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[The following declaration was filed in United States v. Ala-

bama Power Co., 372 F.Supp.2d 1283 (N.D. Ala. 2005).]

DELARA OF RI E. GRU

1. My name is Richard E. Grusnick. I am over 21 years

old, am competent to testify, and have personal knowledge

of the facts set forth in this declaration. In connection with

making this declaration, | have reviewed a number of

documents from the Alabama Department of Environmental

Management (“ADEM”) and the U.S. Environmental Protec-

tion Agency (“EPA”) to refresh my recollection. These are

documents that were generated in the ordinary course of

these agencies’ work and it was the practice and procedure

of the agencies to retain these documents. The ones I found

most relevant to my testimony are attached. I also have re-

viewed the complaint and other filings in United States v.

Alabama Power, as well as the opinions and filings in other

recent EPA litigations involving similar issues.

2. I was employed by the agency responsible for air

pollution control in Alabama for 28 years, from June 1970

through September of 1998, when I retired. I served as the

Deputy Director of ADEM from 1996 to 1998. In that capac-

ity, I assisted the ADEM Director in managing the state’s

efforts for implementing air, water, and waste management

programs. From 1982 to 1996, I was the Chief of ADEM’s

Air Division. In that capacity, 1 directed the state’s efforts to

manage air quality within Alabama. These efforts included

oversight of the processing of permit applications; develop-

ment and implementation of new regulatory requirements;

interpretation of all ADEM air regulations; enforcement ac-

tions; and complaint investigations. The Air Division as-

sumed the responsibilities of the Alabama Air Pollution

Control Commission (“AAPCC”) in 1982. At that time, I

was Director of AAPCC, having been appointed to that posi-

tion in the same year. From 1974 to 1982, I was Assistant

Director of AAPCC, and from 1970 to 1974, I served as an

environmental engineer with the AAPCC. (From this point

forward, my references to “ADEM” should be understood to

include AAPCC for matters predating ADEM’s creation.)

3. My work at ADEM was closely associated with Ala-

bama’s program to regulate air pollution from the program’s

inception until my retirement in 1998. ADEM first adopted

regulations to implement a state-wide air pollution control

program in Alabama in January of 1972, and I took part in

developing those regulations. EPA approved Alabama’s

initial State Implementation Plan (“SIP”) on May 31, 1972.

ADEM adopted additional state air regulations that became

a part of the SIP after that time, cluding Alabama regula-

tions implementing the 1977 Clean Air Act’s Prevention of

Significant Deterioration (“PSD”) program and the Non-

Attainment New Source Review program (collectively called

the “NSR programs”). I participated in and supervised

ADEM’s efforts to seek and obtain EPA approval for these

regulations, including direct participation through personal

communications and meetings with EPA staff. Further, I

participated in and supervised the issuance of permits pur-

suant to the NSR programs, and I participated in and super-

vised ADEM’‘s enforcement of those permits.

4. Alabama followed state rulemaking procedures to

adopt state PSD regulations rather than accept delegated

authority from EPA to implement and enforce the federal

regulations. The principal reason for taking this approach

was the desire to retain primacy over efforts to manage air

quality within the state. It was my belief and understanding

that using state-adopted regulations, which were subse-

quently approved by EPA for inclusion in the SIP, would

provide greater flexibility and deference to the state’s inter-

pretation of the requirements than if the state were to oper-

ate a delegated program. A memorandum dated June 11,

1984, from EPA Assistant Administrator for Air and Radia-

tion to the EPA Regional Administrator (Attachment 1) con-

firms my understanding of the deference extended by EPA

to the state in the interpretation of the state’s own regula-

tions.

5. ADEM adopted state regulations to implement the

state’s PSD permitting program on January 27, 1981. These

regulations became the basis for implementing the PSD pro-

gram in Alabama. Effective December 10, 1981, EPA ap-

proved these regulations.

6. Under Alabama’s PSD program, major sources of air

admissions in areas with air quality better than standards

(“attainment areas”) must obtain a PSD permit prior to cer-

tain construction activities. This requirement applies to the

construction of a new source as well as to construction of a

major modification at an existing source.

