United States Court of Appeals For the First Circuit
No. 21-1131
CITY OF QUINCY, MASSACHUSETTS; TOWN OF HINGHAM, MASSACHUSETTS; TOWN OF BRAINTREE, MASSACHUSETTS; DOROTHY ANDERSON; ALICE ARENA; MARGARET BELLAFIORE; WENDY CULLIVAN; SUSAN GREENE; ANDREA HONORE; MICHAEL LANG; CURTIS NORDGAARD, M.D.; THOMAS PENDERGAST; JUDY ROBERTS; BETSY SOWERS; BERNADETTE WILSON; KENNETH J. DIFAZIO; JANE HACKETT, Councilor at Large; ED HARRINGTON, District Five Councilor; REBECCA HAUGH; GEORGE LORING; ARTHUR MATHEWS; PATRICK M. O'CONNOR; FRANK SINGLETON; THOMAS TANNER,
Petitioners,
v.
MASSACHUSETTS DEPARTMENT OF ENVIRONMENTAL PROTECTION,
Respondent,
ALGONQUIN GAS TRANSMISSION, LLC,
Intervenor.
PETITION FOR REVIEW OF AN ORDER OF THE MASSACHUSETTS DEPARTMENT OF ENVIRONMENTAL PROTECTION
Before
Thompson, Lipez, and Kayatta, Circuit Judges.
Michael H. Hayden, with whom Morrison Mahoney LLP, Nicole I. Taub and Crystal Huff, Office of the Town Solicitor, Town of Braintree, Kerry T. Ryan, and Bogle, DeAscentis & Coughlin, P.C., were on brief, for petitioner. Seth Schofield, Senior Appellate Counsel, Office of the Attorney General of Massachusetts, with whom Maura Healey, Attorney General for the Commonwealth of Massachusetts, was on brief, for respondent. Jeremy C. Marwell, with whom Joshua S. Johnson and Vinson & Elkins LLP were on brief, for intervenor.
December 17, 2021 KAYATTA, Circuit Judge. The City of Quincy, the Towns
of Braintree and Hingham, and a group of citizens (collectively,
"the City") challenge the final decision of the Massachusetts
Department of Environmental Protection (DEP) reaffirming the
issuance of an air permit to Algonquin Gas Transmission, LLC
(Algonquin) for a natural gas compressor station located in
Weymouth, Massachusetts. DEP had previously approved Algonquin's
plans to power the Weymouth station using a natural-gas-fired
turbine, which emits some amount of nitrogen oxides (NOx). The
City and other petitioners convinced this court in a prior appeal
that DEP did not follow its own established procedures when it
eliminated an electric motor as a possible alternative to the gas-
fired turbine. See Town of Weymouth v. Mass. Dep't of Env't Prot.,
961 F.3d 34 (1st Cir.), modified on reh'g, 973 F.3d 143 (1st Cir.
2020). We remanded to DEP to assess whether an electric motor was
in fact what Massachusetts regulations call the "best available
control technology" (BACT) for the new station. After holding a
hearing and considering additional record evidence, DEP again
concluded that an electric motor was not BACT for the Weymouth
compressor station and reaffirmed Algonquin's air permit.
Satisfied that the agency's actions on remand were not arbitrary
and capricious, we now deny the City's petition for further review
and affirm DEP's decision after remand.
- 3 - I.
Our opinion in Town of Weymouth recounts the factual
background and circumstances leading up to the proceedings on
remand that form the basis of this petition. See 961 F.3d at 38–
41. We repeat only the essential details, beginning with a brief
description of the applicable regulatory framework.
A.
Pursuant to the Natural Gas Act (NGA), 15 U.S.C. § 717
et seq., the Federal Energy Regulatory Commission (FERC) oversees
the certification of interstate natural gas pipeline projects. As
part of FERC's review of proposed pipelines, the agency must ensure
that each project complies with all relevant federal permitting
requirements, including those under the federal Clean Air Act
(CAA), 42 U.S.C. § 7401 et seq. See 15 U.S.C. § 717b(d)(2).
