Mr. Parkin, I am now handing you what I have
marked as Plaintiff’s Exhibit 694. You can take your time
to look it over and let me know when you're ready for
questioning.
A. Okay.
Q. First of all, could you identify for the record what
is Exhibit 694?
A. It is an inspection report at Duke Power Cliffside
steam station for the inspection that took place on August
26, 1992.
Q. Were you present for this inspection?
A. Yes.
Q. Did you write this inspection report?
[14] A. Yes, I did.
Q. Do you remember this inspection?
A. Specifically, no, I don’t remember, it.
Q. Besides Cliffside were there any other Duke
facilities that you inspected?
A. No.
Q. During what time frame have you inspected
Cliffside?
A. This may have been the — this I believe was the —
may have been my first compliance inspection at the
facility. I don’t know that for sure but this would have
320
been in the neighborhood of when it would have been, and
I continue to inspect them today.
Q. When you were just identifying this you called it
a compliance inspection. Why did you use that terminol-
ogy?
A. Maybe because I think of things in terms of the
new EPA compliance monitoring strategy. I don’t know. We
do inspections to evaluate compliance. I guess that’s why.
Q. Compliance with what?
A. Their air permit applicable regulations.
Q. When you inspected Cliffside around this time
frame, do you remember seeing work being done to the
units?
(Off-the-record discussion.)
(Interruption for technical problems).
THE WITNESS: Are we preceding at this point?
{15) MR. BERNSTEIN: Do you remember the
question?
THE WITNESS: Yes, about work being done. I
don’t specifically remember August 26, but during this
time period I recall going there and work was being done
in the areas of units 1 through 4.
Q. Did you have any discussions about this work?
A. I don’t recall.
Q. Did you ever discuss PSD with anybody at Duke
about this?
321
A. No, I did not.
Q. Besides seeing the work, did you gain any other
information about what work was being done?
A. There was no detail. My understanding that they
were, the units had been out of service and they were
doing this work in preparation to bring them back online.
Q. How did you get that understanding?
A. Im sure there was at least some conversation as
to, you know, generally as to what was going on. But as far
as specifics, I couldn't tell you.
Q. Did you ever do an evaluation for possible
changes in capacity due to the work that was being done?
A. No, I did not.
Q. How about a — did you ever to do an evaluation
for changes in efficiency?
A. No.
[16] Q. For possible changes in capacity utilization?
A. No.
Q. Did you ever ask them how much the work they
were doing cost?
A. No, I did not.
Q. Did you ever ask them how frequent they have to
replace the components that they were replacing, if you
saw components being replaced?
A. No, I did not.
Q. Did you ever discuss the nature of the work?
322
Not in any detail.
Did you discuss the extent of the work?
No.
Oo > & >
Did you discuss the purpose of the work?
A. Only to the extent I knew it was part of bringing
these units back online.
Q. Did you evaluate the work you saw for PSD
applicability?
A. No.
Q. Okay, focusing on Exhibit 694, do you see Number
6, the last sentence at the bottom of that exhibit?
A. Yes.
Q. What does that sentence mean in relation to PSD
regulations?
A. Nothing. That regulation is not addressed in that.
{17} Q. Are other regulations addressed in that
statement?
A. Pardon?
Q. Are other regulations addressed in that?
A. Yeah, the ones specifically listed on there. But
that was, like I said, that’s to the best of my knowledge
they were in compliance and I wouldn’t call it a definitive
statement of compliance either, at least based — | did not
see anything on the inspection that would lead me to
believe they were out of compliance anyway with those
regulations listed.
323
Q. But this wasn’t even meant to be a definitive
statement that they were in compliance with these regula-
tions?
MR. COTTINGHAM: Object to the form.
BY MS. BEHLES:
Q. Is that what you just stated?
A. I cannot just by looking at it definitively say they
were in compliance.
Q. And when you say in compliance, you mean with
the regulations listed on Number 6; is that right?
A. That’s correct, with the possible exception of say
the physical regulation which I can look at and make an
evaluation of.
Q. Can you look at a boiler and make a PSD evalua-
tion as an inspector?
[18] MR. COTTINGHAM: Object to the form.
THE WITNESS: No.
Q. Why not?
A. It is just there is not enough information to. I
mean, it requires a lot of, I would say, document review of
files and documents and things like that to make a PSD
evaluation.
Q. Earlier you mentioned that you inspect a large
number of industries; is that right?
A. Yes, that’s correct.
324
Q. Is that true for other inspectors?
A. Yes.
/~x * *
_ {28)Q. Have you always had a good relationship with
the people at Cliffside?
A. Yes.
Q. Who do you report to at your regional office?
A. Paul Mueller.
Q. Is he the regional supervisor?
A. Yes, that’s correct.
Q. Who did you report to in 1992 when you did this
first inspection that’s marked indicated by Exhibit 694?
A. That would also be Paul Mueller.
Q. Has he been the regional supervisor the entire
time?
A. Yes.
Q. When you go to a facility like Cliffside to do an
inspection, do you generally show up without any prior
contact?
A. At that time, yes.
Q. And by “that time” you mean of the ’92, ’93 time
frame?
A. Yes.
Q. And do you now more frequently notify them
you're coming?
325
A. More frequently now. That’s across the board just
[29] records review we do and we need appropriate per-
sonnel there to be able to do it.
Q. The main reason you started notifying facilities
that you’re coming is so that they can get all the records
together you want to look at and have somebody there to
help you go through them? ’
A. Yes, exactly.
Q. When you do an inspection, do they make all the
records available to you that you want to look at?
A. Yes.
Q. If you called Cliffside in advance or show up by
surprise and say I want to look at all the records on this
subject they make them available to you?
A. Yes.
MS. BEHLES: Object to form.
Q. You were asking questions or answering ques-
tions of the lawyer about how to evaluate PSD applicabil-
ity, and you said it would take a lot of documents review
but the documents you would review, and if you wanted to
and needed to do that, would be documents that they
would have to make available to you?
MS. BEHLES: Object to form.
Q. Correct?
A. Yes.
Q. When you go through your inspection, and let’s
just [30] focus now on Cliffside, the Duke Energy facility
326
as opposed to something general. Let’s be specific about
that. When you go through those and do inspections there,
if boilers are shut down that’s actually a time when you
can go inside the boiler if you wanted to do that, isn’t it?
A. Icouldn’t answer that question.
Q. Well, you don’t go inside them if they are operat-
ing?
A. Oh, certainly no.
Q. So if there was any time you wanted to go inside
them it would have to be when they were shut down?
A. It would be when they were shut down, but whole
set of issues there.
Q. You're just saying — are you saying you've never
actually done that?
A. No, I have not.
Q. Are you saying there are a whole set of issues? Is
there any reason why you couldn't have done that if that’s
what you, wanted to do?
A. There may be as far as confined space entry and
that kind of thing. I don’t know what sort of OSHA regula-
tions might apply in that scenario.
Q. But assuming you got all the correct safety
training and had the right equipment and had somebody
there to guide you, you don’t know of any reason why you
couldn’t (31) go?
A. Conceivably I could.
MS. BEHLES: Object to form.
327
Q. You said in the 92, 93 time frame some of the
boilers at Cliffside were shut down. Do you remember
which ones they were?
A. Couldn't tell you specifically unless it is men-
tioned in the record.
