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

08/01/03: Opening Brief Filed In Kentucky Pioneer Power Plant Waste Case  Posted: August 30, 2003

COMMONWEALTH OF KENTUCKY

FRANKIN CIRCUIT COURT

CIVIL ACTION NO. 03-CI-561

DIVISION II

CHARLES WALTERS, PETITIONER

V. BRIEF FOR PETITIONER CHARLES WALTERS

NATURAL RESOURCES AND

ENVIRONMENTAL PROTECTION CABINET

And

KENTUCKY PIONEER ENERGY, LLC RESPONDENTS

* * * *

INTRODUCTION

This appeal arises under KRS 224.10-470, seeking review of an April 11, 2003 Order of the Secretary of the Respondent Natural Resources and Environmental Protection Cabinet (Cabinet) affirming a determination by the Cabinet's Division of Waste Management that Respondent Kentucky Pioneer Energy LLC (KPE) did not need to obtain a solid waste permit nor comply with the local solid waste management plan with respect to the proposed handling and disposal by KPE of processed municipal garbage to fuel a new electric power plant in Clark County, Kentucky. This appeal presents several questions of statutory construction relating to whether the proposed mixed municipal waste-based fuel and the receiving facility fall within an exemption from the definition of "waste site or facility" and "waste" so as to avoid the obligation under KRS Chapter 224 to obtain a waste permit and local governmental approval.

Petitioner Charles Walters, a Clark County resident, seeks a reversal of the conclusion of law contained in the Secretary's Final Order, and a determination by this Court that as a matter of law that, on the record before the agency, the proposed solid waste fuel and fuel-handling facility is not exempt from state and local solid waste laws.

STATEMENT OF FACTS

KRS 224.10-470 provides, with respect to "findings of the cabinet" that on appeal, those findings shall be "prima facie evidence of the facts found therein."

In this case, the Findings of Fact contained in the Hearing Officer's Report And Recommended Order (pp. 5-11), were "incorporated by reference" into the Secretary's Final Order, Final Order, p. 1, para.1, and were adopted by the Secretary into the Final Order, and are conclusive. Those factual findings were not appealed from by any party, and are the "law of the case", binding on the parties, who waived any objection to those findings of fact by failing to appeal the Secretary's Final Order. The Hearing Officer's Report And Recommended Order and Secretary's Final Order are attached hereto as Appendix 1.

The factual findings of the Hearing Officer, incorporated and adopted by the Secretary, provide a cogent summary of the case below and are the factual basis on which the legal issues in this appeal turn. Those findings are reprinted in full:

1. Petitioner Charles Walters is a resident, taxpayer and citizen of

Clark County and is an individual within the zone of interests sought

to be protected by the solid waste planning laws.

2. The Cabinet's Division of Waste Management (DWM) has the

statutory duty of enforcing Kentucky's laws relating to solid waste,

as set forth in KRS Chapter 224 and the regulations promulgated

pursuant thereto.

3. Kentucky Pioneer Energy LLC, a subsidiary of Global Energy USA, is

planning to construct an Integrated Gasification Combined Cycle (IGCC)

electric generating plant near the community of Trapp, Clark County,

Kentucky. Under contract with East Kentucky Power Cooperative, (EKPC)

the power generated will be sold and delivered to EKPC for transmission

to its member distribution cooperatives for use in serving their Kentucky

customers. KPE anticipates putting the plan into development by June

2003, with start up of the plant anticipated in late 2005 or early 2006.

4. On October 9, 2000, Global Energy sent a letter to DWM requesting

concurrence that Kentucky's laws and regulations relating to waste

permitting do not apply to the proposed power plant project. The plant

will use a clean coal technology which will convert (via a chemical

reaction process) high sulfur coal and processed fuel pellets into synthetic

gaseous fuel. The processed fuel is a dense pelletized fuel product manufactured offsite out of municipal solid waste (MSW) through a process which typically includes sorting, shredding, addition of a binding

agent and pelletizing. The letter explained that the plant would utilize

state-of-the-art gasification technology to chemically break down carbon-

based feedstock into their basic elemental components.

