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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

House Bill 540 falls short  Posted: January 31, 2002

Yesterday, January 30, Rep. Jon Draud filed House Bill 540, the Patton Administration's proposal for creating a siting board for review of power plant and transmission line siting.

While improved over initial drafts, the bill falls short both in process and substance of a comprehensive siting bill to assure that any proposed expansion of electric generating units in the state are thoroughly reviewed for environmental and community impacts and that those impacts are fully mitigated.

The bill is available on the legislative website, http://www.lrc.state.ky.us/record/02rs/record.htm

The Council's analysis is attached. Please contact your legislator and Governor Patton's office (502-564-2611) and urge them to improve on HB 540 in order to assure that all new power plants be properly scrutinized and their impacts mitigated and offset.

Kentucky Resources Council, Inc.

Post Office Box 1070

Frankfort, Kentucky 40602

(502) 875-2428 phone (502) 875-2845 fax

e-mail FitzKRC@aol.com

January 31, 2002

To: Representative Jon Draud

Tom Dorman

Hon. Paul Patton

From: Tom FitzGerald

Re: Review of HB 540

I have reviewed the language of House Bill 540 concerning the siting of electricity generating units, as filed yesterday, and offer this analysis of the effect of the language on the siting of both merchant and regulated utility facilities.

I appreciate your efforts to create a process by which the environmental and community impacts of these facilities can be reviewed and mitigated in advance of siting. Certainly, for facilities whose ability to affect local environmental quality and economic development is measured in decades, the decision to host a facility is not one entered into unadvisedly or lightly.

It is important, in framing the debate over merchant plant siting, to recognize that we are not dealing with siting new facilities serving native load. The residents and ratepayers of our Commonwealth have adequate generation and transmission capacity to meet our needs, and have a framework of reliable service at regulated rates that is more than adequate for our needs. With the imposition of the NOx SIP call, older coal-fired plants will be forced to reduce emissions, and all but one unit in the state will be installing such controls. The merchant facilities represent new impacts that are cumulative, rather than new units offsetting the baseline of environmental and community impacts.

These comments are offered in the hope that they will result in improvement of the siting bill. As crafted, the Council has serious reservations as to whether the bill will adequately protect the public interest in environmental quality. Without these changes, the Council would be hard-pressed to support the bill, since it falls short in both the area of procedure and substantive standards needed to assure protection of public quality of life and environmental quality.

I look forward to working with you and all interested parties in strengthening the bill. Specific comments, referenced by section, follow.

Section 1

1. The definition of merchant plant needs amendment to clarify that the applicant should include in any application for siting approval, all transmission lines, roads, and appurtenances and other structures, rather than merely facilities, proposed to support the project.

The definition also needs clarification so that a party cannot aggregate a number of units that are individually smaller than 10mW but exceed that threshold in the aggregate. The language as written does not make that clear.

2. Section 8 establishes a separate section governing location of nonregulated transmission lines, and allowing approval under lesser standards than for nonregulated generating plants themselves. Where a proposal for a nonregulated line is associated with a particular plant, it should be reviewed with that plant application. If the proposal is for a nonregulated transmission line standing alone (i.e. a commercial "Transco" that proposes to construct a for-profit line for all users) the level of environmental review should be as rigorous as for plants themselves, and it should be clarified that such line siting is subject to local zoning and planning. Such is not the case in the bill as written.

3. The definition of "residential neighborhood" is used to differentiate between the protections afforded by setbacks for one house, which are only one-fourth as protective as for "neighborhoods" of at least 5 houses on five acres.

While the Council can support setbacks if they are minimum standards that can be expanded in order to assure no off-site impacts, the flaw in setbacks is highlighted by this arbitrary distinction between protecting one neighbor versus 5.

Any setbacks that allow adverse off-site effects, based on current land use rather than protecting all potential land uses, have the effect of reverse-zoning other lands by limiting their future development. The distinction also targets rural areas of lower density for siting, rather than requiring installation of better controls to minimize impacts. No distinction should be made between one or more homes.

4. "Commence to construct" does not prevent substantial disturbance to proposed areas associated with surveying. Since site may contain unknown or unidentified significant cultural, archaeological, or environmental resources, no intrusive land disturbance should be allowed absent scrutiny. Possibility of inadvertent or intentional destruction of such resources, including timber removal, in order to facilitate site approval, must not be encouraged. This should be addressed by requiring submittal and approval of investigative plan for any properties under consideration for siting, with prior review and approval of extent of and location of roads, drilling areas, etc., or by limiting the aggregate amount of area disturbance (including vegetation removal) conducted as part of process of collection of geophysical data collection, surveying, etc.

