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

State Decision Challenged  Posted: December 5, 2002

COMMONWEALTH OF KENTUCKY

NATURAL RESOURCES AND

ENVIRONMENTAL PROTECTION CABINET

FILE No. DWM-25864-037

CHARLES WALTERS, PETITIONER

V. PETITIONER'S CROSS-MOTION AND MEMORANDUM IN SUPPORT

OF A RECOMMENDATION OF SUMMARY DISPOSITION AND

RESPONSE IN OPPOSITION TO MOTION OF KENTUCKY PIONEER ENERGY LLC FOR SUMMARY DISPOSITION

NATURAL RESOURCES AND

ENVIRONMENTAL PROTECTION CABINET

And

KENTUCKY PIONEER ENERGY, LLC RESPONDENTS

* * * *

Comes the Petitioner, Charles Walters, by counsel, and files this Cross-Motion and Memorandum In Support of a Recommendation of Summary Disposition in favor of Petitioner and in opposition to the Motion filed by Kentucky Pioneer Energy LLC for Summary Disposition.

For the reasons stated herein, Petitioner respectfully requests that the Hearing Officer enter a report and recommendation for summary disposition in favor of Petitioner and against Respondents, and that the Hearing Officer enter a recommendation denying the motion of Respondent Kentucky Pioneer Energy LLC (KPE) for summary disposition.

In support of the motion for a recommendation of summary disposition in favor of Petitioner, Petitioner states that there is no issue as to any material fact and that Petitioner is entitled to a recommendation of summary disposition as a matter of law.

STATEMENT OF ISSUES PRESENTED

1. Did the Cabinet act in a manner that is arbitrary, capricious and inconsistent with law in determining that proposed Kentucky Pioneer Energy site is not a "waste site or facility" required to obtain a waste permit for the management of municipal solid waste-based "fuel" at the proposed electricity generation plant?

2. Did the Cabinet act in a manner that is arbitrary, capricious and inconsistent with law in determining that the proposed waste-based fuel was a "refuse-derived fuel"?

3. Did the Cabinet act in a manner that is arbitrary, capricious and inconsistent with law in determining that the proposed Kentucky Pioneer Energy site was a "recovered material processing facility?"

INTRODUCTION

By letter dated October 9, 2000, Global Energy, Inc. (Global) requested "the Department's concurrence that the Kentucky Revised Statutes and Kentucky Administrative Regulations as they relate to waste permitting do not apply to the Kentucky Pioneer Energy proposed integrated gasification combined cycle (IGCC) power plant in Clark County." Global Energy, Inc. has proposed an electric power generation plant for Clark County, Kentucky, named the "Kentucky Pioneer Energy" plant, which will use a "synthesis gas" derived from thermal treatment of waste-derived material and coal, to power gas turbines to generate electricity.

In support of the "Request for Concurrence Regarding Non-Applicability of KRS 224.40", Global provided a two-page letter, with a six-page attached "Analysis of the Non-Applicability of KRS 224.40 to the Kentucky Pioneer Energy IGCC Project" and a one-page schematic of the "proposed IGCC Process." That request and attached analysis are attached as Exhibit A.

The applicant later submitted additional material to the Cabinet consisting of excerpts from two papers regarding the production of dioxin compounds during the process of "gasification" of chlorinated fuels. No other additional material appears to have been submitted to the Cabinet relating to the applicability of the state waste permitting statutes and regulations to the proposed plant, other than public comment, including comments submitted by the Kentucky Resources Council, Inc. Those comments and supporting material referenced in those comments are attached as Exhibit B.

According to the October 9, 2000 letter, Global sought "concurrence regarding non-applicability of KRS 224.40" for the following reasons:"

1. The gasification and gas clean-up process is a "recovered material

processing facility" under definition (21) of KRS 224.01-010.

2. Refuse-Derived Fuel (RDF) described in definition (23) is a "recovered

material" as referenced in (21), and is a purchased feed product

manufactured off-site and brought to the site for gasification.

3. Definition (31)(a) excludes "recovered material" from the definition of

"waste". The facility itself is receiving and managing a product with beneficial

energy content, and is not disposing of any waste material. These together

excluded the facility from the definition of "waste site or facility." (27).

4. Definition (41) excludes "recovered material processing facilities" from

the meaning of "Solid Waste Management Facility."

5. These together exclude the material and the process from definitions

(39) and (40) which are "Solid Waste Management" and "Solid Waste

Management Area."

6. The definition "Municipal Solid Waste Disposal Facility" (15) includes

facilities that "burn" municipal solid waste. However, as explained above,

the facility does not utilize any material considered solid waste. Further,

gasification is not a combustion process.

October 9, 2000 Letter From Global Energy to Robert H. Daniell, Exhibit A, at pp. 1-2.

