UNITED STATES ENVIRONMENTAL PROTECTION AGENCY EPA REGION 4

IN THE MATTER OF : ) ) ) TENNESSEE VALLEY AUTHORITY ) Consent Agreement and Final Order ) 400 West Summit Hill Drive ) Knoxville, Tennessee 37092 ) ) Allen, Bull Run, Colbert, Cumberland, ) Docket No . CAA

- 04

- 2010

- 1528(b) John Sevier, Kingston, Paradise, ) and Shawnee Fossil Plants ) ) Respondent

. ) ) CONSENT AGREEMENT AND FINAL ORDER

I. Nature of the Action/Jurisdictional Statements
1. This is a civil administrative penalty proceeding pursuant to Section 113(d) of the Clean Air Act (“CAA” or “Act”), 42 U.S.C. § 7413(d), and the Consolidated Rules of Practice Governing the Administrative Assessment of Civil Penalties and the Revocation/Terminati on or Suspension of Permits (Consolidated Rules), 40 C.F.R. Part 22, for alleged violations of (a) the Prevention of Significant Deterioration (“PSD”) and Nonattainment New Source Review (“Nonattainment NSR”) provisions of the Act, its implementing regulat ions, and the relevant portions of the federally approved PSD provisions in the State Implementation Plans (“SIPs”) for Alabama, Kentucky, and Tennessee, (b) the New Source Performance Standards (NSPS), Section 111 of the Act, 42 U.S.C. § 7411, and (c) Tit le V of the Act, 42 U.S.C. § 7661

- 7661f, and the federally approved state regulations implementing the federal Title V program. Complainant is the Director, Air, Pesticides and Toxics Management Division, Region 4, United2 States Environmental Protection A gency (“EPA”). Respondent is the Tennessee Valley Authority (“TVA”), which owns and operates facilities located in Region 4.
2. As further described herein, Complainant alleges that Respondent modified and thereafter operated, thirteen coal

- fired electric ge nerating units at eight facilities located in Alabama, Kentucky, and Tennessee without first obtaining appropriate permits authorizing the modification and subsequent operation of such units, and without installing and employing appropriate pollution contr ol technology to control emissions of nitrogen oxides (“NO x ”), sulfur dioxide (“SO 2 ”), and particular matter (“PM”), as the Act requires.
3. Complainant and Respondent (collectively referred to herein as “the Parties”) have conferred for the purpose of settlement pursuant to 40 C.F.R. § 22.18(b)(2) and desire to resolve this matter and settle the allegations described herein without further litigation or adjudication. Therefore, before the taking of any additional testimony or evidence, the making of an y additional arguments, without further adjudication of any issue of fact or law in this matter, and upon consent and agreement of the Parties, this Consent Agreement and Final Order (“CAFO”) will simultaneously commence and conclude this matter as authori zed by 40 C.F.R. § 22.13(b)(2).
4. The authority to take action under Section 113(d) of the Clean Air Act, 42 U.S.C. § 7413(d), is vested in the Administrator. The Administrator has delegated this authority to the Regional Administrato r, Region 4, by EPA Delegation 7

- 6

- A. The Regional Administrator, Region 4, has redelegated this authority to the Director, Air, Pesticides and Toxics Manage ment Division, by EPA Region 4 D elegation 7

- 6

- A. Pursuant to that delegation, the Director of the Air, Pesticides and Toxics Management Division has the authority to commence an enforcement action as Complainant in this matter.3 5. EPA has provided TVA and the States of Alabama, Kentucky, and Tennessee actual notice of the alleged violations in accordanc e with Section 113(a)(1) of the Clean Air Act, 42 U.S.C. § 7413(a)(1).
6. Consistent with Section 113(d) of the CAA, 42 U.S.C. § 7413(d), the requisite joint determination was made by EPA and the United States Department of Justice.
7. Respondent is a corporate agency and instrumentality of the United States, created and existing pursuant to the Tennessee Valley Authority Act of 1933, 16 U.S.C. §§ 831

- 831ee.
8. Respondent is a “person” within the meaning of Section 302(e) of the Act, 42
U.S.C. § 7602(e).
9. Responden t owns and operates 59 coal

- fired electric generating units at eleven facilities located in Alabama, Kentucky, and Tennessee.
10. In 1999, EPA issued TVA an administrative compliance order alleging, inter alia

11. On September 15, 2000, the United States Environmental Appeals Bo ard (“EAB”) issued a Final Order on Reconsideration, , that TVA violated the PSD and Nonattainment NSR p rograms of the Clean Air Act, its implementing regulations, and the relevant SIPs. The administrative compliance order was subsequently amended several times, including on April 10, 2000.

In re Tennessee Valley Auth

.

12. In that Final Order on Reco nsideration, the EAB concluded that TVA had violated the PSD program for NO x , SO 2 , and/or PM at the following units: Allen Unit 3, located at the Allen Fossil Plant in Memphis, Tennessee; Bull Run Unit 1, located at the Bull Run Fossil Plant near Oak R idg e, Tennessee; Colbert Unit 5, located at the Colbert Fossil Plant in Tuscumbia, , 9 E.A.D. 357 (EAB 2000) , in which the EAB sustai ned in part and vacated in part the allegations in the amended administrative compliance order.4 Alabama ; Cumberland Units 1 and 2, located at the Cumberland Fossil Plant in Cumberland City, Tennessee; John Sevier Unit 3, located at the John Sevier Fossil Plant near Rogers ville, Tennessee; Kingston Units 6 and 8, located at the Kingston Fossil Plant near Kingston, Tennessee; Paradise Units 1, 2, and 3, located at the Paradise Fossil Plant in Drakesboro, Kentucky; and Shawnee Units 1 and 4, located at the Shawnee Fossil Plan t near Paducah, Kentucky

. See
13. In that Final Order on Reconsideration, the EAB concluded that Respondent had violated the federally approved and enforceable Nonattainment NSR provisions of the Alabama SIP for SO 2 and the NSPS program for NO x , SO 2 , and PM at Colbert Unit 5. 9 E.A.D. at 451

- 52 (and 9 E.A.D. at 451, Chart No. 6).