Section 2

1. The proposal to establish a siting board with two "ad-hoc" citizen members is of concern for two reasons: first, because there is a need for consistency in the public perspective that may not be presented by having citizen members come and go, and second because there are no standards to assure that the citizen representation is free of conflicts-of-interest.

More robust public representation is needed on a less ad-hoc basis, in order to assist in development of a public/consumer/community advocate expertise that will not occur on an ad-hoc "retail" basis. A permanent public member drawn from environmental/community/consumer perspective is needed to supplement the ad-hoc community member; and direct and indirect pecuniary interest limitations on public membership eligibility should be provided.

2. The language of (4) is unclear, since it identifies the "executive director of a statewide board or agency charged with the review of the impact of electric generating facilities and transmission on the Commonwealth shall serve as the executive secretary and chief administrative officer." Is that intended to refer to the Director of the Energy Policy Board or is another agency intended. The language needs clarification.

Section 3

1. It is unclear which facilities must apply to the siting board for approval.

As proposed, Section 3(1) states that no person, including one who has applied for an air quality or other permit prior to the date of enactment, shall commence to construct a merchant plant until the siting board has approved.

Section 3(2) exempts replacement of an existing generating facility with a "like facility."

Section 3(3) imposes setbacks on facilities except where an existing generating facility with 10 mW of capacity exists.

Among the questions raised by this section are these:

* Does the requirement for siting approval apply to those plants that have received all necessary state permits but have not begun construction and which have not yet received zoning and planning approval?

* Does the requirement apply to those that have begun earth-moving but do not have all necessary permits?

* What constitutes "construction" - does it include ceremonial earth-turning or is it intended that the applicant be engaged in a bona fide process of construction?

* Does the exemption for existing sites from setbacks mean that the siting of plants at existing sites will be exempted from other requirements, or is it intended that they be subject to as rigorous a review for all other requirements. While co-location may lower direct land impacts, it may cause additional adverse effects that deserve review and mitigation The exemption is obviously a recognition that some existing units are already within that zone; because of that, co-location should receive heightened review in the area of controls and mitigating total impacts. . Where co-location occurs, a cumulative assessment of total impacts must be made and a determination of appropriateness of siting of that new unit should evaluate that cumulative off-site impact.

* Exemption of replacement of a facility with a "like" facility is too vague a standard. Does "like" mean the same fuel, same rated capacity, same pollution control equipment, same emissions profile? Why should there be no siting review for a proposal to wholly-replace an existing merchant facility that may be inappropriately sited and which has never undergone a siting review, when that action would extend out the useful life of the facility.

A separate section addressing changes to existing and approved facilities is needed. Any material change in a facility, particularly an existing facility that is materially reconstructing or altering the unit equipment, should be subject to threshold review. Where a change is undertaken in order to meet regulatory requirements or to improve the emissions profile, a streamlined approval at staff level would be appropriate. Where, however, the life of the facility is extended, the ownership and operation of the facility changes, the emissions profile or material conditions of approval of the facility (hours of operations, etc.) change, review is justified.

Section 4

1. Subsection (d), which requires the applicant to supply a certification that the proposed plant will be in compliance with local ordinances and "applicable zoning" ordinances, raises several issues of concern with the bill including

a. Timing.

The integration of the siting review with obtaining of other permits and approvals needs to be clarified. No siting approval should be deemed "administratively complete" and ready for review absent a copy of the approval from the local zoning and planning unit, and absent a copy of all necessary permits from local and state air agencies, water quality and quantity permits. The bill is unclear as to whether the applicant must receive zoning approval prior to siting board approval, and in (f), whether the Natural Resources Cabinet must render a judgment on environmental compatibility prior to review and approval of individual permits; a process that takes more time than that allotted under the bill for review and approval of the environmental compatibility component.

b. Relationship to Zoning and Planning

An amendment is needed to KRS 100.324 to clarify that zoning and planning requirements of KRS Chapter 100 do apply to electric generating plants and their facilities and appurtenances, and to unregulated transmission lines; otherwise the ambiguity is created that "applicable" zoning must be complied with and the merchants will argue that no zoning is applicable because of the 100.324 language.