"To expand on the above points" Global provided a process description and a summary of their analysis of the state waste statutes. Id., p. 2.

On June 27, 2002, the Cabinet, through Director of the Division of Waste Management Robert H. Daniell, issued a final determination to Dwight Lockwood, P.E., Manager of Global Energy, Inc., concerning the "applicability of the solid waste statutes and administrative regulations to the proposed gasification of municipal solid waste (MSW) pellets at the planned Integrated Gasification Combined Cycle plant near Trapp, Kentucky." The determination consisted of a two-page letter which determined that the municipal solid waste pellets proposed to be blended with coal and "gasified" to produce a synthetic gas for combustion in the power plant, were a "refuse derived fuel" (RDF); that the power pant project would be a "recovered material processing facility" and that "no waste permit is needed for the gasification process." That determination letter is attached as Exhibit C.

This appeal challenges the June 27, 2002 determination by the Cabinet. This appeal arises under the provisions of KRS 224.10-420(2), which provides a right to an administrative hearing by any person considering himself aggrieved by the making of any final determination by the Respondent Natural Resources and Environmental Protection Cabinet (Cabinet). The determination complained of was made on June 27, 2002, and the Petition for Review as filed with the Division for Waste Management by Charles Walters on July 26, 2002 and was thus timely filed.

What is at issue in this appeal is whether the Cabinet erred in determining, on the basis of the information supplied in the October 9, 2000 submittal, that "the RDF is a recovered material[;]" that the "clean-coal project you describe in your letter will be considered a recovered material processing facility[;]" and that "no waste permit is needed for the gasification process[.]"

What is at stake is whether the project proponent must, prior to receiving, managing, and thermally treating up to 1 million tons annually of processed solid waste,1 must first seek a waste permit, and whether the activity is one that must receive a determination of consistency for the project with the solid waste plan from the solid waste management governing body of Clark County, Kentucky, and potentially be subject to a county fee on the management of the waste material.2

SUMMARY OF ARGUMENT

The question of whether the proposed coal and waste-fueled electricity generating facility is subject to the requirements of KRS Chapter 224 as a waste site or facility is of significance to the residents of Trapp and of Clark County, since if exempted from the ambit of the KRS Chapter 224.40, the planned importation of processed municipal solid waste from other states representing (according to Global) the equivalent of “roughly half of the residential waste generated in the entire Commonwealth of Kentucky” will not be subject to scrutiny by the local governing body of Clark County for consistency with that county’s approved solid waste plan; nor will the storage, handling, and management of the material be subject to the environmental performance standards of 401 KAR 47:030.

The Cabinet's determination that the material described in the October 9, 2000 letter was "RDF" or refuse derived fuel, under KRS Chapter 224, was arbitrary and capricious and otherwise inconsistent with law and clearly erroneous, since the information available to the Cabinet was insufficient to justify that finding, and further because the representations of the applicant made in response to the federal air permitting process contradicted the Cabinet's conclusion. The waste-based material does not, as a matter of fact and law, constitute "refuse-derived fuel" as that term is defined at KRS 224.01-010, since plastics and paper will not be extracted for recycling but will be retained for energy value in the waste.

The Cabinet's determination that the site need not obtain a waste permit was contrary to law in that the receipt, storage, handling, loading and thermal treatment of the municipal solid waste-based fuel is not exempted from the definition of "waste site or facility." The material is not a "recovered material" nor a "refuse derived fuel," and the facility is not engaged in processing of any material, and certainly not processing "recovered material." Instead, the proposed activity is solid waste management and the facility a waste site or facility required to be permitted under KRS 224.40-305, and is a "municipal solid waste disposal facility" required to obtain local government concurrence prior to permitting under KRS 224.40-315.

ARGUMENT

The current "face" of management of solid waste in Kentucky was substantially defined in the 1991 Special Session of the Kentucky General Assembly. When enacted in 1991, Senate Bill 2 substantially revised state and local solid waste management, requiring of local communities that they plan for the proper management of solid waste generated within their borders and promising, in return, that the local “governing body” responsible for solid waste planning would have the ability to control the manner and extent to which waste generated outside of the boundary of that planning unit would be managed and disposed of within the planning area.

KRS Chapter 224 is a remedial statute, to be given a liberal construction with a view towards promoting their objects and carrying out the intent of the statute. Roland v. Kentucky Retirement Systems, Ky. App., 52 S.W.3d 579 (2001). Exemptions from the scope of a remedial statute are to be narrowly construed. Id.

