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HomeMy WebLinkAboutAttach. 5, 2016-02-10 PSC_SC Duke Ex Parte Briefing re Coal Ash DisposalTHE PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA COLUMBIA, SOUTH CAROLINA PROCEEDING #16-11513 FEBRUARY 10, 2016 10:37 A.M. ALLOWABLE EX PARTE BRIEFING [ND -2016-5-E] REQUESTED BY DUKE ENERGY CAROLINAS, LLC (DEC) AND DUKE ENERGY PROGRESS (DEP) — COAL ASH DISPOSAL TRANSCRIPT OF ALLOWABLE EX PARTE BRIEFING COMMISSION MEMBERS PRESENT: Nikiya M. Nikki' HALL, Chairman; Swain E. WHITFIELD, Vice Chairman; and COMMISSIONERS John E. Butch' HOWARD, Elliott F. ELAM, JR., Comer H. `Randy' RANDALL, Elizabeth B. 'Lib' FLEMING, and G. O'Neal HAMILTON, ADVISOR TO COMMISSION: Joseph Melchers, General Counsel STAFF PRESENT: F. David Butler, Senior Counsel; James Spearman, Ph.D., Executive Assistant to the Commissioners; B. Randall Dong, Esq . , Josh Mi nges , Esq . , and David W. Stark, III, Esq . , Legal Staff; Tom Ellison and Lynn Ballentine, Advisory Staff; Jo Elizabeth M. Wheat, CVR-CM/MIGNSC, Court Reporter; and Allison Minges and Deborah Easterling, Hearing Room Assistants APPEARANCES: HEATHER SHIRLEY SMITH, ESQUIRE, along with MIKE RU H E [Director, Environmental Policy and Affairs / Duke Energy (SC) ] , presenter, representing DUKE ENERGY CAROLINAS, LLC, AND DUKE ENERGY PROGRESS, LLC JEFFREY M. NELSON, ESQUIRE, representing t h e SOUTH CAROLINA OFFICE OF REGULATORY STAFF PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 10 1 EXECUTIVE CENTER DRIVE COLUMBIA, SC 29210 WWW.PSC.SC.GOV POST OFFICE BOX 1 1 649 COLUMBIA, SC 2921 1 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update 2 BRIEFING I N D E X Jnr -C PENING MATTERS ........................................... 3-6 PRESENTATION MR. MIKE RUHE [DUKE ENERGYJ ........................... 6 Question(s)/Comment by Commissioner Hamilton ............... 19 Questions)/Comment by Commissioner Howard ................. 20 Question(s)/Comment by Vice Chairman Whitfield ............. 23 Question(s)/Comment by Commissioner Fleming ................ 28 Question(s)/Comment by Commissioner Elam ................... 33 Question(s)/Comment by Vice Chairman Whitfield ............. 34 REPORTER'S CERTIFICATE ..................................... 39 Please note the following inclusions/attachments to the record: PowerPoint presentation (PDF) For identification of additional referenced materials (if any) and links for same, please see: ORS correspondence filed as part of the ex parte briefing process 2/10/16 PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 3 P R O C E E D I N G S CHAIRMAN HALL: Thank you. Be seated. Good morning, everyone. We will call this Allowable Ex Parte Briefing to order, and ask Mr. Melchers to read the docket, please. MR. MELCHERS: Thank you, Madam Chairman. Commissioners, we are here pursuant to a Notice of Request for Allowable Ex Parte Briefing. The requestors are Duke Energy Carolinas, LLC, and Duke Energy Progress, LLC. The topic is: Coal Ash Disposal. And we are here pursuant to that Notice in the Commission's hearing room, February 10th, at 10:30 in the morning. Madam Chair, if I could just make one programming note. Folks, we are having construction and remodeling done to our downstairs, so if you need to find a restroom, head up the stairs and then just keep going straight down the hall upstairs. Thanks. CHAIRMAN HALL: All riqht. Thank vou, Mr. Melchers. And who appears representing Duke Energy Carolinas? MS. SMITH: Heather Shirley Smith, on behalf PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 0 of Duke Energy Carolinas and Duke Energy Progress. CHAIRMAN HALL: Okay. Thank you. And for ORS? MR. NELSON: Good morning, Madam Chair. I'm Jeff Nelson. I represent the Office of Regulatory Staff as Mr. Dukes Scott's representative. CHAIRMAN HALL: Okay, Mr. Nelson. And do you have any remarks you wanted to give? MR. NELSON: I do. CHAIRMAN HALL: Okay. MR. NELSON: Thank you, Madam Chair. Typically, as I've tried to do in these, recently at least, I'd just like to do a little intro regarding procedures and everything, for some people maybe that haven't been here before. For those of you who don't know me, I'm Jeff Nelson, and I'm the Chief Counsel for the Office of Regulatory Staff, and I am here as the designee for the Executive Director of the Office of Regulatory Staff, this morning. As the ORS representative, it's my duty to certify the proceedings here this morning within 72 hours of them being concluded to the Chief Clerk of the Public Service Commission, so we operate on a fairly tight timeframe under the statutory framework that allows these allowable ex PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 5 partes. The requirements of the statute are, in part, the allowable ex parte be confined to the subject matter which has been noticed for this here today, and the subject matter noticed in this matter is "Coal Ash Disposal." So I, therefore, ask the presenters, the Commission, and the Staff to please keep the subject related just to coal ash disposal this morning. Additionally, the statute prohibits participants, Commissioners, or Commission Staff, from requesting or giving any commitment, predetermination, or prediction regarding any action by the Commission as to any ultimate or penultimate issue which either is or is likely to come before the