5. Global's letter presented an analysis of the waste statutes and regulations which it maintained demonstrate that the proposed facility is

exempt from waste regulations. In addition, Global provided a six-page

analysis of the non-applicability of KRS 224.40 and a one-page schematic

of the proposed IGCC process. Global later submitted additional material to DWM consisting of excerpts from two papers regarding the production of dioxin compounds during the process of "gasification" of chlorinated fuels.

6. The project will be the first commercial application of the British Gas/Lurgi fixed bed gasification technology in the United States. KPE explained that extensive separation of the solid waste and production of the processed fuel pellets will occur at the source, near a landfill. At the separate waste facility, the municipal solid waste will be separated by highly mechanical and automated processes including magnetic removal of iron based metal, electrostatic removal of non-iron (i.e. aluminum) metal, and gravity separation of glass. The remainder, consisting of about 70% paper and 10% plastic, is then shredded and milled into a homogenous mixture that is fairly uniform in size. The shredded material is formed in a mold under pressure to create round fuel pellets about the size of a quarter and one-half inch in thickness.

7. The project will use the equivalent of roughly half of the residential waste generated in Kentucky. In East Kentucky Power Cooperative's responses to questions from the Public Service Commission in its application for approval of the power purchase agreement with Kentucky Pioneer Energy, KPE stated that an estimate of one million tons per year of both coal and RDF would be utilized on an annual basis assuming a 50/50 blend of coal and RDF.

8. In comments made at the public meeting on June 28, 2001, to the federal air permit for the plant, KPE explained the process of manufacturing the fuels pellets from MSW, which involves first removing large objects and white goods, then removing recyclable goods such as glass and metal. KPE acknowledged that "(p)lastic components of the MSW have energy content and will be retained in to (sic) RDF."

9. On December 13, 2001, the Kentucky Resources Council filed a response and objection to the position paper offered by Global in its October 9, 2000 submittal. The response stated that the question of whether the proposed coal and waste-fueled facility is subject to the requirements of KRS Chapter 224 as a waste management and waste disposal facility is of significant to the residents of Trapp and Clark County, since if exempts from the ambit of the term "municipal solid waste facility," the planned importation of processed municipal solid waste from northeastern states representing the equivalent of "roughly half of the residential waste generated in the entire Commonwealth of Kentucky" will not be subject to scrutiny and a determination by the local governing body of Clark County of the consistency with that county's approved solid waste plan.

10. On June 27, 2002, in response to Global's 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, DWM stated that the finished product as described by Global would be typical for most refuse-derived fuel (RDF). DWM made the following determinations:

a. the municipal solid waste pellets proposed to be used as

feedstock at the proposed IGCC plant would be a refuse

derived fuel (RDF);

b. the RDF would be a recovered material;

c. the plant would be a recovered material processing

facility;

d. no waste permit is needed for the gasification process.

The Cabinet advised KPE that at least 30 days before beginning gasification, it must submit the description of the selected RDF

process. The Cabinet stated that it would evaluate if the manufacturing of the fuel meets the statutory definition.

11. On August 1, 2002, Charles Walters, a resident of Clark County, initiated this case by filing a petition challenging the Cabinet's determination.

Hearing Officer's Report And Recommended Order, pp. 2-5; Final Order, p. 1, para.1.

The administrative appeal filed by Petitioner Charles T. Walters challenged the June 27, 2002 determination by the Cabinet 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 was timely filed on July 26, 2002.

The administrative appeal questioned whether the Cabinet erred as a matter of law and fact in determining that the mixed municipal waste material fell within the definition of exempted "refuse-derived fuel" and was a "recovered material", and in finding that the project would be considered a "recovered material processing facility", so that the proposed handling and disposal of the processed municipal solid waste would be exempt from state solid waste laws, and by extension, local government approval.