Whether the proposed importation of the pelletized municipal solid waste into Clark County is subject to a waste permit and to a determination of consistency with the local solid waste plan hinges on whether the facility is subject to permitting under KRS Chapter 224.40. The issues are matters of law, in which there is no room for agency "interpretation" where the statute is clear. Alexander v. S & M Motors, Ky., 28 S.W.3d 303, 305 (2000). Each part of the law is to be given significance and effect, and the statute is to be construed so that no part if rendered meaningless. Kidd v. Board of Education of McCreary County, Ky.App., 29 S.W.3d 374 (2000).

KRS 224.40-305, the statutory provision captioned "Necessity of permit," provides in full that:

No person shall establish, construct, operate, maintain, or

permit the use of a waste site or facility without first having

obtained a permit from the cabinet pursuant to this chapter

and administrative regulations adopted by the cabinet.

The threshold question, for the purposes of determining whether a permit is necessary under KRS Chapter 224.40, is whether the proposed importation, collocation, storage, transfer and thermal treatment of this municipal solid waste-derived material through "gasification" in order to generate "syngas" to power combustion turbines, makes the proposed plant a "waste site or facility." It is apparent that the facility is a waste site or facility and is otherwise not exempted from the obligation to obtain a waste permit for the management of the waste-derived fuel.

I. The Proposed Facility is a "Waste Site or Facility."

The General Assembly defined "waste site or facility" under KRS 224.01-010(27) to mean:

any place where waste is managed, processed or disposed of

by incineration, landfilling or any other method, but does not

include . . . a recovered material processing facility[.]

There is no serious argument that the material to be blended with coal in order to produce the "synthesis gas" will be "managed" at the site.3 The material is referred to by Global variously as "carbon-based feedstock", Global letter at 1; "refuse-derived fuel (RDF); Global Analysis at 1; a "dense pelletized fuel product manufactured offsite out of MSW [municipal solid waste]; Global Analysis at 1.

The dispute centers instead on how the material is defined under Kentucky law and more specifically whether it is "waste" so as to fall within the definition of "waste site or facility" and whether the site or facility is a "recovered material processing facility" so to be exempted from that definition.

A review of KRS Chapter 224 reflects both that the municipal solid waste-derived material is a "waste" within the meaning of the applicable definitions, and that the proposed site is not exempt from the definition of "waste site or facility" as a "recovered material processing facility."

A. The proposed municipal solid waste fuel is a "waste".

The requirement to obtain a waste permit under KRS 224.40-305 attaches to a "waste site or facility" that is engaged in the management, processing or disposal of "waste." "Waste" is defined by the General Assembly in KRS 224.01-010(31) to mean both hazardous and solid waste, and in relevant part, "waste" is defined to mean:

(a) "Solid waste" means any garbage, refuse, sludge, and

other discarded material. . . resulting from industrial, commercial,

. . . and from community activities[.]

The definition includes a number of exclusions, one of which excludes "recovered material." Global argued in its October 9, 2000 letter that its proposed waste-derived fuel falls within the ambit of that exemption, asserting that "Definition (31)(a) excludes "recovered material" from the definition of "waste[ ]". Exhibit A, p. 1.

In truth, the waste-derived fuel proposed to be used by Global is not a "recovered material" as that term is defined by KRS 224.01-010(20) and hence is not exempted from the definition of "waste."

"Recovered material" is defined in KRS 1224.01-010(20) to mean

those materials . . . which known current use, reuse or

recycling potential, which can be feasibly used, reused or recycled,

and which have been diverted or removed from the solid waste

stream for sale, use, reuse, or recycling, whether or not requiring

subsequent separation and processing[.]

While the general definition could be read to cover any waste-derived fuel, the General Assembly intentionally excluded from the definition of "recovered material" the diversion of waste materials for the purpose of energy recovery or combustion, unless that diverted material qualified as a "refuse-derived fuel (RDF)".

The definition of "recovered material" continued:

Recovered material . . . does not include materials diverted or

removed for purposes of energy recovery or combustion except

refuse-derived fuel (RDF), which shall be credited as a recovered

material in an amount equal to that percentage of the municipal

solid waste received on a daily basis at the processing facility and

processed into RDF; but not to exceed fifteen percent (15%) of the

total amount of the municipal solid waste received at the processing

facility on a daily basis[.]

KRS 224.01-010(20).

In short, only those materials diverted for energy recovery which fall within the

definition of "refuse-derived fuel" are considered a "recovered material" under KRS 224.01-010(20). Because the waste-derived fuel that Global intends to receive and use at KPE is not a "refuse-derived fuel" within the definition of that term under KRS 224.01-010(23), the material is not a "recovered material" and is within the definition of "waste" since it is not otherwise exempted.

Before demonstrating why the waste-derived fuel as represented by Global before the Cabinet and federal agencies is not a "refuse-derived fuel," the secondary argument presented by Global to the Cabinet is readily revealed to be misplaced.