See

14. TVA petitioned for review of the administrative compliance order and the EAB’s Final Order on Reconsideration in the United States Court of Appeals for the Eleventh Circuit, which concluded that EPA’s administrative proceedings, and the CAA provisions under which the order was issued, violated due process. 9 E.A.D. at 451 n. 110; 9 E.A.D. at 452

- 58.

Tennessee Valley Auth

. v. Whitman , 336 F.3d 1236, 1244, 1260 (11th Cir. 2003), cert. denied , 541 U.S. 1030 (2004). See Brief for Respondent in Opposition to a Writ of Certiorari ( “ Brief for Respondent ” ) at 4 , National Parks Conservation
Ass ’ n, et al. v. Tennessee Valley Auth

. , 554 U.S. 917 (2008) ( No. 07

- 867 ). Th e court then held that the unconstitutionality of the CAA provision meant that EPA’s order was not a “final agency action” and that the court of appeals therefore lacked jurisdiction to review it. See Brief for Respondent at 4 (citing Whitman , 336 F. 3d at 1248, 1260)

.5 II

. Legal Background
15. The Clean Air Act is designed to protect and enhance the quality of the nation’s air so as to promote the public health and welfare and the productive capacity of its population. 42 U.S.C. § 7401(b)(1).

16. Section 109 of the Act, 42 U.S.C. § 7409, requires the Administrator to promulgate regulations establishing primary and secondary national ambient air quality standards (“NAAQS”) for those air pollutants (“criteria pollutant s”) for which air quality criteria have been issued pursuant to Section 108 of the Act, 42 U.S.C. § 7408. The primary NAAQS are to be adequate to protect the public health with an adequate margin of safety, and the secondary NAAQS are to be adequate to pr otect the public welfare from any known or anticipated adverse effects associated with the presence of the air pollutant in the ambient air. The Nationa l Ambient Air Quality Standards

17. Under Section 107(d) of the Act, 42 U.S.C. § 7407(d), each state is required to designate those areas within its boundaries where the air quality is better or worse than the NAAQS for each criteria pollutant, or where the air quality cannot be classified due to insufficient data. An area that meets the NAAQS for a particular pollutant is termed an “attainment” area. An area that does not meet the NAAQS is termed a “nonattainment” area. An area that cannot be classified due to insufficient data is “unclassifiable.”
18. Pursuant to Section 110 of the Act, 42 U.S.C. § 7410, each state must adopt and submit to EPA for appr oval a SIP that provides for the attainment and maintenance of the NAAQS. Under Section 110(a)(2), 42 U.S.C. § 7410(a)(2), each SIP must include a permit program to regulate the modification and construction of any stationary source of air pollution,6 incl uding stationary sources in attainment and nonattainment areas of the state, as necessary to assure the NAAQS are achieved. 19. Upon approval, state SIP requirements are federally enforceable under Section 113 of the Act, 42 U.S.C. § 7413.

20. Part C of the Act, 42 U.S.C. §§ 7470

- 7492, sets forth requirements for the prevention of significant deterioration (“PSD”) of air quality in those areas designated as either attainment or unclassifiable for purpose s of meeting the NAAQS. These requirements are designed to protect public health and welfare, to assure that economic growth will occur in a manner consistent with the preservation of existing clean air resources, and to assure that any decision to permit increased air pollution is made only after careful evaluation of all the consequences of such decision and after public participation in the decision making process. These provisions are referred to herein as the “PSD program.” The Prevention of Significant Deterioration Requirements

21. Section 161 of the Act, 42 U.S.C. § 7471, requires that each applicable SIP contain a PSD program.
22. Section 165 of the Act, 42 U.S.C. § 7475, among other things, prohibits the construction and operation of a “major emitting facility” in an area designated as attainment unless a pe rmit has been issued that comports with the requirements of Section 165 of the Act, and the facility employs best available control technology (“BACT”) for each pollutant subject to regulation under the Act that is emitted from the facility.
23. Section 169( 1) of the Act, 42 U.S. C. § 7479(1), designates fossil fuel

- fired steam electric plants of more than two hundred and fifty million British Thermal Units (“BTU’s”) per7 hour heat input and that emit or have the potential to emit one hundred tons per year or m ore of any pollutant to be “major emitting facilities.”
24. Section 169(2)(C) of the Act, 42 U.S.C. § 7479(2)(C), defines construction as including “modification” (as defined in Section 111(a) of the Act). “Modification” is defined in Section 111(a) of the A ct, 42 U.S.C. § 7411(a), to be “any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted.”
25. Applicable federal regulations codified at 40 C.F.R. Parts 51 and 52, as well as those in the federally approved SIPs for Alabama, Kentucky, and Tennessee (including Memphis/Shelby County) have at all times relevant to this CAFO prohibited a ma jor stationary source from constructing a major modification in an area designated as attainment without, among other things, first obtaining a PSD permit, undergoing a BACT determination, and applying BACT pursuant to such determination for each relevant pollutant. The definitions contained in the federal PSD regulations and in the relevant SIPs have at all relevant times defined “construction” to include any physical change or change in the method of operation which would result in a change in actual emi ssions. These regulations have at all times relevant to this CAFO also defined “major modification” to include a physical change in or change in the method of operation of a major stationary source that would result in a significant net emissions increase of any pollutant subject to regulation under the Act. These regulations have at all times relevant to this CAFO defined “major stationary source” to include fossil fuel

- fired steam electric plants of more than 250 million BTUs per hour heat input. These regulations have at all times relevant to this CAFO defined “significant,” in reference to a net emissions increase, to8 mean a rate of emissions that would equal or exceed 40 tons per year each for NO x and SO 2 , and 25 tons per year of PM emissions.