Commission. We, therefore, ask the participants, Commissioners, and Staff, also, if possible, to keep from trying to refer to any additional documents or materials that aren't included in the presentation. When you do that, myself and Heather both have to try and pull this stuff together at the last minute, so we'd ask, if at all possible, that you try and refrain from referencing any documents like that. As a final note, I'd like to point out to PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 0 everybody here: Y'all should've gotten, when you came in today, a form at the table out here. You should have both signed in for the Public Service Commission and received a form. Good legal advice always is: Read the form. Read anything before you sign it. So, I would ask you to please read that, make sure you sign that form, and then turn it in before you leave today. That's all I have, Madam Chair. Thank you. CHAIRMAN HALL: Okay. Thank you. If there's nothing further, then Mr. Ruhe, if you want to go ahead with your presentation. MIKE RUHE [DUKE ENERGY]: Thank you. All right. CHAIRMAN HALL: Yeah, if you can hit that button and pull it closer, please. MIKE RUHE [DUKE ENERGY]: [Indicating.] Yeah. I see the lights now. Okay. CHAIRMAN HALL: Okay. MIKE RUHE [DUKE ENERGY]: All right. Good morning, Commissioners. [Reference: Presentation Slide 1] My name is Mike Ruhe. I'm the Environmental Policy & Affairs Director for Duke Energy here in South Carolina. Thank you for the opportunity to PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 7 provide this update on Duke Energy's coal ash management activities here in the State. It's been exactly one year since I was last here before you. Since then, much scientific and engineering work has been done at both our W.S. Lee and Robinson Plants. The results of that work have been shared with our regulators, and we worked closely with them and our local communities to finalize these ash basin closure strategies. [Reference: Presentation Slide 2] As you may recall, following the Dan River ash release in February of 2014, the company initiated a thorough engineering evaluation of all of its ash basins and related piping systems across our fleet. We are committed to the safe and reliable operations of those basins until they're ultimately closed. We've been developing a comprehensive, longer- term ash basin closure strategy for all of our ash basins. While closing these basins has always been part of our — of the company's vision, we have substantially accelerated that work. Because conditions at each site are unique, we believe that effective closure approaches should be based on site-specific science and engineering, and we've PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING engaged some of the best experts in the country to help us develop those protective closure strategies. These strategies must protect the public and they must protect groundwater. Further, we must be able to implement them safely. The results of this work has helped the company shape its overall ash management closure strategies for both Lee and Robinson, and I'm pleased to be able to share this update with you today. So let's first take a look at what we're doing at W.S. Lee. [Reference: Presentation Slide 3] To review, the Lee Steam Station was built in 1951. Units 1 and 2 were officially retired on November 6, 2014. Unit 3 was converted from coal - firing to natural gas last year. And construction of the new 750 megawatt natural-gas combined -cycle is well underway. Recall that the station has two active ash basins, a primary and secondary basin, and these basins no longer receive coal ash or coal -ash waste since those units are retired, but they do still receive processed wastewater from the plant. There's also a closed inactive basin from the PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 0 1950s, an ash structural fill, and a former borrow area where ash was placed years ago that is referred to as the ash fill area. Collectively, the site contains about 3.6 million tons of ash. [Reference: Presentation Slide 4] All right. Here's an overview picture of the site. You can see — I'll point out a couple of things. Hopefully, I don't shut the machine off. CHAIRMAN HALL: Just don't touch it. MIKE RUHE [DUKE ENERGY]: Yes. Here is the primary basin we're talking about [indicating], the secondary basin [indicating]. The structural fill [indicating] is right here. The plant proper [indicating]. The coal pile that's long been gone [indicating]. Here [indicating] is the inactive basin, right here; you can see the footprint here. And then the ash fill area is down here [indicating], just in the lower right corner. And, of course, there's the Saluda River [indicating]. [Reference: Presentation Slide 5] On September 23, 2014, the company announced that ash from the closed inactive basin and that ash fill area would be excavated and disposed of in a lined solution. Duke Energy entered into an PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 10 agreement with DHEC on September 29th of that year to do this work, and submitted an Ash Removal Plan to the agency on December 18th. We believe it will take about three years to complete the removal of the ash from these two areas. The company selected Waste Management, Incorporated, to excavate and transport ash from