Global argued that since "RDF" is defined elsewhere a "product" and is not specifically "included" in the definition of waste, it is excluded merely by virtue of being a "product."

Additionally, the specific term "waste" is defined in 224.01-010 as

any garbage, refuse, sludge, and other discarded material and

specifically includes municipal solid waste, MSW. The definition does

not specifically reference RDF. Since RDF is separately defined as a

"product" derived from a waste, and since it is not a "discarded

material" (an inherent characteristic in the concept and definition

of waste), RDF is not considered a "waste" as is intended in this

statute.

Global Analysis at p. 5.

As demonstrated below, the waste-derived fuel proposed to be used by Global fails to meet the intentionally exacting standard for being considered a "refuse- derived fuel." The mere diversion of the waste or the "product" status of the discarded and processed material does not exempt it from the definition of "waste", for two reasons. First, to read "waste" as exempting any reuse of discarded material for energy purposes because the General Assembly didn't specifically include diverted waste materials used for energy recovery, stands the rules of statutory construction on end, and is contrary to the expressed intent of the General Assembly that the scope of the exemption from "waste" for "recovered materials" would be limited, where those diverted materials were to be used for energy recovery, to only exempting those diverted materials meeting the exacting definition of a "refuse-derived fuel." Obviously, failing that test, the diversion and reuse of discarded material for energy recovery is not a "recovered material," and is presumptively waste.

Second, the General Assembly specifically provided for categorical exemptions of other wastes-turned-products or wastes-diverted, and did not categorically exclude wastes diverted for reuse for energy recovery beyond providing a narrow exemption for RDF as a "recovered material." The implication that the further processing or end use of the waste as a fuel or "product" exempts it from being considered a "waste" cannot be squared with the statute. The definition of "waste" includes numerous exemptions for discarded materials that are intended to be reused.

"Waste" means, according to KRS 224.01-010(31)(a),

garbage, reuse, sludge, and other discarded material, including

solid, liquid, semi-solid, or contained gaseous material resulting from industrial, commercial, mining (excluding coal mining wastes, coal

mining by-products, refuse, and overburden), agricultural operations,

and from community activities, but does not include those materials

including, but not limited to, sand, soil, rock, gravel, or bridge

debris extracted as part of a public road construction project . . .,

recovered material, special wastes[,] solid or dissolved material

in domestic sewage, manure, crops, crop residue, or a combination

thereof which are placed on the soil for return to the soil as fertilizers

or soil conditioners, . . . .

If the reuse of a discarded material for beneficial purposes categorically exempted a material from being considered a "waste," then the specific language exempting the use of domestic sewage, manure and crop residue as soil fertilizers or soil conditioners would not have been needed. Likewise, the Cabinet's authority to issue permits-by-rule and registered permits-by-rule for reuse of wastes would itself come into serious question because all of those wastes could be viewed as "products derived from" wastes.

The traditional tool of statutory construction expressio unius est exclusio alterius – the “mention of one thing implies the exclusion of another thing," belies the reading proffered by Global. Material recovered from waste streams is not categorically exempted from the definition of "waste" simply by virtue of being diverted from the waste stream; instead only "recovered material" meeting the statutory definition is exempted from the scope of the definition of "waste", and in the case of diverted material reused for energy recovery, only where it meets the definition of "refuse-derived fuel" is the waste-based material to be considered "recovered material." If the waste-based fuel represented by Global in the October 9, 2000 letter does not categorically constitute a "refuse-derived fuel," then the material is a not a "recovered material" but is instead a "waste" and the determination of exemption by the Cabinet is erroneous as a matter of law unless the facility is otherwise exempted from being considered a "waste site or facility" under KRS 224.40-305 as a "recovered material processing facility." KRS 224.01-010(27). The General Assembly specifically listed and tailored the exceptions, and others are not to be implied or read into the statute.

B. The proposed waste-based fuel is not "refuse-derived fuel" within the

meaning of KRS 224.01-010(23).

Since the statutory definition of "waste" exempts as "recovered materials" only those materials diverted or removed for purposes of energy recovery or combustion that meet the definition of "refuse-derived fuel (RDF)," unless the evidence before the Cabinet in the October 9, 2000 letter and otherwise provided during the comment period by the public or applicant demonstrates that the material falls within that definition, the material must considered a "waste" and the site a "waste site or facility" for the purposes of KRS 224.40-305.

"Refuse-derived fuel" was defined by the General Assembly to mean

a sized, processed fuel product derived from the extensive

separation of municipal solid waste, which includes the

extraction of recoverable materials for recycling and the

removal of nonprocessables such as dirt and gravel prior to

processing the balance of the municipal solid waste into the refuse-

derived fuel product[.]

