20030147 Ver 2_General Correspondence_20071019

Progress Energy
VIA HAND DELNERY
Robert Krebs
Hearing Officer
c/o N.C. Division of Water Quality
401/Wetlands Unit
Parkview Building
2321 Crabtree Boulevard
Raleigh, NC 27604
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Re: Comments by Progress Energy Carolinas, Inc., on proposed 401 Certification for
Reapplication for FERC License No. 2206 for the Yadkin-Pee Dee Hydroelectric
Project
Dear Mr. Krebs:
Carolina Power and Light Company d/b/a Progress Energy Carolinas, Inc. (PEC) owns and
operates the Yadkin-Pee Dee Hydroelectric Project (the "Project"), subject to the terms and
conditions of License No. 2206 issued by the Federal Energy Regulatory Commission (FERC).
It is located on the Yadkin-Pee Dee River in Anson, Montgomery, Stanly, and Richmond
counties. The 1D8.6 MW Project consists of two hydroelectric developments-Tillery
Hydroelectric Plant and Blewett Falls Hydroelectric Plant. Lake Tillery and Blewett Falls
Lake, each of which are a part of the Project, serve as the impoundment water source for
hydroelectric energy generated by the developments. Each development releases water to the
Pee. Dee River. The Project provides a renewable, emissions-free source of hydropower to
Progress Energy's generation mix for electricity demands in the region.
These comments to the N.C. Division of Water Quality {DWQ) are offered by PEC relating to
its 401 application filed with DWQ on May 11, 2007. The comments also refer to written
comments fled with DWQ on July 18, 2007, on behalf of the City of Rockingham, N.C., and
American Rivers, and comments made by various parties at the public hearing held on
September 18, 2007. PEC believes that the 401 record provides sufficient and complete
information for DWQ to render a decision on the application. PEC also believes that the
stipulations that it has proposed in the 401 application provide a sound basis for DWQ to issue
the 401 Water Quality Certification for the Project.
1 Appendix 1 to these comments contains, among other technical discussions, responses
to issues raised by commenters at the public hearing held on September 18, 2007.
Progress Energy Service Company, LLC
P.O. Box i 551
flaleigh, NC 27602

Robert Krebs
October 18, 2007
Page 2
In addition, we have attached appendices providing documents to be submitted into the record
for the 401 Water Quality Certification and addressing specific technical and legal comments
regarding various issues raised at the public hearing or in written comments submitted into the
record. PEC believes these comments and documents will provide clarification of some issues
or assertions.
The 401 Water Quality Certification process refers to Section 401 of the Clean Water Act.
Whenever a federal license is issued which results in a discharge to waters of the United States,
the affected state must certify that the terms and conditions of the federal license will not result
in the violation of state water quality standards. States may include in the 401 Certification
conditions reasonably related to the protection of water quality, which become enforceable
conditions of the federal license. In this case, the triggering federal license is the renewal of an
operating license for a hydroelectric project issued by FERC.
The regulatory framework that defines the standards to be met in order for the State of North
Carolina to issue a Section 401 Water Quality Certificate is found at 15A NCAC 2B .0200 et
seq. FERC's licensing regulations and authority (as defined by the Federal. Power Act and
FERC's regulations codified in 18 CFR) are clearly separate from the criteria upon which water
quality certifications are determined and issued by the State of North Carolina.
A concept central to 401 Certification in North Carolina that may not be well understood by
some who provided comments at the September 18 public hearing is that of "existing use."
The North Carolina rules governing 401 Certification are promulgated by the Environmental
Management Commission ("EMC") and codified at 15A NCAC 2H .0501, et seq. Aside from
certain numeric criteria, Certification is premised on the protection of existing uses, which are
explicitly defined in EMC rules as those "uses actually attained in the water body, in a
significant and not incidental manner, on or after November 28, 1975...." 15A NCAC 2B
_.0202(30). As a threshold matter, the Director of DWQ must issue a certification if she
determines that existing uses are neither removed nor degraded by the. activity seeking the
federal license.
Because the dams at Lake Tillery and Blewett Falls Lake significantly pre-date the Clean
Water Act and were in place and operational as of November 28, 1975, and currently have the
same minimum flow regime as~ that which existed in 1975, there is, by definition, no loss of
existing uses under the future operation of the dams as proposed by PEC. Indeed, as has been
recognized by DWQ, PBC has agreed in the context of the FERC licensing process to revise
the operating conditions of both the Lake Tillery and Blewett Falls dams to increase minimum
flows, and to undertake other measures which will enhance aquatic habitat, aquatic life
propagation, biological integrity (including fishing and fish), wildlife, and secondary

