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Freeport, Village of - Recommended Decision, September 29, 2003

Recommended Decision, September 29, 2003

* Issued to the parties for submission of comments prior to the Commissioner's Final Decision.

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
625 Broadway
Albany, New York 12233-1550

In the Matter

-of-

the New York State Department of
Environmental Conservation Notice of
Intent to Modify the Title V Permit of

VILLAGE OF FREEPORT

DEC No. 1-2820-00358/00002

HEARING REPORT
-by-

/s/
Molly T. McBride
Administrative Law Judge

September 29, 2003

PROCEEDINGS

This proceeding was initiated by the New York State Department of Environmental Conservation (DEC Staff, Department) to modify the Title V air permit issued to the Village of Freeport (Permittee, Village) to operate the electric generating facility commonly known as Power Plant #2 (PP2). DEC Staff commenced the proceeding in August, 2001 by service of a Notice of Intent to Modify pursuant to Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York (6 NYCRR) Parts 201 and 621. PP2 has two diesel engines and one turbine that have been operational since 1969. The Department is seeking to modify the permit to set emissions limits for the diesels, require stack tests for the turbine, and impose a compliance schedule that provides for the permanent decommissioning of the diesels by November 30, 2003.

The Notice of Intent to Modify and draft modified permit were published in the Environmental Notice Bulletin (ENB), an electronic publication of the DEC, and in Newsday in September, 2001. A legislative public hearing was held on the proposed modified permit on October 22, 2001 at Freeport High School, Freeport, NY. There were approximately 400 people in attendance and approximately 50 speakers. A majority of the speakers called for the immediate closing of the power plant. An issues conference had been noticed to be held on October 23, 2001. However, immediately before the October 22nd hearing DEC Staff indicated that it was seeking to make changes to the modified permit and requested an adjournment of the issues conference. The adjournment was granted. After the October, 2001 legislative hearing DEC Staff and the Village began negotiating the terms of a modified permit for the power plant. After approximately one year of discussions, DEC Staff was unable to reach an agreement with the Village with regards to the power plant's operation. As a result, a new Notice of Intent to Modify and Notice of Public Hearing were issued by DEC Staff in February, 2003.(1) This Notice and attached draft modified permit sought two paramount modifications, the insertion of emissions limits for particulate matter and oxides of nitrogen (NOx). The permit issued in 1998 for PP2 does not contain emissions limits for either. The draft modified permit also contained a provision that PP2 would be brought into compliance with the emissions limits by permanently decommissioning the diesels by November 30, 2003.

In 2002, the Village applied for a permit to construct and operate a new electric generating facility immediately adjacent to the existing structure containing the two diesel engines. It proposed to operate a new General Electric LM6000 Sprint simple cycle combustion turbine with nominal electrical power output of less than 50 MW.(2) The DEC Staff noticed a public hearing and public comment period on the Village's application at the same time as the second Notice of Intent to Modify.

A public hearing was held on both the second proposed modification and the permit application on March 12, 2003 at the Freeport High School. Approximately 15 people were in attendance and 4 people spoke. The speakers at this second hearing were generally grateful that operations at the existing power plant was being scrutinized and that the Department was seeking to close it.

Pursuant to6 NYCRR 621.14(d) the Village requested a hearing on the DEC Staff's second Notice of Intent to Modify. That request triggered the need to hold a third public hearing as well as an issues conference. By Notice dated March 12, 2003 a Notice of Supplemental Legislative Hearing and Issues Conference on the modified permit was published in the ENB and Newsday. This supplemental legislative hearing was held on May 7, 2003 at the Freeport High School. Approximately 12 people attended and 5 people spoke. The speakers all spoke against the diesels' continued operation. An issues conference was convened on May 8, 2003 at 9:00 a.m. at the Freeport Village Hall, 46 N. Ocean Avenue in Freeport, NY. An issues ruling was issued on July 18, 2003 identifying one issue for adjudication, whether the DEC Staff- imposed shut-down schedule in the draft modified permit is arbitrary because it is not linked to a reasonable schedule for commencement of commercial operations by the new facility. The ruling also granted party status to New York Public Interest Research Group (NYPIRG) and the Old Lindemere Civic Association (OLCA) and joined those two parties for the hearing.