KRS 224.01-010(23).

A processed fuel product intended for use as a fuel does not automatically become "refuse-derived fuel" merely by virtue of having been diverted or removed for the purpose of energy recovery; this much is clear from the definition of "recovered material" which differentiates such diverted or removed material from "refuse-derived fuel." A waste-based fuel becomes a "refuse-derived fuel" under KRS 224.01-010(23) only by "extensive separation of municipal solid waste."

The General Assembly defined "extensive separation of municipal solid waste" to "include[ ] the extraction of recoverable materials for recycling[ ]" and the removal of nonprocessables such as dirt and gravel, prior to further processing.

The legislature did not mandate removal of some, a few, a certain percentage, or less than all of the recoverable materials for recycling; instead it demanded that all recoverable materials be removed, and definition "extensive separation" to mean extraction of all recoverable materials for recycling.

This definition, and the rigorous requirement for removing recyclables, reflects a conscious decision to distinguish between reuse and recycling of waste materials and the use of recyclable materials (such as paper and plastic) as a fuel for energy recovery or combustion. The statutory definitions of "refuse-derived fuel" and "recovered material" were part of the 1991 legislation, which intentionally differentiated reuse and recycling from use of wastes for energy recovery. KRS 224.43-010(3). The rigorous standard defining "extensive" separation as the extraction of recoverable materials for recycling, is clear and unambiguous, and the Cabinet is without authority to expand or constrict the standard in order to accommodate the interests of the applicant Global.

In the face of a clear and unambiguous mandate that recoverable materials that can be recycled be removed in order to qualify the material as RDF, the Respondents blur the language in order to limit the obligation of material separation, arguing that complete extraction of recoverable recyclable material is not required. The Respondents are in error.

The statute is clear in defining "extensive separation" to mean requiring the extraction of recoverable materials for recycling. A waste stream intended for use as a fuel becomes a "refuse-derived fuel" only through "extensive separation of municipal solid waste[.]" "Extensive separation" is defined in the next clause as including "the extraction of recoverable materials for recycling." The statute does not qualify the word "extraction" in any manner that allows partial removal of materials that are recyclable. It does not state that RDF is a material derived from "extensive separation of recoverable materials for recycling." Instead, it defines what is considered "extensive separation" by demanding the extraction of recoverable materials for recycling, and any processed municipal solid waste stream for which extraction of recoverable materials for recycling has not been complete is, by implication, less-than-extensive.

Even assuming that the statute could be interpreted to modify "extraction" to all for less-than-complete extraction, the Cabinet's categorical determination on the record before the agency, that the waste-based fuel material "would be an RDF" was arbitrary, capricious and inconsistent with law. The Cabinet's determination was apparently based on the "predicted characterization" of the waste composition by Global. According to the Cabinet's June 27, 2002 letter,

I am writing you in response to your letter of October 9, 2000

concerning the applicability of the solid waste statutes and

regulations to the proposed gasification of municipal solid waste

(MSW) pellets at the planned Integrated Gasification Combined

Cycle plant near Trapp, Kentucky. According to your predicted

characterization, a contractor would make the pellets as follows:

first, the recyclables would be removed, leaving about 70%

paper and 10% plastics; then, the manufacturer would mix

binders with the material and extrude the mix into pellets.

The finished product would be typical for most Refuse Derived

Fuels (RDF).

The Division of Waste Management has determined that the

above-described MSW pellets would be a RDF.

June 27, 2002 Determination Letter, Exhibit C, at p. 1 (emphasis added).

There is nothing in the October 9, 2000 Global Letter or Analysis that provides

a description of the composition of processing of the material into RDF such as would support a conclusion that the municipal solid waste would be subject to extensive separation or that recoverable materials for recycling would be extracted. The sum total of the descriptions of the waste-based fuel are these:

The RDF is a dense pelletized fuel product manufactured

offsite out of MSW through a process which typically includes

sorting, shredding, addition of a binding agent and pelletizing.

Global Analysis, p.1.

[T]he project is being partially sponsored by the U.S. Department

of Energy as part of their clean coal technology program.

Id. at p. 2.

Kentucky Pioneer Energy has accepted, though we do not agree

with, US EPA Region IV's view that the Municipal Solid Waste

Combustor Rule (40 CFR 60, Subpart Eb) applies. However,

that does not mean that the waste statutes and rules of the

Commonwealth should also apply.

Id. at 3.

[T]he RDF will have been separated from MSW and manufactured

into a RDF fuel product at a separate facility.

Id. at 5.

Nowhere in the October 9, 2000 submittal is there any representation of the "typical characterization" of the composition of the waste-based fuel. The assumption by the Cabinet of the composition of the waste-derived fuel is not grounded in the record and the determination to categorically define the fuel material as RDF is arbitrary and capricious.