The parties to the administrative proceeding submitted the case for decision on cross-motions for summary disposition by Petitioner Walters and Respondent KPE. The Cabinet joined in KPE's motion. On February 20, 2003, the Hearing Officer issued a Hearing Officer's Report and Recommended Order concluding that there were no disputed issues as to any material fact and that Petitioner Walters was entitled to a summary disposition as a matter of law.

The Hearing Officer's Report included findings of fact, discussion and conclusions of law. The Secretary, after consideration of exceptions filed by both respondents, accepted and incorporated as his own all of the factual findings and discussion contained in the Hearing Officer's Report and Recommendation, but rejected the conclusions of law and recommendations, and instead affirmed the Division of Waste Management decision. Rather than supply his own conclusions of law, the Secretary stated only that:

The Division of Waste Management's June 27, 2002 determination

that a local determination and a solid waste permit are not required

for the Kentucky Pioneer, LLC facility is supported by the statutes

upon which it relied.

Final Order, p. 1, para. 2.

The Secretary's Final Order thus stands or falls on the strength of the legal arguments provided by the Division of Waste Management in its June 27, 2002 determination; a two-page document that provided a two-paragraph basis to support the granting of an exemption to KPE:

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

concerning the applicability of the solid waste statutes and adminis-

trative 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 (DWM) has determined that

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

recovered material, and that the clean-coal project you describe in your

letter will be considered a recovered material processing facility. This

determination is based on the description of the planned Integrated Gasi-

fication Combined Cycle plant that you provide in your letter of October

9, 2000.

June 27, 2002 Letter to Global Energy, at p. 1. (Attached as Appendix 2).

Petitioner Walters timely filed this appeal and vested this Court with subject matter jurisdiction over the appeal of the Secretary's April 11, 2003 Final Order.

STANDARD OF REVIEW

This appeal is brought under KRS 224.10-470, which provides that on hearing the appeal, the findings of the Cabinet shall be prima facie evidence of the facts found therein, and that the Court shall review the entire record and findings and final order of the Cabinet. The underlying administrative proceeding was submitted to the Cabinet Hearing Officer on cross-motions for recommendation of summary disposition, and all of the findings of fact contained in the Hearing Officer's Report and Recommendation were adopted by the Secretary. Final Order, p. 1, para. 1 ("The Hearing Officer's Report and Recommendation filed on February 20, 2003, 2001 (sic) is hereby incorporated by reference as if fully stated herein, EXCEPT as follows . . .")

This appeal presents questions of law which are to be accorded de novo review by this Court on appeal. Rogers v. Fiscal Court of Jefferson County, Ky. App., 48 S.W. 3d 28 (2001); Roland v. Kentucky Retirement Systems, Ky. App. 52 S.W.3d 579 (2001); Kentucky Board of Nursing v. Ward, Ky. App., 890 S.W.2d 641 (1994).

QUESTIONS PRESENTED

1. Did the Cabinet Secretary err as a matter of law when he determined that the KPE facility did not need a waste permit because the receipt, storage, handling, loading and thermal treatment of this municipal solid waste-based fuel was exempt from the definition of "waste site or facility?"

2. Did the Secretary err as a matter of law in concluding that the proposed waste-based fuel comprised of mixed municipal waste for which plastics and paper will not be removed for recycling but will instead purposefully be retained in the processed garbage for energy value, constituted a "refuse-derived fuel" as that term is defined at KRS 224.01-010?

3. Did the Cabinet Secretary err as a matter of law in determining that the proposed waste-based fuel is a "recovered material" as that term is defined in KRS Chapter 224?

4. Did the Cabinet Secretary err as a matter of law in determining that the proposed power plant facility is a "recovered material processing facility" as that term is defined in KRS Chapter 224?

