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Mirant Bowline, LLC - Ruling 2, May 15, 2001

Ruling 2, May 15, 2001

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Application for a State Pollutant Discharge Elimination System permit pursuant to
Environmental Conservation Law (ECL) Article 17 and Title 6 of
the Official Compilation of Codes, Rules and Regulations of the State of New York (6 NYCRR)
Parts 750 et seq., Air Pollution Control permits consisting of a Preconstruction permit
and a Certificate to Operate, pursuant to ECL Article 19 and 6 NYCRR Parts 200 et seq.,

- by -

Mirant Bowline, LLC,
formerly Southern Energy Bowline, LLC,
900 Ashwood Parkway, Suite 900
Atlanta, Georgia 30339-4780,

Applicant

RULING ON PREHEARING MOTIONS

DEC No.

3-3922-0003/00015
and
SPDES No.
NY0264342

[May 15, 2001]

Introduction

In August 2000, Mirant Bowline, LLC (formerly Southern Energy Bowline, LLC; the Applicant or Mirant), applied for a Certificate of Environmental Compatibility and Public Need pursuant to Article X of the New York Public Service Law (PSL)(1) and Air Pollution Control and State Pollutant Discharge Elimination System permits pursuant to Articles 17 and 19 of the Environmental Conservation Law (ECL), to construct and operate a 750 megawatt (MW) combined cycle electric generating facility in the Town of Haverstraw, Rockland County, New York.

On March 30, 2001, rulings on party status and issues for adjudication were issued in both this case and the related Article X case. The Article X ruling also set a joint schedule for filing prefiled direct expert testimony, requiring filing of such testimony on or before the fourteenth calendar day following the first day on which both the DEC Commissioner and Siting Board orders from any appeals of the March 30, 2001 rulings are issued, and that further scheduling milestones will be adopted as the case progresses.

Proceedings

By letter dated April 27, 2001, Riverkeeper and Scenic Hudson, PSL Article X Parties and DEC Intervenors, filed a motion seeking a suspension of the schedule for filing prefiled direct testimony. Since this motion addresses the schedule for the cooling technology/BTA issue identified in the March 30, 2001 DEC Ruling (Ruling #7; the "BTA issue"), the motion is addressed in the context of the DEC proceeding.

In their motion, Riverkeeper and Scenic Hudson contended that two reports and a sample of the Gunderboom fabric, necessary to their preparation for adjudication of this issue, were not available. Riverkeeper and Scenic Hudson requested an extension of the schedule for filing prefiled direct expert testimony on the BTA issue until at least six weeks after the Applicant has produced the two studies and also has provided them with a sample of the proposed Gunderboom material, previously requested through discovery.

On April 30, 2001, after the motion was filed, the Applicant filed the two reports; the "Gunderboom MLES Fabric Permeability Study Flow Test Conducted at Bowline Pond" report, dated April 2001 and the "Lovett Generating Station Gunderboom Deployment Program 2000" report, dated April 2001. These reports now are available for review by the participants in the DEC proceeding.

On May 7, 2001, the DEC Staff filed a one-paragraph letter in support of the request for extension of time.

Also filed on May 7, 2001 was the Applicant's reply in opposition to the motion, noting that the two reports recently were provided, and further, that the Bowline Article X Siting Board has not yet been convened.

Discovery Status of the Gunderboom Fabric

Regarding the joint discovery request of Riverkeeper and Scenic Hudson for a sample of the Gunderboom fabric proposed for use at Bowline 3, the Applicant claims that a fabric sample is not discoverable. Mirant claims that the Gunderboom fabric is not within the Applicant's possession, custody or control, but instead is in the exclusive possession, custody and control of Gunderboom, Inc., the Applicant's consultant that will manufacture and install the proposed Gunderboom fabric.

Ruling 1: The Applicant has the burden of proof to show that its proposal will be in compliance with all applicable laws and regulations administered by the Department. 6 NYCRR 624.9(b)(1). The Gunderboom is the cornerstone of the Applicant's proposed hybrid cooling system. The cooling system is intended to meet the requirements of the Department's SPDES program. It follows that pursuant to 6 NYCRR 624.9(b)(1), if the Applicant is to meet its burden of proof, then this element of the project must be available through discovery for evaluation and full review during the Department's permit hearing process.