Q. This first exhibit says Units 3 and 4 went offline,
and I’m reading paragraph 2 of Exhibit 694, says Units 3
and 4 went offline and remained offline at the time of the
inspection. And you said you saw the work being done on
some of the units at some time, and I just want to be more
specific. Did you see work being done, at Units 3 and 4 at
the time of this inspection in 1992?
A. Do not recall.
Q. But you do recall see being work done on those
units?
A. Yes, there are four boilers right there together
and there was work being done in that area. I can’t recall
specifically which boilers were being worked on when I
was there.
Q. Just so we will all understand, Cliffside 5 is a
large unit on one side of the river, Cliffside 1 through 4 are
smaller units that are on the opposite side of the river?
[32] A. I think they are on the same side of the river,
but -
Q. I thought they were on different sides.
A. I would say different sides of the large coal
storage pile there.
328
Q. Okay, close enough. So you can go to Cliffside 5
and then takes a little time to get over to the other?
A. Yes.
Q. Cliffside 1 through 4. But you said that you knew
that work was being done on Cliffside Units 1 through 4 in
the ’92 ’93, 94 time frame when you were going —
A. Yes.
Q. And there was nothing to keep you from going to
look and see exactly what that work was, was there?
MS. BEHLES: Object to form.
THE WITNESS: No.
Q. In fact you saw the work being done, didn’t you?
A. That’s correct.
Q. Did you see parts of the boiler disassembled and
large components being replaced in the boilers?
A. I could recall seeing parts laying around. I don’t
remember specifically anything else other than there was,
there was quite a bit of activity there.
Q. And this is on Units I through 4?
A. Yeah, some of them. As I mentioned I don’t [33]
specifically remember which ones.
Q. If you saw something that you thought might
trigger PSD, then your normal process was to, I think you
said, to follow up or investigate it further; is that right?
A. That’s correct.
329
Q. And if you actually found something that you
thought constituted a violation, you could issue a notice of
violation or an NOV, couldn't you?
MS. BEHLES: Object to form.
A. That’s correct.
Q. In fact you issued an NOV at Cliffside, haven't
A. I don’t recall if I have or not.
Q. But, you know that’s something you could do?
A. Yes.
Q. Now when you prepare your inspection reports,
has Mr. Mueller reviewed the inspection reports?
A. He’s reviewed some of them. I would not know if
he reviewed these reports specifically.
* - *
[36] Q. So following up what we said earlier, when
‘new people came on board at Cliffside for Duke Energy
you would go and get to know them?
A. Yes.
Q. And then at the same time you inspected Units 1
through 4 it looks like. Just looking at the last sentence of
that paragraph?
A. Yes.
Q. Now turn to the second page of that exhibit and
there’s a paragraph which starts near the top right after
the list of people of Kim Kelley, Mike Hager, Marty Beam
330
and Sam Sojourner. It says they are expecting to begin
firing low Nox burners in Units 3 and 4 in the next few
months. Do you see that paragraph?
A. Yes.
Q. And that paragraph ends by saying, “A three
week outage is scheduled for Unit 5 during 1997 and
eleven week outage is scheduled for Unit 5 in 2001.” Do
you remember a discussion about what work was going to
occur during that time?
A. No, I do not.
Q. And then it says, “Units 1 through 4 we're essen-
tially rebuilt before they were brought online over the past
five years.” That appears to be information they gave you
at the time of this inspection if you didn’t know it [37]
already?
A. Yeah. I cannot recall.
Q. It was either something that Duke Energy people
told you or something you learned from seeing the work or
something you learned from looking at the documents or
some combination of that? Correct?
A. I think that’s a fair assessment.
Q. As of November 12, 1996, if you didn’t know
earlier you knew then, that Units 1 through 4 had essen-
tially been rebuilt over the past five years, correct?
A. Yes.
MS. BEHLES: Object to form.
331
Q. Look at the next inspection report. It is March 12,
1997 is the next one in the stack. Do you see that? Has
Bates numbers 11795?
A. Yes, I see that.
Q. Let me just direct your attention to the first
paragraph. This time it says, “On March 12, 1997 Troy
Harrison and I visited the Duke Power plant to observe a
source test for particulate emissions from Unit Number 5.”
Who was Troy Harrison?
A. Troy Harrison is, at least at that time, was an
Environmental Technician 5. He was responsible for doing
small source inspections and complaint investigations in
Rutherford County.
* * ~
[41] Q. Did anyone at EPA ever communicate with
you about any interest or concern about what had occurred
or was occurring at Duke’s facility at Cliffside?
A. Not with me.
Q. Look at the last inspection report that’s dated
July 29, 1999 that ends in Bates numbers 11788. The
conclusion of that report in paragraph 6 is, and this is
talking about the Cliffside facility, the facility appeared to
be operating in compliance with applicable requirements.
Correct?
MS. BEHLES: Object to form.
BY MR. COTTINGHAM:
| Q. That's what you wrote?
A. That’s what the sentence states.
552
MR. COTTINGHAM: Thank you. That's all the
questions I have.
MS. BEHLES: Okay. I just have a few more
questions for you.
RE-EXAMINATION
BY MS. BEHLES:
Q. When you said you saw work being done at
Cliffside, did you say you saw — how did you know work
was being done at Cliffside?
A. There were crews of people. The significant [42]
project I guess at that time there wasn’t really as a formal
a process for initiating the inspection as it become later
when I met with the corporate folks and all that. There
were times when I showed up to Units 1 through 4 and
went to — I didn’t go through the reception process in this
case. | went and tried first would try to locate Steve Porter
in his office; and there are times when I went out to the
area where all this work was going on to try and find or
see if I could finds someone who knew where he was. And
so during this process I was out where Units 1 through 4
were and could see the work going on.
Q. Can you identify all the parts of a boiler by
looking at a boiler?
A. Not all the parts but some of the parts, yes.
Q. Are you required to go into boilers that are not,
that are shut down?
MR. COTTINGHAM: Object to the form.
THE WITNESS: No.
333
Q. Are you encouraged to go into boilers that are
shut down?
MR. COTTINGHAM: Object to the form.
THE WITNESS: We are basically told not to go
into confined spaces.
Q. Referring back to what Mr. Cottingham has
identified as Exhibit 901. Can I first have you turn to —
[43] A. 901?
Q. You got it okay?
A. I got it.
Q. To the last page of that exhibit. It ends in the
Bates number on the corner is 1790.
A. I got it.
Q. Did you mean for that sentence to be a PSD
applicability determination?
MR. COTTINGHAM: Object to the form.
THE WITNESS: When I write that sentence in
my mind I’m referring to the list of applicable regulations
that are in the air permit.
5; @. When you write the sentence why do you include
the word “appeared”?
A. As I mentioned before, in the business of air
quality, without doing rather extensive and complex
testing you really can’t make definitive statements as to
whether a facility is in compliance. So I would not write
and guarantee that everything was in compliance just
from looking at it.
334
Q. When you were discussing the file review that
you do in inspections, do you perform that file review as
part of inspections to determine if boiler rehabilitation
work triggers PSD?
MR. COTTINGHAM: Object to the form.
[44] THE WITNESS: No.
Q. And why not?
—_—_—
A. This is the context of now or in 1992 or 93?
Q. First let’s start with 1992-93 and then we can
discuss now.
A. One thing, there’s probably not much in the files
on what was done. And I would say as far as really to
modifications at the facility are normally reviewed in the
context of an air permit application. And at that time I
guess I just didn’t think to inquire more about what was
going on.