26. Part D of Title I of the Act, 42 U.S.C §§ 7501

- 7515, sets forth provisions for new source review requirements for areas designated as being in nonattainment with the NAAQS. These provisions are referred to herein as the “Nonattainment NSR program.” The Nonattainment NSR program is intended to reduce emissions of air pollutants in areas that have not attained the NAAQS, so that the areas make progress towards meeting the NAAQS. Non attainment New Source Review Requirements

27. Under Section 172(c)(5) of the Nonatt ainment NSR provisions of the Act, 42 U.S.C. § 7502(c)(5), each state is required to adopt Nonattainment NSR SIP rules that include provisions requiring permits to conform to the requirements of Section 173 of the Act, 42 U.S.C. § 7503, for the constructio n and operation of modified major stationary sources within nonattainment areas. Section 173 of the Act, in turn, sets forth a series of minimum requirements for the issuance of permits for major modifications to major stationary sources within nonattainm ent areas. 28. Section 173(a) of the Act, 42 U.S.C § 7503, provides that construction and operating permits my be issued if, among other things: (a) sufficient offsetting emission reductions have been obtained to reduce existing emissions to the point where reasonable further progress towards meeting the national ambient air quality standards is maintained; and (b) the pollution controls to be employed will reduce emissions to the “lowest achievable emission rate” (“LAER”). 29. Applicable federal regulations cod ified at 40 C.F.R. Part 51, as well as the Nonattainment NSR program in the federally approved SIP for Alabama, have at all times9 relevant to this CAFO prohibited a major stationary source from constructing a major modification in an area designated as non attainment without, among other things, applying for and obtaining a Nonattainment NSR permit, obtaining sufficient offsetting emission reductions, and installing and operating state

- of

- the

- art pollution control technology to comply with LAER. These regula tions have at all times relevant to this CAFO also defined “major modification” to include “a physical change in or change in the method of operation of a major stationary source that would result in a significant net emissions increase of any pollutant su bject to regulation under [the Clean Air Act].” These regulations have at all times relevant to this CAFO defined “major stationary source” to include fossil fuel

- fired steam electric plants of more than 250 million BTUs per hour heat input.

30. Section 111 of the Act, 42 U.S.C. § 7411, requires the Administrator to publish a list of categories of stationary sources that emit or may emit any air pollutant and to promulgate regulations establishing federal stan dards of performance for new sources (“NSPS”) of air pollutants within each of these categories. The New Source Performance Standards

31. Section 111(a)(2), 42 U.S.C. § 7411(a)(2), defines new sources to include existing sources that are modified. Section 111(a)(4), 42 U.S.C. § 7411(a)(4), def ines a modification as any physical or operational change that increases the amount of any air pollutant emitted by such source or results in the emission of any air pollutant not previously emitted.
32. Section 111(e), 42 U.S.C. § 7411(e), prohibits an owner or operator of a new or modified source from operating that source in violation of an NSPS after the effective date of the applicable NSPS to such source.10 33. 40 C.F.R. § 60.1 states that the provisions of 40 C.F.R. Part 60 apply to the owner or operator of an y stationary source that contains an affected facility, the construction or modification of which is commenced after the publication in Part 60 of any standard (or, if earlier, the date of publication of any proposed standard) applicable to that facility.
34. 40 C.F.R. § 60.2 defines “affected facility” as any apparatus to which a standard is applicable.
35. The NSPS applicable to “electric utility steam generating units” is codified at 40 C.F.R. Part 60 subpart Da.
36. The “affected facility” to which subpart Da applies is an “electric utility steam generating unit” that is capable of combusting more than 73 megawatts (250 BTU/hour) heat input of fossil fuel (either alone or in combination with any other fuel) and for which construction or modification is commenc ed after September 19, 1978. 40 C.F.R. § 60.40Da.
37. An “electric utility steam generating unit” means any steam electric generating unit that is constructed for the purpose of supplying more than one

- third of its potential electric output capacity and more than 25 megawatts electrical output to any utility power distribution system for sale. 40 C.F.R. § 60.41Da.
38. Pursuant to 40 C.F.R. § 60.14, upon modification, an existing facility becomes an “affected facility” for which the applicable NSPS must be satisfi ed.