Moreover, the Applicant has made a claim that this Gunderboom proposal is distinguishable from the Athens Gunderboom proposal, representing a further development of the Gunderboom technology. But, now the Applicant will not support discovery on that claim. The Applicant's position precludes a full, complete review of this aspect of the project during the Department's adjudicatory permit hearing process. Under these circumstances, it is not unreasonable to conclude that the Bowline Gunderboom is not substantially different from the Gunderboom that was rejected in the Athens project. In fact, these circumstances could provide the basis to support the granting of a motion for summary judgment denying the project.

Trade Secret Status

Gunderboom Inc., through the Applicant, asserts trade secret status for its fabric product. I treat this as a countermotion by the Applicant for trade secret protection on behalf of its consultant Gunderboom, Inc. By letter dated May 4, 2001, attached as Exhibit A to the Applicant's reply in opposition to the motion (Dreyer, President, Gunderboom, Inc., to Brenner), Gunderboom, Inc., declines to provide the Applicant or Riverkeeper and Scenic Hudson with fabric samples. Gunderboom, Inc., "considers much of the information and use of our materials as Proprietary and subject to Trade Secrecy. . . [W]e have adopted a firm policy of not providing materials for testing or evaluation except under mutually agreed upon terms and conditions." The letter does not specify the terms and conditions that would be acceptable to Gunderboom, Inc., and the Applicant has not indicated that any attempt has been made to obtain the consent of Riverkeeper and Scenic Hudson to such conditions. In New York, the law of trade secrets is governed by common law rules(2). A trade secret is "any formula, pattern, device or compilation of information which is used in one's business, and which gives [that business] an opportunity to obtain an advantage over competitors who do not know or use it". Restatement of Torts §757, Comment b, at 5 (1939; cited in Ashland Mgmnt. Inc. v Janien, 82 NY2d at 407). Trade secrets are property. In appropriate cases, preservation of trade secrets will be shielded by the courts against unauthorized appropriation on the grounds that no person has the right to secure a secret by unfair means and to use or disclose it after it has been unlawfully obtained. New York courts recognize that almost any information used in the conduct of one's business may be protected as a trade secret.

Although the Restatement of Torts identifies six factors to consider in determining whether trade secret protection should be granted, in New York two factors are dispositive. A business entity will be granted trade secret protection for its confidential information upon a showing that (1) the information is subject to protection as a trade secret, and (2) that the acquisition, use or disclosure of the information is a breach of a confidence or fiduciary duty or involves other improper means (i.e., a misappropriation). The most important factor is whether the information is secret. See, Ashland Mgmnt., supra, at 407. New York courts have emphasized the need for the trade secret owner to take reasonable precautions to prevent disclosure of the trade secret.

Further, when the claimed trade secret relates to a publicly marketed product, the secrecy element is not necessarily lost. Instead, the inquiry focuses upon whether the information sought to be protected is readily discernable from the product or easily extracted from the product (i.e., through reverse engineering). See, Tabor v Hoffman, 118 NY 30 (1889), Eagle Comtronics, Inc. v Pico, Inc., 89 AD2d at 804.

Ruling 2: The Applicant has not shown that any attempt was made to reach mutually agreed upon terms and conditions between its consultant and the Intervenors' consultant so that the fabric sample could be provided and subjected to testing or evaluation. Further, since the fabric is a commercially available product, the Applicant or its consultant must show that the information sought to be protected is not readily discernable from the product or easily extracted from the product. No such showing has been made. For these reasons, the Applicant's motion for trade secret protection must be rejected.

The Applicant is directed to comply with the discovery request of Riverkeeper and Scenic Hudson by May 21, 2001.

Since the two reports already have been provided and the Bowline Siting Board has not yet been convened, the Intervenors' motion for extension of time is premature. The Intervenors' motion is denied without prejudice to renew.

_____________/s/_____________
By: Kevin J. Casutto
Administrative Law Judge

Dated: May 15, 2001
Albany, New York

To: Bowline 3 Distribution List (March 16, 2001)

1 See Department of Public Service Case No. 99-F-1164, Application by Mirant Bowline, LLC, for a Certificate of Environmental Compatibility and Public Need to Construct and Operate a 750 Megawatt Generating Facility in the Town of Haverstraw, Rockland County.

2 See, generally, 104 NY Jur2d, Trade Regulation, §§243 through 263; see, also, Report to the NY Legislature on the Adoption of the Uniform Trade Secrets Act in New York, issued June 1999.

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