these two areas to a fully lined, solid -waste landfill located in Homer, Georgia. This landfill is also operated by Waste Management. Trucks started hauling that ash from the site on May 15th of last year, and so far, just over 260,000 tons have been excavated and transported off-site. That total represents about 19.2 percent of the total ash from those two areas. [Reference: Presentation Slide 6] Okay. And here, we just have highlighted those two areas a little bit more, so you can get a better idea of what we're talking about, you know. It just shows that other side of the road, where the ash fill area is. [Reference: Presentation Slide 7] All right. Here is an aerial view where — let's see, the ash fill area [indicating]. The inactive basin [indicating]. And, of course, in PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 11 the foreground here is where land was cleared for the natural gas combined -cycle plant. [Reference: Presentation Slide 8] All right. Here's the inactive basin after the trees were cleared and the topsoil removed, and you can see here, of course, the dark material is coal ash. [Reference: Presentation Slide 9] Here is a view, an overhead view, of how we're loading trucks at that site, and you can see we've got trucks that drive in, do the little loop here, and then backhoes are excavating ash and loading it into the trucks. Then they drive around to an automated truck wash, here, to help reduce dust, and then tarps are put over the truck to make sure no ash or dust gets off when it goes on the road. [Reference: Presentation Slide 10] Then the trucks would proceed out, and then they're weighed to make sure that they're in spec. on the weight. And then they go off on the road towards Georgia. [Reference: Presentation Slide 11] Of course, here's the route that we take, which is primarily Interstate highway. The company worked closely with Waste PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 12 Management, South Carolina DOT, and local municipal officials to determine the best route, or the best combination of haul routes, that would present the least impact to the local public. Obtaining meaningful community input was important to us, because we realized we'd be putting a lot of trucks on local roads as they left the station. So we met with community leaders, developed targeted messages for those neighbors, providing them updates about our plans. You know, we sent over 5000 letters to them through the mail and hosted community meetings where we had our project managers and subject -matter experts available to answer any of their questions. We also support a website, so interested parties can get the latest information about that project. You know, the information that we were able to get was invaluable to us, as we have to determine what the best routes to go from out of the — from leaving the station. [Reference: Presentation Slide 12] Okay, let's turn to discuss the other basins at the site. Recall on December 18, 2014, Duke Energy communicated to DHEC its closure strategy for the remaining ash, for the primary and PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 13 secondary basins and the structural fill. Now, based upon the results of that site- specific engineering work, the company decided, at that time, to excavate the ash from those two areas, as well, and to relocate them in a fully lined landfill. That analysis also explored options for disposing of this remaining ash at the Lee site. Duke Energy submitted a Conceptual Closure Plan for these areas on December 15, 2015, and that plan also included a design for a potential on-site, lined landfill. Currently, we are looking to site that landfill on the footprint of the existing secondary basin. Landfill siting studies are currently underway and we anticipate submitting a Landfill Permit Application to DHEC in October of this year. [Reference: Presentation Slide 13] All right. Here is a drawing of what we had in that proposed — in that Closure Plan. You can see the outline of the primary basin, secondary basin, and the structural fill. Now, our plans would be to drain the water out of the secondary basin, which is in the upper left-hand corner, and then what little ash was in there — because that secondary basin doesn't contain much ash — remove PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 14 that ash, put it in the primary basin, and then we would reconfigure that footprint to make it suitable for a landfill, and then line it, and then remove all the ash from the primary basin and that structural fill into that secondary basin footprint, and then cap it and close it. [Reference: Presentation Slide 14] So what are the advantages of the proposed closure strategy? Well, first and foremost, it eliminates the existing impoundments. Second, it consolidates the ash in a fully lined and capped location in close proximity to those existing ash management units, minimizing ash handling, and it also reduces community impacts. Third, groundwater is protected. That landfill will be lined and capped, leachate will be collected, and we will continue to perform groundwater monitoring to ensure that these controls function as designed. And, finally, we are eliminating the use of public roads for hauling ash once that landfill is operational. This is very important for our plant