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

NRDC Comments on the Thoroughbred Energy Coal-fired Electric Generating Unit  Posted: March 1, 2002

February 28, 2002

By Email, Facsimile, and Federal Express

Mr. Allan Elliott

Division for Air Quality

Kentucky Natural Resources and

Environmental Protection Cabinet

803 Schenkel Lane

Frankfort, KY 40601-1403

Re: Comments on Draft Permit for Thoroughbred Generating Station

Dear Mr. Elliott,

On behalf of NRDC, I submit these comments on the draft pre-construction and operating permit that the Division for Air Quality ( DAQ ) has issued to Peabody Energy Corporation for the proposed Thoroughbred Generating Station. DAQ published the draft permit on January 9, 2002.

I. Introduction

NRDC is a non-profit membership organization devoted to protecting public health and the natural environment. For over thirty years, NRDC has pursued its mission in large part by working to ensure that the laws written to protect human health and the environment are fully implemented and strictly enforced.

NRDC s membership consists of nearly 500,000 individuals, approximately 3,000 of whom live in Kentucky. Some part of the air pollution that Peabody proposes to emit from the Thoroughbred facility would ultimately enter the lungs of NRDC members and their loved ones. Also, pollution emanating from Thoroughbred would affect plants, animals, and visibility at Mammoth Cave National Park, which hundreds of NRDC members and their families visit every year. What is more, air pollutants generated by Thoroughbred would impact the natural environment in which millions of Americans, including NRDC members and their families, live. In defense of the health and well being of its members and of all humans, plants, and animals that would be exposed to Thoroughbred s pollution NRDC will oppose any effort to permit the facility to pollute unlawfully.

The information that Peabody has submitted to DAQ fails to satisfy the legal prerequisites of a pre-construction and operating permit. Notwithstanding the inadequacy of Peabody s application, DAQ has issued a draft permit. In its rush to do so, DAQ has failed to satisfy important procedural requirements found in Kentucky s own regulations. Were it now to finalize the draft permit on the basis of Peabody s deficient submission and without rectifying the procedural missteps DAQ would contravene both federal and state law. Accordingly, I urge DAQ to remand the permit application to Peabody with instructions to correct the defects identified below. When and if Peabody submits a new application that corrects these defects, I ask that DAQ follow the procedural requirements identified in these comments. Because portions of NRDC s comments call upon the U.S. Environmental Protection Agency ( EPA ) to take action with regard to Thoroughbred, I am copying responsible EPA officials on this letter.

II. Procedural Issues

A. Failure to Comply With Section 15 of 401 KAR 51:017

Section 15, Subsection 1, of 401 KAR 51:017 provides that within thirty days of receiving a pre-construction permit application for a proposed major stationary source, the emissions from which may affect a Class I area, DAQ shall give notice of the application to the federal land manager responsible for the Class I area in question. The notice shall include an analysis of the proposed source s anticipated impacts on visibility in the Class I area. 401 KAR 51:017, Section 15(1); see also 40 CFR § 51:307(a)(1). Subsection 3 of Section 15 provides:

[DAQ] shall consider an analysis performed by the federal land manager, provided within thirty (30) days of the notice and analysis required by subsection (1) of this section, that shows that a proposed new major stationary source or major modification may have an adverse impact on visibility in a Class I area. If [DAQ] finds that analysis does not demonstrate to the satisfaction of [DAQ] that an adverse impact on visibility will result in the Class I area, [DAQ] shall, in the public notice required in 401 KAR 52:100, either explain that decision or give notice as to where the explanation can be obtained.

401 KAR 51:017, Section 15(3); see also 40 CFR § 51:307(a)(3); New Source Review Workshop Manual (October 1990), at E.23 ( Where the reviewing agency does not agree with the FLM s finding of an adverse impact on visibility the agency must, in the notice of public hearing, either explain its decision or indicate where the explanation can be obtained. ).

The original permit application that Peabody sent to DAQ on February 28, 2001 contained an analysis of Thoroughbred s anticipated impacts on visibility at Mammoth Cave National Park, a Class I area. Peabody supplanted that analysis when, on October 26, 2001, it sent DAQ a revised permit application. At the beginning of February 2002, Peabody revised its visibility analysis yet again, announcing that the previous study contained errors.

On April 27, 2001, the superintendent of Mammoth Cave sent a letter to DAQ expressing his conclusion that the proposed emissions from the TGS facility would adversely impact visibility at Mammoth Cave NP and that emissions from the proposed TGS facility may adversely affect two federally listed endangered species at Mammoth Cave NP. Letter from Ronald Switzer to Diana Andrews (April 27, 2001), at 2. On February 14, 2002, the federal land manager for Mammoth Cave wrote to DAQ expressing his determination that the air pollution Peabody proposed to emit from Thoroughbred would have an adverse impact on visibility and could potentially affect federally listed threatened and endangered species at Mammoth Cave National Park. Letter from Joseph Claridge to Allan Elliott (February 14, 2002). The land manager notified DAQ that his staff was still reviewing the new information that Peabody had just submitted, and that once the review was complete, he would communicate any resultant findings to DAQ. Id.

DAQ published the notice required by 401 KAR 52:100 on January 9, 2002 before the federal land manager submitted his analysis of visibility impacts at Mammoth Cave. As a result, the public notice contains no explanation of DAQ s determination, notwithstanding the land manager s conclusion, that Thoroughbred will not adversely impact visibility at the park. DAQ has failed, therefore, to comply with Section 15, Subsection 3, of 401 KAR 51:017. To remedy this failure, DAQ should give the federal land manager an adequate opportunity to review Peabody s most recent visibility analysis. If, following that review, the land manager renews his determination that Thoroughbred will adversely impact visibility at Mammoth Cave, DAQ should either withdraw the draft permit or publish a new public notice that (1) includes the land manager s determination and an explanation as to why DAQ is rejecting his conclusions;1 (2) establishes a new thirty-day period for public comment; and (3) schedules a public hearing. DAQ should then refrain from issuing a final permit unless and until it addresses all comments submitted during the new comment period and at the hearing.