7. ADEM did not require the owner or operator of a

source to seek an “applicability determination.”

8. ADEM interpreted the phrase “major modification”

in its regulations such that the PSD permitting requirement

applied only to a project or activity intended to make the

existing unit or facility physically bigger, that is, one that

would increase unit capacity. A project or activity intended

to fix the components and parts of an existing source was

not considered by ADEM to be a major modification. Re-

placing deteriorated or malfunctioning parts to restore or

return an existing unit or facility back to its normal or per-

mitted operations was not considered a major modification.

9. Existing sources were generally permitted at a cer-

tain hourly capacity and/or set of operating conditions. Ei-

ther way, ADEM did not view upkeep or repairs which

promoted the expected cperations at these sources as major

modifications. Rather, ADEM focused on the maximum

hourly rate of emissions. Only if the maximum hourly rate

of emissions increased as the result of a project or activity

could the activity potentially trigger PSD requirements. This

was how ADEM applied the production rate and hours of

operations exclusion in the state’s regulations. Only activi-

ties which caused an increase in the maximum hourly emis-

sion rate would have then triggered as evaluation of the rou-

tine maintenance, repair and replacement exclusion or the

evaluation of the net emissions at the plant as a whole.

10. The definition of “major modification” in Alabama’s

PSD regulations has not changed substantively since its

original adoption in 1981.

_ 11. ADEM did not interpret the Alabama PSD rules in

way that would require PSD preconstruction permitting for

projects or activities on the basis of increased availability or

utilization of a facility, rather than first determining if there

was an increase in the maximum hourly rate of emissions.

12. I do not recall any suggestion from any EPA official

that the exclusion for routine maintenance, repair and re-

‘placement should be determined with reference to what is

routine at a specific unit, plant or facility. I can recall no

EPA directive or guidance from my time of service at ADEM

indicating a policy of applying such a standard rather than

an industry-wide standard. I recall no EPA directive or

guidance from my time at ADEM suggesting that “major

modification” or the exclusion for routine maintenance, re-

pair, or replacement should be determined with reference to

the absolute cost of the project, the accounting treatment of

- project costs (for example, as capital costs or expenses), or

the employment status of personnel carrying out the project

(for example, as employees or contractors).

13. ADEM utilized many techniques to insure that the

requirements of its regulations were satisfied, including in-

spections, review of plant records, requiring periodic reports

from the regulated community, and direct personal commu-

nications between ADEM staff and representatives of the

plant. An on-site inspection of each major plant in the state

was conducted at least once per year. During these inspec-

tions, maintenance, repair, and replacement activities often

would be observed.

14. ADEM was aware that Alabama Power and other

sources undertook projects similar or comparable to those

named in the complaint and even some of those very pro-

jects. In my preparation for this declaration, I identified

documentation of the following specific examples: |

a. Attachment 2 includes reports of two unannounced

inspection for Alabama Power Company’s E.C. Gas-

ton Stem Plant which indicate that Unit 5 was out of

service for scheduled maintenance during the course

of inspections. The report, dated April 15, 1991, con-

cerns an inspection conducted on April 8, 1991,

which appears to be during the time of one of the

Gaston projects which is the subject of this litigation.

b. Alabama Power Company approached ADEM in

February of 1984 to discuss alternative opacity moni-

toring procedures to be used while converting Unit

10 to a balanced draft system. Attachment 3 includes

a memorandum of the meeting and follow-up corre-

spondence regarding this issue. The Unit 10 conver-

sion appears to be one of the projects which are the

subject of this litigation. It is clear that Alabama

Power was not attempting to hide this conversion.

15. Based on my experience, industrial facilities in this

State, including electric utilities, are continuously perform-

ing maintenance, repairing or replacing components that

wear out, and otherwise undertaking the steps necessary to

maintain their operations. ADEM did not view these actions

as triggering a PSD review, not did EPA ever suggest other-

wise while I was at ADEM.