neighbors. [Reference: Presentation Slide 15] Now, let's take a look at the Robinson Plant. The Robinson coal unit was built in 1960 and PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 15 retired in September of 2012. The second Robinson unit is a 710 megawatt nuclear unit that continues to operate. The Robinson ash management facility includes a single -celled ash basin and what we are calling the 1960 fill area. That area's located just to the west of Units 1 and 2. The entire site contains about 4.2 million tons of ash. [Reference: Presentation Slide 16] And here's an aerial view of the site. Just to reorient you, the plant proper is down here — here's the plant proper, right down here [indicating]. The ash basin is up here [indicating] in this footprint. Here is Lake Robinson and the dam [indicating]. And the 1960 fill area — and I'll have another drawing to kind of highlight it — is in this area right here [indicating]. This part right here [indicating] is the footprint for the Darlington County CT site. That 72 -acre ash basin is comprised of a 49 - acre basin, itself, and then a 23 -acre dry storage area located just to the western part of that basin. Ash thickness ranges anywhere between 11 to 53 feet. The surface of that ash basin is dry and has been dry for several years. [Reference: Presentation Slide 17] PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 16 The 1960 fill area was created when the plant started operating, and it received ash from Unit 1 until the current ash basin was constructed in the mid -'70s. Duke Energy contracted with an outside engineering firm in late 2013 to evaluate the extent and volume of the ash stored in that area. We've determined that this area covers approximately 25 acres and holds an estimated 330,000 tons of ash. Duke Energy entered into an agreement with DHEC on July 17, 2015, to excavate the ash from that area and relocate it to a proposed lined landfill to be built on-site. Landfill siting studies are currently underway for that landfill, and we anticipate submitting a Class 3 Landfill Permit Application to DHEC by April 1st. The agreement we signed with DHEC requires us to complete the excavation and removal of all ash from this area within eight years. [Reference: Presentation Slide 18] Okay. And here's that extra drawing I was showing you, zooming in on the plant a little bit. It's a little bit faint, but you can get an idea of where the boundary of that 1960 fill area is, right underneath part of the transmission corridor there. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 17 [Reference: Presentation Slide 19[ So let's now take a look at the active basin at Robinson. We conducted a number of geotechnical studies in and around that basin and concluded, again, that the best closure strategy would be to excavate the ash from that area and relocate it to a lined solution. That decision was communicated to DHEC on April 30, 2015. A Conceptual Closure Plan was submitted to the agency on November 13th, and our plans are to dispose of this ash in the same landfill that's being constructed for the 1960 ash -fill ash. [Reference: Presentation Slide 20] The location of the proposed landfill's on Duke -Energy -owned land, on that adjacent Darlington County combustion turbine site. You can see, the square up there is the footprint of where we propose to put the landfill. [Reference: Presentation Slide 21] The advantages of this proposed closure strategy are very similar to those for W.S. Lee. First, it eliminates the existing impoundment and fill area. Second, it consolidates the ash on-site in a fully lined, capped location that's in close proximity to the existing ash management units. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING Third, groundwater is protected. Ash will be removed and placed in an engineered landfill, segregated from groundwater. Leachate, again, will be collected, and we will perform groundwater monitoring to ensure that these controls function as designed. Finally, we'll be keeping ash trucks off of public roads. We're looking into the possibility of building either internal roads or possibly a conveyor system to get ash from those two areas to this new landfill. [Reference: Presentation Slide 22] As at W.S. Lee, we actively engaged the local community and our plant neighbors to obtain feedback about our site plans. We hosted community meetings there, as well, making our project leaders and subject -matter experts available to answer any questions. At Robinson, we sent out almost 1000 letters to plant neighbors, providing them information about the project. And like at Lee, we have a public website that provides the most current information about the project. Our employees live in that community also, so, you know, it's important to us to have all of our plant neighbors be knowledgeable and comfortable with the plans that we have at the site. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 19 [Reference: Presentation Slide 23] So, in conclusion, Duke Energy is committed to closing our ash basis. We will do this safely and in a manner that protects the environment, particularly groundwater. We will do it in a way that minimizes the impacts to our communities, and we will continue to work with our neighbors to keep them informed on what we are doing. We will manage these projects in a manner that controls cost. And, finally, we will continue to work with DHEC to ensure that we meet all of our — all required regulatory standards. Thank you, so much, for your time. [Reference: Presentation Slide 24] CHAIRMAN HALL: Thank you, Mr. Ruhe. Commissioners, questions? Commissioner Hamilton. COMMISSIONER HAMILTON: Thank vou. Madam Chair. Happy to have you with us, today, sir, and we certainly appreciate the update. At this present time, are you on schedule with all DHEC requirements and time limits, et cetera? MIKE RUHE [DUKE ENERGY]: Yes, sir, we are. COMMISSIONER HAMILTON: Have we experienced PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 20 any fines in South Carolina, at this point? MIKE RUHE [DUKE ENERGY]: We have not. COMMISSIONER HAMILTON: Okay. So, as far as DHEC is concerned, the project is totally on schedule. MIKE RUHE [DUKE ENERGY]: Yes, sir. We — the project team meets with the technical folks over at DHEC monthly, you know, to keep them updated and because everything is really being fast -tracked, you know, in their minds, so we're working very closely with the agency to make sure all the reviews are working on schedule to meet the timeline. COMMISSIONER HAMILTON: Thank you, very much. Thank you, Madam Chair. CHAIRMAN HALL: Thank you. Commissioner Howard. COMMISSIONER HOWARD: Good morning. Explain to me what you mean by: still active as a wastewater treatment system. MIKE RUHE [DUKE ENERGY]: The plant has — those ponds are considered NPDES — National Pollutant Discharge System treatment systems, you know, for wastewater, and are regulated by DHEC. And so there are plant systems that still drain PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 21 water — think floor sumps, that kind of thing, that are still draining there. As part of the overall new permit that we've got, that we're just now getting from DHEC, you know, we will be closing all that down, you know, when we close down the basins, but we have to go over and have the new piping systems all ready to go before we can shut down that existing plant, because Unit 3 is still operating as a natural gas plant. COMMISSIONER HOWARD: Okay, thank you. Commissioner Hamilton asked you about any fines in South Carolina. What about fines about coal ash, in general? How many fines have you procured or are threatened with to have now for your coal ash disposal? MIKE RUHE [DUKE ENERGY]: There was the EPA fine that was announced early last year for the overall Dan River event. And then, in the press, there was a North Carolina Department of Environmental Quality fine for Dan River, also, that was between $6-$7 million, you know, for that event, too. COMMISSIONER HOWARD: How much, total, were they? MIKE RUHE [DUKE ENERGY]: How much, total? PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 22 COMMISSIONER HOWARD: Yeah, how many total fines do you have? MIKE RUHE [DUKE ENERGY]: Off the top of my head, I do not know. COMMISSIONER HOWARD: Well, how — MIKE RUHE [DUKE ENERGY]: The EPA fine was, I want to say, $100 million, you know, in that range. COMMISSIONER HOWARD: How do you plan cost recovery of these expenses? MIKE RUHE [DUKE ENERGY]: I — COMMISSIONER HOWARD: In other words, are you planning to put them in rate base or not? That's my question. MIKE RUHE [DUKE ENERGY]: Closure of ash basins, you know, since ash basins are part of the NPDES treatment system, we've always viewed eventual — we've always gone to eventual closure of those basins. I'm not the person that's really in a position to address rate questions. We'll have someone else come back, you know, at that time, when the time is right for that. COMMISSIONER HOWARD: A hundred miles comes to mind, but how long is the haul from this coal ash at the disposal to the landfill in Homer, Georgia? How long is that route? PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 23 MIKE RUHE [DUKE ENERGY]: I believe it's 75 miles. COMMISSIONER HOWARD: Thanks, very much. CHAIRMAN HALL: Commissioner Whitfield. VICE CHAIRMAN WHITFIELD: Thank you, Madam Chair. Thank you for this presentation. Appreciate having you back here again, a year later, to update us, and we appreciate you coming up to keep us informed. And I've got just a couple of quick questions. The Class 3 landfill that you said you'll be submitting the permit application in October of 2016, this year, when would that — assuming you have the application in then, when would that Class 3 landfill be operational at the Lee facility? MIKE RUHE [DUKE ENERGY]: It takes DHEC about between three and five years to approve a landfill and get it constructed, so that's why we've got eight years to dispose of — well, we have eight years to dispose of the ash from that one area. VICE CHAIRMAN WHITFIELD: So three to five years permitting, and another few years to — MIKE RUHE [DUKE ENERGY]: And — VICE CHAIRMAN WHITFIELD: — construct, so a PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 24 total of roughly eight years, is — MIKE RUHE [DUKE ENERGY]: That's correct. VICE CHAIRMAN WHITFIELD: — what you're looking at, before — MIKE RUHE [DUKE ENERGY]: And that's been the target that we've been working with DHEC, to try to get it done in eight years. VICE CHAIRMAN WHITFIELD: — before you would have on-site — MIKE RUHE [DUKE ENERGY]: Disposal capability. VICE CHAIRMAN WHITFIELD: And that's just for the