B. Failure to Comply With Section 8 of 401 KAR 52:100

The manner in which DAQ has proceeded also runs afoul of Section 8, Subsection 1, of 401 KAR 52:100. That subsection provides, in part, that DAQ shall make available for public inspection during the comment period all materials supporting the application that is, all materials relevant to DAQ s permitting decision. This requirement stems from 40 CFR § 51.161(a), which declares that a state s air permitting program must require the State or local agency to provide opportunity for public comment on information submitted by owners and operators. On account of the fact that Peabody submitted the most recent revision to its Class I visibility analysis well after the public comment period opened, and just a few days before the hearing was held, the public has not had a reasonable opportunity to obtain, inspect, and comment on important information that will affect DAQ s final decision on the Thoroughbred application. Cf. In the Matter of Hadson Power 14 Buena Vista, 4 EAD 258, 276 (EAB October 5, 1992), at 271-72 (holding that public notice of the hearing on a draft permit was defective because it failed to include relevant information, namely, the predicted amount of increment consumption in the affected Class I area). To remedy this violation of the procedural requirements, DAQ should announce the availability of Peabody s new visibility analysis, accept public comment for thirty days following the announcement, and hold another public hearing. See id. at 272 (imposing the remedy of a new public notice, to be followed by a renewed period for public comment).

C. Violation of 42 USC § 7475(a)(1) and Section 8 of 401 KAR 51:017

The Clean Air Act declares that [n]o major emitting facility on which construction is commenced after August 7, 1977, may be constructed in any area to which [the prevention of significant deterioration ( PSD ) provisions of the Act] appl[y] unless . . . a permit has been issued for such proposed facility in accordance with [the PSD provisions] setting forth emission limitations for such proposed facility in accordance with the requirements of [those provisions]. 42 USC § 7475(a)(1). Echoing the federal prohibition, Kentucky s PSD regulations provide that

[a] major stationary source or major modification to which [the PSD provisions] of this administrative regulation apply shall not begin actual construction until it obtains a permit stating that the stationary source or modification shall comply with [those provisions].

401 KAR 51:017, Section 8(1). The Commonwealth s regulations define begin actual construction as

[the] initiation of physical onsite construction activities on an emissions unit which are of a permanent nature. Those activities include, but are not limited to, installation of building supports and foundations, laying underground pipework, and construction of permanent storage structures.

401 KAR 51:017, Section 1(7) (emphasis added).

On June 5, 2001, Peabody requested permission from DAQ to begin various construction activities at the Thoroughbred site. Those activities included

Earthwork cut and fill to prepare site for foundation and building construction, possible construction of retaining walls;

Clear and pave entrance and access roads to property;

Clear and pave parking area;

Clear and construction of railroad spur to plant site;

Employee break and locker facility (including restrooms and showers);

Security building and fences;

Construction of phone, electric, water and sewer lines as needed for construction; and

Site lighting and drainage.

Letter from Bryan Handy to Donald Newell (June 5, 2001). A July 20, 2001 letter from Peabody to DAQ indicates that on July 2, DAQ either approved or conditionally approved most items listed in Peabody s June 5 letter. Letter from Bryan Handy to Donald Newell (July 20, 2001). NRDC cannot determine which construction activities were approved, because DAQ s July 2 letter was not included in the documents that DAQ sent NRDC in response to the latter s request for all communications relating to Thoroughbred. DAQ did provide NRDC with a copy of a letter that DAQ sent to Peabody on August 28, 2001, however. That letter conveys DAQ s determination that Peabody may prepare the site and erect wooden planks for a proposed electrical substation, while cautioning Peabody not to pour ready concrete of any kind. Letter from Donald Newell to Bryan Handy (August 28, 2001).

Several of the activities listed in Peabody s June 5 letter (in particular those identified above) meet the definition of begin actual construction set forth in Section 1, Subsection 7, of 401 KAR 51:017. The commencement of any such activities prior to the issuance of a final permit would constitute a violation of 42 USC § 7475(a)(1) and Section 8, Subsection 1, of 401 KAR 51:017. The correspondence described above could certainly lead a reasonable person to fear that Peabody has, for many months, been proceeding under the false impression that it may carry out those activities irrespective of the fact that DAQ has not yet issued a final pre-construction permit for Thoroughbred.

The Clean Air Act declares that [t]he Administrator [of EPA] shall, and a State may, take such measures, including issuance of an order, or seeking injunctive relief, as necessary to prevent the construction or modification of a major emitting facility which does not conform to the requirements of [the Act s PSD provisions]. 42 USC § 7477. Similarly, Section 17, Subsection 1, of 401 KAR 51:017 provides that an owner or operator of a source or modification subject to [Kentucky s PSD] regulation[s] who begins actual construction after September 22, 1982 without applying for and receiving approval, shall be subject to appropriate enforcement action. NRDC urges DAQ and EPA to investigate whether Peabody has performed any construction activities at the proposed Thoroughbred site in violation of 42 USC § 7475(a)(1) and Section 8, Subsection 1, of 401 KAR 51:017. If Peabody has conducted any such activities, then it is the responsibility of EPA and DAQ, under 42 USC § 7477 and Section 17, Subsection 1, of 401 KAR 51:017, respectively, to compel the company to cease all construction-related activities at the site and to dismantle any illegal construction.

