### MEMORANDUM

TO: Ron Jordan, EPA

FROM: Kurt Blohm, ERG Sarah Holman, ERG

DATE: 6 January 2010

SUBJECT: Notes from EPA Conference Call with Headwaters Resources

On December 2, 2009, EPA’s Office of Water/E ngineering and Analysis Division (OW/EAD)

held a conference call with Headwaters Res ources (Headwaters) to discuss the design and operation of dry ash handling systems at power plants and ash marketing. The following people participated in the conference call:

EPA

Ron Jordan

Headwaters Mike Adams – Regional Vice Pres ident (Eastern United States) Tom Smoltz – Corporate Environmental Director Lance Staron – Capital Projects Manager Peter Fote – Director of Capital Projects

ERG

Deb Bartram

Kurt Blohm

Sarah Holman

This memorandum details the topics th at were discussed during the call.

EPA’s Introduction

 EPA went over the main objectives of the conference call for the call participants

and introduced the Steam Electric Effluent Guidelines (ELGs).

 EPA stated that through communicati ons with Headwaters, EPA hopes to

understand Headwater’s role in ash handli ng and to better understand what is involved with wet-to-dry ash handling conve rsions at power plants, including the ash handling equipment that can be reused and the new equipment that is typically

installed.

 EPA stated that Headwaters can claim info rmation discussed with or provided to EPA as confidential business information ( CBI). Headwaters stated that being inMemorandum January 6, 2010 Page 2

the coal combustion product (CCP) busine ss, they do need to be careful about their clients’ (power pl ants’) confidential information. EPA explained the Agency’s CBI handling procedures and how information may be made public, but only in an aggregated format that precl udes the tying of information to certain plants or companies.

Ash Handling Discussion

 ERG asked Headwaters to give a brie f introduction to their company, including information on all aspects of ash hand ling in which Headwaters is involved. Headwaters stated that they deal solely with CCP recycling and operate at over 100 utility sites in the United States. The services they provide to plants include disposal and marketing of ash, and provi ding equipment to utilities to collect, store, or transport fly ash and bottom ash. Headwaters stated that they landfill approximately 20 million tons of CCP annually and that they market 50 percent of all fly ash used in the U.S. for concrete manufacturing.

 Headwaters stated that power plants in need of ash management services will approach Headwaters to supply equi pment, design ash handling systems (Headwaters’ capital projects group does th e design), market/transport the ash, or all of these. Headwaters stated that po wer plants sometimes use a combination of Headwaters’ design and other vendors’ de sign for their ash handling systems.

Headwaters stated that the installation of the dry ash handling system at DTE Energy’s Monroe Power Plant is an exampl e of a situation in which Headwaters was contracted to design the fly ash hand ling system in addition to marketing the fly ash. Headwaters stated that they own and operate the entire dry fly ash handling and storage system at Monroe. Headwaters stated that Monroe has retained the ability to slui ce the fly ash to the ash pond. Headwaters stated that the quality of the ash at Monroe is m onitored approximately once every eight

hours.

 ERG inquired about the factors that aff ect the ash quality and marketability. Headwaters stated that each plant is uni que and that ash quality depends on the efficiency of the plant and the type of coal burned.

 Headwaters stated that they primarily d eal with the storage, marketing and reuse of dry collected fly ash. Headwaters stat ed that in 90 to 95 percent of their projects, the power plant had already inst alled all or most of the dry fly ash handling equipment and Headwaters was contracted to manage the marketing and/or disposal of the fly ash. In some cases, Headwaters installs dry ash storage facilities (silos) for plants that have already installed dry fly ash collection equipment, or upgrades the fly ash hand ling equipment such as installing rail load-out equipment. Headwaters noted th at each contract that they have with power plants explicitly lays out where the division line is regarding responsibility for the ash handling system. Typically, H eadwaters’ area of responsibility begins at the silo and includes the loading equi pment. At approximately 20 percent of the projects, the Headwaters area of respons ibility also includes the transfer of ash from hoppers to the silo.Memorandum January 6, 2010 Page 3

 Headwaters stated that ash may be tran sported locally, or across large distances. Ash is typically transported by truck if the distance between the plant and the market is less than 100 miles, and by rail if the distance is great er than 100 miles.

