Permanent Replacement Water Supplies at Belews Creek, Mayo, and Roxboro_20180109

Environmental
Quality
January 9, 2018
Bryan Brice
Law Offices of F. Bryan Brice, Jr.
127 W. Hargett St., Suite 600
Raleigh, North Carolina. 27601
ROY COOPER
Governor
MICHAEL S. REGAIN
Secretary
Re: Permanent Replacement Water Supplies at Belews Creek, Mayo, and Roxboro
Dear Mr. Brice:
On behalf of the North Carolina Department of Environmental Quality (DEQ), I write in
response to your request for review of proposed water replacement strategies under the Coal Ash
Management Act (LAMA) at three Duke Energy facilities: Belews Creek, Mayo and Roxboro.
In particular, you have asked DEQ to reject Duke Energy's proposal to provide water filtration
systems at all eligible households at these three locations and instead direct Duke Energy to
provide to each eligible household a connection to a public water supply. After an extensive
review of all the information provided to DEQ, including your written comments and analyses,
DEQ has determined that installing additional infrastructure to provide connections to public
water supplies at these three sites would cause health -related water quality concerns, would
result in wasting of large quantities of clean drinking water, and would be cost -prohibitive.
Therefore, DEQ will authorize Duke Energy to proceed with the installation of filtration systems
for the eligible households at these three locations.
I. BACKGROUND
CAMA requires Duke Energy to provide permanent replacement water supplies for each
household that has a drinking water supply well located within a one-half mile radius from the
established compliance boundary of a coal ash impoundment. N.C.G.S. § 130A-309.211(cl).
This provision of the statute further provides:
Preference shall be given to permanent water supplies by connection to public
water supplies; provided that (i) a household may elect to receive a filtration
system in lieu of connection to public water supplies and (ii) if the Department
determines that connection to a public water supply to a particular household
would be cost -prohibitive, the Department shall authorize provision of a
State of North Carolina I Environmental Quality
217 West Jones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 8600

permanent replacement water supply to that household through installation of a
filtration system.
Duke Energy is responsible for periodic required maintenance for any installed filtration
systems.
While CAMA provides DEQ with the discretion to determine if connection to a public
water supply would be cost -prohibitive (which would justify the installation of a filtration
system), the statute does not establish a monetary threshold or a methodology for making that
determination. Therefore, it is within DEQ's discretion to apply a reasonable method for
assessing whether connection to a public water supply would be cost -prohibitive. In a letter
dated September 7, 2016, Duke Energy proposed that public water supplies should be made
available to eligible households if the installation cost is less than $35,000 per household.
According to Duke Energy, this equates to five times the cost of filtration. In a response letter
dated September 22, 2016, former DEQ Assistant Secretary Tom Reeder approved of the
$35,000 level "as an acceptable planning value for the purposes of the initial proposed plan."
Mr. Reeder indicated that the threshold may be adjusted "if the per resident costs of previous
municipal extensions vary significantly."
On December 7, 2016, Duke Energy submitted to DEQ proposed water replacement
plans for twelve coal ash sites.' According to Duke Energy, the eligible households near the
Belews Creek, Mayo and Roxboro sites were in rural areas and far from public water lines, thus
making it "technically difficult and cost prohibitive to extend that service and maintain water
quality over great distances." A summary of Duke Energy's cost analysis is included below in
Table 1. In particular, Duke Energy determined that of the 58 eligible households at Belews
Creek, 19 should be excluded from the municipal water line evaluation because a new water line
would require a bridge crossing and the crossing of a canal. For the remaining 39 households,
which are located at least three miles from the nearest connection, the estimated cost to connect
to the Stokes County municipal line would be $4.8 million total or $123,000 per household.
Table 1: Summary of Duke Energy Initial Analysis of Public Water Connections
Duke Energy
Water Supply
Service
Total Cost
Cost per
Plant
Household
Mayo
City of Roxboro
Partial households
$1,200,000
$150,000
8
Roxboro
City of Roxboro
Partial households
$10,980,000
$131,000
84)
Belews Creek
Stokes County
Partial households
$4,800,000
$123,000
39)
For Mayo, Duke Energy accounted for 22 eligible households. According to Duke
Energy, the City of Roxboro expressed concern with providing water to any of these households
due to water quality concerns associated with low water demand and the residence time of the
I Documents related to the replacement water supplies under CAMA are available on the DEQ website at:
ht .11edocs.de .nc. ov/WaterResources/Browse.as x?startid=221202.
State of North Carolina I Environmental Quality
217 West Jones Street 1 1601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 8600

