Opinion ID: 4538714
Heading Depth: 4
Heading Rank: 1

Heading: Electric Motor

Text: Algonquin's air-permit application initially made no mention of an electric-motor option. But during the adjudication process, petitioners asserted that an electric motor would be a more effective and economically feasible alternative to the SoLoNOx turbine. Essentially, the petitioners proposed that the compressor station could be hooked up to the existing electrical grid and create the necessary pressure without burning any natural gas. This would eliminate all emissions of NOx from the Weymouth station. And at least some compressor stations in other parts of the country operate with such an electric motor. Algonquin revised its application in May 2018 to address the feasibility of an electric motor. Algonquin explained that this option was excluded for several reasons, including the high cost of upgrading the existing power infrastructure. Algonquin also cited the fact that FERC's environmental assessment concluded that an electric motor would not offer a significant environmental advantage over the proposed gas-fired turbine. DEP staff accepted - 14 - Algonquin's exclusion, relying on FERC's assessment and concededly not making an independent determination for purposes of BACT. Algonquin and DEP refocused their position before the Presiding Officer, arguing that the electric-motor option was properly excluded from Step 1 of the BACT analysis as a project redesign. Per the NSR Workshop Manual, Step 1 is a wide-ranging process, in which applicants should initially identify all control options with potential application to the emissions unit under review. NSR Workshop Manual, supra, at B.7 (emphasis added). However, a technology may be excluded from Step 1 if it would redefine the source. Helping Hand Tools v. EPA, 848 F.3d 1185, 1194 (9th Cir. 2016). In a classic and simple example, a coal-burning power plant need not consider a nuclear fuel option as a 'cleaner' fuel because it would require a complete redesign of the coal-burning power-plant. Id. (citing Sierra Club v. EPA, 499 F.3d 653, 655 (7th Cir. 2007)); see also Friends of Buckingham, 947 F.3d at 74, 82–85 (analyzing whether an electric motor would redefine the source of a proposed gas-fired compressor station turbine). The Presiding Officer was not persuaded by the redesign argument. She stated that DEP erred in relying on FERC's environmental assessment and that DEP should have included all control technologies in the BACT analysis (emphasis in original). She left unresolved whether the electric motor would - 15 - in fact constitute a redesign if properly analyzed as such by DEP staff.6 Instead, she determined that, even assuming use of an electric driven compressor would not redefine the source, the electric motor would properly be excluded at Step 4 of the BACT analysis as not cost feasible. The support for the Presiding Officer's cost-feasibility conclusion came largely from the testimony of Algonquin witness William Welch. Welch testified, with respect to the redesign issue, that an electric motor at the Weymouth station would require substantial infrastructure investment, including construction of a new substation and the laying of half a mile of underground electric transmission line. In total, Welch estimated that these upgrades could cost between $9 million and $12 million. The Presiding Officer acknowledged that there is no corroboration of these numbers, and [that] they seem to be based on several conversations or meetings at which no notes apparently were taken. However, she stated, there is no evidence disputing them, since petitioners' witness did not take into account these Neither DEP nor Algonquin argue on this appeal that we can 6 affirm on the ground that an electric motor would constitute a redesign. Nor could they, since DEP's final decision does not rest on that ground. See Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983) (citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)); NSTAR Elec. Co. v. Dep't of Pub. Utils., 968 N.E.2d 895, 900–01 (Mass. 2012). Algonquin reserves the right to reassert its redesign argument on remand to DEP. - 16 - infrastructure costs in his own cost estimates. She thus infer[red] that the total cost for this infrastructure would be substantial. So, she concluded, Algonquin's evidence, though scant and uncorroborated by any documentation, at least provides some basis to infer that the electric motor would not be cost