5. Did the Cabinet err as a matter of law in determining that the proposed facility was not a "municipal solid waste disposal facility" required to obtain local government concurrence prior to permitting under KRS 224.40-315?

SUMMARY OF ARGUMENT

The Secretary erred as a matter of law in concluding that the proposed solid municipal waste stream was a "refuse derived fuel", the handling, storage and disposal of which would be exempt from the ambit of a "solid waste site or facility." The proposed waste-based fuel did not fit the exemption for "refuse-derived fuel" because recoverable plastics and paper were not to be separated, but instead retained for fuel value. As a waste-based fuel that does not fall within the exemption for a "refuse-derived fuel" the material is not a "recovered material" and the proposed power plant, which engages in no processing of the material for reuse or resale, is not a "recovered material processing facility." Failing to demonstrate entitlement to an exemption, 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.

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 KPE's parent 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.

ARGUMENT

A review of the relevant statutes reflects that the Secretary erred in his construction of the KRS Chapter 224, and that the Hearing Officer was correct in recommending summary disposition on behalf of the Petitioner.

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

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 its 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, as here, 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.

(Emphasis added).

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 one (1) million tons per year of this municipal solid waste-derived material in order to generate "syngas" to power combustion turbines, makes the proposed plant a "waste site or facility." On review, it is apparent that the facility is a waste site or facility not otherwise exempted from the obligation to obtain a waste permit for the management of the proposed waste-based fuel.

The General Assembly has 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[.]

KRS 224.01-020(27) (Italics added).

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

This dispute has centered not on the question of management but instead on how the material is characterized under Kentucky law - more specifically, whether it is a "waste" so as to fall within the definition of "waste site or facility", and if so, whether the site or facility is a "recovered material processing facility" that is exempted from that definition.

The Secretary erred in his construction of the statutory definitions both in failing to conclude that the municipal solid waste-derived material is a "solid waste" rather than a "refuse derived fuel" or "recovered material" within the meaning of the applicable definitions, and in concluding that the proposed site is 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, but does not include . . . recovered

material . . . .

KRS 224.01-010(31)(a).

It is undisputed that the material in question will be comprised of mixed municipal solid waste. The question is whether the proposed waste-derived fuel falls within the exclusion for "recovered material." KPE's parent Global argued in its October 9, 2000 letter that its proposed waste-derived fuel falls within that exemption, asserting that "Definition (31)(a) excludes "recovered material" from the definition of "waste[ ]". Appendix 2, p. 1.

In truth, the waste-derived fuel proposed to be used by KPE 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."

The introductory paragraph of the definition of "recovered material" defines the term to mean:

those materials . . . with 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. . . .

If the definition ended there, it could be read to cover any waste-derived fuel. However, the General Assembly included additional language intentionally excluding from the definition of "recovered material" the diversion of waste materials for the purpose of energy recovery or combustion, unless that diverted material also qualified as a "refuse-derived fuel (RDF)".

The definition of "recovered material" continues:

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). (Italics added).

In short, according to the statute 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). Otherwise, wastes to be used for energy recovery are considered "solid waste." Because the waste-derived fuel that KPE intends to receive and use does not fall within the statutory definition of a "refuse-derived fuel" as defined in KRS 224.01-010(23), the waste material is not a "recovered material" and is a "solid waste" since it is not otherwise exempted.

B. The KPE argument that the proposed waste-based fuel

is exempt from the definition of "waste" merely by virtue of being

a reused "product" is misplaced, since only recovered waste used for

energy recovery that fits the definition of "refuse-derived fuel" is exempt.

Before demonstrating why the Secretary erred as a matter of law and fact in concluding that the waste-based fuel as represented by Global before the Cabinet and federal agencies is a "refuse-derived fuel (RDF)" that is a "recovered material," an ancillary argument presented by KPE to the Cabinet is readily revealed to be misplaced.

KPE 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." According to the argument presented to the Cabinet:

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 (Appendix 3).