Congress expressly reserved in the NGA the rights of states to
issue or deny permits under the CAA for interstate natural gas
projects. See id. (providing that the NGA does not "affect[] the
rights of States under . . . the Clean Air Act"); see also Town of
Weymouth, 961 F.3d at 39.
For its part, the CAA embraces a "cooperative
federalism" approach "such that DEP, in enforcing the
Massachusetts CAA, is in fact acting pursuant to the federal CAA."
Town of Weymouth, 961 F.3d at 40 n.4; see also id. at 39 n.2.
Under its authority, DEP has issued comprehensive regulations
- 4 - governing the control of air pollutants, including regulations
regarding the issuance of air permits for stationary sources of
air pollution like the Weymouth compressor station at issue in
this appeal. See 310 Mass. Code Regs. § 7.02.
In order to obtain an air permit from DEP, an applicant
must show that the proposed facility employs the "best available
control technology" for each regulated air pollutant, including
NOx. Id. § 7.02(8)(a)(2); see also Town of Weymouth, 961 F.3d at
41. BACT is defined as "an emission limitation based on the
maximum degree of reduction of any regulated air contaminant
emitted from or which results from any regulated facility" that
DEP "determines is achievable for such facility through
application of production processes and available methods, systems
and techniques for control of each such contaminant." 310 Mass.
Code Regs. § 7.00; see also 42 U.S.C. § 7479(3). Simply put, BACT
is the most effective emissions control technology for a pollutant
that is technologically and economically feasible for the given
project.
The Environmental Protection Agency (EPA) has developed
a five-step, "top-down" process for determining BACT. See EPA,
New Source Review Workshop Manual: Prevention of Significant
Deterioration and Nonattainment Area Permitting B.5–B.6 (1990),
https://www.epa.gov/sites/default/files/2015-
- 5 - 07/documents/1990wman.pdf [hereinafter NSR Workshop Manual]. The
five steps are as follows:
• Step 1: The applicant identifies and lists all available
control technologies that have "a practical potential for
application to the emissions unit and the regulated pollutant
under evaluation." Id. at B.5. However, a control technology
may be excluded at Step 1 of the BACT analysis if it would
"redefine the source." Helping Hand Tools v. EPA, 848 F.3d
1185, 1194 (9th Cir. 2016); see also Town of Weymouth, 961
F.3d at 43.1
• Step 2: The applicant eliminates any "technically infeasible
options" from the list generated at Step 1. NSR Workshop
Manual, supra, at B.7.2
• Step 3: The applicant "rank[s]" the "remaining control
alternatives not eliminated in [S]tep 2" based on their
1 A control alternative "redefines the source" and is properly excluded from the BACT analysis if using the technology essentially "requires a complete redesign of the facility." Helping Hand Tools, 848 F.3d at 1194. As a "classic" 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 NSR Workshop Manual, supra, at B.13–B.14. 2 A control option is "technically infeasible" if, "based on physical, chemical, and engineering principles, . . . technical difficulties would preclude the successful use of the control option on the emissions unit under review." Id.
- 6 - effectiveness in reducing controlled pollutant emissions.
Id. at B.7–B.8.
• Step 4: The applicant evaluates "the energy, environmental,
and economic impacts" of each control option and eliminates
any controls that do not meet certain effectiveness criteria.
Id. at B.8–B.9.
• Step 5: The "most effective control option" that has not
been eliminated is selected as BACT. Id. at B.9.
DEP has adopted EPA's five-step approach for BACT
analysis in its guidance, which incorporates the NSR Workshop
Manual by reference. See DEP, Best Available Control Technology
(BACT) Guidance: Air Pollution Control Requirements for
Construction, Substantial Reconstruction or Alteration of
Facilities that Emit Air Contaminants 3 (2011),
https://www.mass.gov/files/documents/2016/08/oo/bactguid.pdf
[hereinafter DEP BACT Guidance]. An applicant for an air permit
must submit a BACT assessment to DEP, which the agency
independently reviews before making a final determination with
respect to BACT. See id. at 1; see also 310 Mass. Code Regs.