feasible. Petitioners challenge that conclusion on three grounds: (1) they assert that scant and uncorroborated evidence of infrastructure costs cannot be considered substantial evidence, as would be needed for us to affirm an agency's finding of fact; (2) they argue that neither the Presiding Officer nor anyone else at DEP ever provided a full Step 4 analysis as required by DEP's BACT Guidance; and (3) they contend that the Presiding Officer raised the Step 4 issue sua sponte after the hearing without providing an opportunity for the parties to weigh in, thus denying them their Due Process rights and violating Massachusetts law. We easily dispatch with the first of these arguments. Welch offered an estimate that does not seem irrational on its face, and petitioners offered no contrary estimate of what must be a real cost. So while the Presiding Officer fairly noted the unimpressive support for the estimate, we cannot say that the evidence was insubstantial as a matter of law. See Bath Iron Works Corp. v. U.S. Dep't of Labor, 336 F.3d 51, 56 (1st Cir. 2003) (recognizing that, under the substantial evidence standard, we - 17 - will accept the findings and inferences drawn by an agency so long as they are not irrational, meaning that the record contains 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion' (quoting Barker v. U.S. Dep't of Labor, 138 F.3d 431, 434 (1st Cir. 1998), and Sprague v. Dir., Office of Workers' Comp. Programs, U.S. Dep't of Labor, 688 F.2d 862, 865 (1st Cir. 1982))). Petitioners' second argument fares better.7 According to the NSR Workshop Manual, [c]ost effectiveness is the economic criterion used to assess the potential for achieving an objective at least cost. Effectiveness is measured in terms of tons of pollutant emissions removed. NSR Workshop Manual, supra, at B.36. So at Step 4 of the BACT analysis, the agency (or the applicant) must calculate the cost effectiveness of the most effective technology remaining after Step 3 and eliminate that technology if it falls above a predetermined cost-feasibility threshold. For NOx, DEP has established that technologies falling in (or below) the range of $11,000 to $13,000 per ton of NOx removed per year will be considered cost feasible. BACT Guidance, supra, at 5. DEP never calculated cost effectiveness for an electric motor, nor did it compare that figure to the range established in 7Because we vacate DEP's decision on this ground, see infra subpart II(C), we need not address petitioners' third argument or Algonquin's response that petitioners waived that particular argument by not moving for reconsideration. - 18 - its BACT Guidance. And even in their briefs before us, DEP and Algonquin do not attempt to perform the required mathematical calculations. Instead, DEP states that the full calculation was unnecessary because the infrastructure costs were so obviously substantial. Effectively, DEP argues that a $9–12 million infrastructure cost is so high that the cost effectiveness, if calculated, would necessarily exceed the $13,000-per-ton cutoff. Without a more detailed explanation by DEP, we cannot be so sure. According to the NSR Workshop Manual, [c]ost effectiveness calculations can be conducted on an average, or incremental basis. NSR Workshop Manual, supra, at B.36. Starting with average cost effectiveness, the manual provides us with the following formula: Average cost Effectiveness (in dollars per ton removed) = (Control option annualized cost) / (Baseline emissions rate – Control option emissions rate) Id. at B.37 (mathematical notations reformatted). And, to annualize costs for capital investments, the manual tells us to multiply up-front costs by: (real interest rate)  (1 + real interest rate)^(economic life of equipment in years) / ((1 + real interest rate)^(economic life of equipment in years) - 1) Id. at b.10 (mathematical notations reformatted). - 19 - When we attempt to solve for average cost effectiveness, it becomes apparent that the record before us does not contain enough information. As to the numerator, we are assuming that the infrastructure costs of the electric motor would be between $9 million and $12 million based on Welch's testimony. But we cannot annualize that figure because we do not know the lifespan of the equipment. The NSR Workshop Manual tells us that [t]he economic life of a control system typically varies between 10 to 20 years and longer, id., but that hardly narrows things. We also do not know what interest rate DEP