As will be demonstrated below, the waste-derived fuel proposed to be used by KPE fails to meet the intentionally exacting standard for being considered a "refuse-derived fuel." The initial proposition that a mere diversion of the waste for use as a fuel or the "product" status of the discarded and processed material exempts it from the definition of "waste" is in error, 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 in the definition, diverted waste materials used for energy recovery, stands the rules of statutory construction on end. It is also in direct conflict with 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 the diversion and reuse of discarded material for energy recovery that fails that test for exclusion is not a "recovered material," and is presumptively waste. Had the General Assembly intended that the mere diversion of waste for energy recovery confer exempt status on the waste as "product" it would not have defined "recovered material" and "refuse derived fuel" to bound that exception.

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 mere reuse of a discarded material for "beneficial" purposes categorically exempts 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 be surplusage. 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 would be viewed as "products derived from" wastes and under KPE's rationale, be exempt.

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 before the agency. 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 waste-based material meeting the definition of "refuse-derived fuel" is 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.

C. 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 a "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 demonstrated that the proposed waste material falls within the definition of "refuse derived fuel", the material is 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 defined "extensive separation" to mean extraction of all recoverable materials for recycling.

This definition, and the rigorous requirement for removing recyclables, reflects a conscious decision on the part of the 1991 Kentucky General Assembly 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, and intentionally differentiated reuse and recycling from the 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 lower the standard in order to accommodate the interests of the applicant Global/KPE in keeping recoverable recyclable plastics and paper in the waste mix for Btu value.

Respondents countered that complete extraction of recoverable recyclable material is not required, because "extensive" modified both "separation of municipal solid waste" and the subsequent phrase "which includes the extraction of recoverable materials for recycling[,]", even though the phrases are separated by a comma and the latter phrase is intended to define what is meant by "extensive" rather than to be modified by it.

The Respondents are in error.

The definition is clear – in order to be considered a "refuse derived fuel," extensive separation of the municipal solid waste must occur, and in order to be considered "extensive," that separation must include extraction of recoverable materials for recycling. Respondents failed below to provide any alternative reading of the statutory definition that gives full effect to all of the plain language. The requirement of "extensive separation" modifies the phrase "municipal solid waste" stream, and the subsequent phrase defines "extensive separation" to be "extraction of recoverable materials for recycling" and the "removal of nonprocessables[.]". With respect to extraction of recoverable materials for recycling, the statute is unqualified in requiring that they be removed in order for the separation of the municipal solid waste stream to be considered extensive. The Respondents' construction of the statutory definition leaves the Cabinet with no meaningful standard to guide the exercise of agency discretion, and renders the definition incomprehensible by reading into the statute additional modifiers to limit the obligations imposed by the law with respect to both extraction of recoverable materials and removal of nonprocessables. The only reading consistent with the statutory definition is that the applicant has an obligation of "extensive separation of the municipal solid waste" in order to qualify the waste as an exempt "refuse derived fuel" and that "extensive separation" of the waste is defined to mean the extraction of all recoverable materials and removal of nonprocessables prior to further processing.

Petitioner Walters' construction of the statute is fully consistent with and advances the goals of the 1991 comprehensive solid waste statutory reform in which the General Assembly differentiated reuse and recycling of wastes from the use of wastes for energy recovery, and favored recovery of recyclable materials over use of wastes for energy recovery. KRS 224.43-010(3). Requiring removal of recoverable materials or recycling prior to use of municipal solid waste as a fuel is the only interpretation consistent with both the statutory definition and the priorities established by the General Assembly.

Even assuming, for the sake of argument, that the statute could be interpreted so that "extensive separation" modified "extraction" so as to allow for less-than-complete extraction, the Cabinet's categorical determination on the record before the agency that the proposed waste-based fuel material "would be an RDF" was inconsistent with law because the only evidence available to the agency indicated that certain classes of recyclables (plastics and paper) were to be purposefully retained2and not extracted – extensively, completely or at all.