Q. Do you know whether or not if you — well, strike
that. And what do you do now? When we were talking the
file review. Is it any different now?
A. In what way?
Q. Do you perform that file review as the file review
that you perform as part of inspections, do you do that to
determine if boiler rehabilitation work triggers PSD?
MR. COTTINGHAM: Object to the form.
THE WITNESS: I would say now if I was
looking at a similar or project for somebody that was
rebuilding the first, first thing that would pop into my
head is get information on how much it was costing and
335
whether emissions, there would be the bottlenecking quote
in any way or something of that nature.
[45] Q. How long has that been your understanding
or your practice?
A. I couldn’t state specifically. | was probably more
regulatorally aware of the NSPS requirements as far as
reconstruction if I recall around ‘94 or so. That’s just
guessing though.
Q. How about for PSD requirements? Would you
perform a file review as part of your inspection to deter-
mine if that boiler work triggered PSD?
A. As part -
MR. COTTINGHAM: Objection to form.
THE WITNESS: As part of inspection, no.
Q. Would you do that currently?
MR. COTTINGHAM: Object to the form.
THE WITNESS: That’s a difficult question. It
would have to be the scenario. I might.
Q. If I could have you look at Exhibit 694, the first
page of Exhibit 901?
A. Which one are we talking again? 8-26-92.
Q. Yes.
A. Okay.
Q. And in reference to paragraph number 5, was it
Duke's duty or obligation to tell about that violation?
MR. COTTINGHAM: Object to the form.
336
THE WITNESS: In essence, yes, because they
are [46] required to report their annual average capacities,
which is reviewed under in the stationery source compli-
ance branch as reports.
Q. Is it the source’s duties to go to the state for a
PSD applicability determination?
MR. COTTINGHAM: Object to the form.
THE WITNESS: It is a difficult question. It
would be my opinion if they suspect there is a PSD issue it
is their duty to come to the state.
Q. Have you ever given any indication to Duke that
the boiler work that you saw did not trigger PSD?
MR. COTTINGHAM: Object to the form.
A. No.
MS. BEHLES: I think that’s all. Thank, you for
your time.
337
RE-EXAMINATION
BY MR. COTTINGHAM:
Q. Mr. Parkin, you never went back after you came
to understand that you might look at cost and other
factors in connection with work that had been performed,
you never went back and tried to collect that information
on Cliffside 1 through 4, did you?
A. No, I did not.
MR. COTTINGHAM: Thank you.
* * *
338
EXHIBIT 141
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,
v.
)
)
)
)
ENVIRONMENTAL DEFENSE, ?
NORTH CAROLINA SIERRA iO?
CLUB, NORTH CAROLINA )
PUBLIC INTEREST )
RESEARCH GROUP
Plaintiff-Intervenors )
Vv. )
)
)
)
DUKE ENERGY CORPORATION
Defendant.
DEPOSITION OF MICHAEL LANDIS
(Taken on behalf of the Defendant)
Raleigh, North Carolina
December 11, 2002
* * o
{15} Q. Did the people you had contact with at Duke
Energy during all the years you inspected there, did they
always seem interested and sincerely interested in comply-
ing with environmental] regulations and rules?
MS. BEHLES: Object to form.
THE WITNESS: To the best I could tell, yes.
Like I say, I never have any problem getting the informa-
tion I needed. And generally the information I needed was
339
for compliance issues anyway, and it was always made
available.
902 and those are inspection reports for the Riverbend
facility that you prepared?
A. Okay.
Okay, yeah, all these except for the things by Therman
Horne are mine, yes, that’s correct.
Q. And they start —~ the first one is dated August 16,
1978?
A. That’s correct.
Q. And the last one is dated, looks like, February 20,
1991.
A. Yes, it appears to be 1991, yes.
Q. Let me ask you to look at the one that’s dated —
we will start here at June 5, 1989?
A. Do you have a page?
Q. It has a Bates stamp number of 7129 at the
bottom and since it is a 1989 it is near the back.
A. What's the date of the thing again?
Q. June 5, 1989. You signed it on June 14?
A. June 5, 1989, yes, I’m at the one.
BEST AVAILABLE COPY
340
Q. That’s an inspection that you conducted on June
5, 1989 at the Riverbend facility?
A. Yes, sir.
Q. It says, “This facility is an electricity generating
plant. There are four boilers at the plants, 6, 7, 8 and 9.” Is
that the way you remember Riverbend?
A. Yes, sir.
[18] Q. And then you say, “only boiler number 8 was
in operation during this inspection.”
A. Uh-hum.
Q. “The other three boilers are in the plant moderni-
zation program.”
A. Yes, sir.
Q. Tell us what you saw or knew about the Duke
Energy plant modernization program?
A. I really don’t recall what I saw. I just really don’t
remember a whole lot about ~ my understanding of the
plant modernization program was that Duke Power was to
increase, was trying to increase the efficiency of the
boilers. And my understanding of that, whether incorrect
or correct, my understanding of that was to try to get more
generation capacity out of the same amount of coal. And
also my understanding was that there would be no in-
crease in BTU heat input. It was just a matter of however
you get more power, I don’t know. But that was my under-
standing of the plant modernization program.
341
Q. Did you have an understanding that that pro-
gram had been approved in some way by headquarters in
Raleigh?
A. Well, I hadn’t really thought about that until
during the interviews Keith mentioned that there was
headquarters that said that was, headquarters being down
here in Raleigh, and the division or the department had
said [19] that that was okay, and that said it was okay to
do that. That’s about all I know about that memo. I don’t
recall seeing the memo specifically. And so and I’m sure
Keith, and I don’t recall Keith ever saying it but I’m sure
he did at some time, that said it was okay. And I never
gave it any more thought.
Q. Keith Overcash was your supervisor at the time
of this inspection?
A. Yes, sir. He was regional supervisor at the time
yes, sir.
Q. And now is Director of Division of Air Quality?
A. Yes, sir.
Q. When you saw the plant modernization work at
the three boilers, did you see activity and see tubes and
parts on the ground or around or being installed?
A. Yes. There was a lot of stuff on the ground. I think
in part 2 I think they were trying to get rid of asbestos at
the same time. It was kind of concurrent sort of thing.
There was a lot of stuff laying around on the floors, tubes
and things. But like I say, once in my impression was it
was okay to do that, I really didn’t pay a lot of attention to
it. It wasn’t something | needed to be concerned about.
342
[21] Q. But at least appears from these inspection
reports that Mr. Cheng’s the one who did the inspections
at Riverbend during that time?
A. Like I say, all I can tell you, that’s his signature
and at least that’s the way I recall his signature.
Q. And he’s dated each inspection beside his signa-
ture?
A. Yes.
Q. Let me just ask you to look at the first one which
is November 24, 1986 in the first paragraph. It says,
“None of the units of this power plant were in operation
during my visit. Unit Number 6 and 7 had been put into
the plant modernization project in 1989.” Is that what he
wrote then?
A. That’s what it says, yes, sir.
Q. And if you look at the very next report, the one
dated May 4, 1987, he dated it when he signed it May 13,
1987. Again in paragraph 1 it says, “Units Number 6 and 7
have been put into the plant modernization plan until
1991 and 1992.”
A. That’s what it says.
Q. The next report, which is dated looks like June 5,
1987 is when he signed it. In the second paragraph he
says, (22) “Units 6 and 7 are currently in the plant mod-
ernization program and not expected to be in operation
until 1991 and 1992.”