would use. The manual says that [t]he value used in most control analyses is 10 percent, id. at b.11, but again this is not a categorical pronouncement. So we cannot tell what the annualized cost of the electric motor infrastructure would be. We also have no information on the annual operating expenses for the electric motor, although anything above zero would be helpful to DEP in this exercise. Even more difficult is the denominator. We know that the emissions rate for the electric motor is zero, but the record is incomplete as to what the baseline emissions rate would be. According to Algonquin's air-permit application, the Base Case is Good Combustion Practices (presumably a gas-fired turbine - 20 - that, unlike SoLoNOx, employs no control of NOx emissions).8 But the application does not give a value for Potential NOx Emissions for this option. The control technology just above Good Combustion Practices is Water Injection, which the application tells us has an emissions rate of 20 to 42 ppm (water). So, it is probably safe to assume that the baseline emissions rate is at least that high, and probably higher. We are also not provided with a formula for converting ppm (parts per million) to tons per year. We know that the SoLoNOx turbine will result in 10.03 tons of NOx per year and that it has an emissions rate of 9 ppm, so for ballparking purposes a one-to-one conversion would seem to be good enough (although we must accept a wide margin of error, especially since we do not know what (water) means). So, if we assume, reasonably, that the interest rate is 10% and that the lifespan of the electric motor infrastructure is twenty years, then the average cost effectiveness of a $12 million electric motor would be below $13,000 per ton per year if the Good Combustion Practices emissions exceed 108 tons per year.9 For a The electric motor, unlike the SCR discussed below, is a 8 process-control technology, rather than an add-on technology (i.e., the compressor station needs either an electric motor or a SoLoNOx turbine, but not both). As such, the baseline emissions rate is not the emissions rate of the SoLoNOx turbine. 9 $13,000 per ton ≥ ($12,000,000  0.1  (1.120) / (1.120 - 1)) / (Baseline emissions rate - 0). Baseline emissions rate ≥ ($12,000,000  0.1  (1.120) / (1.1 - 1)) / ($13,000 per ton). 20 Baseline emissions rate ≥ 108.42 tons. - 21 - $9 million motor, that value would drop to 81 tons per year.10 These values are higher than the 42 ppm for Water Injection (as we expected they would be), but not so high as to be unthinkable, given what we know from this incomplete record.11 Turning to incremental cost effectiveness, we run into similar, though different, problems. The NSR Workshop Manual gives us this formula: Incremental Cost (in dollars per incremental ton removed) = (Total costs (annualized) of control option – Total costs (annualized) of next control option) / (Next control option emission rate – Control option emissions rate) Id. at B.41 (mathematical notations reformatted). Here the control option is the electric motor, and the next control option is the SoLoNOx turbine. And we know the denominator will be 10.03 tons (10.03 minus zero). But we run 10 $13,000 per ton ≥ ($9,000,000  0.1  (1.120) / (1.120 - 1)) / (Baseline emissions rate - 0). Baseline emissions rate ≥ ($9,000,000  0.1  (1.120) / (1.1 - 1)) / ($13,000 per ton). 20 Baseline emissions rate ≥ 81.32 tons. 11 To illustrate how much wiggle room there is in these numbers, we can adjust our assumptions to a 1% interest rate and a fifty-year equipment lifespan. At that point, a $9 million electric motor would be cost feasible if the uncontrolled emissions rate is above 17.7 tons per year (which, based on the Water Injection figures, it almost certainly is). $13,000 per ton ≥ ($9,000,000  0.01  (1.0150) / (1.0150 - 1)) / (Baseline emissions rate - 0). Baseline emissions rate ≥ ($9,000,000  0.01  (1.0150) / (1.01 - 1)) / ($13,000 per ton). 50 Baseline emissions rate ≥ 17.66 tons. - 22 - into the same problems as before with annualizing the costs of the electric motor, and more importantly, we have no information from the record of what the costs -- annual or capital -- are for the SoLoNOx turbine. Indeed, Algonquin's application includes a line-item cost breakdown of the SCR (discussed below), but in the column for SoLoNOx, the fields are all blank. Sticking with our ballparking approach and assuming a 10% interest rate and twentyyear lifespan on the electric motor (and zero costs for the electric motor beyond capital expenses), a $9 million electric motor would be cost feasible if the annualized SoLoNOx costs (factoring in capital investments and operating costs) are $926,747 or higher.12 The actual costs for SoLoNOx may in fact be far less than that, but not so obviously that we can shrug off the lack of data in the record. And, in any event, it is DEP's job, not ours, to do these calculations properly. See Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. 