Additionally, absent information in the record on the composition of the raw municipal solid waste feedstock, the Cabinet could not make a rational determination that "extensive" separation of the MSW, including extraction of recoverable materials for recycling, had occurred. Depending on the composition of the unprocessed MSW, removal of materials leaving 70% plastics and 10% paper may or may not meet the definition, depending on whether those materials were recoverable and recyclable.

In fact, the only evidence in the record before the Cabinet, supplied from the representations of Global made in response to comments during the federal air permitting process for the Kentucky Pioneer Energy facility, was that the company would intentionally not be separating plastics and paper from the waste streams, despite the recyclable nature of many papers and plastics. There is a simple explanation for this – the removal of plastics and paper from the waste feed conflicts with the desire of the company to retain the plastics and paper, including those that are capable of removal and recycling, because it needs the Btu value of the plastics and paper and wants them to remain in the processed waste fuel.

As part of the 40 CFR Part 60 Subpart Eb process of issuing air permits to municipal waste combustors, a public meeting was held on June 28, 2001. Kentucky Pioneer subsequently provided a document, submitted to the Division of Waste Management during the comment period on this determination, providing responses to comments and questions received during the June 28, 2001 public meeting.

The company described the composition of the waste-based fuel in this manner:

RDF is produced by first removing white goods as well as metal

and glass recyclable material. The balance is shredded and formed

into pellets under pressure.

* * * *

As was explained at the public meeting in June 28th, the project

will use the equivalent of roughly half of the residential waste

generated in the entire Commonwealth of Kentucky. . . .

Subpart Eb Siting Analysis, Public Meeting and Comments, Exhibit B, p. 3.

KPE will acquire Refuse Derived Fuel (RDF) Pellets from a supplier,

delivered by rail. As discussed above, the several thousand tons

per day of pellets is far larger than is reasonably available within

Kentucky. Once the main supply is established, efforts will be made

to establish supplied of RDF Pellets of smaller economic quantities

within Kentucky.

The pellet supplier will have expertise and access to large quantities

of MSW as the feedstock to their RDF Pellet manufacturing process.

KPE will not be involved in that operation. KPE is currently negot-

iating contracts in regions of the country that have larger populations,

larger quantities of waste available and higher tipping fees.

RDF Pellets are manufactured from MSW by first removing large

objects and white goods. Recyclable materials, such as glass and

metal, are removed and the remainder shredded and milled into

a homogeneous mixture.

Id. at pp. 7-8. The comments were referenced in public comments submitted to the Cabinet and are attached at Exhibit B.

Any doubt as to whether recyclable plastics would be intentionally removed or retained was resolved in the next sentence of the description provided by KPE:

Plastic components of the MSW have energy content and will

be retained in to RDF.

Id. (Emphasis added).

Thus the only evidence available to the Cabinet at the time of the June 27, 2002 determination was that plastics would be intentionally retained in the waste in order to provide needed energy content for the gasification process, and not extracted. On the basis of this evidence, whether one construes the requirement for "extensive separation" to include extraction of all recoverable materials for recycling, or some lesser standard of effort to recover recyclables, it was arbitrary and capricious, and absolutely contrary to the evidence in the record and contrary to law for the Cabinet to have issued a determination categorically defining the waste fuel as "RDF" when the company acknowledged that it would consciously seek to retain plastics in the waste feed rather than make any effort to "extract" them whether recyclable or not.

Since the only evidence in the record before the Cabinet was that the material diverted for use as fuel for energy recovery would not meet the definition of RDF, the waste would not be considered "recovered material" and would not be exempted from the definition of "waste."

Thus, unless otherwise exempted by the definition of "waste site or facility" in KRS 224.01-010(27), the facility would be required to obtain a waste permit and the Cabinet's determination otherwise would be inconsistent with law.

2. The Proposed Facility Is Not Otherwise Exempted From The

Definition of "Waste Site or Facility" and Is Required To Obtain

A Waste Permit.

The statute defines "waste site or facility" expansively as "any place where

waste is managed, processed, or disposed or by incineration, land-

filling, or any other method, but does not include a container located

on property where solid waste is generated and which is used solely

for the purpose of collection and temporary storage of that solid

waste prior to off-site disposal, or a recovered material processing

facility, or the combustion of processed waste in a utility boiler.

KRS 224.40-010(27).

The proposed KPE facility does not meet any of the exceptions to the scope of the definition, and since it is engaged in management of "waste" because the waste-derived fuel does not qualify as "refuse-derived fuel", it is a waste site of facility and must obtain a waste permit.