§ 7.02(8)(a)(2). DEP assesses BACT "on a case-by-case basis taking
into account energy, environmental, and economic impacts and other
costs." 310 Mass. Code Regs. § 7.00.
- 7 - B.
In 2015, Algonquin, a natural gas transmission company,
proposed to construct and operate the Atlantic Bridge Project, an
infrastructure project designed to deliver natural gas to the
northeastern United States. As part of the project, Algonquin
sought to build several natural gas compression facilities,
including the compressor station in Weymouth. Compressor stations
are necessary for the delivery of natural gas through the Atlantic
Bridge Project pipeline because they increase the system pressure
inside the pipeline to ensure that gas flow remains at the required
rates. See Town of Weymouth, 961 F.3d at 38–39. A compressor
station is powered by a "driver," which can include, among other
things, a gas-fired turbine or an electric motor.
For the Weymouth compressor station, Algonquin proposed
to use a "SoLoNOx" Solar Taurus 60 natural-gas-fired combustion
turbine as the station's driver. The basic idea is that the
Weymouth compressor station, which is co-located with the
pipeline, burns a small amount of the natural gas in the pipeline
as fuel in order to generate the pressure necessary to allow the
rest of the gas to flow through the pipeline to its ultimate
destinations. See id. at 39. However, because the SoLoNOx turbine
burns natural gas, it emits NOx, an air pollutant covered by federal
- 8 - and Massachusetts state environmental regulations.3 An electric
motor does not emit NOx.
Initially, Algonquin's air permit application did not
assess whether an electric motor, rather than the gas-fired SoLoNOx
turbine, was BACT. Id. at 42. But after nearby municipalities
and citizen groups, including the City, raised the potential of an
electric motor as an alternative to the SoLoNOx turbine, Algonquin
revised its application to account for the electric motor option.
Algonquin's assessment of the electric motor proposed several
reasons for excluding it from the BACT analysis, including the
high costs of installing and operating an electric motor.
Crucially, however, Algonquin did not submit a detailed BACT
analysis evaluating the electric motor option in its revised
application. Nonetheless, DEP accepted Algonquin's exclusion of
the electric motor without conducting its own independent BACT
analysis. See id. DEP subsequently issued an air permit for the
Weymouth station in January 2019, approving Algonquin's proposal
to use the SoLoNOx turbine.
Unhappy with the decision, the same group of
municipalities and citizen groups filed an administrative appeal,
raising, among other things, DEP's failure to consider an electric
3The SoLoNOx is a proprietary model of dry low NOx turbine, which is designed to reduce, although not eliminate, NOx emissions by operating as a lower combustion temperature.
- 9 - motor as BACT. See id. at 40. As relevant to that issue, Algonquin
and DEP argued to the Presiding Officer of the appeal that an
electric motor could be eliminated at Step 1 of the BACT analysis
because it would involve a complete redesign of the Weymouth
station project. Id. at 42–43. The Presiding Officer was
unpersuaded by this argument, at least as then presented. Id. at
43. Instead, the Presiding Officer found that an electric motor
would not be cost-effective for the Weymouth station because it
would require substantial infrastructure investment and,
therefore, was excludable at Step 4 of the BACT analysis. Id.
Accordingly, on the Presiding Officer's recommendation, DEP's
Commissioner affirmed the issuance of the Weymouth station air
permit. These prior administrative proceedings culminated in a
petition for review before this court and our decision in Town of
Weymouth. In that opinion, we held that DEP's decision to exclude
an electric motor as not BACT without performing the cost-
effectiveness calculations required by the agency's established
procedures was arbitrary and capricious. See id. at 47. We
therefore remanded to DEP to redo the BACT analysis.4 Id. at 59.