39. Title V of the Act, 42 U.S.C. §§ 7661

- 7661f, establishes an operating permit program for certain sources, including “major sources.” The purpose of Title V is, among other things, to ensure t hat all “applicable requirements” for compliance with the Act, including PSD, are collected in one place

. Title V Requirements11 40. A “major source” for purposes of Title V is defined, among other things, as a source with a potential to emit greater than 100 tons per year of any air pollutant. 42 U.S.C. § 7661(2).
41. Pu rsuant to Section 502(b), 42 U.S.C. § 7661a(b), EPA promulgated regulations to implement the Title V program, which are codified at 40 C.F.R. Parts 70 and 71.
42. The Alabama Title V operating permit program was granted final approval by EPA on November 8, 20 01, and is codified at Ala. Admin. Code ch. 335

- 3

- 16. The Kentucky Title V operating permit program was granted final approval by EPA on November 30, 2001, and is codified a t 401 Ky. Admin. Regs. 52:020. The Tennessee Title V operating permit program was granted final approval by EPA on November 30, 2001, and is codified at Tenn. Comp. R. & Regs. R. 1200

- 3

- 9

- .02.
43. Section 502(a) of the Act, 42 U.S.C. § 7661a(a), and the approved Title V programs for Alabama, Kentucky, and Tennessee, have at all relevant ti mes made it unlawful for any person to operate a major source except in compliance with a permit issued by a permitting authority under Title V.
44. Section 503(c) of the Act, 42 U.S.C § 7661b(c), the Title V regulations codified at
40 C.F.R. §§ 70.5(a), (c), and (d), and the approved Title V programs for Alabama, Kentucky, and Tennessee, have at all relevant times required the owner or operator of a source to submit an application for a Title V permit that is timely and complete and includes, among other thing s: the citations and descriptions of all requirements applicable to the source (including any requirement to meet BACT pursuant to PSD); a description of, and compliance plan for, requirements for which the source is not in compliance; and a certification by a responsible official of the truth, accuracy, and completeness of the application.12 45. Section 504(a), 42 U.S.C. § 7661c(a), 40 C.F.R. § 70.6(a)(1), and the approved Title V programs for Alabama, Kentucky, and Tennessee, have at all times relevant to this CAFO required that each Title V permit include, among other things, enforceable emission limitations and such other conditions as are necessary to assure compliance with applicable requirements of the Clean Air Act and the requirements of the applicable SI P, including any applicable PSD and Nonattainment NSR requirement to comply with an emission rate that meets BACT and LAER.

46. A state may comply with sections 110, 161, and 172(c) of the Act, 42 U.S.C. §§ 7410, 7471, 7 502(c), by having its own PSD and Nonattainment NSR regulations approved by EPA as part of its SIP, which must be at least as stringent as those set forth at 40 C.F.R. §§ 51.165 and 51.166, and Appendix S to Part 51. State Implementation Plan Requirements

47. EPA has promulgated two largely ident ical sets of regulations to implement the PSD program. One set, found at 40 C

. F

. R

. § 52.21, contains EPA’s own federal PSD program, which applies in areas without a SIP

- approved state PSD program. The other set of regulations, found
at 40 C

. F

. R

. § 51.166 , contains requirements that state PSD programs must meet to be approved as part of a SIP. EPA has promulgated one set of regulations to implement the Nonattainment NSR program, codified at 40 C.F.R. § 51.165, which contains requirements that state
Nonatt ainment NSR programs must meet to be approved as part of a SIP.
48. Pursuant to the Act and federal regulations codified at 40 C.F.R. § 52.21, no construction or operation of a modification of a major stationary source can occur in an attainment area without f irst obtaining a permit. See 49. Pursuant to the Act, and at all times relevant to this CAFO, the Alabama SIP requires that no construction or operation of a modification of a major stationary source occur in 42 U.S.C. § 7475; 40 C.F.R. § 52.21.13 an attainment or nonattainment area without first obtaining a permit. See

50. Pursuant to the Act, and at all times relevant to this CAFO, the Kentucky SIP requires that no construction or operation of a modification of a major stationary source occur in an attainment area without first obtaining a permit. Ala. Admin. Code r.
335

- 3

- 14

- .04; Ala. Admin. Code r. 335

- 3

- 14

- .05.

See 51. Pursuant to the Act, and at all times relevant to this CAFO, the Tennessee SIP requires that no construction or operation of a modification of a major stationary source occur in an attainment area without first obtaining a permit. 401 Ky. Admin. Regs. 51:017

.

See

52. The SIP provisions identified in Paragraphs 49

- 51, above, are federally enforceable pursuant to Sections 110 and 113 of the Act, 42 U.S.C. §§ 7410 and 7413. Tenn. Comp. R. & Regs. R.1200

- 3

- 9

- .01(4). With regard to the City of Memphis, Tennessee , and Shelby County, Tennessee, the State of Tennessee has issued a Certificate of Exemption to the local governments pursuant to Tenn. Code. Ann. § 68

- 201

- 115. During all times relevant to this CAFO, this Certificate of Exemption was recognized by EPA. 40 C.F.R. § 52.2220 (Table 2). This Certificate of Exemption (hereinafter referred to as “Memphis/Shelby County local program”) incorporates all relevant provisions of the Tennes see SIP.

53. Sections 113(a)(1) and (3), 42 U.S.C. §§ 7413(a)(1) and (3), provide that the Administrator may bring an administrative penalty action pursuant to Section 113(d) of the Act, 42 U.S.C. § 7413(d), whenever, on the basis of any information available, the Admi nistrator finds that any person has violated or is in violation of any requirement or prohibition of, Enforcement Provisions

inter alia , the Prevention of Significant Deterioration provisions of Section 165(a) of the Act, 4214 U.S.C. § 7475(a); the federally approved PSD and Nonat tainment NSR provisions of the relevant SIP; and Title V of the Act, 42 U.S.C. §§ 7661

- 7661f, or any rule or permit issued there under.
54. Section 113(d), 42 U.S.C. § 7413(d), authorizes the Administrator to assess a civil administrative penalty against any p erson of up to $25,000 per day for each violation occurring before January 31, 1997; $27,500 per day for each such violation occurring on or after January 31, 1997; $32,500 per day for each such violation occurring after March 15, 2004; and $37,500 per day for each such violation occurring after January 12, 2009. See
I II

. 40 C.F.R. Part 19. Factual Allegations

55. At all times relevant to this CAFO, Respondent was the owner and operator of the Allen Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in Shelby County, Memphis, Tennessee. At all times relevant to this CAFO, the Allen Fossil Plant was located in an area classified as attainment for NO 2 , SO 2 , and PM 10 . At all times relevan t to this CAFO, the Allen Fossil Plant was within the jur isdiction of the Memphis/Shelby County local program. At all times relevant to this CAFO, the Allen Fossil Plant was a “major emitting facility” and a “major stationary source” within the meaning of the Act, its implementing regulations, and the applicable PSD provisions of the Memphis/Shelby County local program. The Allen Fossil Plant and Allen Unit 3

56. During a three

- month period from 1992 through 1993, Respondent performed the following project at Allen Unit 3: replaced several boiler components, including the existing horizontal reheater with a redesigned reheater.

