STATE OF SOUTH DAKOTA BOARD OF MINERALS AND ENVIRONMENT DEPARTMENT OF ENVIRONMENTAL AND NATURAL RESOURCES

Transcription

1 STATE OF SOUTH DAKOTA BOARD OF MINERALS AND ENVIRONMENT DEPARTMENT OF ENVIRONMENTAL AND NATURAL RESOURCES IN THE MATTER OF DRAFT TITLE V AIR ) QUALITY PERMIT AND ACID RAIN 1 CONSOLIDATED PERMIT NO FOR THE BIG ) STONE FACILITY AND IN THE MATTER OF ) Permit No DRAFT PSD PERMIT NO PSD 1 & PERMIT NO PSD FOR THE BIG ) Permit No PSD STONE FACILITY ) 1 DENR Draft Permits Issued: ) DENR Proposed Permits Issued: ) BOARD'S AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW April 2 1, 2009

2 TABLE OF CONTENTS... ACRONYMS AMENDED FINDINGS OF FACT... 6 I. Overview... 6 A. Parties... 7 B. Existing Big Stone I Facility... 7 C. Proposed Big Stone I1 Project... 8 I1. Background on DENR Air Quality Program and Requested Permits DENR Action on Otter Tail's Permit Applications IV. Procedural History of Contested Case Proceedings A. Petitions, Motions and Pre-Hearing Procedures (2008) B. Evidentiary Contested Case Hearing Before the Board (2008) C. Evidentiary Contested Case Hearing Before the Board (2009) V. D. General Findings Regarding Contested Case Hearings Facts Supporting the Issuance of the Proposed PSD Permit A. Applicability of PSD B. BACT Analysis The BACT Process and Relevant Definitions BACT Analysis of Big Stone I1 Emissions a. PMlo b. CO C. vocs d. SAM e. Fluorides C. Other Applicable Limits (PSD Permit Section 5) D. Performance Tests (PSD Permit Section 6) E. Fugitive Dust Controls (PSD Permit Section 7) F. Air Quality Analysis-Air Dispersion Modeling G. Modeling for Class I Areas H. Additional Impacts Analysis I. Conclusion Regarding PSD Permit VI. Facts Supporting the Issuance of the Proposed Title V Permit... 44

3 A. General B. Netting and Other Conditions Applicable to NO, and SO C. Adequacy of Compliance Provisions for SO2 and NO, D Mercury Limits E. Limitation on HAPS to Avoid Triggering MACT F. Addition of PSD Requirements G. Conclusion Regarding Revised Title V and Acid Rain Permit VII. Findings Relating to Issues Raised by Petitioners (2008 Contested Case) A. Plantwide Caps (Issues 1-4) B. IGCC (Issue 8) C. General Findings Regarding Petitioners' Challenges to the BACT Determinations (Issues 10-12) D. PMlo BACT Analysis (Issue 10) E. SAM BACT Analysis (Issue 11) F. Fluoride BACT Analysis (Issue 12) G. BACT During Periods of Startup and Shutdown (Issue 13) H. Modeling For Periods of Startup and Shutdown (Issue 14) I. PMlo NAAQS and Increments (Issue 15) J. SO2 and NOx NAAQS and Increments (Issue 16) K. Case-by-Case MACT Requirements (Issue 18) The Permit Limits Ensure That Big Stone I1 is not a Major Source of HAPS The Evidence Proved That Big Stone I1 Can Meet the HAP Limits The HAP Limits Are Enforceable The Public Was Provided Proper and Sufficient Notice L. Contents of Title V Permit (Issue 19) VIII. Findings Relating to Questions and Claims Raised in April 2009 Contested Case Hearing AMENDED CONCLUSIONS OF LAW I. General I1. The Board Should Issue the PSD Permit I11. The Board Should Issue the Revised Proposed Title V Permit for EPA's Review IV. Petitioners' Claims Are Rejected... 85

4 ACRONYMS AHPC BACT Btu CAA CAMR CEMS CO DENR EAB HAPS HF IGCC MACT NAAQS NO, NSPS NWS PAL PC PM PM2.5 PMl0 PSD SAM SCR SIP so2 VOC WESP WFGD Advanced Hybrid Particulate Collector Best Available Control Technology British thermal units Clean Air Act Clean Air Mercury Rule Continuous Emissions Monitoring Systems Carbon Monoxide South Dakota Department of Environment and Natural Resources EPA's Environmental Appeals Board Hazardous Air Pollutants Hydrogen Fluoride Integrated Gasification Combined Cycle Maximum Achievable Control Technology National Ambient Air Quality Standards Nitrogen Oxides New Source Performance Standard National Weather Service Plantwide Applicability Limit Pulverized Coal Particulate Matter Particulate Matter with an Aerodynamic Diameter of or Less than 2.5 Microns Particulate Matter of or Less than 10 Microns Prevention of Significant Deterioration Sulfuric Acid Mist (also known as H2SO4) Selective Catalytic Reduction Unit South Dakota Air Quality Program's State Implementation Plan Sulfur dioxide Volatile Organic Compounds Wet Electrostatic Precipitator Wet Flue Gas Desulfurization system (also known as a "wet scrubber")