4In our initial opinion, we also vacated the grant of the air permit for the Weymouth compressor station. See Town of Weymouth, 961 F.3d at 58–59. However, after a panel rehearing, we revised our opinion to reflect that the remedy granted was remand without vacating the air permit. Town of Weymouth v. Mass. Dep't of Env't Prot., 973 F.3d 143, 145 (1st Cir. 2020).
- 10 - On remand, Algonquin submitted a detailed technical
addendum to its air permit application laying out a more extensive
BACT analysis. Algonquin concluded that an electric motor could
be excluded at either Step 1 (because it would redefine the source)
or Step 4 (because it was not cost-effective). DEP's Regional
Office agreed with Algonquin's analyses and reaffirmed its prior
BACT determination. The City and other interested parties again
requested an adjudicatory hearing before DEP's Office of Appeals
and Dispute Resolution and submitted its own testimony, including
a BACT analysis conducted by its expert Dr. Ranajit Sahu. Dr.
Sahu concluded that an electric motor was BACT because it would
not redefine the source at Step 1 and would be cost-effective at
Step 4.
On January 11, 2021, after holding a hearing and
considering additional filings from the parties, the Presiding
Officer for the matter issued a "Recommended Final Decision After
Remand," finding that DEP properly determined that an electric
motor is not BACT and recommending that DEP's Commissioner reaffirm
the air permit for the Weymouth compressor station. The Presiding
Officer found that an electric motor could be excluded either at
Step 1 of the BACT analysis because it would redefine the source
or at Step 4 of the BACT analysis because it was not a cost-
effective control. The Commissioner issued a "Final Decision After
Remand" on January 19, 2021, adopting the Presiding Officer's
- 11 - recommendations. The Commissioner noted in his decision that the
exclusion of an electric motor at Step 1 and Step 4 provided
"independent bases for affirming the air permit."
The City now challenges DEP's decision after remand to
reaffirm the air permit for the Weymouth compressor station. As
it did before, Algonquin intervened as a respondent. See Town of
Weymouth, 961 F.3d at 41. We have original jurisdiction over this
petition for review under the NGA. Id. at 40–41; 15 U.S.C.
§ 717r(d)(1).
II.
As we noted in Town of Weymouth, the NGA does not provide
a standard of review for a state agency's final permitting
decisions. See 961 F.3d at 41. The City and DEP previously
maintained differing positions as to whether the federal
Administrative Procedure Act or instead the Massachusetts
Administrative Procedure Act should apply, but as we explained
before, the standards do not vary materially, at least with respect
to this case. See id. The parties do not now raise any objections
to this approach. Thus, as before, we will review formally
adjudicated findings of fact for "substantial evidence," and
reverse agency decisions if they are "arbitrary and capricious."
Id.
- 12 - III.
We begin our analysis of the merits of the City's
petition with the City's principal claim: that DEP's exclusion of
an electric motor as not BACT was arbitrary and capricious. There
is no dispute that an electric motor would be technically feasible
at Step 2 and would be ranked higher in control effectiveness than
the SoLoNOx turbine at Step 3. So, if the City is correct that an
electric motor survives exclusion in both Step 1 and Step 4, an
electric motor should be selected as BACT at Step 5. If, however,
we conclude that DEP reasonably eliminated an electric motor at
either Step 1 or Step 4, we will affirm DEP's determination that
an electric motor is not BACT. As we will explain in more detail
below, because we conclude that DEP did not act arbitrarily and
capriciously when it eliminated an electric motor at Step 4 of the
BACT analysis, we need not resolve the parties' disagreement as to
Step 1.
