NCC000001_Beason & Ellis 2005_20050513

POYNER SPRUILL LLP
ATTORNEYS-AT-LAW 1-f.Glenn Dunn
Attorney-at-Law
Direct Dial:919.783.2842
hgdunn@poynersprui I I.com
www.poynerspruill.com
Other offices: Charlotte,Rocky Mount
May 13,2005
Renee Ellis
Robert A. Beason
Beason&Ellis Conflict Resolution, LLC
2741 University Drive
Post Office Box 52270
Durham,NC 27717-2270
Re: Beason & Ellis Case No.: ME-05-27B
Dear Renee and Bob:
Pursuant to your letter dated April 8, 2005, we are submitting a summary outlining the
position of the Neuse River Compliance Association ("NRCA") in 05 EHR 0326 and 05 EHR
0308. We understand that you have been notified of the pending motion to consolidate 05 EHR
0326 and 05 EHR 0308 and of the NRCA's agreement to participate in the mediation schedule
for May 16, 2005. The NRCA has filed a motion to intervene in both contested cases as the
holder of the "group" permit that is the subject of both contested cases. I apologize for the
length of this summary, but think it necessary to understand the unique regulatory framework
under which these cases arise.
The NRCA is a"group compliance association" formed to help achieve compliance with
required total nitrogen ("TN") reductions in the Neuse River Basin as required by the Neuse
River Basin Nutrient Sensitive Waters Rules ("Neuse Rules"). Under the Neuse Rules,
dischargers must reduce their TN discharge by 30%from their 1995 discharge. Each major point
source discharger is given an allocation in pounds of TN, which is the limit the discharger is
allowed to discharge per year. The TN allocation given to each individual discharger was based
on the amount of wastewater the discharger was permitted to treat in 1995. Some had permits to
treat much more wastewater than they were discharging, so they received excess TN allocation.
Some had less excess treatment capacity and received a smaller allocation relative to their needs,
creating a more immediate need to spend large sums of money on treatment plant improvements.
Recognizing the inequities of the allocations and the financial difficulties that some
smaller cities would have in meeting their allocation, the Neuse Rules allow the major
dischargers to join together in a group for compliance purposes. The NRCA is such a group and
all its members are allowed to comply collectively, i.e. the total amount of nitrogen discharged
by all members in a year must not exceed the total of all those members' individual allocations.
3600 Glenwood Avenue. Raleigh, NC 27612 • P O Box 10096, Raleigh, NC 27605 0096 • 919.783.6400 Tel • 919.783.1075 Fax

POYNER45PRUILLLLP
ATTORNEYS-AT-LAW
Robert A.Beason
May 13,2005
Page 2
Through group compliance, the dischargers for whom a 30% nitrogen reduction is a heavy
burden benefit from being grouped with those dischargers who are able to exceed their 30%
reduction, which allows them more time to meet their individual allocation. But very
importantly, under all circumstances the members must always comply with the 30% nitrogen
reduction as a group. It is important to note that NRCA members as a group have reduced the
TN discharge by approximately 65% from 1995 levels, so this regulatory framework has been
extraordinarily successful.
The Neuse Rules also allow dischargers that need more allocation to acquire it from
others in the Neuse River Basin with excess allocation. Such trading encourages economic
efficiency in meeting the overall nitrogen limit in the Neuse, based on the assumption that
dischargers will make trades that benefit both parties while still meeting the required 30%
reduction. Importantly, the NRCA has no authority over or direct involvement in such trades,
and trades are not limited to members of the NRCA. However, when an NRCA member
acquires additional TN, the NRCA's group permit is modified to credit the member with the
allocation that it acquired and the new allocation is also added to the NRCA's group allocation.
In order to ensure that a TN discharge that is shifted from one location to another in the
Neuse Basin will not unacceptably affect water quality at the new location of the discharge, the
Neuse Rules authorize the Division of Water Quality to reduce the amount of nitrogen any
discharger may discharge if necessary to protect local water quality. Importantly, the Neuse
Rules also require that any expanding discharger improve its wastewater plant's treatment
capability so that the wastewater only contains 3.5 milligrams per liter of nitrogen,which is at or
near the lowest concentration technologically achievable.
In the context of this regulatory framework,in December 2004,DHHS-Butner,a member
of the NRCA,acquired a 6,113 pound TN allocation from the Bay River Metropolitan Sewerage
District. In December 2004 the Department of Environment and Natural Resources, the
Respondent in both of these contested case, modified the NRCA's NPDES permit, effective
January 1, 2005, to add the 6,113 pounds of TN acquired by DHHS-Butner to its existing
allocation. This new allocation constitutes DHHS-Butner's individual permit limit for TN. The
modification was considered a minor modification because moving the allocation from one
location to another does not effectuate an increase in the total amount of TN than ultimately
reaches the estuary. (It is important to emphasize that the allocations and group permit are all
designed to protect the estuary.)
It is the NRCA's view that the challenge by both Petitioners is based on the possible
impact to Falls Lake, not the estuary, if DHHS-Butner begins to discharge the additional TN
allocation allowed by the permit modification. Therefore, they are challenging the permit
modification having been done as a minor modification without the additional procedures and

POYNER4SPRUILLLLP
ATTORNEYS-AT-LAW
Robert A.Beason
May 13,2005
Page 3
public scrutiny that accompany a major modification, and without additional study to determine
the potential water quality impacts on Falls Lake.
The NRCA's position is that the modification was correctly considered minor in regard to
any impact on the estuary and that appropriate procedures were followed. However,the NRCA
supports the City of Raleigh in its concern that the potential localized impacts of the discharge
should be studied and that in the interim TN limits and/or other measures should be established
as reasonably necessary to avoid unacceptable local impacts.
Sincerely,
H.Glenn Dunn
HGD:sam
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