57. At all times relevant to this CAFO, Respondent was the owner and operator of the Bull Run Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in The Bull Run Fossil Plant and Bull Run Unit 115 Anderson County, Clinton, Tennessee . At all times relevant to this CAFO, the Bull Run Fossil Plant was located in an area classified as attainment for NO 2 , SO 2 , and PM 10 . At all times relevant to this CA FO, Tennessee had a SIP

- approved PSD program governing PSD permitting. At all times relevant to this CAFO, the Bull Run Fossil Plant was a “major emitting facility” and “major stationary source” within the meaning of the Act, its implementing regulations, and the applicable PSD provisions of the Tennessee SIP.
58. During a three

- month period in 1988, Respondent performed the following project at Bull Run Unit 1: removed and replaced over 67 miles of tubing from the economizer and removed and replaced over 58, 000 feet of tubing from the secondary superheater.

59. At all times relevant to this CAFO, Respondent was the owner and operator of the Colbert Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in Colbert County, Tuscumbia, Alabama . At all times relevant to this CAFO, the Colbert Fossil Plant was located in an area classified as attainment for NO 2 and TSP/ PM 10 . At all times relevant to this CAFO, the Colbert Fossil Plant was located in an area classified as nonattainment for SO 2 . At all times relevant to this CAFO, Alabama had a SIP

- approved PSD and Nonattainment NSR program governing PSD and Nonattainment NSR p ermitting respectively. At all times relevant to this CAFO, the Colbert Fossil Plant was a “major emitting facility” and a “major stationary source,” and Colbert Unit 5 was an “electric utility steam generating unit,” within the meaning of the Act, its im plementing regulations, and the applicable PSD and Nonattainment NSR provisions of the Alabama SIP. The Colbert Fossil Plant and Colbert Unit 5

60. During a thirteen

- month period from 1982 through 1983, Respondent performed the following project at Colbert Unit 5: replaced the waterwalls and horizontal reheater, modified16 the startup system, modified the superheater by adding wingwalls in the furnace, replaced the gas proportioning dampers, replaced the windbox, redesigned and replaced the control system, and converted the unit from forced draft to balan ced draft operation.

61. At all times relevant to this CAFO, Respondent was the owner and operator of the Cumberland Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in Stewart County, Cumberland City, Tennessee . At all times relevant to this CAFO, the Cumberland Fossil Plant was located in an area classified as attainment for NO 2 , SO 2 , and PM 10 . At all times relevant to this CAFO, Alabama had a SIP

- approved PSD program governing PSD permitting. At all times relevant to this CAFO, the Cumberland Fossil Plant was a “major emitting facility” and “major stationary source” within the meaning of the Act, its implementing regulations, and the applicable PSD provisions of the Alabama SIP. The Cumberland Fossil Plant and Cumberland Units 1 and 2

62. During a three

- month period in 1994, Respondent performed the following project at Cumberland Unit 2: replaced and redesigned the secondary superheater outlet headers, replaced the secondary superheater pendant elements, and replaced the lowe r slope and lower waterwalls. During a three

- month period in 1996, Respondent performed the following project at Cumberland Unit 1: replaced and redesigned the secondary superheater outlet headers, replaced the secondary superheater pendant elements, and replaced the lower slope and lower waterwalls.

63. At all times relevant to this CAFO, Respondent was the owner and operator of the John Sevier Fossil Plant, a fossil fuel

- fired electric utility steam gen erating plant located in Hawkins County, Rogersville, Tennessee . At all times relevant to this CAFO, the John Sevier The John Sevier Fossil Plant and John Sevier Unit 317 Fossil Plant was located in an area classified as attainment for NO 2 , SO 2 , and PM 10 . At all times relevant to this CAFO, Tennessee had a SIP

- approved PSD program governing PSD permitting. At all times relevant to this CAFO, the John Sevier Fossil Plant was a “major emitting facility” and “major stationary source” within the meaning of the Act, its implementing regulations, and the applicab le PSD provisions of the Tennessee SIP.
64. During a two

- month period in 1986, Respondent performed the following project at John Sevier Unit 3 : replaced the superheater pla ten elements, replaced all burner tube panels, and replaced the waterwalls in the fron t, rear, and sidewalls.