An adjudicatory hearing was held on September 3, 2003 at the Freeport Village Hall. The Village appeared with counsel, Sive, Paget and Riesel, Paul D. Casowitz, Esq. and Jay P. Eversman, Esq., of counsel; the Department appeared by attorneys Franz T. Litz and Michelle A. Crew; and NYPIRG and OLCA appeared by Tracy Peel and Joseph Kralovich.

APPLICABLE REGULATORY PROVISIONS

The Department's Notice of Intent to Modify states that the Department is seeking to modify the 1998 Title V permit "to assure compliance with state and federal applicable requirements." 6 NYCRR 621.14(a)(5) provides for a Department initiated modification if there is noncompliance with any provisions of the ECL or regulations of the Department related to the permitted activity. The Permittee submitted stack tests for this facility which indicated that the diesels were operating in violation of the state and federal emissions limits for oxides of nitrogen (NOx) and particulates. The existing permit had no emissions limits for either NOx or PM which is contrary to the Clean Air Act (CAA) and New York State statues and regulations. The Clean Air Act requires all permits to include, among other things, enforceable emissions limitations and standards and a schedule of compliance. (CAA §504[a]). The draft permit sets particulate emissions limits at 0.10 lbs. per million Btu(3) and NOx emissions at 9 grams per brake- horsepower per hour pursuant to 6 NYCRR 227-2.4 and has a schedule of compliance.

Pursuant to 6 NYCRR 624.9(b) the Department has the burden of proof to show that the modification is supported by a preponderance of the evidence.

POSITION OF THE PARTIES

Permittee

The Permittee contends that PP2 should not be decommissioned before the new LM6000 turbine is operational. The Permittee notes that several different factors have resulted in delays in the construction of the new facility and because of those delays, the decommissioning should be delayed as well. The Permittee has agreed to the permanent decommissioning as soon as the LM6000 is operating.

Department

DEC Staff contends that the lack of emissions limits for NOx and particulates in the 1998 permit must be corrected and, therefore, the permit must be modified. Past stack tests submitted to the Department indicate that the facility cannot meet the applicable emissions limits and therefore DEC Staff has modified the permit to established the only possible means of compliance, decommissioning. DEC Staff chose the decommissioning date after it received a schedule from the Village indicating that the new facility would be operating by that date. Although the Permittee has now encountered problems that are delaying the new project, DEC Staff stated that the Permittee could have avoided these delays and, therefore, it will not extend the time of operation for the diesels.

ISSUE FOR ADJUDICATION

As indicated above, one issue was identified for adjudication, the closing date for PP2.

DISCUSSION

DEC Staff commenced the modification proceeding to correct a mistake made when the 1998 Title V air pollution control permit was issued to the Village. That permit failed to set emissions limits for two contaminants, NOx and particulates. It is agreed by all parties that this omission is an error that requires correction. There does not appear to be a dispute as to how to correct this mistake and there is no dispute as to the applicable emissions limits. The Clean Air Act requires a permit to set emissions limits and craft a compliance schedule to bring a facility into compliance with those limits. DEC Staff, in the modified permit, set emissions limits and established a compliance schedule.

At the adjudicatory hearing there was no argument raised as to other means of bringing the facility into compliance other than shutting it down. No proof has been offered that the diesels could be equipped in some way to bring them into compliance. Although the Village argued at the issues conference that it should be provided an opportunity to seek a variance from the applicable emissions limits, that argument was not pursued at the adjudicatory hearing and I am not aware of any variance request having been made.

The only remaining dispute is what date PP2 should be permanently decommissioned. The modified permit has set November 30, 2003 as the shutdown for the 2 diesels. It is acknowledged by DEC Staff that the November 30th date was arrived at after the Village indicated that it expected the LM6000 to be operational by that date. However, the Village has encountered some delays and the LM6000 will not be operational by that date. In fact, according to the testimony presented at the hearing, the earliest this facility will be operational is late April, 2004 and it may very well be later than that date.