At Step 4, DEP assesses, among other things, the
"economic impacts" of the control alternatives remaining after
Step 3. NSR Workshop Manual, supra, at B.26. The economic
feasibility of a control option is measured by the technology's
cost-effectiveness at reducing emissions of regulated pollutants
-- with effectiveness "measured in terms of tons of pollutant
emissions removed" and cost "measured in terms of annualized
- 13 - control costs." Id. at B.36; see also DEP BACT Guidance, supra,
at 4. Agency guidance explains that "[c]ost effectiveness
calculations can be conducted on an average[] or incremental
basis." NSR Workshop Manual, supra, at B.36. Here, DEP and
Algonquin assessed the average cost-effectiveness of an electric
motor in its BACT analysis.
According to the NSR Workshop Manual, average cost-
effectiveness, which measures the dollar value of each ton of
pollutant removed, is calculated as:
control option annualized cost / (baseline emissions rate - control option emissions rate)
Id. at B.37 (mathematical notations reformatted).
The numerator, the annualized cost of the control
option, is "the capital cost of the control technology or technique
amortized over its expected lifetime, plus annual operating and
maintenance costs." DEP BACT Guidance, supra, at 4. To determine
the annualized capital cost, total capital investments are
multiplied by the capital recovery factor, which is calculated as:
[real interest rate * (1 + real interest rate)^(economic life of equipment in years)] / [(1 + real interest rate)^(economic life of equipment in years) - 1]
See id., app. B, at b.10 (representing the formula symbolically).
The denominator of the average cost-effectiveness
formula is the difference between the baseline emission rate --
- 14 - which "represents a realistic scenario of upper boundary
uncontrolled emissions for the source," NSR Workshop Manual,
supra, at B.37 -- and the emissions rate of the control option
being evaluated. This figure indicates the annual reduction in
tons of regulated pollutant that is expected to result from
adopting the control option under consideration. See DEP BACT
Guidance, supra, at 6. For the Weymouth station, because an
electric motor does not emit NOx, the control option emissions rate
is zero.
Applying the average cost-effectiveness formula
described above produces a measure of the cost per ton of pollutant
(in this case, NOx) controlled per year by using the control
alternative. 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. See DEP
BACT Guidance, supra, at 5. Control technologies with an average
cost-effectiveness that is more costly than this range may be
excluded as not BACT at Step 4.
After completing the average cost-effectiveness
calculations, DEP concluded that an electric motor was not BACT
for the Weymouth station because its average cost-effectiveness
far exceeded the range set by DEP. As inputs to the denominator,
DEP considered two alternative baseline emissions rates for the
- 15 - gas-fired turbine: 9 ppmvd5 (or 10.03 tons per year) and 25 ppmvd
(or 30.32 tons per year).
For the numerator, DEP adopted Algonquin's estimate of
the total capital cost of installing an electric motor
($12,242,077), measured as the net additional cost of an electric
motor over a gas-fired turbine.6 As for the capital recovery
factor, DEP applied an interest rate of 10.137% and assumed a
fifty-year economic life for the electric motor, resulting in
annualized capital costs of $1,250,993. The final component DEP
considered for the numerator was annual operating costs. To
calculate this figure, DEP determined the annual cost of
electricity to fuel the proposed electric motor ($7,943,500) and
subtracted annual operating costs uniquely associated with a gas-
fired turbine ($2,106,763), arriving at annual operating costs of
$5,836,737. Summing the annualized capital costs and the annual
5 The unit ppmvd stands for parts per million by volume (dry basis), which is a measure of the concentration of a specified substance in air. Emissions in ppmvd are converted into tons of pollutant per year for purposes of the Step 4 cost-effectiveness calculations. 6 All parties assume that the relevant control option costs in the numerator of the formula are the net costs associated with the use of an electric motor over a gas-fired turbine. Going forward, references to "capital costs" represents the capital costs unique to installing an electric motor reduced by the capital costs unique to a gas-fired turbine and references to "operating costs" represents the operating costs unique to running an electric motor reduced by the operating costs unique to a gas-fired turbine.
- 16 - operating costs, DEP determined that the total annualized control
cost was $7,087,730.