A. That’s what it says.
| 343
Q. And the next report, which looks like February
25, 1988, he says there, “Units 4, 6 and 7 have been put
into the plant modernization plan until 1991 and 1992.”
A. That’s what it says.
Q. And then the final report by Mr. Cheng dated
October 12, 1988 says “Units 4, 5 and 7 have been put into
the plant modernization plan until 1991, ’92.”
A. That's what it says.
Q. Look also just one more minute at his reports. All
of them have a paragraph that conclude with a sentence
that says either the facility is considered to be in compli-
ance with the applicable regulations or it says in some
cases “PSD NSR, and NESHAP do not apply.”
MS. BEHLES: Object to the form.
THE WITNESS: That’s what it says.
Q. You also inspected at the Bucks station | think we
said?
A. Yes, sir.
baad ~ -
[33] EXAMINATION
BY MS. BEHLES:
Q. Mr. Landis, my name is Deborah Behles. I am
hear representing the Department of Justice. I have a few
. follow up questions for you this morning.
A. Yes, ma’am.
Q. When you would go on inspections of Duke
facilities, did you ever talk about PSD issues?
344
A. Not that I recall, no, ma’am.
Q. Did Duke ever talk about PSD issues on these
inspections?
A. Not that I recall, no, ma’am.
Q. Do you know whether any other inspectors ever
discussed PSD issues on their inspections?
A. No, I don’t know whether they did or not.
Q. Do you know what happened on inspections that
you did not attend such as the ones by — the ones that we
have that you've seen in these exhibits?
A. No, I wouldn’t know. The only thing I would know
is what was in the report itself. That’s the only thing I
could tel] you because it is generally what you wrote your
report from, the notes that you took during the inspection
itself.
Q. Did you ever do any emission calculations when
you went on an inspection?
(34) A. No.
Q. Did you ever inquire about the cost of the work
that was being done when you went on an inspection?
A. No, I did not. I don’t recall doing that. I may have
asked a question but I just don’t recall that.
Q. Did you ever ask about the frequency of the
components, of how frequent the components were re-
placed in the boiler that were being worked on?
A. No, ma’am, I didn’t.
345
Q. Did you ever ask about the nature of the work in
your inspections?
A. I may have talked about it to like during the stack
test, you’re standing up on the roof and just watching the
test go on and you just talk; and I may have talked with
plant people about what they were doing and that sort of
thing. But that wus just kind of general conversation with
maybe one of the welders or something, just to have
something to talk about. Other than that, that’s about all I
remember.
Q. Did you ever do any netting analysis on any of
these inspections?
A. No, ma’am, I did not.
Q. Earlier you mentioned that on these inspections
your contact was generally the precipitator, is a precipita-
tor engineer?
A. He would have been one of the contacts, one of the
[35] contacts. Generally when we did an inspection we
would say hello to the plant manager, and then one of the
plant engineers, and generally the engineer that was
assigned to supervise the operation of the precipitators,
would go along with us because we eventually wind up
there anyway. Rather than trying to run him down 30
minutes after we started, it is easier to take him with us.
And that’s generally - and then when we have a closing
interview and let the plant manager know if we observed
any problems and what those problems might have been.
And if not, we say everything looked like it was okay to us.
That’s kind of a quick overview of an inspection.
Q. On the inspections that you went on that Mr.
Cottingham showed you in these exhibits up in front of
346
you, was the focus of these inspections to look at particu-
late matter related issues?
MR. COTTINGHAM: Object to the form.
THE WITNESS: Well, like I said, a lot of these
are stack test observations. But generally the inspections,
whenever we would do inspection, generally yes, I would
say that it was related to particulate, because ESP doesn’t
control sulphur dioxide or gaseous emissions. And that’s
what we looked at in general was to make sure the opera-
tion of the precipitators was within what they should have
been. And we looked at visible emissions, too, and that
again is in [36] general of particulate emissions.
Q. You mentioned that you saw some work being
done at some of the inspections that you went on. Did you
know the specifics of all the work that was being done?
A. No, I did not know the specifics, un-unh.
Q. When you're on an inspection, can you determine
whether a facility is in compliance with the visible emis-
sions limit by looking at the stack?
A. Yes, sir. Yes, ma’am, I’m sorry. I apologize. Yes,
ma’am. I’m certified to read visible emissions, and I was
during the time that I was performing these inspections as
well.
Q. Can you determine if a boiler is in compliance
with PSD by looking at the boiler?
A. By — can you define that a little more? Do you
mean by just — I really don’t understand what you mean. If
you could define that a little better for me, appreciate it.
347
Q. By just looking at the boiler and the work that is
being done, can you determine on an inspection the PSD is
triggered?
A. No.
MR. COTTINGHAM: Object to the form.
A. lam sorry. I should have waited. No, you can't.
Q. And why not?
A. PSD is not a regulation that is easy to interpret.
[37] You got to do some calculations and that sort of stuff.
You got to do a lot of stuff to determine generally whether
a facility is subject to PSD or not. And during inspections
we didn’t do calculations and those kinds of things. During
an inspection in general, just from the inspection and
looking at a boiler, you couldn't say it is subject to PSD or
not.
Q. Earlier when you were talking to Mr. Cottingham
you mentioned that you had an understanding of the PMP
program, that they were trying to use the same amount of
coal to increase the efficiency?
A. That's just my impression. If someone says they
are trying to increase the efficiency of a boiler or whatever,
I Just kind of maybe made an assumption that that’s what
they were trying to do. I never really talked about it. But
it” just seemed like you’re increasing the efficiency of
something that seems like a good idea at least from the
. ace.
ss ed
Q. And where did you get that understanding?
beaioi “A. Oh, just, you know, in talking with the plant
‘people during inspections and asking a few questions
2.
348
about the PMP program, there was the understanding I
got.
Q. Earlier you also mentioned that you thought
Keith Overcash had okayed —
A. No, it wasn’t Keith. It was | think the Director of
Air Quality probably had some input. And this is using
{38] Keith’s words from the interviews that we had previ-
ously. I didn’t directly recall that until he started mention-
ing that and | thought, oh, yeah, that is right. That the
department secretary, I don’t remember who that was,
said that it was okay. And so, like I say, those guys say it’s
okay, it is fine with me.
Q. What interviews are you referring to?
A. The interviews that we had, | had with — I apolo-
gize. I've forgotten your name.
MR. COTTINGHAM: ‘Tom Cottingham.
THE WITNESS: And the other fellow that was
on at the Winston-Salem office. That was during the
interview and Keith mentioned, Keith was there and he
mentioned that particular memo from, | think it is, Paul
Williams. I don’t remember. But that’s the one he men-
tioned. And I thought, yeah, we wouldn't have said - we
would probably questioned it a lot more if we had not had
something like that from the departments. And that would
have made sense. If you go do an inspection and something
is going on like that, you’re going to ask a lot of questions.
I don’t ever recall asking any questions about why are you
doing this, that sort of thing. When he said that was —
yeah, that made a lot of sense that I didn’t ask any ques-
tions about what was going on and why they were doing
it until — that’s the reason I didn’t ask those kind of
349
questions during inspection. Because I would [39] ask
those kinds of questions, I would have asked those kinds of
questions if something hadn’t been cleared or I felt like it
was okay.
Q. If I could show you what’s been previously
marked as Exhibit Number 6. Take your time to look
through it and let me know when you're ready for some
questions on that exhibit. I just want to note for the
record, the copy that I handed him actually had a notation
that says “Evans” on the bottom left-head corner. And that
was written by my co-counsel. Not part of the document.