2. The elimination of "cemeteries" from the list of protected features highlights a more fundamental concern, which is that the scope of the siting bill should not and cannot be structured to accommodate certain pending proposals.

Siting review should apply across the board to any facility that is not fully permitted and fully constructed. For those fully permitted and under construction, a siting review is still appropriate to determine whether unmitigated effects should be subject to additional conditions for the site.

3. The heart of the siting review is in the sufficiency of the analysis of effects and the strength of the standards for approval. In both of these areas, the bill is an improvement on earlier drafts but still short of adequate.

The siting review should fully assess the direct, indirect and cumulative impacts of the proposed electricity generating facility and associated service and transmission facilities and structures, including impacts on farmland and the production of food, fuel and fiber; attainment and maintenance of air quality standards; surface and groundwater quality and water supply, and protection of the hydrologic balance. The applicant should be required to evaluate the public health, safety and environmental impacts of the proposal, including changes in property values, community perception, effects on the pattern and types of development of surrounding and nearby properties, effects on the cost and availability of public services and facilities, and the ability to host the proposed facility while still protecting fully the health, safety and welfare of the host community.

Anything short of fully mitigating adverse effects is a disservice to the host communities and to our ability to manage our environmental quality.

a. The Council had recommended that "direct, indirect and cumulative effects" be reviewed. The exclusion of "indirect" suggests that less than the totality of effects of the proposal on the environment and economy will suffice. Indirect effects, such as growth-inducing or growth-stifling effects on land use and the local economy and environment should be evaluated as well. The core principle for the siting bill should be that all of the effects of merchant plants on the environment and host community are fully evaluated and mitigated.

b. The language in subsection (g) requiring the Board to accept documentation of compliance with the National Environmental Policy Act as evidence of a statement of environmental compatibility needs revision. Only where there has been an environmental impact statement conducted will the level of assessment approach that needed for siting review, and even in that case, the siting board must have the ability to request additional or updated information.

4. The language requiring disclosure of past compliance information is a good start, but disclosure should be required for key personnel, including principal shareholders (5% or more), such as is already required for solid waste landfill applications.

5. The idea in subsection (3) that a majority of the Board must determine whether fees are sufficient is unnecessary. Either the fees are or aren't going to be sufficient, based on workload projections and other costs of analysis. An estimate should be made with a provision to "true up" the numbers as needed when the assessment reaches certain points or at the end of the process.

Section 5

1. Since the bill creates a timeline for review of siting proposals, the timeline should be triggered only after a threshold finding that the application is administratively complete, meaning that the Board finds that all information necessary to begin technical review as outlined in the law has been provided. After that determination of administrative completeness, the technical review clock should begin to run, and should be stopped at the time that technical deficiency letters are sent, until resubmission of the information.

2. Section 5 contains the approval criteria, and is in need of clarification and strengthening.

a. As written, it is unclear how the various criteria are to be weighted. Approval is "based on the following criteria" but there is no clear standard for approval. For example, could a facility with negative economic impact be approved? Could one that didn't comply with all local and state laws?

The language needs rewriting in order to supply a clear standard for approval, such as "the facility must demonstrate, and the Board find, that ... all adverse environmental effects are mitigated; the applicant has provided evidence that all needed permits and approvals have been obtained; there are no other feasible alternatives with lesser impacts; etc.)

b. Compliance with al waste laws, not just solid and hazardous, is needed, since the utility wastes are considered "special" wastes.

c. All effects, indirect as well as direct and cumulative, should be mitigated to prevent adverse effects.

d. The standard for approving or disapproving an application based on the environmental compliance history of the applicant or key personnel should be strengthened to provide meaningful standards. State solid waste laws have language that should be modeled here. No approval would be given to an applicant unless it demonstrated sufficient experience and appropriate regulatory record, and financial resources to properly construct and operate the facility. In addition, no approval would be given to an applicant who has outstanding unabated violations of air, waste and water laws or whose record of performance does not demonstrate a likelihood that the facility will be operated in compliance with law.

e. The applicant should be required to demonstrate and the Board to find that:

i. No other feasible alternatives exist, including other locations, and other technologies and investments (including demand-side investments), that would satisfy the project purposes with lesser impact;

ii. The applicant possesses the necessary allowances for oxides of sulfur and nitrogen, and for other criteria pollutants as might limit the emissions from the plant, in order to support operation of the facility at the rated capacity. Absent such a demonstration, the application shall not be accepted for processing.