5 This matter came to the attention of the South Dakota Department of Environment and Natural Resources ("DENR) Board of Minerals & Environment ("Board") for a contested case hearing on the renewal of a Title V operating permit and the issuance of a pre-construction permit for the Big Stone facility near Big Stone City, South Dakota. In addition to other preliminary hearings in this matter, including a public input hearing, the Board conducted contested case hearings in this matter on Monday, August 18, 2008 through Thursday, August 20,2008; and Tuesday, August 26,2008; and further contested case hearings on modeling issues on Wednesday, September 24, 2008, through Friday, September 26, At these hearings, Applicant appeared by and through its attorneys Harry M. Johnson, 111 (pro hac vice), and Penny Shamblin (pro hac vice) of the firm Hunton & Williams; and Thomas J. Welk and Christopher W. Madsen of Boyce, Greenfield, Pashby & Welk, LLP. DENR appeared by and through its attorneys, Deputy Attorney General Roxanne Giedd and Assistant Attorney General Scott Swier. Petitioners Sierra Club and Clean Water Action appeared by and through William A. Moore (pro hac vice) and Aaron Emerson. Following the contested case hearings, the Board received post-hearing briefs and reply briefs from the parties. On November 20, 2008, the Board heard final oral arguments and presentations from the parties. Based on the testimony of the witnesses, the evidence submitted to the Board at the contested case hearings, the administrative record, and the arguments of counsel, the Board entered Findings of Fact and Conclusions of Law to support its Final Decision dated the same day that authorized and directed DENR to prepare and issue in the Board's name the Prevention of Significant Deterioration ("PSD") permit for the Big Stone I1 project, and to prepare and issue the proposed Title V permit for the Big Stone facility for review by

6 the United States Environmental Protection Agency ("EPA"). The PSD permit and proposed Title V permit were issued on November 20, 2008, and the Title V permit and supporting materials were subsequently submitted to EPA for its 45-day review. On January 22, 2009, DENR received EPA's objections to the proposed Title V permit. In accordance with federal and South Dakota regulations, DENR may not issue the Title V permit and must respond to the objections within 90 days thereafter. In addition, on February 26, 2009 and in connection with the appeal of the PSD permit, the Circuit Court of Hughes County directed the Board pursuant to SDCL to take additional evidence on the limited issue of whether any revisions to the proposed Title V permit to meet EPA's objections necessitate any changes to the PSD permit and/or Findings of Fact and Conclusions of Law dated November 20,2008. In addition to other preliminary hearings in the continuation of this matter, the Board conducted a combined contested case and evidentiary hearing on Monday, April 20, 2009 and Tuesday, April 21, At these hearings, Applicant appeared by and through its attorneys Harry M. Johnson, 111 (pro hac vice), and Penny A. Shamblin (pro hac vice) of the firm Hunton & Williams; and Thomas J. Welk and Christopher W. Madsen of Boyce, Greenfield, Pashby & Welk, LLP. DENR appeared by and through its attorneys, Deputy Attorney General Roxanne Giedd and Assistant Attorney General Scott Swier. Petitioners Sierra Club and Clean Water Action appeared by and through George Hays (pro hac vice) and Aaron Emerson. Based on the testimony of the witnesses, the evidence submitted to the Board at all the hearings, the administrative record, and the arguments of counsel, the Board enters the following Amended Findings of Fact and Conclusions of Law:

7 AMENDED FINDINGS OF FACT The Board concludes that it is appropriate and lawful to issue the permits at issue in this contested case proceeding, as amended and clarified, for the reasons stated herein and in the prior orders of the Board. I. Overview 1. The proposed Title V permit has been revised to meet EPA's objections, and these Amended Findings of Fact and Conclusions of Law support the issuance of the revised proposed Title V permit. The Board concludes that the revisions to the proposed Title V permit do not necessitate any changes to the PSD permit issued on November 20, Likewise, the revisions to the Title V permit do not necessitate any changes to the Findings of Facts and Conclusions of Law as they relate specifically to the PSD permit, except to conform the general findings and conclusions to the revisions. 2. The Board finds that the revised proposed Title V permit resolves EPA's objections. 3. Nothing in these Amended Findings of Fact and Conclusions of Law is intended or shall be deemed to alter or amend the date that the PSD permit was issued (November 20,2008). 4. To the extent any of the following findings of fact may be determined to be conclusions of law or mixed findings of fact and conclusions of law, the same are incorporated by this reference as a conclusion of law as if set forth in detail. 5. All of these findings of fact have been established by a preponderance of the evidence introduced or stipulated to at the contested case hearing. 6. Citations to specific evidence herein are not intended to be exhaustive; rather, they are representative of the evidence to support the individual findings.

8 A. Parties 7. Applicant Otter Tail Corporation d/b/a Otter Tail Power Company ("Otter Tail"), along with Montana-Dakota Utilities Co. ("MDU"), a Division of MDU Resources Group, and Northwestern Energy are the co-owners of the existing Big Stone I facility. Otter Tail is the operator of the existing Big Stone I facility. Otter Tail is also one of the co-owners of the proposed Big Stone I1 facility, along with Central Minnesota Municipal Power Agency, Heartland Consumers Power District, MDU, and Western Minnesota Municipal Power Agency d/b/a Missouri River Energy Services. [Tr (Rolfes, ); Ex. 300-Dl. 8. Petitioner Sierra Club is a national non-profit corporation organized and existing under the non-profit corporation laws of the state of California. 9. Petitioner Clean Water Action, Inc., is a national non-profit corporation organized and existing under the non-profit corporation laws of the District of Columbia. B. Existing Big Stone I Facility 10. Big Stone I is an existing pulverized coal-fired plant near Big Stone City in Grant County, South Dakota. The Big Stone I power plant converts steam to electricity by burning subbituminous coal and other approved alternative fuels. 11. Big Stone I began construction on January 18, [Core Ex Because construction commenced prior to August 7, 1977, Big Stone I was not required to obtain a Prevention of Significant Deterioration ("PSD") permit. 12. On January 22, 1975, DENR issued Otter Tail an operating permit for the Big Stone I power plant. [Core Ex. 198 at 61.