The Department has the burden of proof in this proceeding. It produced no witnesses but did introduce into evidence the permits recently issued for 4 similar power plants. These permits were offered by DEC Staff to show that the typical construction schedule for a facility like the one the Village is seeking to construct is 6-7 months. The Village stipulated that these were typical time frames and the Department rested.

The Village presented four witnesses, Hubert Bianco, Superintendent of Freeport Electric; Paul Grosser, President of P.W. Grosser, the environmental engineers hired by the Village for this project; James H. Slack a senior program manager for ENSR which is providing air quality and multi disciplinary consulting services to the Village; and Peter A. Bender, Associate Vice President for the engineering consulting firm responsible for the planning, design and construction of this new facility.

The Village's position is that it agrees to the permanent decommissioning of the diesels but opposes the shut down prior to the new facility being in operation. It argues that unforeseen delays have slowed the construction of the new plant and, as a result, the old plant should continued operating.

The delays encountered by the Village occurred in 2002 and 2003. The first delay was due to problems with hiring a contractor. Initially, the Village considered having two new electric power generating facilities constructed. The demand for power on Long Island had increased and in 2000 the Long Island Power Authority (LIPA) began the process of siting turbines on Long Island. Freeport participated in this project with the intent of entering into a contract with a private developer to construct 2 facilities on the site of PP2. Hubert Bianco, Superintendent of Freeport Electric described the Village's intentions as seeking a "turnkey" operation. They wanted to contract with a private developer to build both facilities and then sell one facility to the Village for its use and operation. (Bianco p. 6-7) For various reasons, this project turned out not to be possible. (Bianco p. 10) The Village then turned its attention to constructing its own facility and put the project out to bid. The Village chose what is called a "design build approach" for the project. Rather than hiring one contractor to design and then going to bid again for other phases of the project, the Village chose to bid the whole project at once and award a contract to one developer who would both design it and build it. The intention was that this would save time overall. (Bianco p. 11) This went to bid for the first time in July, 2002. Eventually the project had to be re-bid due to problems with the low bidder and changes to the project. The project went to bid for the second time in October, 2002. After this second bid went out the Village encountered additional problems. A private developer had contracted with the Village to build a private facility on the site of PP2. That facility would have generated rental income for the Village that was to have been used to construct the Village's facility. Also, the private developer and the Village were intending to share in the costs of and responsibility for construction of the transmission lines. However, this private developer cancelled its project and in January, 2003 a third bid document was issued by the Village in 2003 to reflect the changes in the project again.

A contract was awarded in April, 2003 to construct the Village's LM6000 facility and all related gas and electric transmission lines. Despite all of the delays encountered by the Village up to that point, it was still possible at that time to have the new facility operational by November 30, 2003.

The Village contends now that two major problems occurred in 2003 that make it impossible to have the new facility on line by November 30th. The new project requires installation of gas and electric transmission lines. The Public Service Commission (PSC) is the state agency responsible for permitting these types of projects. The permits for the gas and electric transmission lines were not issued until late July, 2003 and this delayed the project. Also, the new facility is being constructed on the site of a former landfill and PCB contamination at the site must be cleaned up before construction can begin and this clean up has caused further delay. Although the Village learned of PCBs on the site in 1992, it was not until after July, 2003 that Village became aware of the extent of the contamination.

DEC Staff counters the Village's excuses by arguing that the Village's actions caused the delays and they should not benefit from that. DEC Staff presented evidence at the hearing that the Village did not promptly respond to requests of the PSC for information supplementing the permit applications. DEC Staff presented 2 letters from the PSC dated November 22, 2002 and February 14, 2003. The November letter to Mr. Bianco asks for additional information in several areas. In the February letter the PSC states that the Village did not respond to the November letter for over two months and that some information was still missing. The Department's contention is that had the Village promptly addressed the PSC's inquiries, the permits could have been issued sooner.

