Office of Governor Gary Locke
FOR IMMEDIATE RELEASE - August 23, 2002
Contact:  Governor's Communications Office, 360-902-4136

Gov. Locke's Letter to EFSEC Chairman Jim Luce

August 23, 2002



Mr. Jim Luce, Chairman
Energy Facility Site Evaluation Council
P.O. Box 43172
Olympia, Washington 98504-3172

Dear Mr. Luce:

After extensive consideration of the reasons for and against permitting the Sumas Energy 2 Power
Plant (SE2) in Whatcom County, I would like to inform you that I agree with the Energy Facility Site Evaluation Council’s (EFSEC) unanimous recommendation and have decided to approve the plant’s construction. The plant will benefit our state by addressing the ongoing need for stable, clean power sources in the Northwest, while maintaining rigorous environmental protections.

On June 24, you sent me Order Number 768, recommending that I approve the SE2 June 2001 Second Revised Application for Site Certification. You also provided the Site Certification Agreement, which
I have signed and enclosed.

Because of the outpouring of public comment about this project – reflected in more than 24,000 messages I received during my evaluation – I have expanded below on the key issues surrounding this important decision.

Benefits of SE2

Reliable, long-term power capacity is needed

As we know from 2000 and 2001, power shortages can wreak havoc on our economy and our communities. We need to expand our stable, clean power supplies, and this project will contribute
to that objective in an environmentally sound manner.

Transparent, long-term contracts to protect ratepayers and customers

While no contracts can be signed until permits are issued and financing obtained, NESCO, the project developer, has already approached a number of potential utility and industrial customers and said it intends to keep books on the project fully open. The company has offered a variety of means for purchasing power, including:

·Long-term, fixed-rate contracts, protecting customers from sudden spikes as seen last year
·Contracts where customers buy a quantity of natural gas to generate a certain amount of power from SE2, thus protecting them from surges in gas prices
·Contracts that share the risk on gas price increases, but also share the benefit if gas prices drop

A new standard of excellence

As EFSEC said in its recommendation to approve the SE2 application, SE2 sets a new standard of excellence for protection of the environment and the public interest. The company, NESCO, has voluntarily committed to several environmental protections, including:
· Approximately $8 million for greenhouse gas impacts
· Zero net emissions of nitrogen oxides and particulate emissions – the two greatest contributors to haze in the Fraser Valley – by offsetting other pollution sources
· If the offsets cannot be negotiated privately, NESCO will put $1.5 million into a public trust fund to be jointly administered by the state of Washington and the province of British Columbia to offset pollution

Creating family-wage jobs

At peak construction, SE2 will employ nearly 400 skilled trades people. These are family-wage jobs for a county that has lost hundreds of those types of jobs during the past two years. Once operational, SE2 will add new jobs with a combined annual payroll of more than $1 million in Sumas, which has been hit hard by the recession and the exchange rate with Canada. In addition, it is estimated that when built, SE2 will add almost $5 million annually in property tax revenues for local schools, libraries and government.
Addressing Key Issues

Potential health effects from air pollution

It should be pointed out that SE2 is one of the cleanest fossil fuel energy projects ever proposed in Washington state. I looked closely at the potential impacts on air quality and the health of people near the plant and determined the issues were thoroughly researched during the energy facility siting process.

Ultimately, my decision relied on concrete facts. The conclusions drawn by the EFSEC technical expert who prepared the plant’s air pollution permit stated, “All regulated pollutants are well below ambient air quality standards established to protect human health and welfare.” This is true for both U.S. and Canadian air quality standards.

In fact, the plant will meet the most restrictive Canadian standards scheduled to go into effect by 2010. I also note that the research conducted to evaluate health impacts reveals that the project will have no measurable effects. These findings helped alleviate any concerns I had regarding possible health effects associated with the approval of SE2.