The Cabinet's determination was 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, Appendix 2 (italics added).

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

a description of the composition of the raw waste or the processing of the material into RDF such as would support a conclusion that the entire municipal solid waste stream would be subject to extensive separation or that all 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. (Appendix 3).

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 was inconsistent with law, for the record failed to demonstrate that complete or even extensive separation of all recoverable materials would occur. 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, would occur. Depending on the composition of the unprocessed MSW, removal of materials leaving 70% plastics and 10% paper might or might not reflect "extensive" or complete separation or recoverable recyclables.

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, and provided to the Cabinet for consideration during the evaluation of the request for advance determination, 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 stated intent 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. KPE had admitted as much, and the Cabinet knew that when it reviewed the request.

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 provided a document responding to comments and questions received during the June 28, 2001 public meeting, and during the comment period on this determination that document was submitted to the Division of Waste Management. In that response document, 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. . . .

* * *

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.

Subpart Eb Siting Analysis, Public Meeting and Comments, pp. 3, 7-8 (attached as Appendix 4). (Italics added).

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).

There is a fundamental inconsistency between the statutory requirement that extraction of recoverable materials for recycling occur before a waste fuel can be considered a "refuse-derived fuel", and the representation by KPE to EPA and the Division for Air Quality that "[p]lastic components of the MSW have energy content and will be retained" rather than being extracted for recycling.

The agency provided no explanation for the inconsistency between the requirement of the law that removal of recoverable materials such as paper and recyclable plastics must occur for a waste-based material to be considered "refuse-derived fuel", and the admission by KPE that plastics and paper will not be removed. The failure to reconcile the company admission that plastics and paper would be retained in the waste with the demand of the statutory definition of "refuse derived fuel" that such recoverable materials be extracted in order to qualify for that designation, is fatal error.

The only evidence available to the Cabinet at the time of the June 27, 2002 determination was the statement by the company indicating 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 that 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 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" where 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.

KPE admitted in the Subpart Eb comments that all of the plastics and paper (including, sub nom, those plastics and paper that are recyclable and recoverable) would be retained to heat value. The inescapable conclusion is that the Cabinet approved a proposed waste-based fuel that will contain up to a range of 10% plastics and 70% paper where no effort would been made to process the waste so as to recover the recyclable component of those papers and plastics, in direct conflict with the mandate of the statute.

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." Failing to qualify as a "refuse-derived fuel", the waste and facility handling the waste would be required to obtain a waste permit unless otherwise exempted by the definition of "waste site or facility" in KRS 224.01-010(27).

D. 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 and paper prior to processing the waste 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, Appendix2, 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, at p. 5 (Emphasis added).

The fact that the KPE facility is engaged in a "gasification process whereby RDF and coal are broken down into elemental components through the application of heat in order to form syngas" does not make the facility a "recovered material processing facility" since the waste fuel is not being processed for reuse or resale, but instead is being processed elsewhere for use by KPE as a fuel. The receipt, storage and use of the "already processed" waste-based fuel for the gasification process does not make the facility a "recovered material processing facility" since it is not processing the material before reuse. 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, processing 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 that meet the definition of "refuse-derived fuel." Since this waste fails to meet the definition of 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).

E. The Proposed Facility Is Not Otherwise Exempted From The

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

A Waste Permit.

The proposed facility is not otherwise entitled to exemption 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.

F. 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 KPE, 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: Appendix 3, 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 is not a "recovered material processing facility" and that the Cabinet's determination otherwise is in error.

2. 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 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 thus 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 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.