9 13. On February 24, 1997, Otter Tail was issued its initial Title V operating permit for the Big Stone I power plant. The Title V permit was issued for a period of five years, with an expiration date of February 24, Condition 5.2 of Otter Tail's Title V permit provides that, if a renewal application is submitted six months prior to the expiration of the Title V permit, Otter Tail may continue to operate under the terms of the expired permit until DENR takes action on the renewal application. [Core Ex. 217 at 11. On June 4, 2001, Otter Tail, as operator, timely submitted an application to renew Big Stone I's Title V permit. [Core Ex. 210Al. Therefore, Otter Tail is authorized to operate under the terms of the February 24, 1997 Title V permit. 14. On October 23, 2006, Otter Tail submitted notification to DENR of planned projects during the 2007 Maintenance Outage for Big Stone I, including replacement of the Advanced Hybrid Particulate Collector ("AHPC") with a pulse-jet fabric filter. [Core Ex. 21 OG]. 15. On March 21, 2007, DEIVR issued an Amended Title V permit for Big Stone I addressing the removal of the AHPC and other projects described in Otter Tail's October 23,2006 submittal. [Core Ex. 21 lg]. C. Proposed Big Stone I1 Project 16. Big Stone 11 is a proposed super-critical pulverized coal-fired electric generating unit and associated facilities intended to provide approximately 600 MW of baseload energy for the participating owners in a low-cost, environmentally responsible manner. "Baseload" means the power from the proposed Big Stone 11 plant must be available to meet customer demand on a 24-hour per day, 7 days per week basis except for times when the plant is off-line for maintenance. The Big Stone I1 Project co-owners

10 serve customers in South Dakota, North Dakota, Montana, Iowa and Minnesota. The energy from the facility is intended to serve its co-owners' retail and wholesale native load customers. The facility is expected to produce 4.6 million megawatt hours of electricity per year. [Tr. 502, 526 (Rolfes, 8/20/08)]. 17. Big Stone I1 will be constructed near Big Stone City, South Dakota, at the same site as the existing Big Stone I unit. The two units will share a common stack and wet flue gas desulfurization system ("WFGD" or "Wet FGD"). South Dakota is in attainment with the National Ambient Air Quality Standards ("NAAQS") for all the pollutants regulated under the Clean Air Act ("CAW). [Core Ex. 183 at The Big Stone I1 Project must obtain a number of permits in order to construct the proposed plant and has already been subject to substantial scrutiny from various agencies, including the South Dakota Public Utilities Commission and the South Dakota Water Management Board. The Big Stone I1 Project has obtained the following permits: solid waste permit, surface water permit, siting permit, South Dakota route permit for transmission facilities, and South Dakota groundwater permit. [Tr (Rolfes, 8/20/08)]. These permits are final. 19. The Big Stone I1 Project considered and investigated several generation resources for the Big Stone I1 plant, including (1) atmospheric circulating fluidized bed, which was determined not to provide sufficient efficiency and economic value; (2) integrated gasification combined cycle ("IGCC"), which was rejected from a business standpoint because the technology has not been proven to be reliable and is not generally commercially available; (3) natural gas-powered turbines, which would be a much more expensive option; and (4) wind power, which is too intermittent to provide the needed

11 baseload power. The investigation and analysis of these alternatives was conducted by Burns & McDonnell, a national engineering firm with extensive experience in power generation. At the conclusion of the investigation, a super-critical pulverized coal plant was determined to be the best option for the Project. [Tr (Rolfes, ); Ex Burns & McDonnell also investigated potential sites for the location of the proposed plant. Ultimately, the investigation and analysis revealed the best location for the new unit was the existing Big Stone I site. [Tr (Rolfes, 8/20/08)]. 21. The proposed Big Stone I1 plant is estimated to cost approximately $1.4 billion and the related transmission facilities are estimated to cost approximately another quarter of a billion dollars. The proposed Big Stone I1 Project will have significant positive economic impact on the Milbank-Big Stone City area. [Tr , (Rolfes, 8/20/08)]. 22. The Mid-Continent Area Power Pool, an organization composed of electrical utilities and other electric industry participants, projects a deficit in generation capacity, even if Big Stone I1 is constructed. [Tr (Rolfes, 8/20/08)]. Without Big Stone 11, the utilities will need to find additional generation sources - most likely combustion turbines which are more expensive than coal on a ~ tu' basis. [Id.] 23. The proposed Big Stone I1 Project will employ a number of pollution control devices, including the following: a. Gases leaving Big Stone 11's super-critical boiler will flow into a selective catalytic reduction unit ("SCR). The SCR uses catalysts ' - British thermal units.

12 to convert nitrogen oxides ("NOx") into nitrogen and water vapor. [Tr. 524 (Rolfes, 8/20/08)]. b. The gases then flow into the "baghouse" where the air flows through fabric filters. [Tr. 525 (Rolfes, 8/20/08)]. The baghouse has thousands of fabric filter bags which trap ash and other particulate matter. [Tr. 530 (Rolfes, 8/20/08)]. Pulses of air directed at the bags periodically knock the solids off of the bags, and the particulate matter falls into hoppers where it can be collected. [Tr. 530 (Rolfes, 8/20/08)]. c. Gases then flow into a wet FGD. A wet FGD is also known as a "wet scrubber." The wet scrubber is a device that will be shared with Big Stone I, meaning that Big Stone 1's exhaust gases will also flow into the wet scrubber. A wet scrubber, as compared to a dry scrubber, will provide for greater reduction of emissions of sulfur dioxide ("S02"). [Tr (Rolfes, 8/20/08)]. d. The estimated capital cost of the pollution control equipment for the proposed Big Stone I1 plant is significant. Rough approximations are as follows: $300 million for a boiler with the SCR device; $40 million for the fabric filter baghouse; and $1 50 million for the wet scrubber. [Tr. 538 (Rolfes, 8/20/08)]. 24. The pollution control equipment has not been ordered and final design has not been completed. Once the permits are issued, the Project will select a vendor to build the boiler and the pollution control equipment. The emission control efficiencies will be