A. The Proposed Site Is Not A Container For Temporary Collection]

Of Waste Prior To Offsite Disposal, Or A Utility Boiler Combusting

Processed Waste, According To KPE

The KPE facility does not fall within the exception from the definition of "waste site or facility" at KRS 224.01-010(27) for containers used for temporary storage of waste prior to off-site disposal. Nor, according to KPS, does the KPE process fall within the exception for "combustion of processed waste in a utility boiler," since KPE has vociferously disclaimed any relationship of the proposed "gasification" process with combustion. See: Exhibit A, p. 3 (KPE noted that it disagreed with EPA as to the applicability of the municipal waste combustor rule);

Id., at p. 5 ("[T]he proposed project does not burn municipal solid waste or even RDF.")

It is only if the proposed facility falls within the definition of "recovered material processing facility" that KPE can avoid the application of the definition of "waste site or facility" with the concomitant obligation to obtain a waste permit under KRS 224.40-305. It is apparent that the facility, as represented to the Cabinet in the record before the agency, is not a "recovered material processing facility" and that the Cabinet's determination otherwise is contrary to law and fact.

B. The Proposed KPE Facility is Not A "Recovered Material Processing

Facility" Within The Meaning of KRS 224.01-010 and 224.40

The Cabinet determination that no waste permit was necessary for the proposed KPE site was premised on the characterization of the waste-based fuel as "refuse-derived fuel". As has been demonstrated, the Cabinet erred as a matter of law and fact in making that determination on the evidence before it in the record, since the waste-based fuel will not, according to the representations made by KPE to EPA and the state in the Subpart Eb process, seek to remove the plastics prior to processing into pellets.

The Cabinet's determination that a waste permit was not needed rested also on the status of the site as a "recovered material processing facility". According to the Cabinet:

The Division of Waste Management (DWM) has determined that the]

above-described MSW pellets would be a RDF. Also, the RDF is a

recovered material, and that [sic] the clean-coal project you describe in

your letter will be considered a recovered material processing facility.

June 27, 2002 Cabinet Determination Letter, Exhibit C, at p. 1.

The Cabinet committed clear error in concluding that the facility is a "recovered material processing facility" for several reasons.

First, the proposed facility will not be engaged in "processing" anything. KRS 224.01-010(21) defines a "recovered material processing facility" as:

a facility engaged solely in the storage, processing, and resale or

reuse of recovered material, but does not mean a solid waste

management facility if solid waste generated by a recovered material

processing facility is managed pursuant to this chapter and

administrative regulations adopted by the cabinet[.]

KRS 224.01-010(21) (Emphasis added).

The statute requires that a facility be engaged in three activities – storage, processing and either reuse or resale, of a recovered material, in order to be considered a recovered material processing facility. The KPE facility is not engaged in the "storage, processing and resale or reuse of recovered material[.]" According to the October 9, 2000 representation to the Cabinet of the scope of the facility activity, no processing will occur at the facility:

The proposed Kentucky Pioneer Energy facility will not be receiving

any municipal solid waste, nor will the facility be removing any component

of a solid waste stream for any purpose, energy recovery or otherwise.

Instead, the RDF will have been separated from MSW and manufactured

into a RDF fuel product at a separate facility. The proposed site will

merely be receiving, storing, and reusing the already processed final

fuel product, RDF, a recovered material.

Global Analysis, Exhibit A, at p. 5 (Emphasis added).

The receipt, storage and use of the waste-based fuel for the gasification process does not make the facility a "recovered material processing facility" since it is not processing the material. For this reason alone, the Cabinet determination that the facility was exempt from the requirement to obtain a waste permit due to its status as a "recovered material processing facility" is contrary to law and to fact.

The facility is not a "recovered material processing facility" for a second reason – it is not, for the purposes of KRS Chapter 224, a "recovered material." As previously discussed, the General Assembly defined "recovered material" to mean, in the context of the use of diverted materials for energy recovery, only recovered materials constituting "refuse-derived fuel." Since the waste feed fails the test to be considered a "refuse-derived fuel", it is not a "recovered material" within the meaning of KRS 224.01-010(20) and cannot be considered a "recovered material" for purposes of the definition of a "recovered material processing facility" in KRS 224.01-010(21).

3. The KPE Facility Cannot Bring 1 Million Tons Of Municipal Solid Waste

Based Material For Use As Fuel Prior To Receiving a Permit Under KRS

224.40.315 As A "Municipal Solid Waste Disposal Facility."

In the preceding sections Petitioner has demonstrated that the management of the processed municipal solid waste pellets at the KPE facility constitutes management of a "solid waste" that is not exempted from the definition of "waste site or facility" under KRS 224.01-010(27) and must be conducted under a waste permit issued pursuant to KRS 224.40-305.