A. Okay. I've read the, I guess it is a, letter to Mr.
Helms from Duke Power.
Q. Okay. And can you read the second letter as well?
A. Qh, okay. I’m sorry.
Q. Oh, no.
A. Okay.
Q. Is the correspondence in Exhibit Number 6 the
correspondence you were referring to that was discussed
during this interview you had with —
A. Well, Keith mentioned this memo. I don’t ever
recall seeing it. It is kind of one of those things that
headquarters says it is okay, and Keith would say it is
okay. And I don’t recall seeing the memos specifically. I
really don’t.
_ Q. But is this Exhibit Number 6 the memo that
_ Keith [40] was referring to?
MR. COTTINGHAM: Object to the form.
350
THE WITNESS: I would assume it is. That’s all
I can tell you. I would assume that it is.
Q. Do you know whether Duke ever informed North
Carolina about any work being done to the units during
the PMP projects after this letter?
MR. COTTINGHAM: Object to the form.
THE WITNESS: I don’t know. I really don't.
Q. Do you know whether Ying Pong Cheng ever did a
PSD evaluation when he went on inspections?
MR. COTTINGHAM: Object to the form.
THE WITNESS: I am sorry.
MR. COTTINGHAM: - That’s okay, go ahead.
THE WITNESS: I don’t know. You asked if we
did one during an inspection?
Q. Uh-hum.
A. Like I said, PSD is too complicated to sit down
and do that during an inspection. You have to sit down and
do a lot of calculations and that sort of stuff and look at a
lot of information to make the determination on PSD.
That’s not something that we would do in general during
an inspection, just too complicated.
MS. BEHLES: I have no further questions.
351
RE-EXAMINATION
(41) BY MR. COTTINGHAM:
Q. Mr. Landis, if you saw something during an
inspection which you thought might trigger PSD, you
would then investigate that further outside the inspection
period but you would go back to your office and do other
things to investigate that further?
A. Well, even during an inspection I don’t know that
just — what we generally look for is stuff that’s not in the
permit; and if it is not in the permit, we ask questions
about it and we investigate further. And it is really diffi-
cult to say when you go out and do an inspection that
might be a PSD probiem. You say, well, that’s unusual and
different, but you can’t say during the inspection whether
PSD applies or not; and you would have to go back and
gather more information to make the determination. Just
can’t do that.
Q. And that was my point. If you see something that
raises a question about whether —
A. You do further investigation, that’s correct. Yes,
sir.
Q. And if you wanted to, with the Duke Energy
facilities in particular, if you wanted to find out informa-
tion like the cost, frequency, nature, extent and purpose of
work that you saw going on, there were documents that
you could get from Duke Energy and people you could talk
{42] to at Duke Energy who would give you that informa-
tion, correct?
MS. BEHLES: Object to form.
Q. If that’s what you wanted to find out?
352
MS. BEHLES: Objection.
THE WITNESS: Yes. My experience has been if
we need more information, we ask for it. And most compa-
nies are generally forthcoming in giving us the informa-
tion we need so we can make a proper determination. And
we always — if we don’t get enough information the first
time, we keep asking until we get the right amount of
information to make that determination. We don’t want to
do a PSD applicability determination without all the
information. You got to have all the information to be able
to do it right.
Q. That’s right. Whenever you asked for information
from Duke Energy for purpose, they have always been
forthcoming and given it to you?
A. Yes, sir, they have.
MS. BEHLES: I was going to object to form.
THE WITNESS: But yes, they have.
MR. COTTINGHAM: That’s all the questions I
have.
353
EXHIBIT 142
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,
v.
ENVIRONMENTAL DEFENSE, NORTH CAROLINA
SIERRA CLUB, NORTH CAROLINA PUBLIC
INTEREST RESEARCH GROUP
Plaintiff-Intervenors
v.
DUKE ENERGY CORPORATION
Defendant.
A
DEPOSITION OF THOMAS McMANUS
(Taken on behalf of the Defendant)
Raleigh, North Carolina
December 11, 2002
* x *
[7] Q. So you've been in Air Quality since 91 or 92?
A. Yes, sir, somewhere in that neighborhood.
Q. Have you been conducting inspections during that
entire time you’ve been in Air Quality?
A. Yes, sir.
354
Q. And that includes compliance inspections that
you've conducted at the Duke facilities at the Allen, Buck,
Marshal and Riverbend?
A. Yes, sir, it does.
Q. I’m going to ask you about those inspections in a
minute, but first let’s talk more generally and just focusing
on those Duke Power plants. Do you get to know the Duke
employees in the course of doing those inspections?
A. Yes, sir.
Q. And get to know people who supervise the em-
ployees [8] at the plants?
A. Yes, sir.
Q. Tell us just in your own words what appears to
you to be the attitude of the Duke employees towards
complying with environmental rules and regulations.
A. It’s been my experience that the environmental
coordinators who are located at the site who is responsible
for all environmental programs at each plant as well as
their supervisor and also their support group have been
very open and forthcoming and not only accommodating
our . spections but providing answers or information that
we had regarding any operations or regarding to air
permit at that facility.
Q. Have they always seemed seriously interested in
understanding what they had to do to comply with the
law?
A. Yes, sir.
MS. BEHLES: Objection to form.
355
Q. And seriously interested in trying to comply?
MS. BEHLES: Objection to form.
THE WITNESS: Yes.
Q. Have you had occasions when you had to ask
them for more information about something or try to get
more documents or just more information orally from
them?
A. Yes, sir.
Q. Have they always provided you whatever docu-
ments and information you asked for?
{9} A. Yes, sir.
Q. Let me ask you something more specific. When
you’ve seen work being performed at Duke facilities and
let’s talk about work that’s maintenance, repair or re-
placement work, if you wanted more information about the
nature or extent or purpose or frequency or cost of that
work, is that something that would be available to you
from Duke Energy that you could get?
MS. BEHLES: Objection to form.
THE WITNESS: Yes, sir.
Q. I’m going to show you what we marked as Exhibit
909, Mr. McManus. I want you to look at that for a minute
and see if those appear to be inspection reports that you
signed in connection with inspections at the Duke Power
Allen plant starting in 1994 and going through April 19,
2000?
A. I’ve had this cold a while. These appear to be
copies of the inspections and reports that I prepared.
356
Q. Let me ask you to just look at one first that’s
dated July 14, 1995. I think it is the third one in the stack.
You can take that clip off if it helps you. Is that the July
14, 1995?
A. Yes, sir.
Q. There’s a — okay, let me look at that because there
are two that date. Look at the next one. There’s another
one that has the same date. Is that it?
{10]) A. Yes, sir, this one.
Q. That’s right. That’s the one I want to ask you
about. I want to focus on the last paragraph of that report.
It says, “It should be noted that during this site visit Mr.
Don Scroggs of Duke Power company accompanied the
writer to observe an unpermitted 110 above ground num-
ber 2 oil storage tank.” Do you remember that event?
A. Yes, sir.
Q. Tell us what happened there.
A. I remember this issue because we was looking at
NSPS subpart KB applicability at that time and we were
discussing this issue to determine if it was applicable.
Q. And was this a storage tank that you saw that -
to which NSPS might apply?
A. Yes, sir.
Q. And did Duke Energy cooperate fully with you in
trying to investigate that issue?