13 specified and the equipment will be designed to comply with the permits. [Tr. 552 (Rolfes, 8/20/08)]. 11. Background on DENR Air Quality Program and Requested Permits 25. The DENR Air Quality Program administers air quality permitting as required by the Clean Air Act, and state and federal statutes and regulations. 26. A PSD permit is required for any regulated pollutant prior to construction of new major stationary sources or major modifications to existing sources in areas designated as in attainment with the NAAQS under section 107 of the CAA. 27. In January 2008, the EPA approved the South Dakota Air Quality Program's State Implementation Plan ("SIP") for the PSD Program. Prior to that date, the PSD Program was considered a "delegated program" which meant that DENR administered PSD permitting on behalf of EPA. [Tr (Gustafson, 8118/08)]. 28. NAAQS mandated by the CAA are set by EPA. EPA has promulgated NAAQS for specific criteria pollutants including particulate matter ("PMlo"), SO2, NO,, and carbon monoxide ("CO"). The Air Quality Program maintains ambient air monitors throughout the state to determine the level of pollutants in the ambient air to assure compliance with the NAAQS. South Dakota is in attainment with all the NAAQS. [Tr. 47 (Gustafson, 8118/08)]. 29. A Title V permit is an operating permit required for major sources pursuant to Title V of the CAA. The Title V permit can also serve as construction authorization when a PSD permit is not required. ARSD 74:36:05:02. All PSD sources, among others, are required to have a Title V permit. After construction and within twelve months of commencing operation, a source is required to apply for a Title V

14 operating permit, which will incorporate the requirements of the PSD permit, among others. [Tr (Gustafson, 8118/08)] DENR Action on Otter Tail's Permit Applications 30. On July 20,2005, Otter Tail submitted an application for a PSD Permit for Big Stone I1 on behalf of the co-owners of Big Stone 11. [Core Exs. 144 and DENR considered the application complete on August 9,2005. [Core Ex. 183 at :I]. 31. In April 2006, DENR issued a "Notice of Prevention of Significant Deterioration Permit Application and Draft Permit" soliciting public comment on the initial Draft PSD Permit. [Core Exs. 154, 155, 159, In May and June 2006, DENR received comments on the initial draft PSD permit. [Core Exs In June 2006, Otter Tail submitted an updated application for the PSD Permit on behalf of the Co-Owners of Big Stone 11. [Core Ex DENR extended the public comment period until June 26, [Core Ex In August 2006, Otter Tail submitted further updates to the PSD application. [Core Ex In Otter Tail's PSD application for Big Stone 11, Otter Tail requested emission and operational limits that are associated with both Big Stone I and Big Stone I1 to avoid PSD review for SO2 and NOx emissions. During the public notice period on the initial PSD draft permit, EPA submitted comments suggesting that the PSD Permit was not the appropriate place for the SO2 and NOx limitations. DENR agreed and concluded that the Title V permit was a more appropriate place for those limits. [Core Ex. 217 at :I]. From then on, DENR processed the Big Stone I1 PSD permit application and the Big Stone I Title V renewal concurrently. [Tr. 242 (Rombough, 8/19/08)].

15 35. On December 21, 2008, EPA published its approval of the South Dakota SIP for PSD, effective January 22, Otter Tail resubmitted its PSD application and supporting materials on January 22, 2008 to ensure processing of the applications under the SIP. [Core Ex DENR prepared a second draft PSD Permit [Core Ex and a revised Statement of Basis ("PSD RSOB") [Core Ex The initial PSD Statement of Basis [Core Ex. 1601, as revised and supplemented by the PSD RSOB, is adopted and incorporated herein by reference, as further modified and supplemented by these Findings of Fact and Conclusions of Law. 37. On January 30, 2008, DENR issued a "Notice of Prevention of Significant Deterioration Permit Application and Draft Permit" soliciting public comment on the second draft PSD Permit. [Core Ex In accordance with ARSD 74:36:09:03, public notices were properly published on or about January 25, 2008 in the Watertown Public Opinion and the Grant County Review. [Tr (Rombough, 8/18/08); Core Ex. 18 I]. 38. DENR prepared a draft Title V Air Quality Permit ("Draft Title V Permit") [Core Ex and associated Statement of Basis ("Title V SOB") based on the June 4, 2001 application as supplemented. DENR's Title V SOB [Core Ex is adopted and incorporated herein by reference, as modified and supplemented by these Amended Findings of Fact and Conclusions of Law. 39. On January 30, 2008, DENR issued a "Notice of Title V Air Quality Permit Application and Draft Permit" soliciting public comment on the Draft Title V Permit. [Core Ex In accordance with ARSD 74:36:05: 17, public notices of the

16 Title V application and draft permit were properly published on or about January 25, 2008 in the Watertown Public Opinion and the Grant County Review. [Tr (Rombough, 8119/08); Core Ex Following.the February 8, 2008 ruling by the United States Court of Appeals for the District of Columbia Circuit vacating the Clean Air Mercury Rule, the applicability of case-by-case MACT to Big Stone I1 was uncertain. New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008). In light of this uncertainty, Otter Tail submitted to DENR on February 25, 2008 a request for a case-by-case Maximum Achievable Control Technology ("MACT") determination solely for mercury. [Core Ex On March 18, 2008, Otter Tail withdrew the request for a case-by-case MACT determination after further analysis indicating that Big Stone I1 will not be a major source of Hazardous Air Pollutants ("HAPS"), proposing instead HAP emission limits sufficient to ensure Big Stone 11's potential HAP emissions are below the major source thresholds. [Core Ex In February 2008, DENR received public comments on the second draft PSD and Title V Permits, which are reflected in the core exhibits. [Core Exs. 187, 188, 193, Sierra Club requested and received an extension until March 15, 2008 to file its comments on the draft permits. [Core Exs. 184, On April 15, 2008, DENR published its responses to the comments received during the 2006 and 2008 public notice periods regarding the initial draft PSD permit, the second draft PSD Permit and the draft Title V Permit. [Core Ex DENR's responses to comments were in excess of 90 pages - one of the lengthiest responses to public comments in DENR's history. [Tr. 277 (Rombough, 8/19/08)]. In its