65. At all times relevant to this CAFO, Respondent was the owner and operator of the Kingston Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in Roane County, Kingston, Tennessee . At all times relevant to this CAFO, the Kingston Fossil Plant was located in an area classified as attainment for NO 2 , SO 2 , and PM 10 . At all times relevant to this CAFO, Tennessee had a SIP

- approved PSD program governin g PSD permitting. At all times relevant to this CAFO, the Kingston Fossil Plant was a “major emitting facility” and “major stationary source” within the meaning of the Act, its implementing regulations, and the applicable PSD provisions of the Tennessee S IP. The Kingston Fossil Plant and Kingston Units 6 and 8

66. During a two

- month period in 1989, Respondent performed the following project at Kingston Unit 6: replaced all reheater and superheater intermediate pendant elements, and replaced the waterwalls of the superheater and reheater. During a three

- month p eriod from 1989 through 1990, Respondent performed the following project at Kingston Unit 8: replaced all reheater and superheater intermediate pendant elements, and replaced the waterwalls of the superheater and reheater.18 67. At all times relevant to this CAFO, Respondent was the owner and operator of the Paradise Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in Muhlenburg County, Drakesboro, Kentucky . At all times releva nt to this CAFO, the Paradise Fossil Plant was located in an area classified as attainment for NO 2 . At all times relevant to this CAFO, Kentucky did not have a SIP

- approved PSD program governing PSD permitting. At all times relevant to this CAFO, the fed eral PSD regulations codified at 40 C.F.R. § 52.21 governed PSD permitting in Kentucky. At all times relevant to this CAFO, the Paradise Fossil Plant was a “major emitting facility” and “major stationary source” within the meaning of the Act, its implemen ting regulations, and the applicable federal PSD provisions codified at 40 C.F.R. §
52.21. The Paradise Fossil Plant and Paradise Units 1

- 3

68. During a 6 month

- period in 1985, Respondent performed the following project at Paradise Unit 1: replaced all 14 cyclone burners, and cut out and replaced the lower waterwall below 465 feet, including the lower headers and floor. During a four

- month period from 1985 through 1986, Respondent performed the following project at Paradise Unit 2: replaced all 14 cyclone burners, and cut out and replaced the lower waterwa ll below 465 feet, including the lower headers and floor. During a six

- month period from 1984 through 1985, Respondent performed the following project at Paradise Unit 3: replaced all 23 cyclone burners, and cut out and replaced the waterwalls between 41 8 feet and 501 feet.

69. At all times relevant to this CAFO, Respondent was the owner and operator of the Shawnee Fossil Plant, a fossil fuel

- fired electric utility steam generating plant located in
McCra c k en County, Paducah, Kentucky . At all times relevant to this CAFO, the Shawnee Fossil The Shawnee Fossil Plant and Shawnee Units 1 and 419 Plant was located in an area classified as attainment for NO 2 and SO 2 . At all times relevant to this CAFO, Kentucky had a SIP

- approved PSD program governing PSD permitti ng. At all times relevant to this CAFO, the Shawnee Fossil Plant was a “major emitting facility” and “major stationary source” within the meaning of the Act, its implementing regulations, and the applicable PSD provisions of the Kentucky SIP.
70. During a two

- month period from 1989 through 1990, Respondent performed the following project at Shawnee Unit 1: replaced the secondary superheater and reheater pendant elements and crossover elements, including the header stubs. During a four

- month period in 1990, R espondent performed the following project at Shawnee Unit 2: replaced the secondary superheater and reheater pendant elements and crossover elements, including the header stubs.
IV. Alleged Violations

71. The projects identified in Paragraphs 56, 58, 60, 62, 64, 66, 68, and 70 pertaining to Allen Unit 3, Bull Run Unit 1, Colbert Unit 5, Cumberland Units 1 and 2, John Sevier Unit 3, Kingston Units 6 and 8, Paradise Units 1, 2, and 3, and Shawnee Units 1 and 4, are physical changes in and/or changes in the method of operation of these coal

- fired electric generating units. Each such project identified in Paragraphs 56, 58, 60, 62, 64, 66, 68, and 70 at the aforementioned units resulted in a significant net emissions increase, as defined by the relevant PSD regulations, in NO x , SO 2 , and/or PM. With respect to Allen Unit 3, the project identified in Paragraph 56 resulted in a significant net emissions increase in NO x and SO 2 . With respect to Bull Run Unit 1, the project identified in Par agraph 58 resulted in a significant net emissions increase in NO x and SO 2 . With respect to Colbert Unit 5, the project identified in Paragraph 60 resulted in a significant net emissions increase in NO x and PM. With respect to Cumberland Alleged PSD Violations20 Units 1 and 2, the projects identified in Paragraph 62 resulted in a significant net emissions increase in NO x . With respect to John Sevier Unit 3, the project identified in Paragraph 64 resulted in a significant net emissions increase in SO 2 . With respe ct to Kingston Units 6 and 8, the projects identified in Paragraph 66 resulted in a significant net emissions increase in NO x and
SO 2 . With respect to Paradise Units 1, 2, and 3, the projects identified in Paragraph 68 resulted in a significant net emissi ons increase in NO x . And with respect to Shawnee Units 1 and 4, the projects identified in Paragraph 70 resulted in a significant net emissions increase in NO x and
SO 2 . 72. Accordingly, the projects identified in Paragraphs 56, 58, 60, 62, 64, 66, 68, and 70 are major modifications within the meaning of the Act and the applicable PSD provisions, including the federal PSD requirements codified at 40 C.F.R. § 52.21 and the SIP

- approved PSD programs for Alabama, Kentucky, and Tennessee (including the Memphis/She lby County local program).
73. Respondent did not comply with the applicable PSD requirements in the relevant SIPs (for the projects identified in Paragraphs 56, 58, 60, 62, 64, 66, and 70) or the federal PSD program (for the projects identified in Paragraph 6 8) with respect to the major modifications at Allen Unit 3, Bull Run Unit 1, Colbert Unit 5, Cumberland Units 1 and 2, John Sevier Unit 3, Kingston Units 6 and 8, Paradise Units 1, 2, and 3, and Shawnee Units 1 and 4. Among other things, Respondent failed to obtain a PSD permit as required by the Act, the federal PSD program, and the Alabama SIP, the Kentucky SIP, and the Tennessee SIP (including the Memphis/Shelby County local program), prior to commencing construction and operation of the major modificat ions at the aforementioned units. Respondent did not undergo a BACT determination in connection with these major modifications. Respondent failed to install and21 operate BACT for control of NO x , SO 2 , and/or PM, pursuant to such determination, as required by the Act, the federal PSD program, and the PSD

- approved SIPs for Alabama, Kentucky, and Tennessee (including the Memphis/Shelby County local program).
74. Accordingly, Respondent has violated Section 165 of the Act, 40 C.F.R. § 52.21, the Alabama SIP, the Ke ntucky SIP, the Tennessee SIP, and the Memphis/Shelby County local
program.