The Cabinet erred in exempting the waste-based fuel as a "refuse-derived fuel" and the facility as a "recovered material processing facility." It is clear on remand that the storage and disposal of this waste as fuel for the generation of gas to power an electric power plant makes the facility a "municipal solid waste disposal facility," requiring a finding of consistency with the local solid waste plan capacity provisions prior to permit issuance.

KRS 224.40-315 mandates that:

No permit to construct or expand a municipal solid waste disposal facility

shall be accepted for processing by the Cabinet unless the application

contains a determination from the governing body for the solid waste

management area in which the facility is or will be located concerning the

consistency of the application with the area solid waste Management plan[.]

The term “municipal solid waste disposal facility” is defined in KRS 224.01-010(15) to include:

Any type of waste site or facility where the final deposition of any

amount of municipal solid waste occurs, whether or not mixed with

or including other waste allowed under subtitle D of the Federal

Resource Conservation and Recovery Act of 1976, as amended,

and includes, but is not limited to, incinerators and waste-to-energy

facilities that burn municipal solid waste, . . .

Since the facility would be considered a "waste site or facility" accepting "municipal solid waste" for final disposal as a fuel in the gasification process, the facility would constitute a "municipal solid waste disposal facility" within the meaning of the statute. The underscored phrase reflects a clear intent that waste-to-energy facilities be covered, and the use of indirect thermal treatment of the waste rather than direct exposure to a combustion source does not exempt the facility, since the definition applies to any type of waste site or facility including "but . . . not limited to" waste-to-energy facilities burning municipal solid waste.

In sum, the proposed facility is a type of "waste site or facility" defined as a "municipal solid waste disposal facility" and is obligated by both KRS 224.40-305 to obtain a waste permit, and 224.40-315 to obtain first a statement of consistency of the proposed waste management activity with the local solid waste plan.

CONCLUSION

For the reasons stated herein and on the basis of the evidence in the record, the Petitioner is entitled to a recommendation of summary disposition as a matter of law that the Cabinet's June 27, 2002 determination is arbitrary, capricious, unsupported by substantial evidence in the record, and is contrary to law and fact. Petitioner requests that a recommendation of summary disposition be entered on behalf of the Petitioner and against the Cabinet and KPE, and further that the Motion for Summary Disposition filed by KPE and concurred in by the Cabinet be overruled, and for any and all other relief to which Petitioner may appear entitled.

Respectfully submitted,

__________________

Tom FitzGerald

P.O. Box 1070

Frankfort, Ky. 40602

(502) 875-2428

Counsel for Petitioner

Certification

I hereby certify that a true and accurate copy of the foregoing Petitioners' Cross-Motion and Memorandum in Support of a Recommendation of Summary Disposition and Response In opposition to Motion Of Kentucky Pioneer Energy LLC for Summary Disposition, was served this 5th day of December, 2002 by first-class mail and telefax, and that the text of the document was served electronically on:

Hon. Jack Bates

Hon. John Horne

Office Legal Services

5th Floor, Capital Plaza Tower

Frankfort, Kentucky 40601

Kendrick R. Riggs

Ogden Newell & Welch PLLC

1700 PNC Plaza

500 West Jefferson Street

Louisville, KY 40202

and was sent by first-class mail to:

John P. Proctor

Susan A. McIntyre

Winston & Strawn

1400 L Street NW Washington, D.C. 20005-3502

with a courtesy copy to

Dwight N. Lockwood, P.E. QEP

Global Energy, Inc.

312 Walnut Street, Suite 2000

Cincinnati OH 45202

and that the original has been filed with the Office of Administrative Hearings by fax and by first-class mail this 5th day of December, 2002.

___________________

Tom J. FitzGerald

1 On June 9, 2000, Dwight Lockwood responded on behalf of the East Kentucky Power Cooperative to a data request in Public Service Commission Case No. 2000-079 to the question of "how much coal and how much solid waste are anticipated to be utilized on an annual basis" by representing that, assuming a 50/50 blend of Kentucky Coal and RDF, annual consumption would approach 1 million tons of each. A copy of that question and response were referenced in comments provided to the Cabinet by the Kentucky Resources Council and are attached as Exhibit B.

2 KRS 68.178 allows assessment of license fees by the fiscal court of any county for off-site waste management activities. While the Cabinet's construction of KRS 224.40 is not determinative of whether the activities constitute covered waste management under KRS 68.178, the Cabinet determination may adversely affect the ability of the county to impose such a fee by providing an argument that the agency responsible for permitting waste management activities considers this waste management to be exempted from permitting obligations.

3 Global describes its activities regarding the material as "merely [ ] receiving, storing and reusing the already processed final fuel product, RDF, a recovered material. Global Analysis at p.5.



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