17 responses, DENR addressed all comments respecting the draft permits received as of that time. 43. DENR sent the Final Proposed Permits and its Response to Comments to all persons who had submitted comments on the Draft Permits. [Tr. 247 (Rombough, 8119/08>]. 44. In particular, DENR addressed all EPA comments on the draft permits and modified those permits where appropriate. Until January 22, 2009, when it objected to the proposed Title V permit, EPA neither submitted further written comments nor sought to intervene in these proceedings. 45. On April 15, 2008, DENR issued its final draft proposed Prevention of Significant Deterioration Air Quality Preconstruction Permit for Big Stone I1 (Core Ex. 197), and its final draft proposed Title V Air Quality Permit and Acid Rain Permit (Core Ex. 219). 46. DENR spent thousands of hours investigating and researching the permit applications in this matter and preparing the draft permits, analyzing comments, responding to comments and preparing the final proposed permits. That time is significantly longer than time spent on other PSD or Title V permits. [Tr (Rombough, 8/19/08)]. In performing its review of the permits, Mr. Rombough reviewed applications and similar permits issued by other states and spoke with his counterparts in other states' agencies. [Tr (Rombough, 8/19/08); Exs On July 17, 2008, the Board conducted a public input hearing in Milbank, South Dakota, regarding the proposed permits, the transcript of which is incorporated herein by reference. Seventy-seven persons, excluding lawyers for the parties, signed in

18 at the hearing. Twenty-six persons from South Dakota and Minnesota presented comments regarding the proposed permits. Generally, most commenters expressed positive comments in support of the Big Stone I1 Project, while a minority of commenters opposed the Project. Specifically: a. Many commenters spoke in favor of the project noting that Otter Tail and Big Stone I have been good neighbors and friends for years. The project will provide safe, reliable and environmentally responsible low-cost electricity with less emissions than Big Stone I by itself. A number of commenters noted that they have raised their families in the community alongside the Otter Tail employees and have observed no ill effects among those living close to the power plant. b. Several commenters expressed concern regarding mercury emissions from the Big Stone facilities. The evidence is that the construction of Big Stone I1 will not increase mercury emissions over existing emissions. Combined mercury emissions from Big Stone I and Big Stone I1 are capped at Big Stone 1's calculated mercury emissions from 2004 (189 lbslyear). [Core Ex. 219 at 251. Due to controls that are added to Big Stone I and Big Stone 11, it is anticipated that mercury emissions will be approximately 50% below the caps. Hence, mercury emissions from both Big Stone I and I1 are expected to be less than the current mercury emissions from Big Stone I. c. Several commenters expressed concern regarding the effect of Big Stone I1 on ambient air quality. The Board finds DENR has

19 conducted extensive air quality monitoring and has determined that air quality is excellent. Due to controls to be installed as part of the Big Stone I1 project and based on air dispersion modeling that is accepted by the Board, all legal requirements regarding air quality are satisfied and there is no reason to believe that air quality will be degraded. 48. The Board finds that the public was able to reasonably and meaningfully review and comment in writing and in person on the proposed permits. 49. The Board has considered the public comments received during the 2006, 2008, and 2009 public notice periods, as well as all other public comments received since that time, when deciding whether to issue the permits. DEhTR's responses to comments [Core Exs. 198, 8531 are adopted and incorporated herein by reference, as supplemented herein. 50. During the 2008 contested case hearing, Otter Tail proposed several changes andlor clarifications of the proposed PSD permit. [Ex These included: clarification of Best Available Control Technology ("BACT") requirements during startup, shutdown, and malfunction; more stringent material handling PMlo emission limits consistent with EPA's proposed NSPS and Otter Tail's modeling; the addition of language in Section 1.1 allowing insignificant changes to the design of the plant so long as modeling still reflects compliance with air quality standards; and correction of a typographical error in Unit #35's BACT limit. DENR concurred with all the changes proposed by Otter Tail except for the proposed language in Section 1.1. DENR proposed revised language regarding insignificant design changes in Section 1.1 A, and Otter Tail agreed with DENR's revised language. The final proposed language is shown in Ex. 705,

20 which the Board accepts and will incorporate into the PSD permit. The Board adopts and will incorporate the remaining proposed changes in Exhibit 324 for the reasons herein. 51. Otter Tail had originally proposed changes to the 2008 draft Title V permit. Otter Tail later withdrew those proposed changes. The Board adopted and issued the 2008 proposed Title V permit [Core Ex without modification. 52. The PSD permit and proposed Title V permit were issued on November 20, 2008, and the proposed Title V permit and supporting materials were subsequently submitted to EPA for its 45-day review. 53. On January 22, 2009, DENR received EPA's objections to the proposed Title V permit. [Core Exs In accordance with federal and South Dakota regulations, DENR could not issue the Title V permit and was required to respond to the objections within 90 days thereafter. 54. Generally, EPA objected on the following three areas: a. Failure to include applicable requirements from the PSD permit and New Source Performance Standards ("NSPS") for the proposed Big Stone I1 project in the proposed Title V permit; b. A lack of a proper PSD applicability analysis for SO2 and NOx; and c. Inadequate compliance provisions for SO2 and NO, emissions to avoid a PSD review and for HAP emissions to avoid a Caseby-Case MACT review for the Big Stone I1 project in the proposed Title V permit. EPA also recommended that the HAP provisions in Chapter 11 of the proposed Title V permit be noticed for public comment.