Robert Krebs
October 18, 2007
Page 3
recreation.2 There is nothing in the record of this proceeding which supports a claim that any
existing use, as that term is defined in the rules of the EMC, has been removed or degraded.
To the contrary, existing uses, without exception, will be maintained or enhanced as a result of
this relicensing and that-fact has been expressly acknowledged by opponents.
It is important to note that, under North Carolina law, classifications are assigned to water
bodies based on best usage of those waters, e.g., 15A NCAC 2B .0211(1). The assignment
must take into consideration the water quality standards of downstream waters. 40 CFR
§ 131.10(b). In North Carolina, the quality of all surface waters must be sufficient to support
the best usage assigned for Class C streams. It specifically does not mean that each water body
is required to exhibit every use provided in the classification. For example, unnamed.
intermittent streams tributary to a Class C stream, which are themselves classified as Class C
streams, 15A NCAC 2B .0301(1) cannot reasonably be expected to support fishing and fish in
the same way that a perennial stream can.
Similarly, not all WS-classified tributaries to water supply waters are required to provide an
adequate quantity of water to act as a supply .for drinking. However, those tributaries must
maintain the quality required to support a use as drinking water. Thus, the classified uses for
the streams must be supportable by the quality of the water, but not necessarily be present, nor
somehow maximized, in every classified water body.
Another apparently misunderstood feature of the EMC's 401 Certification rules, 15A NCAC
2H .0501, et seq. (the "401 rules"), relates to the fact that those rules were adopted with a focus
on certification of pernuts proposed to be issued pursuant to Section 404 of the Clean Water
Act. 33 U.S.C. § 1344. Such projects customarily involve the deposition of dredged or fill
material into waters of the United States, such that areas formerly considered to be waters with
existing uses might be reduced in area and reach or removed, with a consequent reduction or
removal of their classified uses. Because of the degradation, reduction, or removal of existing
uses inherent to a project seeking a Section 404 permit, the concept of replacement of
degraded, reduced or removed use is a theme in the 401 rules. This. replacement concept is
referred to as compensatory mitigation, or, more simply, mitigation.
2 Appendix 2 to these comments is the Comprehensive Settlement Agreement executed
by stakeholders which contains terms and conditions relating to Project operations that will
provide enhancements to existing uses. Appendix 3 contains several documents, graphs, and
tables, which summarize the package of enhancement measures proposed by PEC for the
continued operation of the Project and demonstrate how the existing uses of the water bodies
within the Project will be enhanced.

Robert Krebs
October 18, 2007
Page 4
In order to diligently examine Section 404 projects, the EMC incorporated into the 401 rules a
process similar to the "public interest review" conducted by the U.S. Army Corps of Engineers
when considering an application for a permit pursuant to Section 404. The steps of the public
interest review are (1) avoidance (including an analysis of practical alternatives to the project
for which the permit is sought), (2) minimization, and (3) mitigation. Each of these steps is
premised on there being a loss or degradation of the existing use of the water body if the
project goes forward. Most significantly for the Tillery and Blewett Falls developments, there
is no need to consider avoidance; minimization or mitigation for a project which does not
remove or degrade existing uses. Existing uses are not lost or degraded as 'a result of the
operation of the dams, because the uses, as defined by EMC rules; were those which had been
attained as of November 28, 1975.
Notwithstanding the above, through the FERC relicensing process, PEC has worked
collaboratively with stakeholders participating in the FERC process to develop, a
Comprehensive Settlement Agreement ("CSA"), which identifies measures to be implemented
for the purpose of enhancing the uses of the water body with no impact to existing uses. A full
description of the enhancements to existing uses agreed upon by PEC in the context of the
FERC settlement process are provided in the documents attached as Appendix 2.
Some have made the claim in their comments that DWQ should consider alternatives to the
minimum flows below the Tillery Dam that have been agreed upon in the CSA. EMC rules
pertaining to 401 Certification neither require nor invite an analysis of alternatives where there
is no adverse affect on existing uses. This is an example of the commenters' confusion
between the 401 process and the FERC relicensing process. The two processes are distinct and
draw from separate authorities. The 401 inquiry focuses on whether a specific proposed
activity provides protection and maintenance of water quality and existing- uses of the water
body to which the federally-licensed discharge is made. If water quality standards and existing
uses will be protected by the Project, as described by the licensee in its application or the
proposed federal license, the inquiry ends and the 401 Certification must issue. Whether there
should be enhancements of existing uses may be an appropriate inquiry for the FERC
relicensing proceedings, but it is beyond the scope of the 401 Certification. Examples of
misinterpretations and confusion exhibited by submitted comments are provided in Appendix 1
to this letter.
PEC recognizes that Lake Tillery and Blewett Falls Lake are vital to the neighboring counties
and local communities. The recreational uses which the lakes support and the generation of
renewable clean hydropower are uses of those waters which are each legitimate and significant
to the local economies and to the overall economy of North Carolina. PEC worked in good
faith with stakeholders during the relicensing process and believes that it has provided a
complete and comprehensive application. The discussions have resulted in a fair and balanced

Robert Krebs
October 18, 2007
Page 5
plan for the protection and enhancement of the existing uses of state waters while providing for
the continued ability for the generation of post-effective, reliable and renewable energy. PEC
submits that the fact that no existing uses will be lost or degraded requires DWQ to issue 401
Certification for•the renewed FERC license without further conditions requiring enhancements
to those uses.
PEC appreciates the agency's consideration of its comment. We would be happy to discuss
further any comments on the 401 Certification with DWQ staff. If you have any questions,
please do not hesitate to contact me at 919-881-3853.
Sincerely,
ti
L.,
Larry Mann
Hydro Relicensing Project Manager
Enclosures
cc: Craig A. Bromby (Hunton & Williams LLP)
John Dorney