D. EPA s Duty to Prevent DAQ From Issuing a Permit in Violation of the Clean Air Act

As indicated above, EPA is required to take such measures, including issuance of an order, or seeking injunctive relief, as necessary to prevent the construction or modification of a major emitting facility which does not conform to the requirements of [the Clean Air Act s PSD provisions]. 42 USC § 7477. Section 113(a)(5)(A) of the Act furnishes EPA with means for carrying out its duty. It provides that

[w]henever, on the basis of any available information, the Administrator finds that a State is not acting in compliance with any requirement or prohibition of the chapter relating to the construction of new sources or the modification of existing sources, the Administrator may . . . issue an order prohibiting the construction or modification of any major stationary source in any area to which such requirement applies . . . .

42 USC § 7413(a)(5)(A).

The Clean Air Act also requires EPA to object to the issuance of and, if necessary, step in and deny any operating permit containing provisions that are determined by the Administrator as not in compliance with the applicable requirements, including the requirements of an applicable implementation plan. 42 USC § 7661d(b)(1), (c). Pursuant to that provision and 40 CFR §§ 70.1(b) and 70.2, EPA must object to the issuance of an operating permit if the permit fails to comply with any of the federal and approved state requirements for operating permits, or if the permit fails to comply with any of the federal and approved state requirements for pre-construction permits. In the Matter of Monroe Electric Generating Plant, Petition No. 6-99-2 (EPA Administrator 1999), at 2 n.1; In the Matter of Shintech, Inc., Permit Nos. 2466-VO, 2467-VO, 2468-VO (EPA Administrator 1997), at 3 n.2.

As indicated elsewhere in these comments, the draft permit that DAQ has issued for Thoroughbred fails to comply with federal and approved state requirements both the provisions applicable to operating permits and those applicable to pre-construction permits. If DAQ finalizes the draft permit without first bringing it into compliance with the applicable legal requirements, NRDC expects EPA to object pursuant to 42 USC § 7661d(b)(1) and Section 10, Subsection 6, of 401 KAR 52:100. If DAQ fails to heed EPA s objection, NRDC expects EPA to step in and deny the permit pursuant to 42 USC § 7413(a)(5)(A), 42 USC § 7661d(c), and Section 10, Subsection 8, of 401 KAR 52:100. If EPA does not object on its own volition, then NRDC will, under 42 USC § 7661d(b)(2) and Section 10, Subsection 9, of 401 KAR 52:100, petition the agency to take such action.

III. Failure to Demonstrate That Thoroughbred Will Use the Best Available Control Technology

Section 165(a)(4) of the Clean Air Act provides that [n]o major emitting facility on which construction is commenced after August 7, 1977, may be constructed in any area to which this part applies unless . . . the facility is subject to the best available control technology for each pollutant subject to regulation under this chapter emitted from, or which results from, such facility. 42 USC § 7475(a)(4). In line with this federal provision, Section 9, Subsection 2 of 401 KAR 51:017 declares that [a] new major stationary source shall apply best available control technology for each pollutant subject to regulation under 42 USC 7401 to 7671q (Clean Air Act), that it will have the potential to emit in significant amounts. Hemming to the definition provided in the Clean Air Act, 42 USC § 7479(3), and the federal regulations setting standards for state implementation plans, 40 CFR § 51.166(b)(12), the Kentucky regulations define best available control technology ( BACT ) as

[a]n emissions limitation (including a visible emission standard) based on the maximum degree of reduction for each pollutant subject to regulation under 42 USC 7401 to 7671q (Clean Air Act), which would be emitted from a proposed major stationary source or major modification which the cabinet, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for that source or modification through application of production processes or available methods, systems, and techniques, including fuel cleaning or treatment or innovative fuel combustion techniques for control of that pollutant.

401 KAR 51:017, Section 1(8).

The wording of the definition of BACT found in Kentucky s regulations is nearly identical to the wording of the federal definition. Compare 401 KAR 51:017, Section 1(8), to 40 CFR § 51.166(b)(12). Moreover, EPA approved Kentucky s wording only after the state certified that its use of language yielded a BACT definition that was more stringent, or at least as stringent, in all respects as the federal definition. 40 CFR § 51.166((b). DAQ is therefore bound to construe the BACT requirement at least as strictly, from the perspective of the permit applicant, as EPA and the federal courts construe it.

EPA and the federal courts have consistently interpreted the BACT provisions found in the Clean Air Act and the agency s regulations as requiring the permit applicant to either implement the most effective available means for minimizing air pollution or justify its selection of less effective means on grounds consistent with the purposes of the Act. See, e.g., Memorandum from John Calcagni, Director of EPA Air Quality Management Division, to EPA regional air directors (June 13, 1989), at 4 ( Regardless of the specific methodology used for determining BACT, be it top-down, bottom-up, or otherwise, the same core criteria apply to any BACT analysis: the applicant must consider all available alternatives, and [either select the most stringent of them or] demonstrate why the most stringent should not be adopted. ); Citizens for Clean Air v. EPA, 959 F.2d 839, 845 (9th Cir. 1992) ( Initially, the burden rests with the PSD applicant to identify the best available control technology. ).