A. Yes, sir. They provided the information that I
requested in order to make that determination.
357
Q. And did you eventually make a determination
about whether NSPS applied?
A. Yes, sir, best of my knowledge we did make that
determination. I don’t remember exactly if it was applica-
ble or not, but we did make that determination because I
do recall reviewing that and discussing it at that time with
my [11) regional supervisor.
Q. How did this above ground storage tank come to
your attention?
A. IfI recall correctly, I believe Duke Power brought
it to our attention about whether I think through an
internal audit, if I recall, some of their own internal
environmental audits, the question came up: Is this
applicable or not? They brought it to our attention. When I
performed our inspection, I went and ahead and looked at
it closely and we asked for the information acquired to
make that determination.
Q. Is that an example of Duke Power having a
concern or question about whether NSPS or regulation
applied to something they had at their facility or were
doing »: their facility and they would raise that with you?
MS. BEHLES: Objection to form.
THE WITNESS: It’s been my experience not
only this inspection but through my dealings with Duke
Power, whether there's been a situation that may lead to a
‘notice of violation or whether it’s just been issues that
need clarification, that they've always been forthcoming
with whatever I have asked for.
* * *
358
{13} Q. It says here, “Bill Kissel of MRODAQ s*com-
panied me on this inspection.” Tell us what M?©DAQ
stands for?
A. Mooresville Regional Office, Division of Air
Quality.
Q. Same type of position you held?
A. Yes, sir. He was an engineer.
Q. And he accompanied the EPA people about a
month or six weeks earlier when they went to Allen?
A. Yes, sir, he did.
Q. The report is six pages long. Tell us what you
concluded at the end about the compliance status?
MS. BEHLES: Objection to form.
THE WITNESS: Okay. When we perform
inspections, whether it is a Title 5, Duke Power or any
facility that we have a permit on, after we inspect and
review records and everything is considered, our bottom
statement is, determines whether we feel like based upon
what we reviewed and what we inspected at that time it
appeared to be in compliance with all the applicable air
quality regulations.
* ~ *
{18} Q. This, in looking at paragraph 3 where it says
“Purpose, purpose of inspection/facility, general.” “The
purpose of this visit was to conduct a routine air quality
compliance inspection.”
A. Yes, sir.
359
Q. Is that one of the, like the others, a general
inspection that you conduct?
A. Yes, sir. These are our, like it states there, routine
air quality compliance inspections that we do periodically.
Q. This looks like Angela Hall from Mooresville
accompanied, you on this inspection?
A. Yes, sir, she did.
Q. And you met with Donna Burre! or is it Burrell?
A. Icall her Burrel.
Q. I will too. And she’s the environmental coordina-
tor at the Allen plant?
A. Yes, sir.
Q. Has she always been forthcoming and open and
honest with you?
A. Donna sticks out particularly well because she is
very meticulous and they call her the school teacher
because she'll correct everyone’s paper before they send
them out. They'll let her proofread them. Donna is very
meticulous and also I'd like to at this point there’s a
gentleman on here [19] named Lawson Jenkins. And he is
also available and we go into quite in depth and of what
they're doing with the ESPs and basically giving me a
good education every time I go. Learn a little more each
time. Jeff Russell, he is typically there so he can answer
anything from the CEMS side or anything along those
lines.
Q. Does Duke Power always provide the people to
answer any questions you have?
360
A. Yes, sir. Typically the way they do it now is like
for instance, Ms. Burrel, we typically do unannounced
inspections; but I will give several days notice because if
these folks are not there, there is no use for me to go to the
plant and didn’t feel like there’s nothing that can change
in that short of amount of time. But she'll organize it with
these folks to work it out so they can be there to answer all
my questions, because I do get very detailed in some of
these issues. And the other plants, they have these folks
available, similar positions at the other plants also so that
I can ask questions. And when we go to the plants, I'll
even go and typically talk to the operators and ask them
questions about what they do and so forth, if they have
people readily available. And then there are folks from an
operator to whoever is working that I'll just — not unusual
for me to stop and ask them question, whether it was just
for my knowledge, education or whether I feel like it may
be [20] compliance related.
Q. Let me show you one more group, Exhibit 912.
Are those inspection reports that you prepared and signed
for the Riverbend facility of Duke Power company from
March 11, 1994 through June 13, 2000?
A. Yes, sir, these appear to be copies of my inspec-
tions performed at Riverbend station.
Q. Let me ask you to look at the last one that’s dated
June 13, 2000.
A. Okay.
Q. This appears to be one of the — under paragraph
3, the routine air quality compliance inspections?
A. Yes, sir.
361
Q. And Ms. Carlotta Adams from the Monroe office
accompanied you on that inspection?
A. Yes, sir, from the Mooresville office.
Q. I mean from the Mooresville office. And you met
with Steve Rutledge at Riverbend plant?
A. Yes, sir.
Q. Has he always been cooperative with you?
A. Yes, sir, he has.
Q. And does he appear to be knowledgeable and
interested in complying with Clean Air Act regulations?
MS. BEHLES: Objection to form.
THE WITNESS: Based upon my interaction
with him [21] and the questions I asked, he’s always been
forthcoming and appeared to me to be conscientious about
not just air quality but these folks are also responsible for
the water, waste and other issues. But yes, sir, he did.
Q. Let’s look at your conclusion in paragraph 11 and
12. You say, “During this inspection the facility appeared
to be in compliance with applicable air quality regulations
with the exception of the following.” And then this is the
first time I have seen it in any of your reports you refer to
the EPA saying that the Riverbend facility is in violation
but on schedule is —
MS. BEHLES: Objection to form.
THE WITNESS: And -
362
Q. Let me ask you first. Was it your conclusion
separate from what EPA said that the facility appeared to
be in compliance with applicable air quality regulations?
MS. BEHLES: Objection to form.
THE WITNESS: Everything appeared to be in
compliance with exception to EPA’s concern with the PSD
issue.
Q. Tell us what EPA had said to you, if anything
about their concern about the PSD issue?
A. I have limited interaction. I am not sure I even
talked with any of the EPA folks. This came down through
our office, that there was a concern about PSD applicabil-
ity on (22) rework of some of the units and that came down
through our folks.
Q. In all your experience in inspecting units at Duke
Power, had EPA ever before this time in 2000 said they
had any concern about PSD issues at Duke Power plants?
A. Not during my tenure, no, sir.
MR. COTTINGHAM: Thank you, Mr. McManus.
That’s all the questions I have.
MS. BEHLES: Can we take about a five-minute
break?
VIDEOGRAPHER: Off record. Time is 12:10.
VIDEOGRAPHER: On record. Time is 12:16.
363
EXAMINATION
BY MS. BEHLES:
Q. Mr. McManus, thank you for coming down today.
As I mentioned earlier, my name is Deborah Behles. I am
here representing the U.S. Department of Justice.
First of all, in reference to something you were just
speaking about to Mr. Cottingham, you were talking about
NSPS applicability to some kind of tank. What kind of
tank was that?
A. If I remember correctly, I think it was about a
hundred, 110,000 gallon number 2 fuel oil storage tank
which is typically used for light-off say from a cold start
where they use number 2 fuel oil until they get it up to a
temperature where they can inject the pulverized coal
unit.
- ™ *
{24) Q. During thse inspections that we have the
,reports that are marked in Exhibits 909 through 912, did
_you ever have any discussions about PSD?