Dividing the total annualized control cost ($7,087,730)
by the respective baseline emissions rates (10.03 tons per year
and 30.32 tons per year), DEP found that an electric motor's
average cost-effectiveness was significantly higher than DEP's
cost-feasibility range of $11,000 to $13,000 per ton of NOx removed
per year.7 Indeed, according to DEP's calculations, even entirely
excluding the capital costs required to install an electric motor
at the Weymouth station, the average cost-effectiveness of an
electric motor still greatly exceeded the upper bound of DEP's
guideline range.8
In its briefing before this court, the City argues that
DEP's conclusion that an electric motor should be excluded at
Step 4 of the BACT analysis as cost-infeasible was erroneous for
several reasons. First, the City asserts that DEP erred by using
incorrect baseline emissions rates for a gas-fired turbine in the
7 According to DEP's calculations, the average cost- effectiveness of an electric motor was $706,653 per ton of NOx controlled (assuming a 9 ppmvd baseline emissions rate) or $233,764 per ton of NOx controlled (assuming a 25 ppmvd baseline emissions rate). 8 Excluding capital costs entirely, DEP calculated the average cost-effectiveness of an electric motor to be $581,928 per ton of NOx controlled (assuming a 9 ppmvd baseline emissions rate) or $192,505 per ton of NOx controlled (assuming a 25 ppmvd baseline emissions rate).
- 17 - denominator of the cost-effectiveness calculation (9 and 25 ppmvd)
and should have used a higher baseline emissions rate (120 ppmvd)
instead. The City explains that 120 ppmvd is a more accurate
representation of the upper-bound emissions expected from a gas-
fired turbine during non-standard conditions like low-load and
sub-zero temperature operation. Second, the City contends that
DEP improperly considered the cost of electricity in the numerator
of the formula as an annual operating cost of an electric motor.
The City argues that DEP should have written off an electric
motor's annual operating costs because Algonquin could have
completely recovered the cost of electricity used by the motor
from its consumers.9 Third, as to the annual capital costs
component of the numerator, the City asserts that DEP's acceptance
of Algonquin's calculations for the total capital and
infrastructure costs of installing an electric motor was not
supported by substantial evidence. Fourth, the City argues that
DEP applied an unrealistic interest rate of 10.137% to calculate
9 The City's expert, Dr. Sahu, argued in testimony before the Presiding Officer that the natural gas costs Algonquin used in its calculation of the annual operating cost of the gas-fired turbine were underestimated to make the operating costs for the electric motor look comparatively more expensive. In his own BACT Step 4 calculations, Dr. Sahu used the retail rate of natural gas as opposed to the lower wholesale rate proposed by Algonquin, which drastically reduced the total annual control cost in the numerator of the cost-effectiveness calculations. However, it does not appear that the City attempts to renew this contention on appeal. We, therefore, consider it waived.
- 18 - the annualized capital costs of an electric motor and should have
used the bank prime interest rate of 3%. Finally, the City
contends that DEP improperly relied on its own guidance by
evaluating an electric motor's cost-effectiveness against an
outdated average cost-effectiveness range that was unadjusted for
inflation.10 In proceedings before the agency, the City proposed
an inflation-adjusted cost-effectiveness range of $20,350 to
$24,050.
It is unnecessary to delve too deeply into the
labyrinthine ledgers of Algonquin's and DEP's cost-effectiveness
calculations. Algonquin in its brief (and DEP at oral argument)
contend that even if we were to agree with the City as to all its
other proposed figures, an electric motor would still be properly
eliminated at Step 4 unless we also agree with the City that the
cost of electricity should be excluded. The City in its reply
brief offered no cogent response to this contention. And our own
review of the record does indeed indicate that the City's critical
path to demonstrating that an electric motor is cost-effective at
Step 4 runs through the City's claim that the cost of electricity
to fuel an electric motor should be excluded from the electric
motor's annual operating costs.
10DEP's BACT Guidance, issued in 2011, explains that the cost-effectiveness range applied here has been in use "[s]ince 1990." DEP BACT Guidance, supra, at 5.