In its New Source Review Workshop Manual ( NSR Manual ), EPA sets forth a top-down process by which a permit applicant may select BACT in a manner consistent with the Clean Air Act. Under the top-down methodology, applicants must apply the best available control technology unless they can demonstrate that the technology is technically or economically infeasible. The top-down approach places the burden of proof on the applicant to justify why the proposed source is unable to apply the best technology available. Id. (citing In re: Spokane Regional Waste-to-Energy Applicant, PSD Appeal No. 88-12 (EPA June 9, 1989), at 9) (internal quotation marks omitted) (emphasis in original); see also In re: Inter-Power of New York, Inc. PSD Appeal Nos. 92-8 and 92-9 (EAB March 16, 1994) ( Under the top-down approach, permit applicants must apply the most stringent control alternative, unless the applicant can demonstrate that the alternative is not technically or economically achievable. ); In the Matter of Pennsauken County, New Jersey Resource Recovery Facility, PSD Appeal No. 88-8 (EAB November 10, 1988) ( Thus, the top-down approach shifts the burden of proof to the applicant to justify why the proposed source is unable to apply the best technology available. ).

The first step in the top-down process is the identification of all available control options for the emissions unit in question. NSR Manual (October 1990), at B.5 - B.7. An emissions unit is a process or activity, such as generating electricity or refining oil, that causes air pollution. Available control options are those air pollution control technologies or techniques with a practical potential for application to the emissions unit and the regulated pollutant under evaluation. Id. at B.5. The term available is used . . . to refer to whether the technology can be obtained by the applicant through commercial channels or is otherwise available within the common sense meaning of the term. In re: Maui Electric Company, PSD Appeal No. 98-2 (EAB September 10, 1998), at 29-30 (quoting NSR Manual at B.17). In keeping with the stringent nature of the BACT requirement, EPA has repeatedly emphasized that available

is used in the broadest sense under the first step and refers to control options with a practical potential for application to the emissions unit under evaluation. . . . The goal of this step is to develop a comprehensive list of control options.

In re: Knauf Fiber Glass, PSD Appeal Nos. 98-3 98-20 (EAB February 4, 1999), at 12-13 (quoting NSR Manual at B.5) (emphasis added by EAB); see also In re: Steel Dynamics, Inc., PSD Appeal Nos. 99-4 and 99-5 (EAB June 22, 2000), at 29 n.24 (citing Knauf with approval); NSR Manual at B.10 ( The objective in step 1 is to identify all control options with potential application to the source and pollutant under evaluation. ); id. at B.6 (emphasizing that a proper Step 1 list is comprehensive ). The broad reading of available is intended to ensure that prior to the selection of a proposed BACT, all potential sources of information have been reviewed by the source to ensure that the list of potentially applicable control alternatives is complete (most importantly as it relates to any more effective control options than the one chosen) and that all considerations relating to economic, energy and environmental impacts have been addressed. Id. at B.55.

Although Peabody purports to follow the top-down process for selecting BACT in its permit application, the company fails, in the first step of its analysis, to identify all available options for controlling the release of air pollutants from the Thoroughbred facility. Where Peabody has (with great reluctance and after much delay) acknowledged the existence of control options that would limit Thoroughbred s air pollution more effectively than the selected means, the company has failed to recognize the availability of those options, or to justify its refusal to implement them.2 Unfortunately, DAQ has incorporated Peabody s illegitimate BACT selection into the Thoroughbred permit. Finalizing that permit would contravene federal and state law, necessitating a remand. See In re: Knauf Fiber Glass, PSD Appeal Nos. 98-3 98-20 (EAB February 4, 1999), at 28 ( Incomplete BACT analyses are grounds for remand. ); see also In re: Inter-Power of New York, Inc., PSD Appeal Nos. 92-8 and 92-9 (March 16, 1994), at 144 ( Where a more stringent alternative is not evaluated because the permitting authority erred in not identifying it as an available option, a remand is usually appropriate, because a proper BACT analysis requires consideration of all potentially available control technologies. ).3

A. Circulating Fluidized Bed Technology

In the application materials that Peabody has submitted to DAQ, the company fails to acknowledge the availability of circulating fluidized bed combustion technology ( CFB ) as a means of controlling Thoroughbred s air pollution. When the National Parks Service attempted to alert Peabody to the existence of a full-scale, operating coal-fired CFB facility that was achieving a lower PM emissions limitation than Peabody proposed for Thoroughbred, Peabody shot back with the following snide response:

The NPS recognizes the validity of our comment of September 6, 2001 that the Northampton Generating Facility is a fluidized bed boiler while TGS is a pulverized coal boiler. Apparently, the NPS fails to understand the fundamental differences between a fluidized bed boiler and pulverized coal boiler. They also fail to understand the differences between the fuels used. North Hampton uses an anthracite coal available in Pennsylvania while TGS, a mine mouth generating station, will use Illinois basin coal. . . . This is the best available control technology. We see nothing in NPS comments to dispute this other than their wish that the TGS emissions would be the same as that for the fundamentally different North Hampton facility.

Response to Comments of the National Parks Service (December 10, 2001), at 2. The passage quoted above not only reflects a great deal of arrogance and lack of respect on Peabody s part, it also reveals that the company is either ignorant of the law or simply content to disregard it. The Parks Service undoubtedly is aware that the Northampton Generating Facility is a fluidized bed boiler while TGS is a pulverized coal boiler. What the Parks Service also undoubtedly knows is that the difference is irrelevant to the first step of the top-down BACT selection process, which Peabody purports to follow. EPA regulations define major stationary sources by their product or purpose (e.g., steel mill, municipal incinerator, taconite ore processing plant, etc.), not by fuel choice. In the Matter of Hibbing Taconite Company, PSD Appeal No. 87-3 (EAB July 19, 1989), at 12. Where the emissions unit is a power plant, EPA has expressed skepticism with the notion that BACT for a proposed coal-fired facility could be a natural gas-fired boiler, see NSR Manual at B.13 B.14. EPA has never taken the position, however, that the consideration of lower-sulfur coal or alternative techniques for burning coal would be tantamount to redefining the source and thus not required in the BACT analysis of a proposed pulverized-coal-fired power plant. Indeed, the definition of BACT found in the Clean Air Act expressly includes clean fuels and innovative fuel combustion techniques. 42 USC § 7479(3).