75. The project identified in Paragraph 60 is a physical change in and/or change in the method of operation of Colbert Unit 5. The project identified in Paragraph 60 resulted in a significant net emissions increase in SO 2 . The project identified in Paragraph 60 increased the hourly emission rate of NO x , SO 2 , and PM from Colbert Unit 5 above the maximum hourly emissions p reviously achieved. Alleged N onattainment NSR and NSPS Violation s at Colbert Unit 5

76. The project identified in Paragraph 60 is a major modification within the meaning of the Act and the SIP

- approved N onattainment NSR program for Alabama.
77. Respondent did not comply with the applicable Nonattainment NSR requirements in the Alabama SIP. Among other things, Respondent failed to obtain a Nonattainment NSR permit as required by the Act and the Alabama SIP prior to commencing construction and operation of the major modification at Colbert Unit 5. Respondent did not undergo a LAER determination in connection with this major modification. Respondent failed to install and operate LAER for control of SO 2 pursuant to such determination, as required by the Act and the Alabama SIP.
78. Accordingly, Respondent violated the Act and the Alabama SIP.
79. The project identified in Paragraph 60 is a modification of an affected facility within the meaning of the Act and 40 C.F.R. Part 60.22 80. Respondent failed to comply with the requirements of 40 C.F.R. Part 60 subparts A and Da for Colbert Unit 5 as an affected facility.
81. Accordingly, Respondent violated the Section 111(e) of the Act and 40 C.F.R. Part 60 subparts A and Da.

82. As set forth above, Respondent commenced major modifications at Allen Unit 3, Bull Run Unit 1, C olbert Unit 5, Cumberland Units 1 and 2, John Sevier Unit 3, Kingston Units 6 and 8, Paradise Units 1, 2, and 3, and Shawnee Units 1 and 4. As a result, these modifications triggered the requirements to, Alleged Title V Violations

inter alia

83. Respondent failed to submit a complete application for a Title V operating permit for the Allen Fossil Plant, the Bull Run Fossil Plant, the Colbert Fossil Plant, the Cumberland Fossil Plant, the John Sevier Fossil Plant, the Kingston Fossil Plant, the Paradise Fossil Plant, and the Shawnee Fossil Plant and identify all applicable requirements, accurately certify compliance with such requirements, and contain a compliance plan for all applicable requirements for which Respondent’s units were not in compliance with the Act (including t he requirement to meet BACT/LAER pursuant to a BACT/LAER determination under PSD and Nonattainment NSR, and the applicable NSPS requirements of 40 C.F.R. Part 60 subpart A and Da for Colbert Unit 5). Respondent failed to obtain a proper or adequate Title V operating permit for the aforementioned facilities that contained emission limitations for NO x , SO 2 , and/or PM that met BACT/LAER pursuant to a BACT/LAER determination and the applicable , undergo a BACT/LAER determination, to o btain a PSD/Nonattainment NSR permit establishing emission limitations that meet BACT/LAER pursuant to such a determination, and to operate in compliance with such limitations. Respondent failed to satisfy these requirements.23 emission limitations in the NSPS for Colbert Unit 5. Respondent th ereafter operated the modified units without meeting such limitations and without having a valid operating permit that required compliance with such limitations or that contained a compliance plan for all applicable requirements for which Respondent’s unit s were not in compliance. Respondent’s conduct violated Sections 502, 503, and 504 of the Act, 42 U.S.C. §§ 7661a, 7661b and 7661c; the regulations codified at 40 C.F.R. Part 70, including, but not limited to, 40 C.F.R. §§ 70.1(b), 70.5(a), (b) and (c), 70.6 and 70.7(b); and the federally approved Title V programs of Alabama, Kentucky, and Tennessee.
84. As provided in Section 113(d) of the Act, the violations set forth in Paragraphs 71

- 83 subject Respondent to civil administrative penalties of up to $25,000 per day for each violation occurring before January 31, 1997; $27,500 per day for each such violation occurring on or after January 31, 1997; $32,500 per day for each such violation occurring after March 15, 2004; and $37,500 per day for each such violatio n occurring after January 12, 2009.
V. 85. Solely or purposes of this CAFO, and for no other purpose, as required by 40 C.F.R. § 22.18(b)(2), Respondent admits the jurisdictional allegations set forth in Paragraphs 1

- 14, above. Consent Agreement

86. Solely for pu rposes of this CAFO, and for no other purpose, as required by 40 C.F.R. § 22.18(b)(2), Respondent neither admits nor denies the factual allegations set forth in Paragraphs 55

- 70, above.
87. Solely for purposes of this CAFO, and as referenced in the Federal Facilities Compliance Agreement Between the United States Environmental Protection Agency and the
Tenness ee Valley Authority, Docket No. CAA