water in the pipeline. The City further indicated that it would not be feasible to provide
municipal water to the 14 households north of the plant. For the remaining eight households,
which are located up to one mile from the nearest connection, the estimated cost to connect to an
existing City of Roxboro municipal line would be $1.2 million total or $150,000 per household.
For Roxboro, Duke determined there are 91 eligible households. Seven of these
households were excluded from consideration because connection to a municipal water line
would require crossing the plant intake canal and a railroad. For the remaining 84 households,
which are located at least three miles from the nearest connection, the City of Roxboro expressed
concern with water quality issues related to residual disinfection concentration and disinfection
by-product formation. The estimated cost to connect to the nearest City of Roxboro municipal
line would be $11 million total or $131,000 per household.
For Belews Creek, Mayo and Roxboro, Duke Energy proposed that eligible households
be offered water filtration systems in lieu of a connection to a public water supply. DEQ issued
a provisional approval of Duke Energy's plans on January 13, 2017.
H. DEO RECONSIDERATION OF INITIAL APPROVAL
Since the provisional approval, DEQ has received several letters and other
correspondence from you in which you have asked the Department to reconsider the approval of
water filtration systems for all eligible households at Belews Creek, Mayo and Roxboro. Table 2
below summarizes your communication with DEQ.
Table 2: Summary of Correspondence with DEQ
Date of Correspondence
SummM of Comments
March 15, 2017
Concerns with Duke Energy plan for filtration systems for all
households at Belews Creek, Roxboro, and Mayo
• $35,000 is arbitrary cost -prohibitive threshold
• Cost analysis for filtration is based on 10 years; useful life
of public water line is 70 years
• Long term cost of public water supply (over 50 years or
more) is comparable to filtration costs over same time
period
• Public water supplies ensure the possibility of community
growth and avoid devaluation of property
October 3, 2017
Review of Duke Energy's supplemental analysis (August 31, 2017)
of public water supply options at Roxboro, Mayo and Belews Creek
November 16, 2017
Recommendation that cost -prohibitive analysis should include:
• Total cost per Duke facility of providing public water supply
• Updated counts of well eligible households and multiple
households connected to a single well
• Impacts on current and future property development
State of North Carolina I Environmental Quality
217 West ones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 8600