In short, neither the Clean Air Act nor Kentucky s regulations care that Peabody wants to burn its coal in a process other than CFB. Nor do those laws care that Peabody wants to sell extraordinarily dirty coal from a mine in Muhlenberg County. The Clean Air Act and Kentucky s regulations prohibit Peabody from burning a single ounce of coal until the company proves that it will implement the most effective technology available for limiting air pollution from any type of combustion of any type of coal. The sooner Peabody learns that lesson, the sooner it can start complying with the law.

Peabody apparently does recognize EPA s RACT/BACT/LAER Clearinghouse ( RBLC ) as a source of information on available emission control technologies. Revised Thoroughbred Permit Application at 4-4. NRDC staff recently searched the RBLC for control technologies implemented in plants generating electricity from coal combustion. This search yielded eleven full-scale coal-fired power plants in this country utilizing CFB. The information listed in the RBLC under these facilities indicates that if Peabody used CFB in tandem with some of the add-on controls it proposes for Thoroughbred,4 the facility might emit PM, SO2, NOx, CO, and VOC at rates lower than the company has proposed to achieve.

Neither Peabody nor DAQ can argue that CFB is not available. For one thing, EPA has already identified CFB as a proven control technology. Sur Contra la Contaminacion v. EPA, 202 F.3d 443, 447 (1st Cir. 2000). For another, DAQ has itself issued draft permits for coal-fired CFB units.5 The agency recently issued draft permits to Kentucky Power for two separate coal-fired CFB units. In fact, Kentucky Power has recently proposed three new CFB units in this country, all of which would boast SO2 emission rates over 20% below Thoroughbred s proposed rate.

In 1994, Inter-Power of New York proposed to construct a coal-fired power plant utilizing CFB. In so doing, the company identified a number of coal-fired CFB facilities already in existence,6 several of which used high-sulfur coal as fuel.7 In re: Inter-Power of New York, Inc., PSD Appeal Nos. 92-8 and 92-9 (EAB March 16, 1994), at 137, 138, 138 n.12. Three years ago, the EAB considered the application of AES to construct two coal-fired CFB boilers in Puerto Rico. In re: AES Puerto Rico, L.P., PSD Appeal Nos. 98-29, 98-30, 98-31 (EAB May 27, 1999), at 3. By combining CFB with limestone injection, low sulfur coal, 8 and a dry scrubber, AES was able to commit to an SO2 emission rate limit of 0.022 lbs/MMBTU, id. at 12, which is 87% lower than Peabody s proposed SO2 emission rate of 0.167 lbs/MMBTU. The coal-fired Northampton Generating Station in Pennsylvania (which Peabody apparently finds particularly threatening) combines CFB with a baghouse to achieve a PM emission rate that is 44% lower than the proposed rate for Thoroughbred. Late last year, JEA began operating a CFB unit, called the Northside Generating Station, in Jacksonville, Florida. The unit is capable of burning petroleum coke or coal. When it is burning coal as when it is burning coke the facility will be subject to its permitted maximum emissions rates. With respect to PM and SO2, those rates are lower (4% lower for PM; 1% lower for SO2) than the levels at which Peabody seeks to have Thoroughbred permitted, and Northside s NOx permitted rate is no higher than Thorougbred s. See Florida DEP File No. 0310045-003-AC, Permit No. PSD-FL-265.

In light of the above, CFB is clearly an available control option in the context of the BACT analysis that Peabody was required to perform. Peabody was thus under an obligation to examine the technical and economic feasibility, as well as the environmental desirability, of implementing CFB in tandem with other control technologies at Thoroughbred. Peabody is apparently stunned that the law requires it to perform such an analysis. Response to Comments of the National Parks Service (December 10, 2001), at 2. Stunning though it may be, that is what the law requires. Because Peabody has not performed the required analysis, the company has not demonstrated that upon commencement of operation, Thoroughbred would be subject to the best available control technology for each regulated pollutant that it would emit in significant amounts. If, notwithstanding this defect in Peabody s application, DAQ grants a final permit for the facility, the agency will have run afoul of both 42 USC § 7475(a)(4) and Section 9, Subsection 2, of 401 KAR 51:017.

  1. Coal Washing

In neither its original nor its revised application does Peabody acknowledge the existence of coal washing as a potential control technology for Thoroughbred this despite the explicit inclusion of fuel cleaning in the definition of BACT found in the Clean Air Act, EPA s regulations, and Kentucky s regulations. 42 USC § 7479(3); 40 CFR § 51.166(b)(12); 401 KAR 51:017, Section 1(8). After repeated urging by EPA, Peabody finally, in December 2001, acknowledged the availability of coal washing. Response of Thoroughbred Generating Company to EPA Region 4 Comments (December 12, 2001), at 9-10. Peabody nevertheless refuses to implement coal washing, on two grounds.

First, Peabody asserts that coal washing would be uneconomical. In support of this claim, Peabody represents that washing would increase Thoroughbred s operating costs by between $5 and $6 per clean ton of coal. Id. at 10. Assuming Peabody s cost estimate is accurate, it does not demonstrate that coal washing is economically infeasible.

For purposes of selecting BACT, [a] control option is not considered infeasible simply based upon the cost of applying that option to the proposed project. In re: Knauf Fiber Glass, PSD Appeal Nos. 98-3 98-20 (EAB February 4, 1999) (citing NSR Manual at B.19); see also Memorandum from John Calcagni, Director of EPA Air Quality Management Division, to EPA regional air directors (June 13, 1989), at 7 ( [I]t is not sufficient to reject a control technology merely asserting that it is too costly. ).