- 19 - As an illustration, let us assume that the City is
correct that the proper baseline emissions rate for the gas-fired
turbine is 120 ppmvd (or 145.54 tons per year NOx), the highest
estimated rate proposed by the City's expert.11 We can also assume
that we should adopt the City's proposed interest rate of 3%.12
Calculating the average cost-effectiveness based on these figures
results in an estimate of $43,373 per ton of NOx reduced.13 This
well exceeds the City's proposed higher cost-effectiveness range
11 The City's expert, Dr. Sahu, proposed a baseline emissions rate of 120 ppmvd for a gas-fired turbine. From that rate, Dr. Sahu converted the emissions rate from ppmvd to tons per year based on two different conversion rates. For the purposes of this illustration, we assume the higher of the converted baseline emissions rates: 145.54 tons per year NOx. This represents the upper-bound of the City's proposed baseline emissions rate. 12 Adopting the City's proposed interest rate of 3% results in annualized capital costs of $475,794 based on Algonquin's estimate of $12,242,077 in total capital costs of installing an electric motor over a gas-fired turbine, and an assumption that the economic life of an electric motor is 50 years (an assumption both parties accept). Annualized capital costs = $12,242,077 * [0.03 * (1 + 0.03)^50] / [(1 + 0.03)^50 - 1] = $475,794. 13 Annual operating costs = $7,943,500 (annual operating costs of an electric motor) - $2,106,763 (unique annual operating costs of a gas-fired turbine) = $5,836,737. Annualized cost of an electric motor = $5,836,737 (annual operating costs) + $475,794 (annualized capital costs) = $6,312,531. Reduction in NOx emissions from an electric motor = 145.54 tons per year (baseline emissions rate of a gas-fired turbine) - 0 tons per year (emissions rate of an electric motor). Average cost-effectiveness of an electric motor = $6,312,531 per year / 145.54 tons per year = $43,373 per ton.
- 20 - of $20,350 to $24,050 per ton of NOx reduced. To take this further,
suppose we also agree with the City that DEP's estimates for the
total capital costs of installing an electric motor are wholly
inaccurate. Although the City does not provide its own figure, we
can proceed under the assumption that the additional capital costs
of installing an electric motor over a gas-fired turbine are $0,
a number that is likely lower than any the City could have
provided. The average cost-effectiveness of an electric motor in
this scenario is still nearly double the City's proposed range.14
Only if we accept the City's argument that the annual
operating costs of an electric motor should be completely written
off does the cost of an electric motor become low enough so that
the other alleged errors to which the City points could make a
difference in the outcome. Thus, the City's argument turns on
whether the annual operating costs -- i.e., the cost of electricity
necessary each year to operate an electric motor -- should be set
at $0 in the cost-effectiveness calculation at Step 4 of the BACT
analysis.15
14 Annualized cost of an electric motor = $5,836,737 (annual operating costs) + $0 (annualized capital costs) = $5,836,737. Average cost-effectiveness of an electric motor = $5,836,737 per year / 145.54 tons per year = $40,104 per ton. 15 The City presents, in the statement of the case section of its opening brief, a potential alternative argument: that Algonquin inflated the annual cost of electricity to power an electric motor. The City proposes that a more accurate figure would be $6,574,775 per year. This argument is waived because the
- 21 - The City asserts that the annual electricity costs of an
electric motor should be $0 because Algonquin can simply pass along
its utility costs to its consumers and completely recoup these
costs each year. The City's argument focuses on a supposed
admission from one of Algonquin's witnesses, Christopher Harvey,
that Algonquin or its parent company could recover the electricity
costs required to power an electric motor by including an
additional charge in the rates negotiated with its customers. If
the City is correct and annual operating costs should be set at
$0, it would significantly shrink the numerator in the cost-
effectiveness formula and make an electric motor's economic
feasibility a closer question.