21 55. After receiving EPA's objections, DENR and EPA communicated frequently via telephone and about revisions to the proposed Title V permit and the supplemental Statement of Basis. [See, e.g., Core Exs , , DENR sought to ensure that EPA was satisfied with the revisions before publishing the public notice of the draft revisions to the proposed Title V permit and the Statement of Basis. 56. DENR drafted revisions to the proposed Title V air quality permit in response to EPA's objection to ensure compliance with SDCL 34A-1 and the federal Clean Air Act. DENR took the following specific actions on the permit: a. Re-noticingpermitconditions11.1,11.2,11.3,11.4,11.6, 11.7, and 11.9; b. Revising permit conditions 5.5, 5.9, 7.1 1, 7.12, 8.4, 9.2, 9.5,9.8, and 11.5; c. Adding permit conditions 5.12,9.3, 9.6, 9.9,9.10, and 11.8; and d. Adding Chapters 12.0, 13.0, 14.0, 15.0, and On February 9, 2009, DENR issued a "Notice of Issuance of Draft Revisions to Proposed Title V Air Quality Permit in Response to EPA Objections." [Core Exs. 833, , Public notices of the draft revised Title V permit were properly published on or about February 11, 2009, in the Watertown Public Opinion and the Grant County Review. [Core Ex The notices solicited public comment on the draft revisions to the Title V Permit, solicited public comment on certain other provisions

22 in accordance with EPAYs objections, and provided notice of the contested case hearing on or about April 20,2009. [Id] 58. DENR received public comments from approximately 300 individuals and environmental groups. [See Core Exs DENR reviewed and considered the comments, and where appropriate, incorporated changes into the revised proposed Title V permit. DEhTR issued responses to the comments on March 18, 2009 [Core Ex. 8531, and submitted them to EPA and the commenters along with notification of the time and location of the contested case hearing. [Core Exs , DENR issued its final draft revisions to the Title V permit on March 18, [Core Ex At the April 2009 contested case hearing, Otter Tail proposed a slight wording change to Condition 9.5 of DENRYs March 18, 2009 final draft revision of the Title V permit to clarify that the Unit #1 and Unit #13 annual nitrogen oxide limits go into effect the month of the initial startup of Unit #13 consistent with Condition 9.2 for sulfur dioxide. DENR concurred with the change proposed by Otter Tail. The Board adopts and will incorporate the proposed change. The first paragraph of Condition 9.5 will read as follows: 9.5 Nitrogen oxide limit. In accordance with ARSD 74:36:05:16:01(8), the owner or operator shall not emit into the ambient air nitrogen oxide emissions in excess of the 12-month rolling emission limit specified in Table 9-2. The 12-month rolling emission limits includes periods of startup, shutdown, and malfunction: The first month of the 12-month rolling total shall begin the month of the initial startup of the Unit #13.

23 IV. Procedural History of Contested Case Proceedings A. Petitions, Motions and Pre-Hearing Procedures (2008) 61. On February 20, 2008, Otter Tail timely filed petitions with the Board requesting contested case hearings regarding the PSD and Title V permits. 62. On May 15, 2008, Petitioners Sierra Club and Clean Water Action, Inc., timely filed their "Petitions for Contested Case Hearings on the Big Stone Facility's Proposed Title V Air Quality Permit and Acid Rain Permit No and the Big Stone I1 Facility's Proposed PSD Permit No PSD" (the "Petition"). The Petition raised the following issues with respect to the proposed permits: a. Issues 1-4: Challenging the use of plantwide caps for SO2 and NO,. b. Issue 5: Arguing that prior modifications to Big Stone I should have triggered PSD Review. c. Issues 6-7: Arguing that the PSD permit was invalid because it did not impose BACT limitations on emissions of greenhouse gases, specifically carbon dioxide ('TO2") and methane. d. Issue 8: Arguing that DENR should have considered IGCC in its BACT analysis. e. Issues 9 and 17: Arguing that DENR should have separately analyzed emissions of particulate matter with an aerodynamic diameter less than 2.5 microns ("PM2,3") in the BACT analysis and with respect to whether Big Stone I1 would violate NAAQS. f. Issue 10: Challenging DENR's BACT analysis with respect to PMlo.

24 g. Issue 11: Challenging DENR's BACT analysis with respect to sulfuric acid mist ("SAM"). h. Issue 12: Challenging DENR's BACT analysis with respect to fluorides. 1. Issue 13: Arguing that the Proposed PSD Permit is legally invalid because it does not require compliance with BACT limits during periods of startup and shutdown. j. Issue 14: Arguing that the Proposed PSD Permit is legally invalid because the modeling was insufficient to demonstrate compliance with NAAQS and PSD increments during periods of startup and shutdown. k. Issue 15: Challenging DENR's conclusion that Big Stone I1 will not cause or contribute to a violation of PMlo NAAQS and PSD increments. 1. Issue 16: Challenging DENR's conclusion that Big Stone I1 will not cause or contribute to a violation of SO2 and NOx NAAQS. m. Issue 18: Arguing that the Proposed Title V Permit is invalid because it did not properly address case-by-case MACT requirements. n. Issue 19: Arguing that the Proposed Title V Permit does not include all applicable requirements and impermissibly allows operation of Big Stone 11.

25 63. The Board consolidated all the pending petitions into one contested case hearing. 64. On May 23, 2008, Petitioners moved to voluntarily dismiss Issue 5 of their Petition. The Board granted the motion by order dated June 16, On June 4, 2008, Otter Tail filed and served a motion and supporting brief seeking dismissal of Issues 6 and 7 of the Petition. 66. On July 7, 2008, both Otter Tail and the Petitioners moved for partial summary judgment. In its motion, Otter Tail sought summary judgment on Issues 9 and 17 regarding DENR's use of PMlo as a surrogate for PM2.5 in its BACT and NAAQS analyses. In Petitioners' motion, Petitioners sought judgment on Issues 1, 2, 4, 6-8, 13-14, and The parties provided the Board with briefs in support of their respective positions. 67. On July 17, 2008, the Board heard argument on Otter Tail's Motion to Dismiss and the parties' respective motions for partial summary judgment. 68. On July 22, 2008, the Board entered an order granting Otter Tail's Motion to Dismiss Issues 6 and 7 because Petitioners failed to state any claim upon which relief could be granted with regard to these issues. Accepting the arguments of Otter Tail and DENR, the Board may not consider control of the emissions of C02 and methane, because they are not regulated at this time by EPA or the State of South Dakota. 69. On July 22, 2008, the Board also entered an order granting Otter Tail's Motion for Partial Summary Judgment with respect to Issues 9 and 17 finding there was no genuine dispute of material fact as to these issues and because Otter Tail was entitled to judgments on these issues as a matter of law. Accepting the arguments of Otter Tail