ii. The applicant has or has an operator who possesses the financial, technical and management capability to construct and operate the proposed facility. Many of these operations are intended as turn-key operations, and the actual operators should be disclosed and their suitability reviewed.

f. In order to assure that new plants do not add to the cumulative burden of air, land and water pollution, the proposed unit should not be approved unless

i. all pollution and compatibility impacts, including noise, air pollution, water usage, surface or groundwater pollution, traffic, are mitigated through on-site controls, design, buffering, and other measures, to a level sufficient to prevent interference with use and enjoyment of nearby lands and to avoid any adverse health and environmental impacts; and

ii. the facility obtains offsetting reductions for criteria and identified air toxic contaminants from another source in the airshed/air quality region.

3. The role and effect of "considering" the policy of the state to encourage the use of coal needs clarification. The bill should not give the Board the authority to "consider the policy" of using coal in making a siting decision to the extent that it would allow approval of a siting causing adverse effects in order to advance coal's fortunes. You subsidize fuels, if you believe it appropriate, through economic incentives and tax policies, not by allowing approval of new power plants that might cause adverse human and environmental impacts.

4. Subsection (4) involves transfers of plants. Any proposed transfer of ownership or control or managerial responsibility to a different entity should be subject not only to review as provided in Section 5(4) by the Board, but also should be subject to public notice and opportunity to comment. The commitments and obligations contained in any facility approval or permit is only as good and solid as the person or entity operating it.

Section 6

The public notice and hearing procedures are inadequate. The decision to site a facility that will have an effect on a community and on the downwind populations for between 20 and 50 years and more, deserves rigorous review.

1. A hearing should be held as a matter of course on all sitings in order to build a formal record for review and approval.

2. A "public" hearing, which is usually construed as an informal matter, should occur prior to filing with the Board as is required for hazardous waster facilities. An adjudicatory hearing such as the PSC conducts for rate cases, should occur in all cases of siting review.

3. It is unclear whether the protections and procedures of KRS Chapter 13B apply. Clarification is needed that those protections do apply.

4. The public notice of as little as 7 days before a hearing is clearly inadequate. At the time of acceptance of an application as administratively complete, a formal hearing date should be set in order to allow the public and other agencies ample time to prepare for the siting hearing.

5. The standard for review of the agency decision should not be limited to "unlawful or unreasonable." The standard for review of agency actions under state law and the state constitution should be applied.

Section 7

The standard for review of regulated units requires only "reasonable mitigation" of "significant adverse" effects. These qualifiers appear to provide handles for argument that a level of environmental impacts beyond that that would tolerated from merchant plants should be accepted. All adverse effects should be mitigated.

Section 8

As earlier mentioned, review of transmission lines should be no less rigorous than for the facilities to which they attach. All impacts, including roads supporting the lines, and impacts of line maintenance (pesticides, etc.) should be assessed.

Section 12

The standard for approval of the transfer of regulated utility assets should be more rigorous than "proper purpose" and "public interest." These assets belong to ratepayers and co-op members, and there should be notice and an opportunity to be heard (unless this transfer is part of a siting case already subject to such notice), and the transfer must not be inconsistent with the utility's integrated resource plan and should cause no loss of value or adverse effect on ratepayers. If the asset is a generating unit or transmission line, the transfer should trigger a siting review to determine if additional controls or mitigation is warranted.

Section 13

The environmental compatibility review should fully assess the direct, indirect and cumulative impacts of the proposed electricity generating facility and associated service and transmission facilities and structures, including impacts on farmland and the production of food, fuel and fiber; attainment and maintenance of air quality standards; surface and groundwater quality and water supply, and protection of the hydrologic balance. The applicant should be required to evaluate the public health, safety and environmental impacts of the proposal, including changes in property values, community perception, effects on the pattern and types of development of surrounding and nearby properties, effects on the cost and availability of public services and facilities, and the ability to host the proposed facility while still protecting fully the health, safety and welfare of the host community. The language in (1) is insufficient.

Thank you for your consideration of these concerns. I look forward to further dialogue on this important issue and enactment of a comprehensive bill that will fully protect the quality of life of our urban and rural areas and will prevent our Commonwealth from becoming the energy "colony" of the Midwest.

Cordially,

Tom FitzGerald

Director



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