No one from the PSC testified at the hearing to confirm or deny that the Village's actions contributed to the delay in the permits being issued. Mr. Bianco was questioned about the length of time between the PSC letter and the Village's response but gave no indication as to why it took over 60 days to respond to the first PSC request and what efforts the Village made to respond to the second request.

The second delay has been caused by PCB contamination at the site. PP2 is located on a former landfill which closed decades ago. In 1992 and 1993 the Village constructed a containment system for the oil storage at the site. This project required soil sampling and the sampling uncovered PCB contamination at the site. The majority of the sampling that took place in 1992 and 1993 involved areas away from the current construction site. The PCB contamination found was at lower levels and the site was remediated with DEC approval.

Mr. Bianco was the Supervisor of Freeport Electric in 1992 and 1993 and worked closely with the PCB issue then. He was questioned at length as to what follow up the Village did with regards to this between 1993 and 2003. Mr. Bianco testified that they did no further soil sampling until 2003. Upon questioning by Mr. Litz, he also testified that the Village determined to build a new facility on the contaminated site as early as 1998. (Bianco p.5) He offered no explanation as to why the Village did not undertake any other soil sampling or why it did not consult the DEC about the site and its contamination until 2003. DEC Staff produced a March 17, 1994 letter to Mr. Bianco from the DEC Region 1 office. That letter advised the Village that it needed to get DEC approval prior to the handling of relocation of soil at this site. The Village was on notice as early as 1994 that the Department had to approve the soil removal that would be necessary as part of any construction at the site. Knowing this, the Village did not take any advance steps to get DEC approval for the soil removal. The Village now claims that this issue has been a major cause of the delay of the project. DEC Staff again contend that the Village's actions directly caused the delay.

The DEC Staff recently requested more soil sampling at the site and that sampling shows varying levels of PCB contamination. Levels as high as 50 ppm or greater have been encountered. PCB contamination at those levels are under the exclusive jurisdiction of the US Environmental Protection Agency (EPA). The Village has been working with the EPA to get a clean up plan approved. As of September 3, 2003, no plan had been approved. Mr. Bianco testified that the majority of construction is being done in areas with lower levels of PCBs. He stated that clean up in those areas was would possibly begin the week of September 10, 2003. The Village anticipated that construction could begin 30 days after the start of the clean up. Mr. Bianco contended that this part of the project could go forward while the Village continues to develop an acceptable remediation plan with the EPA to address the higher PCB concentrations.

Mr. Grosser's firm conducted the soil testing that was completed in 1992 and 1993. Mr. Grosser did not believe that more soil testing would be necessary for the construction of the new plant based on how extensive the earlier testing had been. (Grosser p. 28) However, as part of the new construction project, a new soil management plan had to be submitted to the Department. That plan resulted in DEC Staff requesting additional soil sampling in July, 2003 and, as noted above, that sampling uncovered significant PCB contamination at the site. Mr. Grosser agreed that it was prudent of DEC to request this additional sampling based upon the significant contamination revealed. (Grosser p.33)

Mr. Slack testified about the National Ambient Air Quality Standards (NAAQS) and stated that he contended that his modeling shows that this plant does not exceed those standards. (Slack prefiled p. 5). The key issue here is not NAAQS but that the facility is not meeting emissions limits for NOx and particulates. Mr. Slack was not aware that the emissions limits that the Department has proposed in the modified permit are not being met by the diesels.

Mr. Bender has significant experience in the design and construction of power plants. He confirmed that 6-7 months from the start of construction is the typical completion schedule. (Bender prefiled p.5). He also noted that many unforeseen complications can occur that slow the construction. He acknowledged that the PCB contamination has stopped work on the foundation. According to Mr. Bender, other risks of delay are still present, fire, flood, accidents, strikes and similar events can all slow a project. Mr. Bender produced a schedule his company prepared that estimated the completion of construction and operation as April 29, 2004. Under questioning, he stated that the proposed completion date is not necessarily reliable and would more likely be later than that than earlier. He even suggested that it could take a month longer. (Bender p. 12) Any delay in the EPA approval of a clean up plan would cause additional delay in the project. (Bender p. 13) Mr. Bender provided a realistic assessment of the construction schedule and its uncertainties.