26 and DENR, the Board found that DENR had properly used PMlo as a surrogate for a BACT analysis of PM2,5 and NAAQS modeling, and therefore, as a matter of law, no separate BACT analysis or modeling for PM2,5 is required. 70. On July 22, 2008, the Board entered an order denying Petitioners' Motion for Partial Summary Judgment in its entirety. B. Evidentiary Contested Case Hearing Before the Board (2008) 71. The Contested Case Hearing was bifurcated to allow Petitioners sufficient time to analyze all of Otter Tail's and DENR's modeling evidence. The Board set aside dates in August for the first portion of the hearing and dates in September for the second portion of the hearing. The first portion was designated for all issues other than modeling, while the second portion was designated for the modeling issues and rebuttal. The parties were provided ample time to conduct discovery, present their evidence, and cross examine the witnesses. A quorum of Board members was present at all times during the hearings. In addition, any Board members who were not present at any particular time during the hearing have read the hearing transcript and reviewed the exhibits admitted. 72. Over the course of the contested case hearings, the Board heard the testimony of ten witnesses, and accepted into evidence 292 exhibits comprising over 18,200 pages. In addition to the evidence presented at the hearing, the parties engaged in extensive discovery efforts during which five persons were deposed and more than 46,000 pages of documents were exchanged by the parties pursuant to written discovery requests. [Tr (stipulation by parties, 9/26/08)]. 73. DENR presented the testimony of the following witnesses:

27 a. Brian Gustafson, Administrator of DENR's Air Quality Program. Mr. Gustafson has a Bachelor of Science Degree in geological engineering from the South Dakota School of Mines & Technology. He has been employed by DENR in the Air Quality Program since Mr. Gustafson's responsibilities as the administrator of DENR's Air Quality Program include management of the program and assuring the program is meeting all EPA requirements. [Tr. 41 (Gustafson, 8118/08)]. b. Brad Schultz, Team Leader, DENR Air Quality Program. Mr. Schultz is an Environmental Senior Scientist with the Air Quality Program of DENR. Mr. Schultz is a graduate of South Dakota State University and has a degree in agronomy. Mr. Schultz has been employed by the State of South Dakota in its environmental programs since 1979 (at that time within the Department of Health and presently with DENR). Mr. Schultz, as team leader for the Air Monitoring Program, is responsible for developing and implementing the air monitoring system for the State of South Dakota. [Tr (Schultz, 8118/08)]. c. Kyrik Rombough, Team Leader For Permitting, DENR Air Quality Program. Mr. Rombough received a Bachelor of Science degree in chemical engineering from the South Dakota School of Mines & Technology in May Following graduation, he started work with DENR's air quality program. In his job duties, Mr. Rombough is responsible for processing, reviewing, and making decisions regarding the relevant permit applications, including the preparation of the Statements of

28 Basis, the draft permits, the final proposed permits, and DENR's responses to public comments. Mr. Rombough has worked on most of South Dakota's Title V permits (approximately 90) and PSD permits (approximately 7 or 8), and has been the primary permit writer on of the Title V permits and 4 of the PSD permits. [Tr. 123 (Rombough, 8118/08)], d. Jim Anderson, Natural Resources Project Engineer, DENR Air Quality Program. Mr. Anderson graduated from the South Dakota School of Mines & Technology with a bachelor's degree in chemical engineering. Mr. Anderson performs ambient air quality modeling. 74. Otter Tail presented the testimony of the following witnesses: a. Mark Rolfes, Project Manager of Big Stone I1 Project. Mr. Rolfes has the overall responsibility for the development and implementation of the Big Stone I1 project. [Tr (Rolfes, 8/20/08)]. He is a Professional Engineer licensed in South Dakota and Minnesota. He is a 1977 graduate of North Dakota State University, receiving a Bachelor of Science degree in mechanical engineering. Mr. Rolfes has been employed with Otter Tail for over 31 years. He served as plant manager of the Big Stone I plant for 14 years and has been the manager of the Big Stone I1 Project since b. Terry Graumann, Manager of Environmental Services, Otter Tail. Mr. Graumann is responsible for ensuring that the documentation and permitting activities associated with Otter Tail's

29 operations are in compliance with various state and federal environmental regulations. Mr. Graumann acts as the liaison with DENR to ensure that Otter Tail receives the appropriate information to complete permitting applications and that applications are properly filed. Mr. Graumann also coordinates with plant engineers and outside consultants on data-gathering projects to ensure that Otter Tail meets its obligations outlined in permit conditions. Mr. Grawnann has been employed with Otter Tail since 1973 and has remained actively involved in its environmental division for 35 years. Mr. Graumann has served as a team member on the Big Stone I1 Project since [Tr (Graumann, 8/20/08)]. c. David Gaige, P.E., Project Manager, Environmental Division, Burns & McDonnell. Mr. Gaige is a licensed professional engineer in the State of Colorado and is employed as a senior project manager in the environmental studies and permitting division of Bums & McDonnell. Mr. Gaige has over 32 years of experience in air quality permitting. Mr. Gaige has an undergraduate degree in mechanical engineering from Texas Tech University and a master's degree in mechanical engineering fiom Colorado State University. Mr. Gaige was previously employed by the Colorado Health Department, working in air permitting programs. As a consulting engineer, he has worked on permits for various power plants, including approximately 20 coal-fired plants. Mr. Gaige has extensive experience in BACT analysis and air dispersion modeling. [Tr. 686, 687, 1142 (Gaige, 812 1/08 & 9/25/08); Ex