ENS vs
‘eta-A.. No, ma’am, not that I recall.
Q. Did Duke ever ask about PSD?
A. Not directly to me that I can recall.
Q. Did you ever do a PSD evaluation on any of these
eat eb? fo": ti 9
tt. i) —
>. a» MR. COTTINGHAM: Object to the form.
- A. No, ma’am. No, ma’am. Those determinations are
pitt made in the field. If there would be a red flag to go up,
then of course we start gathering the information to make
BEST AVAILABLE COPY
re
.
S Ie
364
that determination back at the office or once we reviewed
all the information and talked to all the appropriate
people.
Q. Would you ever do emissions calculations for PSD
purposes in the field?
A. No, ma’am. In compliance we typically do the
compliance inspections. That is usually addressed with our
permits folks, and also we received the annual air emis-
sions inventory which provides us with their emissions
and that data is readily available on the CEMS also.
* * *
[32] Q@. Would you say that ESP performance and
opacity determinations are the focus of these routine
inspections?
MR. COTTINGHAM: Object to the form.
THE WITNESS: That’s a big part of the inspec-
tion but that’s not the total inspection. Total inspection is
to look at all air quality related issues at the plant.
Q. In these inspection reports, when you say “this
facility appeared to be in compliance with applicable
regulations,” do you consider this sentence to be a PSD
evaluation?
MR. COTTINGHAM: Object to the form.
THE WITNESS: When I write that statement,
that is everything to my knowledge that I can think of that
would be applicable to that facility. If I thought PSD was an
issue, then that would be raised. Like I stated before, if 1
overlook something, then typically supervisor or other folks
that’s reviewing these would call that to my attention. But
365
when I write that statement, based upon my file review, on
site inspection and all post inspection work, I only write
that statement if I truly feel that this facility is in compli-
ance with all regulations.
Q. Have you ever done a PSD evaluation during an
inspection?
A. No, ma’am, I have not.
* * *
366
EXHIBIT 146
KEY REGULATIONS AND ISSUES IMPACTING
ALTERNATE FUELS, FUEL ADDITIVES,
AND FACILITY MODIFICATIONS
WTH 2/13/95
NTION OF SIGNIFI Tl
The federal PSD regulations were designed to prevent
additional deterioration of air quality in geographical
areas near major emissions sources beyond state-
established emission baselines. If a proposed Duke project
triggers PSD requirements, the cost of the project would
increase substantially for best available emissions control
technologies (e. g. scrubbers, baghouses, upgrades ESPs
etc.) on the emission source/unit in question.
Exemptions from “major modification” definition:
1) Routine repair, maintenance, and replacement.
2) An alternate fuel or raw material generated from
municipal solid waste.
3) An alternate fuel or raw material the source was
capable of accomodating before 1/6/75, unless prohibited
~ under a federally enforceable permit condition after 1/6/75.
4) Achange in ownership.
5) WEPCO: A pollution control project that is overall
“environmentally beneficial” electric utility project, provid-
ing...
a) no significant net increase in representative,
actual, annual emissions of a criteria pollut-
ant (SO2, NOx, particulate, VOC/O3, CO, FI,
Pb, Be, Hg, sulfuric acid mist, plus HCl and
chlorinated dioxins and dibenzofurans from
municipal waste combustors). Note: The
367
State/EPA will consider the representative
actual annual emissions following the modifi-
cation to be the average rate in tons/yr of any
2-yr period w/i a 10-yr window following the
change, taking into consideration the effect of
the change on the hourly emissions rate and
on capacity utilization. Any increased capac-
ity utilization unrelated to the change or
related to growth and increased electric de-
mand will not be considered in the average
rate calculation.
b) will not contribute to national ambient air
quality standard violation, visibility impair-
ment, or consume PSD increment.
Source Exemptions:
6) Emissions increases leading to air quality impacts
less than de miinimis amounts for CO, NO2, TSP,
PM-10, SO2, O03/VOC, Pb, Hg, Be, and Fl, using
current EPA-approved dispersion models.
Key Definitions:
Municipal Waste Incinerators/Combustors, as defined in
the PSD regulations, are capable of burning >250 tons of
refuse/day. Other definitions in the the municipal waste
regulations may also apply.
EW SOURCE PERF STAND Pp
The federal NSPS regulations were designed to ensure
that new facilities meet more stringent air emissions rate
standards and to ensure that existing sources adhere to
the same stringent new source standards when they
undergo an applicable modification (a physical change or
change in method of operation that would increase the
368
ton/hr emission rate of a pollutant to which a standard
applies. If a proposed Duke facility modification triggers
NSPS for the major generating units, the cost of the
project would be substantially increased to achieve more
strignent NSPS emissions rates and for additional moni-
toring and reporting requirements to document compli-
ance under the new requirements.
The ton/hr emission rate following the change would be
compared with ton/hr emission rate 5 years prior to the
change (e. g. the modification must not be for the purpose
of regaining capacity which has not been maintained over
time).
Exemptions from Applicable Modification:
1) Routine maintenance, repair, and replacement.
Replacement of entire systems (including aux. and
other small boilers even if the replacement is smaller
than the the original equipment) is a “reconstruction”
and falls under the 50% rule below.
2) An increase in the production rate w/o a capital
expenditure.
3) An increase in the hours of operation (note: PSD regs
disallow an increase in hr of operation not attributed
to increased electric demand.)
4) Use of an alternate fuel or raw material IF the facility
was originally designed to accomodate the material
(e. g. if the material’s use could accomplished under
the facility’s construction.)
5) Addition or use of a system or device whose primary
function is to reduce air pollutants (overall environ-
mental beneficial determination determined at the
discretion of EPA).
369
6) Change in ownership.
Reconstruction. In addition to any consideration of hourly
emission rate, any replacement of components of an
existing facility that results in a fixed capital cost of the
components in excess of 50% of the capital cost to con-
struct a comparablel entirely new facility would trigger
NSPS.
ELING/TALL S '
State Toxics
NC and SC air toxics regulations prevent increases in
emissions of some 200 listed inorganic and organic toxins
from air emissions sources. Facility modifications includ-
ing use of alternate fuels and fuel additives that increase
emissions of any state-listed toxins will require a toxics
evaluation. The evaluation may involve
1) an analytical demonstration that the change will
offset coal combustion and result in a “net decrease or no
increase in each state-listed toxin.
2) Net increases in a particular toxin will require a
model demonstration that the health based allowable
abmient limit (AAL) can be met at the property line.
Note: Combustion of materials that are higher in arsenic
than coal should be avoided at al] facilities but Belews
Creek and Cliffside 5, due to short stacks and inadequate
poor dispersion. Otherwise, the facility could be subjected
to toxics controls or erection of taller stacks.
370
Sulfur Dioxide
NC and SC regulations have required a modeling demon-
stration of compliance with the national ambient air
quality standards (NAAQS) for SO,. Due to the short
stacks at all facilities but Belews Creek, modeling of SO,
remains an unresolved issue. We are currently demon-
strating compliance for all facilities via monitoring at
Marshall and Riverbend.
Note: Any modifications (including alternate fuels or
additives) that increase sulfur dioxide emissions, would
raise the SO, dispersion modeling issue, triggering a
requirement to build taller stacks, load reductions, or a
lower SO, emissions rate. Also, modifications that nega-
tively impact SO2 dispersion, (eg. decreased exit gas
temperature, or decreased velocity) would raise the SO,
modeling issue for coal-fired facilities other than Belews
Creek.