BACT is required by law. Its costs are integral to the overall cost of doing business and are not to be considered an afterthought. Consequently, for control alternatives that have been effectively employed in the same source category, the economic impact of such alternatives on the particular source under review should not be nearly as pertinent to the BACT decision making process as the average and, where appropriate, incremental cost effectiveness of the control alternative. Thus, where a control technology has been successfully applied to similar sources in a source category, an applicant should concentrate on documenting significant cost differences, if any, between the application of the control technology on those other sources and the particular source under review.

NSR Manual at B.31. In other words, if the cost of reducing emissions with the top control alternative, expressed in dollars per ton, is on the same order as the cost previously borne by other sources of the same type in applying that control alternative, the alternative should initially be considered economically achievable, and therefore acceptable as BACT. Id. at B.44.9

Peabody has made no attempt to refute the fact that, for many years, companies have been effectively employing coal washing as a method of limiting air pollution at a large number of coal-fired power plants in this country.10 Moreover, Peabody has made no effort to show that the incremental cost it assigns to the implementation of coal washing at Thoroughbred is significantly higher than the average cost borne by the many coal-fired power plants employing the control measure. Finally, Peabody has failed to account for the economic benefits to Peabody of implementing coal washing, one of those being the cost savings that would result from having less sulfur and ash to remove from the flue gas control system. Therefore, Peabody cannot avail itself of the economic infeasibility justification for refusing to implement coal washing at Thoroughbred.

The second basis that Peabody offers for its refusal to implement coal washing is its assertion that implementing coal washing would create environmental concerns. Response of Thoroughbred Generating Company to EPA Region 4 Comments (December 12, 2001), at 10. While collateral environmental impacts are relevant to the BACT determination, their relevance is generally couched in terms of discussing which available technology, among several, produces less adverse collateral effects, and, if it does, whether that justifies its utilization even if the technology is otherwise less stringent. In re: Old Dominion Electric Cooperative, 3 EAD 779, 792 (EPA Administrator 1992); see also NSR Manual at B.50 B.53. Peabody does not propose any alternative measure for achieving the dramatic air pollution reductions that coal washing would effect over and above the technologies that Peabody has selected.11 Moreover, Peabody makes no effort to weigh the risks of collateral environmental damage attendant to coal washing against the environmental benefits that its implementation would bring. Also, it appears that Peabody indulges in some exaggeration of the risks associated with coal washing; some portion of the environmental impact Peabody assigns to coal washing would exist in any event on account of the wet scrubbers that Peabody plans to install at Thoroughbred. Finally, the company makes much of the risk of collateral environmental harms such as the failure of impoundment structures that would not occur as long as Peabody obeyed state and federal environmental laws and held itself to a standard of reasonable care. These observations lead to the conclusion that Peabody has failed to make the demonstration of adverse environmental impacts necessary to justify its refusal to select coal washing as a control measure for Thoroughbred.

Because Peabody has failed to justify its refusal to implement coal washing, which has a proven track record of being highly effective in controlling air pollution, the application should be remanded to Peabody with the instruction that the company implement coal washing. If DAQ instead finalizes the draft permit, it will be in violation of 42 USC § 7475(a)(4) and Section 9, Subsection 2 of 401 KAR 51:017.

C. Lower-Sulfur Coal

Peabody proposes to burn coal with five times the sulfur content per unit of heating value of much of the coal currently being burned in Kentucky. Notwithstanding this fact, and as the company s December 10 response to the Parks Service indicates, Peabody has refused to acknowledge the availability of the use of lower-sulfur coal as a measure for limiting the air pollution that Thoroughbred will generate.

The phrase, clean fuels was added to the definition of BACT in the 1990 Clean Air Act Amendments. . . . EPA described the amendment to add clean fuels to the definition of BACT at the time the Act passed, as . . . codifying its present practice, which holds that clean fuels are an available means of reducing emissions to be considered along with other approaches in identifying BACT level controls. Letter from William G. Rosenberg, Assistant Administrator for Air and Radiation, to Henry A. Waxman, Chairman, Subcommittee on Health and Environment, House Committee on Energy and Commerce (Oct. 17, 1990) . . . . EPA policy with regard to BACT has for a long time required that the permit writer examine the inherent cleanliness of the fuel.

In re: Inter-Power of New York, PSD Appeal Nos. 92-8 and 92-9 (EAB March 16, 1994), at 134 (citations omitted). [I]n deciding what constitutes BACT, the Agency must consider both the cleanliness of the fuel and the use of add-on pollution control devices. Id. (citing Hawaiian Commercial & Sugar Company, PSD Appeal No. 92-1 (EAB July 20, 1992), at 5 n.7. This requirement applies by virtue of the 1990 Clean Air Act amendments, which expressly require consideration of clean fuels in selecting BACT, and by virtue of prior decisions of the Administrator, which state that a proper BACT analysis must include consideration of cleaner forms of the fuel proposed by the source. Id. at 145 (citation omitted). A proper BACT analysis will not always yield a requirement that an applicant for a coal-fired power plant burn less dirty coal than it had originally intended to use. The lesson of Inter-Power, however, is that such an applicant must, at the very least, either acknowledge the availability of less dirty coal or meet a heavy burden of proving that such coal is not available.

Peabody has denied the availability of lower-sulfur coal without first meeting its heavy burden to prove that such coal is not available in the context of the BACT provisions in the Clean Air Act, EPA s regulations, and Kentucky s regulations. That failure has precluded the company from demonstrating that Thoroughbred would use the best available control technology for several regulated air pollutants. If, notwithstanding the absence of that demonstration, DAQ finalizes the draft permit, it will be in violation of 42 USC § 7475(a)(4) and Section 9, Subsection 2 of 401 KAR 51:017.