- 04

- 2010

- 1760 (“Compliance Agreement”)24 (attached hereto as Exhibit A), and for no other purpose, as required by 40 C .F.R. § 22.18(b)(2), Respondent waives any right to contest the factual and legal allegations set forth above (although TVA in fact denies such factual and legal allegations), its right to appeal the proposed final order accompanying this agreement, and it s right to request a conference with the Administrator.
88. Respondent consents to the assessment of and agrees to pay the civil penalty as set forth in this CAFO. Based upon an analysis of the penalty assessment criteria in Section 113(e) of the Act, 42 U. S.C. § 7413(e), Complainant has determined that an appropriate civil penalty to settle this matter is $8,000,000.
89. Except as otherwise provided in Section V.H (Resolution of Claims) of the Compliance Agreement, payment of the civil administrative penalty set forth in this CAFO shall resolve the alleged violations and factual issues contained herein, and EPA hereby releases Respondent from liability for the facts and violations alleged herein. This CAFO shall not otherwise affect any liability of Responden t, if any, to the United States. Other than as expressed herein, pursuant to 40 C.F.R. § 22.18(c), settlement of this matter shall not affect the right of EPA or the United States to pursue appropriate injunctive or other equitable relief or criminal

sanc tions for any violations of law. Neither EPA nor Complainant waives any right to bring an enforcement action against Respondent for violation of any federal or state statute, regulation, or permit, to initiate an action for imminent and substantial endange rment, or to pursue criminal enforcement for allegations of violations not contained in this CAFO

. 90. Complainant and Respondent agree to settle this matter by their execution of this CAFO. The Parties agree that the settlement of this matter is in the publi c interest and that this CAFO, together with the Compliance Agreement , are consistent with the requirements of the
Act.25 VI

. 91. Respondent shall pay a civil administrative penalty of EIGHT MILLION DOLLARS ( $8,000,000 ) within 30 days of the effective date of the Compliance Agreement by wire transfer to the Federal Reserve Bank of New York with the following wire transfer content: Final Order

Federal Reserve Bank of New York ABA: 021030004 Account Number: 68010727 SWIFT address: FRNYUS33 TIN : 52

- 0852695 33 Liberty St. New York NY 10045 Field Tag 4200 of the Fedwire message should read: “D 68010727 Environmental Protection Agency ” 92. At the time of payment, Respondent shall send a copy of the wire transfer authorization form and transaction r ecord, together with a transmittal letter which shall state that the payment is for the civil administrative penalty owed pursuant to the Consent Agreement and Final Order in In re Tennessee Valley Authority

Regional Hearing Clerk , Docket No. CAA

- 04

- 2010

- 1528(b) , to the following persons at the following addresses:

U.S. EPA

– Region 4 61 Forsyth Street Atlanta, Georgia 30303 Mr. Jason Dressler Air, Pesticides and Toxics Management Division Air and EPCRA Enforcement Branch U.S. EPA

- Region 4 61 Forsyth Street Atlanta, Georgia 30303 Ms. Saundi Wilson (OEA) U.S. EPA

– Region 4 61 Forsyth Street Atlanta, Georgia 3030326 Ms. Ilana Saltzbart U.S. EPA

– Headquarters Mail Code 2242A 1200 Pennsylvania Avenue, N.W. Washington, DC 20460 93. Pursuant to 31 U.S. C. § 3717, EPA is entitled to assess interest and penalties on debts owed to the United States and a charge to cover the cost of processing and handling a delinquent claim. Interest will therefore begin to accrue on the civil administrative penalty from
t he effective date of this CAFO, if the penalty is not paid by the date required. Interest will be assessed at the rate established by the Secretary of Treasury, pursuant to 31 U.S.C. § 3717. A charge will be assessed to cover the costs of debt collection , including processing and handling costs and attorney fees. In addition, a penalty charge of up to six percent per year compounded annually may be assessed on any portion of the debt that remains delinquent more than ninety (90) days after payment is due

. 94. The penalty described in Paragraph 91, shall represent civil penalties assessed by Complainant within the meaning of Section 162(f) of the Internal Revenue Code, 26 U.S.C. § 162(f), and is not a tax

- deductible expenditure for purposes of federal law. Re spondent, as an agency and instrumentality of the United States, is not subject to federal or state taxation. 95. Complainant and Respondent shall bear their own costs and attorney fees in this
matter. 96. This CAFO shall be binding upon Respondent, its successo rs and assigns.
97. The following individual is authorized to receive service for EPA in this proceeding: Ms. Beverly A. Spagg, Chief Air Enforcement and EPCRA Branch Air, Pesticides and Toxics Management Division U.S. EPA

– Region 4 61 Forsyth Street Atlanta, Georgia 3030327 98. Each undersigned representative of the Parties to this CAFO certifies that he or she is fully authorized by the party represented to enter into this CAFO and legally bind that party to it.
99. This CAFO shall not relieve Resp ondent of its obligation to comply with all applicable provisions of federal, state, or local law, nor shall it be construed to be a ruling on, or determination of, any issue related to any federal, state, or local permit.
VI I

. 100. The effective date of this CAFO shall be the date on which the Final Order is filed. Effective Date

AGREED AND CONSE NTED TO : FOR COMPLAINANT: FOR RESPONDENT:

__________________________ __________________________ Beverly H. Banister, Director Anda Ray, Senior Vice President Air, Pesticides and Toxics Environment and Technol og y Management Division Tennessee Valley Authority U.S. Environmental Protection Agency, Region 4

Date: _____________________ Date:______________________

APPROVED AND SO ORDERED this _________ day of ________, 2011

.

______________________ Susan B. Schub Regional Judicial Officer EPA, Region 4