16. EPA had oversight responsibility to ensure that the

state program satisfied the requirements of the Clean Air

Act. EPA would periodically issue policy memoranda

which would provide EPA’s guidance on major air program

policy issues. These were internal EPA documents which

underwent no public notice but were intended to influence

how state programs would be implemented. Several of

these memoranda dealt with the PSD program. However,

EPA did not communicate to ADEM the interpretations of

PSD preconstruction permitting requirements that it ad-

vances in its NSR cases against other utilities and, appar-

ently, against Alabama Power. To the contrary, contempo-

raneous EPA guidance documents offered no hint of these

interpretations, in spite of numerous opportunities to do so.

OS SRN NEY re OR De PUA

following:

a. EPA periodically made efforts to influence imple-

mentation of the PSD program. One of the more

comprehensive efforts was undertaken by Craig Pot-

ter, EPA’s Assistant Administrator for Air and Radia-

tion. He created a New Source Review task force on

June 27, 1986, which prepared a Final Draft Report in

December of 1986 (Attachment 4). This report ad-

dresses numerous problems in the implementation of

the NSR programs, but it does not promote the inter-

pretations suggested by EPA.

b. Based on the findings of the task force, Mr. Potter

issued a memorandum to the EPA Regional Admin-

istrators on December 1, 1987, entitled “Improving

New Source Review (NSR) Implementation” (At-

tachment 5). The stated purpose of the memo was to

establish “certain program initiatives designed to

improve the timeliness, certainty, and effectiveness

of these programs.” The memorandum dealt with

threshold applicability issues as well as implementa-

tion of the requirements once it was clear PSD ap-

plied. Among other things, the memorandum set up

a system for EPA oversight of PSD permits, created a

new method for determining best available control

technology (top down BACT) for sources subject to

the requirement, promised to improve training , and

promised to improve guidance development and dis-

tribution. The memorandum also encouraged the

Regional offices to “review minor permit actions

which exempt an otherwise major source or modifi-

cation from a major review (e.g., ‘synthetic’ minor

sources).” This minor source permit issue was a

threshold applicability question. Specifically,

sources could avoid a PSD review if they accepted

emission limits which were less than the thresholds

established by the regulations. EPA apparently had

developed concerns that this approach for avoiding a

PSD review had not been properly implemented.

Neither the report nor the memorandum made any

mention of sources improperly avoiding PSD re-

views for modifications. |

c. EPA issued a lengthy New Source Review Workshop

Manual in October of 1990. Despite extensive guid-

ance comprising over 300 pages on such issues as

BACT, synthetic minor sources, and emission net-

ting, the Manual devotes less than two pages to the

implementation of the exclusions from “physical

change” (such as routine maintenance, repair, and

replacement), and it offers not suggestion of EPA’s

current positions on this subject.

17. EPA had numerous, regular opportunities to identify

ADEM’s policies and offer suggestions in the event it dis-

agreed with ADEM on a point of interpretation. During my

tenure as Chief of the Air Division, EPA would usually con-

duct an annual on-site audit of ADEM’s Air Program. The

audits generally included a mid-year review where Regional

EPA staff members would visit ADEM, meet with staff, per-

form file reviews of individual plants, and review other re-

cords. Further, EPA had a mechanism to strongly encourage

ADEM agreement with or acquiescence to its established

policies. The federal grant process included an annual nego-

tiation of commitments between EPA and the state. EPA

would routinely identify the outputs or topics it considered

high priority (often based on EPA headquarters’ guidance)

and negotiate commitments from ADEM. Over the years,

EPA identified several PSD related outputs that it wished

included in ADEM’s grant commitments. These included

commitments to implement top down BACT and to provide

EPA copies of synthetic minor source permits.

18. No audit or grant discussion ever targeted imple-

mentation of the modification provisions of the PSD regula-

tions consistent with EPA’s current interpretation as set

forth in EPA’s other NSR enforcement cases or this case, and

I do not recall this topic ever being an issue identified during

an audit.

19. ADEM’s non-NSR air permitting requirements gen-

erally were not applied to projects at major sources if they

did not trigger an NSR review.

20. I have been retained as a consultant in this case. I am

being compensated for my consulting time at my standard

rate of $150 per hour.

Pursuant to 28 U.S.C. Section 1746, I declare under pen-

alty of perjury that the foregoing is true and correct.

Richard E. Grusnick