30 d. Robynn Andracsek, P.E., Environmental Engineer, Burns & McDonnell. Ms. Andracsek is a licensed professional engineer in the State of Kansas and is employed as an environmental engineer with Bums & McDonnell in Kansas City, Missouri. Ms. Andracsek has an undergraduate degree in mechanical engineering and a master's degree in environmental engineering, both from the University of Kansas. Ms. Andracsek has worked with air dispersion modeling on a daily basis for the last 11 years and has extensive experience with air dispersion modeling for power plants and other industrial facilities. Ms. Andracsek was the primary modeler for the Big Stone I1 project. [Tr (Andracsek, 9/24/08); Ex Petitioners presented the testimony of the following persons: a. Ranajit "Ron" Sahu, Ph.D., consultant. Dr. Sahu works as an independent environmental consultant with experience in reviewing coal-fire power plant applications and air quality emissions calculations. Dr. Sahu has an undergraduate degree in mechanical engineering from the Indian Institute of Technology and completed his Ph.D. in the environmental aspects of coal combustion at Cal Tech in [Tr (Sahu, 8/26/08)]. Dr. Sahu has never served as a regulator, nor can he recall ever preparing an air permit application for a coal-fired power plant. [Id. at He has never prepared a BACT analysis for a coal-fired power plant. [Id. 1.

31 b. Patrick Hanrahan, P.E., consultant. Mr. Hanrahan works as an independent air quality consultant and is a registered professional engineer in chemical and environmental engineering. He received his undergraduate degree in chemistry from Portland State University in 1970 and master's degree in biochemistry from the University of Illinois in Urbana in [Tr , 1320 (Hanrahan, 9/26/08)]. Mr. Hanrahan's experience with air quality modeling for coal-fired power plants, including their haul roads, is very limited. [Id. at Mr. Hanrahan presented his testimony by telephone at the request of Petitioners. C. Evidentiary Contested Case Hearing Before the Board (2009) 76. The Board consolidated the continuation of the contested case on the Title V permit with the evidentiary hearing ordered by the Circuit Court of Hughes County pursuant to SDCL in connection with the PSD appeal. 77. Kyrik Rombough was the only witness who testified. 78. A quorum of Board members was present at all times during the April 2009 hearing. D. General Findings Regarding Contested Case Hearings 79. Throughout the course of the extensive hearings in this matter, the Board had ample opportunity to observe the witnesses in person (or to hear their testimony live via telephone in the case of Mr. Hanrahan). The Board has observed the demeanor of the witnesses and has considered the testimony they provided under direct and cross examination. Considering all the evidence presented at the hearing, the Board finds the testimony of Otter Tail's witnesses and DENR staff to be more credible and convincing

32 than the testimony by Petitioners' witnesses. In further comparison to Petitioners' witnesses, the Board finds the witnesses of Otter Tail and DENR have more education, training, and experience in the field, particularly with regard to air permitting for coalfired power plants. In addition, the Board finds the witnesses of Otter Tail and DENR utilized reasonable, prudent methodologies of analysis whereas Petitioners' witnesses advocated for speculative or unreasonable methodologies. In many instances, Petitioners' witnesses offered nothing more than criticisms without offering any alternatives. Petitioners' witnesses had not spent as much time as DENR's and Otter Tails's witnesses investigating and evaluating this project and did not display nearly as much familiarity with the project and its supporting information. The testimony of Petitioners' witnesses revealed various misunderstandings about the project and about the supporting information. 80. The Board finds that DENR and its staff persons properly exercised their judgment in this matter in concluding that the permits should be issued. DENR and its staff members have substantial education, training, and experience in the field of air permitting (including PSD and Title V permits) and in the enforcement of federal and state air quality standards and regulations. The DENR staff spent thousands of hours reviewing and analyzing Otter Tail's permit applications, preparing draft permits, analyzing and reviewing comments, working with EPA to address and resolve EPA's objections, and participating in the contested case hearings. V. Facts support in^ the Issuance of the Proposed PSD Permit A. Applicability of PSD 81. Grant County is located in an attainment area, and Big Stone I1 is subject to PSD review for PMlo, PM2.5, CO, VOC, fluorides and sulfuric acid mist. The main

33 elements of PSD review are BACT, demonstration of compliance with NAAQS and increment through air quality modeling, and an analysis of additional impacts. 82. PSD review is not required for SO2 and NOx. Under 40 C.F.R (b), Big Stone I and I1 are one stationary source. The 2008 Title V permit established federally enforceable plantwide emission limits for SO2 and NOx. The limits applied to all emission units at Big Stone I and I1 that emit SO2 and NOx. With these limits applicable facility-wide, Big Stone I1 would not cause any increase in SO2 or NO, emissions for the source. [Core Ex. 198 at 15-17]. To respond to EPA's objection that individual unit limits are necessary,, DENR conducted a netting analysis as described in the revised Title V Statement of Basis and established SO2 and NOx limits for each individual emissions unit such that these pollutants are not subject to PSD Review. [Core EX. 842A DENR appropriately used PMlo as a surrogate for PM2 5 in the PSD review. Therefore, the Board finds that a separate PM2 5 PSD review was not required. B. BACT Analysis 1. The BACT Process and Relevant Definitions 84. The BACT requirement applies to each individual new or modified affected emissions unit and pollutant emitting activity at which a net emissions increase would occur. The BACT analysis consists of determining the best available control technology and establishing an emissions limit based on the maximum degree of reduction achievable for each pollutant subject to regulation under the federal Clean Air Act. 85. The BACT analysis is determined