active basins. The others, the inactive and the ash fill pit, all that material is all what's going to Homer, Georgia; is that correct? MIKE RUHE [DUKE ENERGY]: At W.S. Lee, that's correct. VICE CHAIRMAN WHITFIELD: Okay, those two are what's going to Homer, and the primary and secondary — the active — are the ones that you would be waiting to put in this new landfill on- site. MIKE RUHE [DUKE ENERGY]: That's correct. VICE CHAIRMAN WHITFIELD: Okay. Now, how about for the Robinson Plant? I see you're going to have that application in here in about a month PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 25 or so, in April. Is that on the same schedule, again about eight years out? MIKE RUHE [DUKE ENERGY]: Yes, sir. VICE CHAIRMAN WHITFIELD: Okay. And, obviously, it looks like, at Robinson, of course you're dealing with a lot less tonnage of ash, but you're going to be able to, as you said, do something on-site, maybe even a conveyor belt, and not actually have to put anything on the road, over at the Robinson plant. Is that the way I'm hearing it? MIKE RUHE [DUKE ENERGY]: That's what we're looking at. The decisions — the timeline decisions were based upon, you know, working through the investigation with DHEC. At W.S. Lee, there were concerns about, you know, those ash storage areas. The inactive landfill was very close to the river. VICE CHAIRMAN WHITFIELD: Right. MIKE RUHE [DUKE ENERGY]: And in discussions with them, we did not feel that it was in a stable situation for the long term, to wait until a landfill was sited. So that's why that — that determined the timeline there. Over at Robinson, it's a different situation. That 1960 fill area's not anywhere near the lake PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 26 and it's a very stable ash placement. So they were comfortable with the timeline of building a landfill on-site. VICE CHAIRMAN WHITFIELD: I see what you're saying. The inactive basin is the one that's right adjacent, like closest, to the Saluda River. MIKE RUHE [DUKE ENERGY]: Yes, sir. It's right close to the river and the dike is very steep right there. And so, because of the age of that basin, we were not as certain of the long-term stability, you know, until that time. You know, it was all heavily overgrown with trees, and our engineering folks did not think it was a stable configuration, long term, to wait that long. VICE CHAIRMAN WHITFIELD: I noticed that the tonnage you expect to move from Lee — I don't have that page right now, but I think it was 1.4 million tons — here it is — and you've moved not quite 20 percent, 19 -point -something. And it looks like the timeline you're on, you're somewhat on target. Are you under a three-year contract with them to do that? Or is it an annual thing you continue to renew as the work gets done, as the ash gets hauled? Or what obligation are you under, if you could discuss that? PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 27 MIKE RUHE [DUKE ENERGY]: Well, we signed a consent agreement with DHEC, and that set up the timeline to go over and have that ash moved. And so we secured the trucking and everything else to accommodate that. And so, you know, our plans are to get it done within that three years. VICE CHAIRMAN WHITFIELD: And, of course, it's early, but it does look like you're somewhat on target — MIKE RUHE [DUKE ENERGY]: That's correct. VICE CHAIRMAN WHITFIELD: — from your percentages. Well, thank you, Mr. Ruhe. That's all I have. CHAIRMAN HALL: Thank you. Commissioner Fleming. COMMISSIONER FLEMING: Good morning, Mr. Ruhe. Nice to have you here today. MIKE RUHE [DUKE ENERGY]: Thank you. COMMISSIONER FLEMING: Commissioner Howard asked several of the questions that I wanted to ask, so — but I did want to go a little farther about how it will be paid for, the cleanup. And you've talked about the tariff has been used in the past, so the consumer would be the one responsible for paying for the cleanup. But what about the PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING fines? MIKE RUHE [DUKE ENERGY]: With all the cleanup, you know, that went with the Dan River — you know, to be honest, I'm a technical person. I've never really dealt with anything with the fines or that, so I don't have an answer for that. Heather, though, evidently does. [Laughter] MS. SMITH: Commissioner Fleming, we have stated before, publicly, that we would not seek recovery of those fines associated with the subject matter from ratepayers. And we'd be happy to provide a written statement to that effect, articulating that position, for the Commission, in conjunction with this ex parte presentation. COMMISSIONER FLEMING: Okay. And do you confirm, though, that you are planning to request the cleanup recovery in tariffs? MS. SMITH: We would request recovery for our activities, our prudent activities, related to ash disposal — not the fines, but those other activities. And we've publicly stated that, and we can include that language in anything we file with the Commission, as well. COMMISSIONER FLEMING: So the shareholders PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 29 will assume the responsibility for any fines. MS. SMITH: Yes. COMMISSIONER FLEMING: Okay. I know you had a limited timeframe, I believe in North Carolina, to remove the ash. MIKE RUHE [DUKE ENERGY]: [Nodding head.] COMMISSIONER FLEMING: And as