Andersen Corporation

Andersen Corporation: Letter from EPA to Mr. R. Fowler

July 15th, 1998

Mr. Richard Fowler
Environmental Affairs Manager
Andersen Corporation
100 Fourth Avenue North
Bayport, Minnesota 55003-1096

Dear Mr. Fowler:

I am pleased to inform you that EPA has considered your XL proposal dated January 30, 1998, and supplementary materials, and that the Agency is prepared to work with you, the State of Minnesota, and appropriate stakeholders to develop a Final Project Agreement (FPA). The FPA will detail the expectations of EPA, Andersen, the State of Minnesota, and other project partners. If all partners are satisfied and sign the FPA, the signed agreement will constitute acceptance as an XL project.

Project XL was created to test innovative environmental management strategies for the 21st century, and through this process to foster excellence and leadership in environmental protection. EPA is offering you the opportunity to participate in the next phase of XL project development because your proposal shows potential to accomplish these goals.

Through discussions among our staffs, several items in your June 12, 1998, letter modifying your proposal were either clarified or modified. Thus, to ensure a complete understanding of the components of the accepted proposal as well as the work that remains, this letter lists the items that either have been modified or explained through further discussion, or will be the subject of FPA negotiations. Please note that this list is not intended to be comprehensive, but rather serves as a starting point for FPA negotiations.

Some of the items that were modified or explained through subsequent conversations or need to be the subject of FPA negotiations are as follows:

(1) Refinement of the Per Unit Performance Measure -Close examination of Andersen's proposed method for calculating its per unit performance measure indicates that performance at times fluctuates due to changes in production. Ideally, a per unit measure of performance should be production-neutral. Based on discussions with Andersen, the production fluctuation in Andersen's methodology is due at least in part to changes in the "average" size window produced each year. Recognizing Andersen's need to protect confidential business information, the desire to keep the method reasonably simple, the XL goal of minimizing recordkeeping and reporting burdens, and the need for accuracy, the parties should be able to devise a more precise measure of Andersen's per unit performance.

(2) Enforceability of Commitments -We welcome certain Andersen commitments, such as the new preservation processes and paint process commitments in Andersen's June 12, 1998, letter, which will need to be translated into legally enforceable commitments. For example, issues to be resolved include:

. Do these commitments apply on a per unit basis or plant-wide?
. What is the definition of terms such as "waterborne," "major paint processes," and "high solids/low VOCs," and
. How will we determine that non-waterborne processes emit VOCs at the same rate as waterborne?

Similar issues arise with respect to virtually all of Andersen's enforceable commitments.

(3) Rewards - EPA is willing to discuss rewards for performance that exceeds expectations. Generally, the duration of those rewards depends upon the nature of the rewards. The specific example offered by Andersen of automatic extensions to the project may present some legal and policy issues. At this point, the Agency cannot guarantee Andersen that its Plant-wide Applicability Limit (PAL) can be renewed after the initial ten year project period at the current level. It is possible that EPA will require that Andersen's PAL, as well as all other PALs, be evaluated and reduced upon renewal. In addition, Andersen should be aware that upon termination of its PAL, it may be subject to New Source Review requirements, depending on how termination is achieved. Both of these issues are being resolved outside of Project XL and could apply to Andersen as well as any other member of the regulated community.

(4) Adjustable Per Unit Limit -Through further discussions, Andersen's proposal with regard to an adjustable per unit limit has been refined such that it would include four limits: a penalty limit, a project limit, a CAC limit and a reward limit. The penalty limit would be set at the facility's five-year average per unit emission rate plus two standard deviations. This limit would remain the same throughout the project. If Andersen's emission rate exceeded this limit, it would be liable for penalties. The project limit would initially be equal to the penalty limit; however, it would be recalculated on a triennial basis based on the facility's five-year average for VOC emissions per unit produced plus two standard deviations. In no event would the project limit be set higher than the penalty limit. If Andersen's emission rate exceeded the project limit, the project would end unless Andersen demonstrates to the satisfaction of Community Advisory Committee, EPA, and MPCA, each acting in its independent capacity, why the project should continue. The CAC limit would be set at Andersen's five-year average per unit emission rate and would be recalculated on a triennial basis. The CAC limit would increase only if the Community Advisory Committee agreed, and EPA and the State of Minnesota concur . If Andersen's emission rate exceeded the CAC limit, the Community Advisory Committee, in consultation with EPA, the State of Minnesota, would engage in an evaluation process with Andersen and establish a corrective action plan to bring Andersen's emission rate below the CAC limit. The reward limit would be set at Andersen's five-year average emission rate less two standard deviations, and would not be readjusted downward unless Andersen exceeded it for a certain number of years. The number of years would be determined through FPA negotiations and would depend on the type of rewards that Andersen received when it reached the reward limit.

(5) Dip Tanks -EPA, the State of Minnesota, and Andersen have discussed the regulatory relief requested by Andersen with regard to dip tank residues, releases from dip tanks, disposal of dip tank components, and dip tank closure requirements. However, EPA understands that Andersen has not yet completed its tests on the components of dip tank residues and releases. As a result, the flexibility needed with regard to the dip tanks will be determined during FPA negotiations. Because of the lack of specificity on what federal flexibility, if any, is needed with regard to the dip tanks, the development of these details and EPA's ability to adopt regulatory flexibility in this area need to be discussed during FPA negotiations.

(6) Relationship of Andersen West Cap to Main Facility Cap - When establishing cap levels to avoid major NSR for other projects, including XL projects, the use of allowable emissions rather than actual emissions has been unacceptable to EPA under current and proposed major NSR regulations. Consequently, EPA will support the cap for Andersen's Bayport facilities (the main plant and the Andersen West site) using actual emissions only. Using estimates of actual emissions provided by Andersen for 1991 and 1992, EPA believes it can support an actuals based VOC cap of 2,397 tpy for the Bayport facilities. However, EPA understands that Andersen will commit to not exceed 96 tons of VOCs at the Andersen West site. In addition, all existing air permits, including the Andersen West permit, will be terminated in favor of a single permit for all Bayport facilities.

EPA has assembled a staff team to work with Andersen, the State of Minnesota, and stakeholders on development of the project. That team will be led by Brian Barwick of Region 5 (312-886-6620) and Nancy Birnbaum of the Office of Reinvention (202-260-2601). They will be contacting you shortly to commence work.

Sincerely,

David A. Ullrich
Acting Regional Administrator
cc: Peder Larson, Commissioner, Minnesota Pollution Control Agency

bcc: J. Charles Fox, Associate Administrator, Office of Reinvention
Rob Brenner, Acting Deputy Assistant Administrator, Office of Air and Radiation
James Nelson, Associate General Counsel, Office of General Counsel
Sylvia Lowrance, Deputy Assistant Administrator, Office of Enforcement and Compliance Assurance

Andersen Corporation

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