12 $13,000 per ton ≥ (($9,000,000  0.1  (1.120) / (1.120 - 1)) - annualized SoLoNOx costs) / (10.03 tons - 0). Annualized SoLoNOx costs ≥ ($9,000,000  0.1  (1.120) / (1.1 - 1)) - ($13,000 per ton  10.03 tons). 20 Annualized SoLoNOx costs ≥ $926,746.62. With a 1% interest rate and a fifty-year lifespan, see supra note 11, the $9 million motor would be cost feasible if the annualized SoLoNOx costs exceed $99,225. $13,000 per ton ≥ (($9,000,000  0.01  (1.0150) / (1.0150 - 1)) - annualized SoLoNOx costs) / (10.03 tons - 0). Annualized SoLoNOx costs ≥ ($9,000,000  0.01  (1.0150) / (1.01 - 1)) - ($13,000 per ton  10.03 tons). 50 Annualized SoLoNOx costs ≥ $99,224.58. - 23 - Co., 463 U.S. 29, 50 (1983) (It is well-established that an agency's action must be upheld, if at all, on the basis articulated by the agency itself. (citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947))); NSTAR Elec. Co. v. Dep't of Pub. Utils., 968 N.E.2d 895, 900–01 (Mass. 2012). Algonquin tries to paper over the gaps in the record by pointing to something for which there is ample evidence: the costs for the SCR. As will be discussed in the next section, the Presiding Officer found that the SCR/turbine combination was not cost feasible. And, based on Algonquin's line-item analysis in its application, the total capital costs for SCR were $1,432,058, which Algonquin translated into $135,176 annualized. So, Algonquin reasons, a technology with a $9–12 million capital cost must be even more infeasible. We consider the comparison to the SCR unhelpful for two reasons. First, SCR is an add-on technology, and, as will be discussed shortly, the calculations for cost effectiveness for add-on technologies differ from those for process-control technologies like the electric motor. See also supra note 8. Second, Algonquin compares only one variable -- capital costs -- where the formulae encompass multiple variables. Even assuming the lifespan and annual operating costs of each technology are identical, we know that the electric motor is more effective at reducing NOx emissions than the SCR. So the denominator of each - 24 - formula (average and incremental cost effectiveness) would be higher for the electric motor, thus offsetting (at least in part) the higher numerator. We concede that our own calculations are not obviously correct. The problem for the DEP and Algonquin is that no one has provided a basis for concluding that our calculations are so obviously incorrect as to obviate the need for any calculation at all by Algonquin or DEP. The record does not even contain a Fermi estimate13 fixing the magnitude of the quotient above the regulatory cost-effectiveness cut-off. The bottom line is this: DEP's established BACT protocol requires a cost-effectiveness analysis before eliminating a technology at Step 4, and the results of such an analysis do not strike us as so obvious as to overlook as harmless DEP's failure either to follow that protocol or at least do enough to make it clear that following the protocol would eliminate the electric motor as a cost-effective option. An agency may not . . . depart from a prior policy sub silentio or simply disregard rules that are still on the books. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009); see also Nat'l Envtl. Dev. Ass'n's Clean Air Project v. EPA, 752 F.3d 999, 1009 (D.C. Cir. 2014) ([A]n 13 See Robert N. Ronau, Number Sense, 81 Mathematics Tchr. 437, 439–40 (1988). See generally Hans Christian von Baeyer, The Fermi Solution: Essays on Science (1993). - 25 - agency action may be set aside as arbitrary and capricious if the agency fails to 'comply with its own regulations.' (quoting Environmentel, LLC v. FCC, 661 F.3d 80, 85 (D.C. Cir. 2011))); Tofias v. Energy Facilities Siting Bd., 757 N.E.2d 1104, 1111 (Mass. 2001); Town of Northbridge v. Town of Natick, 474 N.E.2d 551, 556 (Mass. 1985). Thus, we find that DEP's final decision excluding the electric motor on this ground was arbitrary and capricious.