 EPA asked whether the cement industry is large enough to reuse all fly ash generated by power plants in the United St ates if the fly ash were classified as

non-hazardous. Headwaters stated that the concrete industry would not be able to reuse all of the fly ash generating in the United States if it were classified as nonhazardous because not all fly ash would be of the appropriate quality for use

in cement. Headwaters stated that another market for the reuse of fly ash, which is not as large as the concrete market, is cement production.

 ERG asked Headwaters to identify the quali ty parameters affecting the ability of

ash to be marketed. Headwaters stated th at the quality requirements are different

for each beneficial reuse market. Headwate rs stated that the loss on ignition (LOI) of the ash (the amount of unburned carbon) negatively affects the ability of the ash to be used as a raw ingredient in conc rete. Headwaters stated that fine (i.e. not coarse) ash is also desirable for use in concrete. Headwaters stated that the American Society for Testing and Mate rials (ASTM) standards ASTM C 618 and ASTM C 311 provide all accepta nce criteria for fly ash used in concrete mixes. Headwaters stated that ash quality may fluctuate significantly at power plants depending on many factors.

 Headwaters stated that some plants are turning to ash beneficiation as a way to increase the quality of the ash so that it may be marketed. Headwaters informed EPA of their two beneficiation technologies : one is a proprietary chemical that is

added to the ash to coat the unburned car bon in the ash rendering it more suitable for use in concrete, and the other is a chemical that will neutralize the ammonia in the ash that is carried over from SCR/SNCR systems.

 Headwaters stated that the two most common beneficiation technologies in the industry for reducing the LOI of the ash are electrostatic pr ecipitation and carbon burn out. Electrostatic precip itation consists of separati ng the carbon in the fly ash from the mineral content by applying an electric field. Carbon burn out involves reburning the ash, which reduces the carbon content of the fly ash and produces

heat that is reused to increase the overall thermodynamic efficiency of the plant.

 ERG, asked how prevalent beneficiation t echnologies are in the coal-fired power generating industry currentl y. Headwaters stated that most beneficiation technologies are brand new and are not wi dely used, mainly due to the large capital investment required and th e relatively long payback period.

 EPA asked Headwaters to identify the power plants in the United States where all of Headwaters’ wet-to-dry conversions have taken place. Headwaters discussed the ash handling/wet-to-dry c onversion projects that they have been involved with at four power plants: Miller (AL), Edward s (IL), Monroe (MI), and Schahfer (IN). At Miller, Headwaters was involved with the expansion of the dry system toMemorandum January 6, 2010 Page 4

increase the amount of dry fly ash produced. The conversion at Edwards consisted of installing an ash storage s ilo and ash transport piping. The Monroe conversion was not a complete wet-to-dry conversion because the storage silo does not have the ability to moisten the fly ash in preparation for storage in a

landfill.

 EPA asked Headwaters to describe the e quipment changes necessary to convert a wet fly ash handling system to a dry system . EPA stated that this information will help ensure that EPA’s questionnaire obt ains the information needed to predict the cost of wet-to-dry fly ash handling sy stem conversions. Headwaters stated that most plants have rows of hoppers under the ESPs that colle ct the ash. Wet ash handling systems typically have wet vacuum equipment that pulls the ash into the sluice water. A wet-to-dry conversion t ypically involves tyin g in to the piping used to draw the ash into the wet system , and installing a new dry vacuum system, filter/separators, and pressure equipment us ed to blow the ash to storage silos. Headwaters noted that some plants retain the wet system in place as a backup in case the dry fly ash is unmarketable.

 ERG asked if there is typically any re dundancy designed into a dry ash handling system if a plant converts to a completely dry system and no wet system is used as a backup. Headwaters stated that inco rporating redundancy into a dry system depends on the factor of safety desired by each plant. Headwaters stated that for redundancy plants may choose to add a backup vacuum pump, for example, or they may double the entire system. Add itionally, a system with a high factor of safety would also allow for an increas e in the capacity (horsepower) of the pressure equipment needed to blow the as h to storage silos. Headwaters stated that plants may install moisturizing e quipment in their storage silos (and may have a separate silo) in case the fly as h becomes unmarketable and they need to landfill the fly ash. Headwaters noted that ash quality is tested before the ash enters the storage/loading silo.

 ERG asked how the cost of transporting th e ash increases as the distance the ash needs to be transported to storage silos in creases. Headwaters stated that the cost of transporting the ash various distances is a major feature of their ash handling system designs and that this information is proprietary.