• Cost of public water connection and relative burden on
community of coal ash activities (per volume of ash stored
and wastewater discharged)
November 28, 2017 • Summary of communications with local water utilities
regarding capacity to supply public water at Belews Creek,
Roxboro and Mayo
• Duke has paid to run a municipal water line to its Mayo
plant and should do the same for the surrounding
community
In response to your request, DEQ has conducted an extensive review of Duke Energy's
water supply plans for Belews Creek, Mayo and Roxboro. Each of the issues that you have
presented is addressed in detail below.
A. Methodology for Cost -Prohibitive Determination
In your March 15, 2017 letter, you asserted that Duke Energy had applied an arbitrary
threshold of $35,000 per household when determining whether connection to a public water
supply would be cost -prohibitive under CAMA. In response to your comment, DEQ has
furthered reviewed available information to determine what might be a representative cost for
water supply connections. For example, DEQ's Division of Waste Management has estimated
that the cost to supply public water at other sites with contaminated groundwater is
approximately $3,000 to $50,000 per household. Also, DEQ's Division of Water Infrastructure
has estimated that the cost to supply public water for water infrastructure projects is
approximately $1,200 to $67,500 per household with an average cost per household of $19,360.
Therefore, there is precedent for applying a threshold higher than $35,000 and DEQ concludes
that higher values up to $70,000 per household can be considered when implementing the
alternative water supply provisions of CAMA.
B. Interconnection with Public Water Supplies
In response to the concerns that you raised about the availability of public water supplies,
DEQ sent a letter on July 12, 2017 directing Duke Energy to further evaluate the availability and
cost of public water supplies, including South Boston Water Supply and Old North State Water
Company, LLC. On August 31, 2017, Duke Energy submitted a response that included an
analysis of all public water supplies located within five miles of the compliance boundary for
each of the three Duke Energy facilities. The results reflect updated estimates of eligible
households and are summarized in Table 3 below.
Table 3: Summary of Duke Energy Supplemental Analysis of Public Water Connections
Duke Energy
Water Supply
Households
Total Cost
Cost per
Plant
Served
Household
Mayo
South Boston
All households
$13,920,000
$733,000
19
State of North Carolina I Environmental Quality
217 West Jones Street 11601 Mail Service Center I Raleigh North Carolina 27699-1601
919 707 6600

South Boston
Households north
$9,980,000
$908,000
of plant 11
Person County Parks
Insufficient well
N/A
N/A
& Recreation*
capacity to serve
all households
Roxboro
Old North State
All households
$29,190,000
$317,000
(92
Person Caswell
All households
$13,540,000
$147,000
Lake Authority*
92
Belews Creek
Aqua
All households
$8,700,000
$167,000
52
*L)enotes transient non -community system that would need to be converted to community service through
modification and permitting
These results indicate that the cost per household of connecting to one of the newly
identified public water supplies was at or above $150,000 in all cases, which is generally
consistent with the initial analysis provided by Duke Energy in December 2016.
While DEQ was reviewing Duke Energy's supplemental analysis, we received your
October 3, 2017 letter in which you presented two principal comments on Duke Energy's
supplement analysis. First, referring to your letter of March 15, 2017, you reiterated your
concern with the 10-year cost analysis for filtrations system as compared to the installation costs
for connection to a public water system with a 75-year useful life. In response to your concerns
with this comparison, DEQ has used the information submitted by you and by Duke Energy to
conduct an economic evaluation of the long-term costs of installation and maintenance for
filtration systems over a 75-year period. Based on Duke Energy's estimated cost ranges of
$7,000 to $10,000 for the installation of a filtration system, $500 to $2,000 in annual
maintenance costs per filtration system, and a ten-year useful life of each filtration system, DEQ
developed two different cost scenarios: a "lower end" scenario with an installation cost of $7,000
and annual maintenance cost of $500, and an "upper end" scenario with an installation cost of
$10,000 and annual maintenance cost of $2,000.
Using the approach that is customarily applied by DEQ to assess the economic impact
analysis of a rule, DEQ then evaluated the net present value (NPV) of each scenario with a
discount rate of 7% that is recommended by the North Carolina Office of State Budget and
Management (OSBM). DEQ also applied a more conservative discount rate of 3.5%. Thus, for
each facility, DEQ evaluated four different scenarios. Table 4 illustrates how the four scenarios
were evaluated for the Roxboro facility and Table 5 summarizes the results for the three
facilities. In summary, the NPV of the cost per household of a filtration system over 75 years
was approximately $72,000 or less under three of the four scenarios. The "upper end" scenario
with a conservative discount rate of 3.5% produced a NPV of the per household cost of
approximately $167,000. DEQ does not believe this scenario provides a representative economic
estimate of the NPV for filtration systems because the 3.5% discount rate does not fully account
for the time value of money and it conflicts with the OSBM recommendation. Thus, the NPV of
installing and maintaining filtration systems over a 75-year period near the three Duke Energy
facilities is generally less than one half of the current one-time cost of installing additional
connections to a public water supply with a 75-year useful life, as provided in Duke Energy's
initial and supplemental analyses.
State of North Carolina I Environmental Quality
217 West Jones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 6600