IV. Failure to Demonstrate That Thoroughbred Will Not Adversely Affect Air Quality Related Values in Mammoth Cave National Park

Peabody proposes to operate Thoroughbred 74 kilometers west of Mammoth Cave National Park. Air pollution already degrades visibility at Mammoth Cave more than at any other Class I area, and visibility at the park is only getting worse. Ozone contamination, acid and mercury deposition, and nitrogen enrichment all attributable to air pollution are already harming the park s sensitive plant and animal species, twelve of which are listed as threatened or endangered under the Endangered Species Act.

The prevailing winds will carry air pollution from Thoroughbred to Mammoth Cave. At the volumes at which DAQ proposes to permit Peabody to pollute, Thoroughbred would exacerbate each of the negative impacts identified in the previous paragraph. As a result, the air quality related values ( AQRVs ) of the park would be degraded significantly.

The federal land manager for Mammoth Cave has opposed the issuance of a permit on the basis of the application materials that the land manager has had a reasonable opportunity to review. In addition to questioning Peabody s air quality impact analysis, the land manager has requested that DAQ require Peabody to correct the defects in its BACT analysis, and that DAQ issue an operating permit for only one of Thoroughbred s proposed 750 MW units. Letter from Joseph Claridge to Allan Elliott (February 14, 2002). I ask that DAQ not issue a final permit unless and until the land manager has determined that Peabody has demonstrated that operation of Thoroughbred would not further degrade AQRVs at Mammoth Cave. I also urge you to defer to the land manager s assessment of the steps that must be taken to avoid further harm to the visibility, flora, and fauna at Mammoth Cave. Issuing a final permit under conditions that the land manager opposes would violate the policy of both the United States and the Commonwealth of Kentucky to safeguard AQRVs in Class I areas. It would also increase the risk for Peabody and DAQ of liability under the Endangered Species Act.

V. Failure to Demonstrate That Peabody Has Performed a Complete Air Quality Impact Analysis

Section 12, Subsection 1, of 401 KAR 51:017 declares that [a]n application for a permit under this administrative regulation shall contain an analysis of ambient air quality in the area that the major stationary source . . . will affect for . . . each pollutant that it will have the potential to emit in a significant amount . . . . With respect to pollutants for which a national ambient air quality standard exists, Subsection 1 declares that the analysis shall contain continuous air quality monitoring data gathered to determine if emissions of that pollutant will cause or contribute to a violation of the standard or a maximum allowable increase. 401 KAR 51:017, Section 12(1)(c).

The required continuous air quality monitoring data shall have been gathered over a period of at least one (1) year and shall represent at least the year preceding receipt of the application, except that, if the cabinet determines that a complete and adequate analysis can be accomplished with monitoring data gathered over a period shorter than one (1) year, but not less than four (4) months (e.g., with data obtained during a time period when maximum air quality levels can be expected), the required data shall have been gathered over at least that shorter period.

401 KAR, Section 12(1)(d).

Peabody claims that only the trigger level for SO2 pre-construction monitoring will be exceeded. With respect to SO2, Peabody proposes to meet the requirement for air quality monitoring data that is current and continuous with out-of-date data from a distant monitor. Specifically, Peabody has presented data collected over the years, 1993-1995, from a TVA monitor located nearly twenty kilometers away from the proposed Thoroughbred site. Letter from Dwain Kincaid to John Hornback (September 8, 2000); Fax from Bryan Handy to Ben Markin (December 19, 2001). Seven-year-old data does not satisfy the requirement for continuous monitoring data from the period immediately preceding receipt of the permit application. See id. Furthermore, the TVA monitor is too distant to provide data from which one could reliably determine whether emissions from Thoroughbred will violate a NAAQS or maximum allowable increase. See 401 KAR 51:017, Section 12(1)(c).

Notwithstanding the inadequacy of the monitoring data Peabody submitted, DAQ determined that the data from the TVA monitor can be used in lieu of pre-construction monitoring. Letter from Bryan Handy to Dwain Kincaid (September 22, 2000). DAQ claimed to have reached its determination on the basis of criteria found in the NSR Manual. Id. The data from the TVA monitor does not meet those criteria, however, because it monitors the air twenty kilometers away from the Thoroughbred site, is of poor quality12 and, most importantly, is not current. See NSR Manual at C.19. Under the very standards DAQ claims to follow, then, the TVA monitor fails to qualify as an adequate substitute for pre-construction monitoring. Before DAQ can properly issue a pre-construction permit for Thoroughbred, Peabody must conduct at least four months of continuous monitoring at the site and then submit a revised permit application. See 401 KAR § 51:017, Section 12(1)(d) (requiring continuous monitoring data for not less than four (4) months immediately preceding submission of the application.).

VI. Failure to Demonstrate That Thoroughbred Will Use the Maximum Achievable Control Technology for Hazardous Air Pollutants

The document that Peabody submitted to DAQ on December 21, 2001 under the heading, Case-by-Case MACT for Thoroughbred Generating Station, does not qualify as a case-by-case MACT analysis such to satisfy the requirements of Section 112(g) of the Clean Air Act and 40 CFR § 63.43(d), (e). Those provisions require Peabody to do more than simply retype its deficient BACT analysis. Moreover, based on the emission estimates that Peabody has submitted to DAQ, the MACT provisions require the company to conduct and submit a full case-by-case MACT analysis for each of the following hazardous air pollutants: mercury, hydrogen chloride, hydrogen fluoride, metallic compounds (represented by arsenic, beryllium, chromium and manganese) and volatile organic HAP (represented by acetaldehyde, benzyl chloride, isophorone, methyl chloride, methyl ethyl ketone and propionaldehyde).