 Headwaters stated that because the desi gn of ash handling systems is complex and plant-specific, if they were to put together a system cost estimate right now (with no plant specifics), they would need to include a contingency of 50 percent (or more, as was mentioned by Headwaters la ter in the conversation). EPA asked Headwaters for input as to what the Ag ency can do to come up with a good cost estimate for wet-to-dry fly ash handling system conversions.

 ERG asked Headwaters to identify the main factors that affect the cost of dry fly ash handling systems and the feasibility of converting from wet to dry fly ash handling. Headwaters provided the following factors:Memorandum January 6, 2010 Page 5

o Ash marketability – If ash cannot be market ed, it needs to be landfilled, and there are significant costs associated with landfill installation/operation.

o Distance transported to storage – Increasing the dist ance the ash must be transferred from ESPs/hoppers to st orage/loading silos increases the

system costs.

o Type/size of stor age/loading silos – The type of silos depends on the markets to which the ash is sold. Silos range in costs depending on capacity and whether or not the ash needs to be handled completely dry, conditioned with water, or both. If a plant is located in a warm climate (e.g., Florida, where construction occurs all year), it would not need extra silo storage space to hold the ash temporarily during winter months; whereas in a cold climate, it would.

o Plant efficiency – The efficiency of a plant can affect the consistency of the ash quality.

o Landfill permitting costs – If a plant is not going to use an ash pond and cannot market the ash produced, it must di spose of it in a landfill, either in

an on-site or commercial landfill.

 EPA asked Headwaters about the effect th at flue gas mercury control systems can have on fly ash, and noted some process opt ions to prevent fly ash contamination, such as injecting activated carbon downstream of the ESP or in the latter stages of

the ESP. Headwaters stated that the a ffect on the fly ash is plant-specific and depends on the type of activated carbon used, but that typically activated carbon injection precludes the use of fly ash for c oncrete. Headwaters stated that if the activated carbon is injected downstream of the ESP, that the fly ash marketability

is not affected. Headwaters stated that they have no role asso ciated with mercury control systems, other than to test fly ash to determine if it is marketable. EPA asked Headwaters about a possible new type of mercury control that reportedly doesn’t affect the marketability of ash to the concrete industry, and Headwaters stated that they are retain ing their opinion until they have more information.

 ERG asked Headwaters to describe a typi cal contract between Headwaters and a power plant and asked Headwaters to di scuss who receives the revenue from marketing the ash. Headwaters stated that e ach contract that they have with power plants is unique, so there is not a “typi cal” contract. Headwaters explained that when they act as a marketing agent, they often are not paid by the plant, but they (Headwaters) receive the revenues for the sale of the ash. When they act as an ash disposal agent, they are often paid by the plant. When they act as a marketing and disposal agent, they may receive ash sa le revenues and payment from the plant, but again, the contr act conditions vary.

 Headwaters stated that with the vast majo rity or their contracts with power plants, Headwaters is solely the byproducts recycler and they do not have any control over the types of coal that the plant bur ns or any coal changes that the plant makes, which may affect ash marketability.Memorandum January 6, 2010 Page 6

 EPA explained that the Steam Electric Information Collection Request (ICR) is currently in the 1 st Federal Register Notice (FRN ) public comment period and encouraged Headwaters to provide EPA w ith feedback on the draft questionnaire. Lance Staron, Headwaters stated that he is aware of the Steam Electric questionnaire and has reviewed Part C (A sh Handling) of the questionnaire. Mr.

Staron stated that he would review Part C of the questionnaire in greater detail, circulate it within Headwaters, and provide EPA with comments.

 ERG asked if Headwaters would be able to provide any engineering reports or studies from the ash handling projects th ey have been involved with. Headwaters stated that they do not have these type s of reports/studies and that EPA would need to request these from the power plants.

 EPA further explained that as part of the Steam Electric ELGs effort, EPA anticipates estimating costs for dry ash sy stem installations and wet-to-dry ash handling conversions to a ssess potential ELGs options, and would appreciate Headwaters’ input to help EPA estimate the costs as accurately as possible.

 EPA asked if Headwaters also design s dry bottom ash handling systems or markets dry bottom ash. Headwaters stated that they have not worked on dry bottom ash handling systems in a long time, but that they worked on a few bottom ash handling projects in the past.