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Second, you expressed that Duke Energy's evaluation did not include discussions with
affected communities, you or the local water system providers. You provided additional
information about your discussions with the Old North State Water Company, who indicated that
they had not been contacted by representatives of Duke Energy. To follow up on this issue,
DEQ staff contacted representatives of the public water supplies which had previously been
identified as possible providers in the Duke Energy initial and supplemental analyses:
• On November 15, 2017, DEQ staff contacted a representative of the City of
Roxboro, who indicated that he had been contacted by Duke Energy's consultant
and was familiar with the Duke Energy initial analysis. DEQ was informed that
the City would not be interested in extending water lines at Mayo or Roxboro
because significant additional costs would be incurred for surplus flow (or
dumping) of water. Significant dumping of water would be needed to ensure that
the level of residual disinfectant and long residence time would not lead to the
formation of unhealthy byproducts (such as trihalomethanes) under low flow, low
demand conditions.
• On December 7, 2017, DEQ staff spoke with representatives of Old North State
Water Company. They informed DEQ they had been contacted by Duke
Energy's consultant and they had reviewed the Duke Energy supplemental
analysis. They stated that the extension of 29 miles of new piping to communities
near the Roxboro facility would make it necessary to dump more new water than
they could sell to ensure water quality.
• On November 14, 2017, DEQ staff contacted a representative of Stokes County
who had been contacted by Duke Energy's consultant and had reviewed the Duke
Energy initial analysis. The County representative confirmed that the Town of
Walnut Cove could be a point of entry. Due to water quality concerns, however,
the County would need to dump more new water than it would sell.
You have indicated that Duke Energy should provide a connection to a public water
supply at Mayo because Duke Energy has a municipal water connection at the plant. DEQ
believes the presence of a municipal water line at the Mayo plant is not relevant to this analysis
because (a) Duke's use of municipal water does not make it a public water supply that could be
available to eligible households and (b) Duke's existing municipal connection does not affect the
cost or water quality concerns associated with providing a separate public water connection to
well eligible households, as outlined above.
DEQ's communication with representatives of public water supplies at each of the three
sites generally affirms the water quality concerns expressed in the earlier Duke Energy reports.
DEQ is concerned that the potential health concerns would make the proposed connections
unsuitable replacements to alleviate health concerns with ongoing use of water supply wells. In
addition, the high volume of water dumping (relative to the amount of water consumed) under
the public water supply scenarios would add more costs and waste clean drinking, an important
resource.
State of North Carolina I Environmental Quality
217 West Jones Street 1 1601 Mail service Center I Raleigh, North Carolina Z7699-1601
919 707 8600

C. Performance of Filtration Systems
In your October 3, 2017 letter, you expressed concerns related to the effectiveness of
filtration systems in delivering clean water. The filtration systems will be required to meet
performance standards established by DEQ in June 2017. The standards were based on health -
based groundwater quality standards for coal ash constituents. On July 19, 2017, DEQ directed
Duke Energy to submit additional information related to the removal of hexavalent chromium
and vanadium. The additional information would enable DEQ to assess the capability of the
filtration systems to meet the NC Department of Health and Human Services (DHHS) health
goals. Duke Energy provided its response on July 26, 2017, including product information and
test results showing that the filtration systems are capable of removing hexavalent chromium to
below 0.1 parts per billion (near the DHHS health goal of 0.07 ppb) and vanadium to the DHHS
health goal of 0.3 ppb.
D. Consideration of Other Cost Criteria
In several of your letters, you urged DEQ to consider alternative models for assessing the
cost of replacement water supply strategies at Belews Creek, Mayo and Roxboro. These issues
are discussed below.
■ You have argued that DEQ should consider the potential growth and future
connections that would result in communities who become connected to new
water supply infrastructure. However, Section 9 of Session Law 2016-95 states
that "Requirements for establishment of a permanent alternative water supply
under G.S. 130A-309.211(c1) shall apply only to households with drinking water
supply wells in existence on the date this act becomes effective." The Session
Law was signed into law on July 14, 2016. Therefore, the consideration of
replacement water supplies is limited to households with drinking water supplies
in existence on or prior to that date. DEQ further believes the intent of the
CAMA replacement requirements is to remedy potential impacts to existing water
supply wells, rather than to spur new development.
• You have presented information to show that determining whether connection to a
public water supply is cost prohibitive should be based on the total cost of
implementing this option at each site. For example, you contend that the total
costs to connection to a public water supply at Belews Creek, Mayo and Roxboro
($4.8 million, $1.2 million and $5.1 million, respectively) are less than the total
cost of installation at Plant Allen ($7.2 million) and in line with or lower than the
total cost at Buck ($4.9 million). There are nearly 300 eligible households at
Plant Allen and nearly 200 at Buck, each of which exceeds the total number at
Belews Creek, Mayo and Roxboro combined. DEQ believes that deciding
whether connection to a public water supply is cost prohibitive based on the total
cost obscures the cost effectiveness of delivering water to eligible households.
State of North Carolina I Environmental Quality
217 West Jones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 8600