VII. Failure to Include a Compliance Assurance Monitoring Plan

EPA s regulations require that a proposed large emissions unit s application for an operating permit include a monitoring plan that satisfies the requirements of 40 C.F.R. § 64.3. 40 CFR § 64.5(a). Peabody has provided nothing more than a sketch of a monitoring plan, which it says it will submit a year or so after Thoroughbred begins emitting air pollution. Response to USEPA General Application Comments (December 12, 2001), at 3-5. Peabody s application for an operating permit is therefore incomplete. DAQ appears to recognize this. In its statement of basis for the draft permit, DAQ states that the applicant shall submit a plan as required by 40 CFR 64 prior [to] commencement of operation. Statement of Basis at 10. It should go without saying that Peabody must submit a monitoring plan before commencing operations at Thoroughbred. What DAQ does not appear to recognize is that the draft operating permit should not have issued before the applicant had even submitted a monitoring plan for DAQ s review. I request that DAQ withdraw the draft permit and remand the permit application to Peabody with notification that the application will not be deemed administratively complete until it includes a full monitoring plan that contains all of the required elements identified in 40 CFR § 64.

Sincerely,

David McIntosh

David McIntosh

Attorney

Washington, DC

(202) 289-2426

dmcintosh@nrdc.org

cc: Stan Krivo, EPA Region IV

Jim Little, EPA Region IV

Greg Worley, EPA Region IV

César Zapata, EPA Region IV

1 DAQ s explanation must be reasoned and specific. States do not have unfettered discretion to reject an FLM s adverse impact determination. . . . If a state determines that an FLM has not satisfactorily demonstrated an adverse impact on [air quality related values] from the proposed facility, the state must provide a rational basis for such a conclusion, given the FLMs affirmative responsibility and expertise regarding the Class I areas within their jurisdiction. . . . Arbitrary and capricious rejections of adverse impact determinations are not sustainable. In the Matter of Hadson Power 14 Buena Vista, 4 EAD 258, 276 (EAB October 5, 1992) (citations and internal quotation marks omitted).

2 See In the Matter of Pennsauken County, New Jersey Resource Recovery Facility, PSD Appeal No. 88-8 (EAB November 10, 1988), at 11-12 ( The applicant s BACT analysis . . . does not contain the level of detail and analysis necessary to satisfy the applicant s burden . . . of showing that [the] technology [in question] is technically or economically unachievable for this source. The applicant s assertions that the technology has not yet been demonstrated to be efficient, reliable, and cost effective in controlling NOx are merely conclusory. ); see also NSR Manual at B.8 B.9 ( In the event that the top candidate is shown to be inappropriate, due to energy, environmental, or economic impacts, the rationale for this finding should be documented for the public record. ).

3 Substituting Peabody s name and Thorougbred s characteristics for Knauf s name and the characteristics of its proposed plant reveals the great extent to which the BACT analysis underlying DAQ s draft permit for Thoroughbred will necessitate a remand in the event the agency attempts to finalize the permit: Although the permit application describes the conclusion of [Peabody s] BACT analysis, it lacks a clearly ascertainable basis for the conclusion. The overall discussion is cursory and does not explain how the decision satisfies the regulatory criteria. The basis for the conclusion might have been ascertainable had [Peabody] documented the preliminary steps of a BACT determination as outlined in the NSR Manual . . . . As it stands, the permit application does not include a listing of all possible control options . . . or a technical feasibility analysis. Without this type of information, it is impossible to know if [Peabody] really adopted the most stringent option available as BACT. In re: Knauf Fiber Glass, PSD Appeal Nos. 983 98-20 (EAB February 4, 1999), at 19.

4 Combinations of inherently lower-polluting processes/practices (or a process made to be inherently less polluting) and add-on controls are likely to yield more effective means of emissions control than either approach alone. Therefore, the option to utilize a[n] inherently lower-polluting process does not, in and of itself, mean that no additional add-on controls need be included in the BACT analysis. These combinations should be identified in step 1 of the top down process for evaluation in subsequent steps. NSR Manual at B.14.

5 [A] permit requiring the application of a certain technology . . . usually is sufficient justification to assume the technical feasibility of that technology . . . . NSR Manual at B.7.

6 A control technique is considered available . . . if it has reached the licensing and commercial sales stage of development. NSR Manual at B.18.

7 In general, a commercially available control option will be presumed applicable if it has been or is soon to be deployed (e.g., is specified in a permit) on the same or a similar source type. NSR Manual at B.18.

8

9 Cost-effectiveness usually involves two considerations. First, the permit writer must evaluate whether the total cost per ton of control for the pollutant is within the range of costs being borne by similar sources also charged with controlling that pollutant. Second, the permit writer should evaluate the comparative cost-effectiveness of various control options to determine their incremental cost-effectiveness. In re: Inter-Power of New York, PSD Appeal Nos. 92-8 and 92-9 (EAB March 16, 1994), at 135.

10 Approximately 77% of eastern and midwestern bituminous coal shipments are cleaned to meet customer specifications on heat, ash, and sulfur content. Study of Hazardous Air Pollutant Emissions from Electric Utility Steam Generating Units: Final Report to Congress, Vol. I (EPA 453/R-98-004a) (February 1998).

11 Reports commissioned by the U.S. Department of Energy have concluded that 40-95% of the pyretic sulfur in coal can be removed with washing. If Peabody could reduce the pyretic sulfur in its coal by 90% before burning the coal, it could cut its currently-proposed SO2 emission rate in half.

12 For one thing, the values selected do not appear to be the maximums measured for respective averaging times in the period in which the monitor was operating.



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