3. Subsequent Reevaluation Of The Determination Does Not Justify Or Excuse A Decision That Is Clearly Erroneous And Inconsistent With Law

Finally, the June 27, 2002 determination regarding whether a solid waste permit is required indicated that the determination would be revisited prior to KPE's start-up in order to assure further that the material will meet the statutory definition of RDF. That the Cabinet will revisit the issue does not excuse the numerous errors of law and fact committed in making the initial determination, nor assure that those errors will be corrected rather than compounded. Among the other errors identified by Walters, the Cabinet erred in construing "refuse derived fuel" to include a waste material that would not, by the company's admission during the Subpart Eb process, be processed to remove plastics and paper. The Cabinet erred in approving as an exempt "refuse derived fuel" a waste-based fuel which would retain recoverable plastic and paper materials, the presence of which under the statute would fail to satisfy the requirement of "extensive separation." The Cabinet erred as a matter of law in approving the proposed facility as a "recovered material processing facility" despite the acknowledgment by KPE that the waste fuel will come to the facility ready-to-use and that no processing of the waste fuel for reuse will occur by KPE or at the KPE facility.3 The errors of law contained in the Secretary's Final Order must be corrected.

CONCLUSION AND REQUEST FOR RELIEF

What is at issue here is whether the Cabinet erred as a matter of law in granting an advance determination of exemption from the requirement to obtain a solid waste permit to the proposed waste-based fuel and its handling and disposal, given the narrow exemption from the definition of "solid waste" for "recovered material" and the definition of "refuse-derived fuel", and the lack of any processing of a material at the facility falling within the statutory definition of "recovered material."

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, 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.4

Wherefore, Petitioner respectfully requests that this Court (a) determine and declare that on the basis of the evidence in the record, and proper interpretation and application of the law, that the Secretary's April 11, 2003 Order was contrary to law and fact in rejecting the conclusions of law and recommended order of the Hearing Officer and affirming the Division of Waste Management's determination of exemption; and (b) enter an order reversing the Cabinet Order and entering an order upholding summary disposition on behalf of the Petitioner and against the Cabinet and KPE; 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

Charles T. Walters

Certification

I hereby certify that a true and accurate copy of the foregoing Brief for Petitioner Charles T. Walters was served by mail this 1st day of August, 2003 by first-class mail to:

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

John P. Proctor

Susan A. McIntyre

Winston & Strawn

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

Dwight N. Lockwood, P.E. QEP

Global Energy, Inc.

312 Walnut Street, Suite 2650

Cincinnati OH 45202

and that the original was filed by mailing same this 1st day of August, 2003 to the Clerk, Franklin Circuit Court. Additionally, the text of the brief was sent by electronic mail to Hon. Kendrick Riggs and Hon. Jack Bates & John Horne.

___________________

Tom FitzGerald

1 In the submittal to the Cabinet requesting an advance determination of regulatory status, KPE described 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. (Attached as Appendix 3).

2 KPE argued below that Petitioner's reading of the statute would "render this entire section of the KRS meaningless" because:

it is technologically and practically infeasible to remove every fiber of

plastic or paper once they are intermingled with other waste.

KPE Memorandum at 6.

In response, there was no evidence before the agency concerning the technological or practical feasibility or infeasibility of complete extraction of "recoverable materials for recycling". Further, the statute itself provides the boundaries for the extent to which recyclable materials must be separated – it is the "recoverable materials" that must be extracted, so that the statute, by definition, limits the duty to those recyclable materials that are technologically recoverable. Third, the assertion of "infeasibility" as a defense masks the reality that, as argued below, KPE needs the plastics and paper in the wastes in order to derive the necessary heat values and had disclaimed any intention of requiring separation of those recyclable papers and plastics whether they might be recoverable or not.

3 KPE, in its opposition memorandum before the Hearing Officer, again acknowledges that it will not be processing the waste-based fuel but will be simply "receiving, storing and reusing the already processed” waste material. KPE Memorandum at 3. (Emphasis added). The KPE confirmation that no processing for reuse will occur clarifies that this facility is not a recovered material processing facility, since it is not processing the material for reuse but is simply receiving the waste-based material for use as one of two fuels.

4 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.



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