• You have asked DEQ to adjust the results of the Duke Energy cost analysis to
include nine additional households at Belews Creek that you claim are served by a
well that is shared with other eligible households. However, you have not
identified whether the nine households are located to the north of the plant, where
a public water supply connection is infeasible due to the required crossing of a
canal and a bridge. Even if we assume that the nine households were not located
to the north of the plant (thereby raising the number of households that could
potentially be connected to public water from 39 to 48) and we assume that the
estimated total cost of $4.8 million would remain the same, the cost per household
would be $100,000. Based on the high cost of this proposal, coupled with the
health -based water quality concerns discussed in this letter, the additional
households would not impact the outcome.
• You have urged DEQ to take into account the amount of ash and wastewater at
each coal ash site. For example, for Plant Allen you estimate that the total cost to
connect to a public water supply ($7.2 million) can be converted to a cost per
gallon of wastewater ($0.11 per gallon) and cost per ton of ash ($0.41 per ton).
Your estimated unit costs for Belews Creek, Mayo and Roxboro are lower, which
in your presentation reflect a greater burden of coal ash and wastewater in those
communities. After considering your proposal, DEQ believes that the amount of
ash or wastewater is not relevant to the determination of whether the connection
to a public water supply is cost prohibitive because it does not affect the total cost
or the cost per eligible household of the public water connection.
III. CONCLUSION
In conclusion, DEQ has conducted an extensive review of the available information
related to the potential connection to a public water supply at communities near the Belews
Creek, Mayo and Roxboro facilities. Based on the information reviewed by DEQ, including
your written comments and analyses, DEQ has determined that installing the additional
infrastructure to provide connections to public water supplies would cause significant health -
based water quality concerns associated with the delivery of public water over long distances
under low demand conditions. In addition, connection to public water would result in significant
waste of water resources. And the high cost of connecting to public water supplies (over
$120,000 per household) would make this proposed approach cost -prohibitive. For these reasons,
DEQ concludes that connection to public water supplies would be inconsistent with the remedial
goals in CAMA. Therefore, DEQ will authorize Duke Energy to proceed with the installation of
filtration systems at all eligible households near Belews Creek, Mayo and Roxboro.
DEQ appreciates your interest in these issues and your strong advocacy for your clients in
the affected communities. DEQ is willing to schedule a community meeting at an appropriate
place and time to discuss the replacement water supply issues covered in this letter.
State of North Carolina I Environmental Quality
217 West Jones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 8600

If you have any questions regarding this determination, please contact me at 919-707-
8619 or Bill Lane at 919-707-8616.
Sincerely,
Sheila Holman
Assistant Secretary for the Environment
State of North Carolina I Environmental Quality
217 West Jones Street 11601 Mail Service Center I Raleigh, North Carolina 27699-1601
919 707 8600