Possible excess emissions during frequent start-ups and shutdowns

Air pollution control is less efficient during start-up and shutdown. This particular concern was raised and addressed during deliberations by EFSEC. The air pollution permit for SE2 prohibits the company from exceeding air-quality standards even during such events. Moreover, the plant is given a maximum annual allowable level of pollutant discharge, so any increased emissions during start-ups or shutdowns must be compensated for by lower emissions during regular operations and zero emissions during shutdown periods. I believe these restrictions are reasonable and fair.

Offsetting certain air pollution emissions

In review, I found that SE2 has offered to fully offset air pollution emissions of nitrogen oxides and particulates, if willing entities can be found that currently release these pollutants. This gives us the rare opportunity to have a new power plant with no net increase of these pollutants.

I expect government air pollution control agencies – on both sides of the border – will do all they can
to help the company identify such entities and encourage them to reduce or discontinue emissions by participating in pollution-reduction programs financed by SE2. In the unlikely event that willing sources cannot be found, the company will put $1.5 million into a fund that the state and province can use for improved air pollution protection.

I am particularly pleased with this environmental protection effort, especially because we do not yet have any statutory or regulatory requirements that energy facility operators offset their emissions.

Possible flooding impacts

The analyses already done by the applicant show that if the entire Sumas industrial area were filled,
any future floods would increase by less than one inch. The SE2 plant will only fill a small portion
of this area.

The company is also working on additional studies to show how water would be displaced even with flooding up to 150 percent of the levels that have occurred during the 1990s. This research is required to be finished six months before construction can begin, and the state will then direct what actions the company must take to remedy any flood impacts that might occur.

Mitigation of the plant’s carbon dioxide emissions

Companies that develop power plants should, as a cost of doing business, make them as clean as possible and minimize their impacts on global climate change. At the same time, we cannot change
the rules in the middle of the game.

Carbon dioxide mitigation is one of the evolving frontiers for regulation. At present, Washington has
no laws regulating greenhouse gases. While I have asked EFSEC to develop carbon dioxide standards for use with future applications, those standards are not yet in place.

I am pleased that SE2 voluntarily committed to mitigate for carbon dioxide emissions based on the Oregon standard in effect at the time of its application. This is a significant step forward. I see this mitigation level as a starting point for future EFSEC deliberations, not a new limit on regulation of carbon dioxide.

The applicant will be required to pay $.57 per ton, the Oregon standard in effect at the time of the application. This amounts to approximately $8 million that SE2 will be paying over five years. These dollars will be used to fund projects that reduce carbon dioxide emissions or remove this gas from the atmosphere.

Possible impact on the water table

SE2 will obtain all its water from the supply already allocated to the City of Sumas. The applicant has acknowledged that its use of city water might affect nearby well owners and has committed to conduct pre- and post-operation monitoring to determine if this occurs. If any effects are detected, the company will compensate by deepening affected wells or connecting well owners to public water systems.

Earthquake risk

Siting agreements between the state and power plant builders often direct operators to conduct studies or modeling and then authorize the state to impose specific design, construction or operation mandates on the applicant based on the study results. In this instance, the siting agreement specifically requires the project to meet the Uniform Building Code for Zone 3, which is the applicable standard for facilities in this area of Whatcom County. The state can impose additional design requirements if modeling demonstrates the necessity.

Conclusion

Based on my evaluation and the benefits described above, I have determined that the Energy Facility Site Evaluation Council’s recommendation is well-grounded and that the SE2 project should be approved.

The SE2 project, built in accordance with the permit conditions imposed by EFSEC, reflects an effective regulatory process. The previous application had a number of shortcomings regarding environmental impacts. The applicant responded thoughtfully and thoroughly. Its second revised application and EFSEC’s resulting siting agreement reflect a state-of-the-art natural gas-fired combustion turbine project that goes beyond U.S. and Canadian environmental requirements. The resulting project will set a new standard of excellence for environmental protection.

Therefore, I have approved the Site Certification Agreement for the Sumas Energy 2 Power Plant.

Sincerely,



Gary Locke
Governor

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