371
EXHIBIT 147
Environmental Permits/
Regulatory Review Training
Grady Allen, Bill Horton
ESS Environmental Division
[Training conducted to Fossil/PG mgt. & staff on
several ocassions during 1994/1995.}
Avoiding PSD
No net increases in ton/yr (or ton/hr) emission rate
- $02, NOx, PM-10, VOC, CO
— Fl, Pb, Be, Hg, sulfuric acid mist, HCL, [partially
illegible — probable “vinyl”] chloride, chlorinated diox-
ins, dibenzofurans
No increased capacity utilization, except for increased
power demand
Representative, actual emissions = 2-yr period w/i 10
yr period following change
~ * *
372
EXHIBIT 148
From: RAM2026—PRDC Date and time 05/23/97 16:56:42
To: JEE7230 —- PRDC
DWS5151 — PRDC
WTH7130 — PRDC
WJM8364 - PRDC Bill McCabe
MJB7220 — PRDC
JJB7235—PRDC Joe Barna
GDT7206 — PRDC
KWK7265—-PRDC Kris Knudsen
Bobby McMurry, MG03C1, 875-5931
Environmental Engineer
Environmental Engineering, Generation Services
Subject: MSS 3&4 mill replacement and PSD/NSPS mtg
5/20/97
A meeting was held to discuss potential PSD/NSPS issues
regarding the MSS3&4 mill replacement. MSS is planning
on replacing one mill with a larger mill on Units 3&4 to
allow the use of lower quality coal or harder grind coal
without derating the unit. When the coal contract was
changed in 1995 MSS started receiving some coal that was
harder to grind and the existing mills could not feed
enough coal to the boiler to meet full load for parts of the
year. The purpose of the replacement mills is NOT to
increase the maximum generation of the units but to
regain load lost due to harder grind coal.
To assure PSD is not an issue a review of 2 representative
years of the past 5 years was performed to assure the PSD
De Minimus would not be exceeded if the larger mills were
available prior to the new coal contract. Using GADS
information Units 3&4 was derated due to wet or poor coal
4917 MWhr in 1993 and 920 MWhrs in 1994. If larger
mills were available and these derates did not occur an
373
additional 14 tons of NOx and 33 tons of S02 in 93 and 2
tons of NOx and 5 tons of SO2 in 94 have been emitted
which is below the 40 tons/yr PSD De Minimus for each of
these pollutants. This demonstrates that the new mills
should net trigger PSD.
The next issue is to assure the new mills will not increase.
the max hourly generation for NSPS. Marshail historically
has been able to achieve approximately 700MWs with the
proper coal. The new mills would not allow these units to
operate at a greater capacity because of other limiting
factors such as feedwater. In other words the new mills
would only allow the units to meet unit load with a wider
variety of coals.
The mill replacements are scheduled for 1999 and 2000 for
units 3. and 4 respectively. Using a 1 year lead time for the
equipment, permitting would need to start in early 1998.
We would probably need to approach the state in Sept 97
to assure there are no road blocks we are not aware of.
There are some environmental benefits such as some
lower sulfur coal is of a harder grind (Belews Coal), lower
NOx at a lower loads (BOOS), and potentially lower LOI.
We will quantify this but may not use because the mills
should be justified independent of the environmental
benefits. However, if additional NOx reduction is required
(very high likelyhood)additional mill replacements would
be required to achieve BOOS at full load which is just part
of the Low NOx Burner.
To prep for the September meeting the following action
items are needed.
374
1. Documentation that the mills are not the limiting
factor above 700 MWs. Equipment specifications and
actual data. Dave Styer
2. Coal information that lower sulfur coal is sometimes
harder grind. Bobby McMurry
3. Evaluation of the best option for lower NOx in the .35
to .38 range. Additional mills for BOOS LOFFERS or
SOFA without mills. Joe Barna
4. Set up meeting in September with the state. Bill
Horton
5. Additional analysis of 93 and 94 MW data to assure
representative years.
6. Existing mill specs and replacement mill specs Joe
Barna or Dave Styer
If we could get the information by June this would allow
us to get it in order prior to September.
Bobby
375
EXHIBIT 149
RK KKEKEKKEKEKKEKEKRKEKEKEKKEKKEREKR KEKE KEK KK KK KK
MSG FROM: TO: 11/02/90 16:29:52
KWK 7265-—PRDC JEP7206—PRDC
To: JEP7206 — PRDC
From: Kris Knudsen
Fossil Environmental Compliance
Air Quality Group - PROFS KWK7265
Subject: Aux. Boiler Air Requirements
Based on the info you gave me, I’ve looked further into the
permitting requirements for new aux. boilers at Belews.
Info provided: Oil guns: two @ 170 million btw/hr each
(Question: Is this one gun per boiler (two
total) or two guns per boiler?)
Stacks: 104 feet or less. Present stack: 120
feet.
REGULATORY REVIEW
NSPS
New Source Performance Standards for industrial boilers
apply to all boilers with greater than 100 mBtvu/hr heat
input. NSPS set standards for particulate, SO2, NOx, and
monitoring requirements. These are summarized as
follows:
Particulate: Emissions must be below 0.10 lb/mBtu,
demonstrated by a stack test after initial operation. Subse-
quent tests not necessarily required, unless the State makes
this a permit condition or requests a special test.
Opacity: Must be below 20%, except startup, shutdown,
and malfunction. There does not appear to be an exemption
376
from monitoring, but we MAY be able to argue this based
on very low capacity factor.
Sulfur Dioxide: Basically no standard will apply as long
as we use a “very low sulfur oil” (less than 0.3 Ib/mBtu) or
our capacity factor is limited by permit to less than 30%.
Number 2 fuel oil would apparently qualify. No monitoring
is required if exempt based on the above, but it’s possible
that we may be required to sample and analyze the fuel
oil.
Nitrogen Oxides: Must be below 0.1 lb/mBtu for low heat
release burners or 0.2 lb/mBtu for high heat release
burners. The transition point is a burner with a heat
release of 70,000 Btuwhr-ft3. NOx monitors ARE RE-
QUIRED unless the capacity factor will be below 10%, in
which case the operator can submit to the agency a plan to
monitor operating conditions to assure that NOx is main-
tained below the limit. NOx limits should be specified as
part of the vendor’s requirement, including a plan which
we can submit to the state to show how the limit will be
met. Apparently this is within the capability of current oil-
fired boiler design, but less us know if this a problem.
PSD REQUIREMENTS
PSD review is required for a source which is listed as a
“major source” or which has the potential to emit more
than 250 tons per year of a pollutant. One “major source”
category is a combination of fossil boilers with greater
than 250million BTU per hour, so the two boilers would
qualify. However, we may be able to show that these are
replacement boilers (a “major modification”) and that
there will be no net increase in emissions, in which case
PSD will not apply. This will also depend on the projected
use of the new boilers versus the old boilers.
377
Presuming PSD does apply (we'll try to argue against, but
may not succeed), a PSD permit must be issued before
beginning construction. This requires 1) ambient air
modeling to show protection of air standards and allow-
able increments for deterioration of air quality; and 2)
review of the proposed control technology. Tighter controls
could be required, but are not likely for this type of boiler
or expected utilization.
More significant is air quality modeling and the time to
get a permit. The proposed stack height could very well
show problems with modeling especially considering the
height of surrounding structures. The model will also have
to consider emissions from the two generating units and
any other sources i
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