While the Village argued against the closure of the diesels before the new plant is operational, it provided little information as to what the ramifications are for the Village if it is not able to supply any electric power for a period of time. Mr. Bianco testified that the Village would have to purchase power from other sources on Long Island and pay the increased costs of that power. If the Village was unable to purchase power on Long Island it would have to go into deficiency auction and be subject to the market price. (Bianco p. 72) It is likely that this would mean higher utility rates for the Village customers for a period of time. There is nothing in the record to indicate that the Village could be left without power because of a shut down of the diesels.

FINDINGS OF FACT

  1. The Village of Freeport owns and operates an electric power generating facility known as Power Plant #2 located on Buffalo Avenue, Freeport, New York.
  2. PP2 operates 2 diesels engines and one turbine.
  3. The Department issued a Title V air pollution control permit to PP2 in 1998. The permit failed to set emissions limits for NOx and particulates.
  4. The failure to set emissions limits in the 1998 permit violates the federal Clean Air Act and New York regulations.
  5. The Village has submitted stack tests for the diesels. These stack tests have shown that the diesels are exceeding the emissions limits for both NOx and particulates applicable for this facility.
  6. The Department initiated a modification proceeding to modify the Title V permit to include emissions limits for NOx and particulates and to set a compliance schedule with those emissions limits.
  7. The Department proposes to bring PP2 into compliance by permanently decommissioning the diesels by November 30, 2003.
  8. The Village has applied for permits to construct and operate an electric power generating facility next to PP2. The proposed facility will utilize an LM6000 simple cycle turbine.
  9. The Village advised the Department that the new facility would be operational by November 30, 2003.
  10. The Village installed a containment system at the site of PP2 in 1993. During the permitting phase of that project soil sampling was performed and PCB contamination was detected on the site.
  11. The Department sent a letter to the Village on March 17,1994 advising the Village that the Department would have to approve any soil removal at the site.
  12. The Village did not consult the Department about additional soil sampling or seek approval for soil removal plans related to construction at the site until 2003.
  13. The Department issued a permit to the Village on May 22, 2003 for the new LM6000 facility.
  14. Construction was begun on the new facility after the permit was issued but had to be stopped when soil sampling revealed high levels of PCB contamination at the site.
  15. PCB contamination as high as 50 ppm has been found at the site. The EPA has exclusive jurisdiction over PCB contamination of 50 ppm or higher.
  16. The Department and the Village have agreed upon the clean up of PCB contamination below 50 ppm. The EPA, as of September 3, 2003, has not approved a clean up plan for the higher concentrations at the site.
  17. The LM6000 facility will not be operational until April 29, 2004 or later.

CONCLUSIONS OF LAW

1) 6 NYCRR 227-2.4 establishes emissions limits for both NOx and particulates for facilities operating in New York State. Those limits are applicable to PP2.

2) The Clean Air Act requires all Title V permits to contain enforceable emissions limits and standards for NOx and particulates as well as a compliance schedule.

3) The failure to set emissions limits in the 1998 permit violates the federal Clean Air Act and New York regulations.

4) The Department has the authority to modify a permit that is not in compliance with any provisions of the ECL or regulations of the department related to the permitted activity.

5) The Department has met its burden of proof by a preponderance of the evidence.

RECOMMENDATION

I recommend that the permit be modified as proposed by DEC Staff and that the modification be referred to DEC Staff for final processing.

1 The Notice of Intent to Modify issued in 2001 was withdrawn by the DEC Staff.

2 The Department issued the permit for this facility in May, 2003.

3 New York's current particulate limit is 0.2 lbs. per million Btus. 6 NYCRR 227-1.2(a)(2). However, the EPA rejected this emission rate as inconsistent with the federal standard for particulate matter emissions and therefore, the federal standard of 0.10 lbs. per million Btus is the applicable rate.

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