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In the Matter Of: ) ) ) Tennessee Valley Auth UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ____________________________________ IN THE MATTER OF: ) ) ) TENNESSEE VALLEY AUTHORITY ) Federal Facilities Compliance Agreement ) Between the United States Environmental 400 West Summit Hill Drive ) Protection Agency and the Tennessee Knoxville, Tennessee 37902 ) Valley Authority ) Allen, Bull Run, Colbert, ) Cumberland, Gallatin, Johnsonville, ) Docket No. CAA-04-2010-1760 John Sevier, Kingston, Paradise, ) Shawnee, and Widows Creek ) Fossil Plants ) ) ____________________________________) FEDERAL FACILITIES COMPLIANCE AGREEMENT TABLE OF CONTENTS I. PURPOSE ................................................................................................................................... 5 II. JURISDICTION ........................................................................................................................ 5 III. PARTIES BOUND .................................................................................................................. 6 IV. EPA’S FINDINGS OF FACT AND CONCLUSIONS OF LAW ........................................... 6 V. COMPLIANCE PROGRAM .................................................................................................... 6 A. DEFINITIONS ...................................................................................................................... 7 B. NOx EMISSION REDUCTIONS AND CONTROLS ........................................................ 21 C. SO2 EMISSION REDUCTIONS AND CONTROLS ......................................................... 28 D. PM EMISSION REDUCTIONS AND CONTROLS ......................................................... 37 E. PROHIBITION ON NETTING OR OFFSETS FROM REQUIRED CONTROLS ........... 43 F. ENVIRONMENTAL MITIGATION PROJECTS .............................................................. 50 G. CIVIL PENALTY ............................................................................................................... 52 H. RESOLUTION OF CLAIMS AGAINST TVA .................................................................. 53 I. PERIODIC REPORTING ..................................................................................................... 57 J. REVIEW AND APPROVAL OF SUBMITTALS ............................................................... 59 K. STIPULATED PENALTIES .............................................................................................. 60 L. PERMITS ............................................................................................................................ 65 VI. COORDINATION OF OVERSIGHT AND ENFORCEMENT ........................................... 69 VII. FORCE MAJEURE .............................................................................................................. 69 VIII. DISPUTE RESOLUTION ................................................................................................... 73 i IX. INFORMATION COLLECTION AND RETENTION ......................................................... 75 X. NOTICES ................................................................................................................................ 76 XI. SALES OR TRANSFERS OF OPERATIONAL OR OWNERSHIP INTERESTS ............. 79 XII. MODIFICATION ................................................................................................................. 81 XIII. GENERAL PROVISIONS .................................................................................................. 81 XIV. SIGNATORIES AND SERVICE ....................................................................................... 85 XV. PUBLIC COMMENT .......................................................................................................... 85 XVI. CONDITIONAL TERMINATION OF ENFORCEMENT UNDER COMPLIANCE AGREEMENT .............................................................................................................................. 86 APPENDIX A – REPORTING REQUIREMENTS APPENDIX B – EMISSION LIMITATIONS FOR NEW CC/CT UNITS APPENDIX C – ENVIRONMENTAL MITIGATION PROJECTS EXHBIT 1 – CONSENT DECREE ii WHEREAS, the United States Environmental Protection Agency (“EPA”) issued an administrative compliance order to the Tennessee Valley Authority (“TVA”) pursuant to Sections 113 and 167 of the Clean Air Act (“Act”), 42 U.S.C. §§ 7413, 7477, alleging that TVA violated, inter alia, the Prevention of Significant Deterioration (“PSD”) and Nonattainment New Source Review (“Nonattainment NSR”) programs of the Act, its implementing regulations, and the federally approved and enforceable State Implementation Plans (“SIPs”) for Alabama, Kentucky, and Tennessee at several of the coal-fired electric generating units that TVA owns and operates when it made certain physical changes without obtaining the necessary permits and installing the controls necessary to reduce emissions of oxides of nitrogen (NOx), sulfur dioxide (SO2), and particulate matter (“PM”); WHEREAS, in the administrative compliance order, issued on November 3, 1999, and subsequently amended several times, including on April 10, 2000, EPA directed TVA to come into compliance with the Clean Air Act; WHEREAS, the United States Environmental Appeals Board (“EAB”) issued a Final Order on Reconsideration in In re Tennessee Valley Auth., 9 E.A.D 357 (EAB 2000), in which it found that TVA had violated the PSD and Nonattainment NSR programs of the Act, its implementing regulations, and the relevant SIPs, and directed TVA to come into compliance with the Act; WHEREAS, 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 Act provisions under 1 which the order was issued, violated due process, Tennessee Valley Auth. v. Whitman, 336 F.3d 1236, 1244, 1260 (11th Cir. 2003), cert. denied, 541 U.S. 1030 (2004); 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), and which then held that the unconstitutionality of the Act 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); WHEREAS, through this Federal Facilities Compliance Agreement (“Compliance Agreement”) and the Consent Agreement and Final Order executed by EPA and TVA pursuant to 40 C.F.R §§ 22.13(b) and 22.18(b)(2), forwarded to the Region 4 Regional Judicial Officer for ratification, In re Tennessee Valley Auth., Docket No. CAA-04-2010-1528(b), EPA and TVA are resolving the violations alleged in the amended administrative compliance order and the Final Order on Reconsideration; WHEREAS, the States of Alabama, North Carolina, and Tennessee and the Commonwealth of Kentucky (collectively “the States”), are concurrently filing a complaint and lodging a proposed Consent Decree in the Eastern District of Tennessee (Exhibit 1 to this Compliance Agreement), that, when entered, will secure by way of injunction the same relief as this Compliance Agreement and that, therefore, TVA’s operations will be governed by both this Compliance Agreement and the Consent Decree; WHEREAS, National Parks Conservation Association, Sierra Club, and Our Children’s Earth Foundation (collectively the “Citizen Plaintiffs”) are concurrently filing a complaint and 2 lodging a Consent Decree in the Eastern District of Tennessee with the States, that secures the same injunctive relief as this Compliance Agreement; WHEREAS, in their complaints, the States and Citizen Plaintiffs allege, inter alia, that TVA made major modifications to major emitting facilities, and failed to obtain the necessary permits and install the controls necessary under the Act to reduce NOx, SO2, and/or PM emissions, and further allege that such emissions damage human health and the environment; WHEREAS, EPA and TVA agree that this Compliance Agreement has been negotiated and executed by the Parties in good faith to ensure compliance with the law; WHEREAS, EPA, the States, and the Citizen Plaintiffs anticipate that this Compliance Agreement (and the States’ and Citizen Plaintiffs’ Consent Decree), including the installation and operation of pollution control technology and other measures adopted pursuant to this Compliance Agreement and the Consent Decree, will achieve significant reductions of emissions from the TVA System and thereby significantly improve air quality; WHEREAS, TVA is now undertaking a process to transform itself into a cleaner power system by reducing emissions from its coal-fired power plants, by retiring some coal-fired units, and by relying more on lower-emitting or non-emitting generation like natural gas and nuclear units and energy-efficiency and demand response programs; WHEREAS, TVA disagreed with, and continues to disagree with, the allegations of the administrative compliance order and the findings of fact and conclusions of law of the Final Order on Reconsideration by the EAB, and denies that it violated the Act as so alleged and found (see Whitman, 336 F.3d at 1244-45); 3 WHEREAS, TVA wishes to resolve, without the uncertainty and expense associated with further litigation, the claims of EPA and other parties that it has violated any provisions of the Act’s PSD, Nonattainment NSR, New Source Performance Standards (“NSPS”),
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