a result of that, you said, as I recall, that that was a reason not to do recycling or reprocess of that ash, that there just wasn't enough time. Am I correct in that? MIKE RUHE [DUKE ENERGY]: In this presentation, I didn't say anything — COMMISSIONER FLEMING: No, no, no, no. In the past. MIKE RUHE [DUKE ENERGY]: The plants that we have in North Carolina are different than the ones we have in South Carolina. You know, our South Carolina plants were older plants. They did not have all of the pollution control agreement; they're not continuing to operate. So, you know, all our ash is sitting in ponds. To make ash suitable for recycling, you know, we would — there would have to be, in many cases, carbon burnout, or this, that — different PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 30 technologies done to make it suitable. And because our volumes, in the grand scheme of things, are very low at these two plants, economically it's not feasible. Now if you looked to the larger plants that have scrubbers and continue to operate, there are companies out there that will partner with utilities to go over and make ash more amenable to being recycled. But it's more difficult to do with ash that — you know, it's not worth many recyclers' time to set up an operation to do these types of volumes. COMMISSIONER FLEMING: So you would not be doing recycling or — MIKE RUHE [DUKE ENERGY]: We don't anticipate doing any recycling of this ash. COMMISSIONER FLEMING: — or reprocessing, because of the cost factor. MIKE RUHE [DUKE ENERGY]: Because of the cost, that's right. COMMISSIONER FLEMING: Okay. And I wanted to also go back — could you talk some more about the "active as a wastewater treatment" — and, I mean, because as I understood what you said, there is coal ash in that, as well, correct? PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 31 MIKE RUHE [DUKE ENERGY]: Right. COMMISSIONER FLEMING: And what are your plans for those that are still active? MIKE RUHE [DUKE ENERGY]: In South Carolina? Or in North Carolina? COMMISSIONER FLEMING: South Carolina. MIKE RUHE [DUKE ENERGY]: Well, I mean, you know, we still have active NPDES permits at both Robinson and W.S. Lee. Both those ash basins are still included in those permits. Part of the Conceptual Closure Plans for those sites are a requirement from DHEC to go over and close those ash management units. That's why we submitted them. And so we're going through closure right now, and then that — and once they're closed, they will be removed from the permit. COMMISSIONER FLEMING: Okay. So there won't be ash ponds — MIKE RUHE [DUKE ENERGY]: There'll be no — COMMISSIONER FLEMING: — once you've — MIKE RUHE [DUKE ENERGY]: — ash ponds left. COMMISSIONER FLEMING: — finished this, so they'll — MIKE RUHE [DUKE ENERGY]: That's correct. COMMISSIONER FLEMING: — be totally — PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 32 everything will be totally cleaned up. MIKE RUHE [DUKE ENERGY]: They'll be totally cleaned up. In fact, the last step will be, you know, analysis of the ground that's left, and it has to meet the criteria that DHEC sets for us, you know, to say that "You're done." COMMISSIONER FLEMING: I guess my confusion is the fact that you can continue to use it — that they continue to be active at the present time. MIKE RUHE [DUKE ENERGY]: Well, I mean, they're active until they're removed — COMMISSIONER FLEMING: Uh-huh? MIKE RUHE [DUKE ENERGY]: — you know, from the permit. And since they're still on the permit, we're still sampling them. COMMISSIONER FLEMING: So there's been no contamination, no — MIKE RUHE [DUKE ENERGY]: No — COMMISSIONER FLEMING: — release, as far as — MIKE RUHE [DUKE ENERGY]: You know, as processed water or rainwater or storm water goes into the pond, we do monitor those, and they are released like they were before, as long as they're within the specifications of our permit. But there's been no coal ash going to them for — you PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 33 know, since those plants stopped operating. COMMISSIONER FLEMING: Okay. And you're saying that both Lake Robinson and the Saluda River are — the measures that you're taking are protecting both of those water sources. MIKE RUHE [DUKE ENERGY]: Yes, ma'am. COMMISSIONER FLEMING: Okay. MIKE RUHE [DUKE ENERGY]: And groundwater, as well. COMMISSIONER FLEMING: Okay. Thank you. CHAIRMAN HALL: Commissioner Elam. COMMISSIONER ELAM: Good morning. Just one question out of curiosity, I guess. On 17 and 18 of the presentation, you were talking about the 1960 fill area. MIKE RUHE [DUKE ENERGY]: Right. COMMISSIONER ELAM: And on the picture, you had the fill area where the transmission corridor from the plant went right through it. MIKE RUHE [DUKE ENERGY]: [Nodding head.] COMMISSIONER ELAM: When you're excavating that, is that going to impact the operation of the plant? Are you going to have to move the transmission lines to keep the plant running, or... MIKE RUHE [DUKE ENERGY]: We will have to PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING coordinate that activity with plant operations. And we've had discussions with the agency about that. 34 COMMISSIONER ELAM: Okay. I just — it didn't seem like you could dig around it. [Laughter] Okay, thank you. CHAIRMAN HALL: Commissioner Whitfield. VICE CHAIRMAN WHITFIELD: Thank you, Madam