The Presiding Officer, though, found that Christopher
Harvey's testimony only established that Algonquin's parent
company could negotiate electric power costs into the rates it
charges its customers as a general matter, not that it could be
done for the Weymouth station or the Atlantic Bridge Project in
particular. Indeed, Harvey's testimony explained that the
recovery of electricity costs "varie[d] by contract and by
individual pipeline."
City failed to develop it outside of a casual mention in the background section of its brief. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990). In any event, adopting the City's proposed figure would still not make an electric motor cost- effective.
- 22 - Additionally, even assuming that Algonquin could recover
all of the electricity costs of an electric motor from its
customers, the City points to no authority supporting its
contention that recoverable utility costs must be excluded from
the cost-effectiveness analysis. Nor do we see any basis for
finding this contention so compelling as to make its rejection by
DEP arbitrary and capricious. It is not self-evident why pass-
along costs must, as a categorical matter, be excluded from the
annual operating costs of a control technology simply because they
can be recouped from consumers. Unless a business is to run at a
loss, all costs are presumably passed along to customers in some
form or another.
Relevant EPA guidance, which DEP has adopted, expressly
contemplates that electricity and other utility costs be factored
into the assessment of the operating costs of a proposed control
technology. For instance, the NSR Workshop Manual explains that
when assessing the "energy requirements of the control technology"
in Step 4, "the energy impacts analysis can, in most cases, simply
be factored into the economic impacts analysis" because energy
consumption "can usually be quantified in terms of additional cost
or income to the source." NSR Workshop Manual, supra, at B.29–
B.30; see also id., app. B, at b.9 (considering electricity as a
direct cost in an example cost estimate). Similarly, DEP's BACT
Guidance makes clear that "[a]s a matter of course, energy impacts
- 23 - and costs are considered in the economic impacts assessment of
Top-Down BACT." DEP BACT Guidance, supra, at 4; see also id. at
5 (listing "[f]uel and electricity costs" as line items to include
in the economic impacts analysis). Finally, the EPA Air Pollution
Control Cost Manual, which DEP expressly references in its BACT
Guidance, contemplates including the electricity costs of a
control as an operating cost. See EPA, Office of Air Quality
Planning and Standards, EPA Air Pollution Control Cost Manual,
ch. 2, § 2.4.1, at 9 (2017) (categorizing utility costs as an
operating cost and including electricity as a utility cost); see
also id. § 2.6.5.4, at 33 (describing electricity as an example of
an annual utility cost). Thus, in including the cost of
electricity as an annual operating cost for an electric motor, DEP
simply followed its established guidance and procedures. See DEP
BACT Guidance, supra, at 4 (incorporating the EPA Air Pollution
Control Cost Manual by reference).
For all of these reasons, the City has not convinced us
that DEP inappropriately considered the cost of electricity as a
component of the annual operating cost of an electric motor. And,
as we have explained, that decision obviates any need to consider
the collectively inconsequential other alleged errors in DEP's
BACT analysis.
Because DEP's finding that an electric motor could be
excluded at Step 4 of the BACT analysis was neither arbitrary nor
- 24 - capricious, we have no need to also decide whether an electric
motor could also be excluded at Step 1. Therefore, we decline to
address whether an electric motor would "redefine the source" at
B.
The City's only other argument is that DEP failed to
comply with Massachusetts's Environmental Justice Policy (the "EJ
Policy"). We previously rejected a nearly identical claim based
on this policy brought by the City and other petitioners in Town
of Weymouth. See 961 F.3d at 54. Although the City points us to
intervening changes to the EJ Policy since our decision, we see
nothing in those changes that disturbs our prior reasoning. In
any event, in Town of Weymouth we remanded to DEP to conduct
further proceedings "limited to the purposes we [had] identified."
Id. at 59 (remanding to that agency to reconduct the BACT
analysis). A reassessment of the air permit under the EJ Policy
was not one of those purposes.
IV.
We deny the City's petition for review and affirm DEP's
final decision after remand.
- 25 -