Chairman. Mr. Ruhe, I've just got one quick follow-up on what we were talking about, about the ash that you are removing from the Lee facility and hauling to Homer, Georgia. Now that Ms. Smith has been real clear on what would be paid for by the shareholders and what would be paid for, or sought for payment, by the ratepayers, since you're doing this work kind of, as you would say, proactively, not as a result of any fine or not a fine in effect, and as we talked about the tonnage, you were on a percentage of almost 20 percent right now being hauled out of that facility, I guess what I was getting at when I asked you was the contract under a year, or three years — and if it's a contractual matter and you can't say, just let me know, but my PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 35 concern is, when you're dealing with a bulk item like ash and as you start to remove it, naturally, you're going to pick up dirt and other particles, and that 1.4 million tons might end up being 1.7 million tons or, you know, more than what you're estimating here, and if you find yourself a year or so down the road slipping in that percentage and as you get closer to finishing getting the remaining amounts, cleaning up all of the ash, naturally, that bulk item might be a little bigger than you think it is. And what is your out, I guess, since if you're going to potentially come seek recovery for this one day, what are you doing to manage the costs of this removal and transporting of this ash into Georgia? MIKE RUHE [DUKE ENERGY]: The volume of ash that's in that basin is just an estimate. You know, there weren't records really kept in those days to say how much was in there. So we've done geotechnical studies, probing, sticking probes in the ground and then just doing the math to figure out what an estimate of the tonnage would be. The timeline and the closure — the clean closure — requirements, you know, are outlined in the order that we have from DHEC. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coa1 Ash Disposal Update BRIEFING VICE CHAIRMAN WHITFIELD: In the consent 36 order. MIKE RUHE [DUKE ENERGY]: Yes, in the consent order. So we're going to follow the requirements of that. VICE CHAIRMAN WHITFIELD: Well, I get — MIKE RUHE [DUKE ENERGY]: Now, as far as the details of how our contract is set up with Waste Management, I do not know those details. VICE CHAIRMAN WHITFIELD: Okay. Well, and I get that you have to abide by the DHEC consent order. I just wondered if there were any recourses you have if you see yourself slipping in where you need to be on the removal of that tonnage, or if that tonnage — you said it was an estimated number, 1.4 million tons — if it ends up being more than that, or for whatever reason — you know, I know when you're dealing with a bulk item, it's hard to get your arms around that sometimes. And I just wondered if you had any — if Duke had any management or oversight of that, to kind of manage where you are. And I do see your percentages here and you appear to be on target, but who knows if you're going to stay with that or slip or where you may be in the future, or what your recourse might PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING 37 be if you do. MIKE RUHE [DUKE ENERGY]: We've got a dedicated organization that is managing that project and has folks at the site, you know, to follow it. And I think right now we're probably doing 100 trips a day, you know, going back and forth. VICE CHAIRMAN WHITFIELD: Right. MIKE RUHE [DUKE ENERGY]: We believe that there's enough time in that timeline to go over and get it done within three years, you know, with the give or take. There were even some delays in the timeline just because of the heavy rains, both on our end and those rains hit Homer, Georgia, as well, and the landfills were closed for a week at a time. So, you know, we're working aggressively to go over and stay as close to that schedule as we can. VICE CHAIRMAN WHITFIELD: Well, thank you — MIKE RUHE [DUKE ENERGY]: And we think we can do it in the three years. We don't want to go back before DHEC and ask for an extension. VICE CHAIRMAN WHITFIELD: Well, I guess we'll know more at your next update. Thank you. Thank you, Madam Chair. PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update BRIEFING CHAIRMAN HALL: Thank you. Commissioners, any other questions? [No response] Okay. Thank you, so much, for your presentation, Mr. Ruhe, and Ms. Smith, for assuring us that the fines will be absorbed by the shareholders. I think we breathe easier, hearing that. And if there's nothing else, then we are adjourned. [WHEREUPON, at 11:20 a.m., the proceedings in the above -entitled matter were adjourned.] PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA 2/10/16 ALLOWABLE EX PARTE DEC and DEP / Coal Ash Disposal Update 39 BRIEFING C E R T I F I C A T E I, Jo Elizabeth M. Wheat, CVR-CM-GNSC, do hereby certify that the foregoing is, to the best of my skill and ability, a true and correct transcript of all the proceedings had in an Allowable Ex Parte Proceeding held before THE PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA in Columbia, South Carolina, according to my verbatim record of same. Given under my hand this 10th day of February, 2016. Jo Elizabeth M. Wheat, CVR-CM/M-GNSC Court Reporter 2/10/16 PUBLIC SERVICE COMMISSION OF SOUTH CAROLINA