PUBLIC SERVICE COMMISSION

OF WEST VIRGINIA

CHARLESTON

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OLD STANDARD, LLC Case No. 05-0042-S-CN

HEARING: Tuesday, August 9, 2005

9:33 a.m.

LOCATION: PSC Howard M. Cunningham Hearing Room

201 Brooks Street

First Floor

Charleston WV 25323

P R O C E E D I N G S

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CHAIRMAN MCKINNEY:

Good morning. My name is Jon McKinney. I’m the new Chair of the Public Service Commission. This is Ed Staats and Mike Shaw, Commissioners. It’s interesting, this is my first time to go through this, so I’m looking forward to hearing this particular case. Case Number 05-0042-S-CN, Old Standard, LLC, application for a Certificate of Convenience and Necessity to construct, install, and operate a wastewater treatment facility in Jefferson County.

We will begin by taking appearances of the parties and their attorneys. Following appearances, I will ask Counsel for parties to summarize their positions in this case. When they have finished their summaries, the Commission will hear from members of the public. There’s a sign-in sheet, and I’ve got a copy of the sign-in sheet, which is what I will use to call those who wish to speak. If you have not signed yet, please see the court reporter.

When all of the public comment has been received, the Commission will begin the evidentiary hearing of this case. We appreciate all of you coming here to participate. I will now take appearances.

ATTORNEY MCDONALD:

Good morning, Your Honor. Appearing this morning on behalf of Old Standard, LLC, D. Dandridge McDonald from the firm of Steptoe and Johnson of Charleston.

ATTORNEY KELSH:

Good morning, Your Honor. My name is James V. Kelsh, representing the Jefferson County Public Service District.

MR. FAULKER:

Good morning, Your Honor, my name is Scot Faulkner. Myself and my wife, Vicky, are pro se.

ATTORNEY ROBERTSON:

Good morning, Chairman, Commissioners, my name is Ron Robertson. I’m here on behalf of the Commission Staff. Thank you.

CHAIRMAN MCKINNEY:

Is there anyone else today who wants to make an appearance in this case? If that’s all, then we’re ready to proceed with the public comment portion of today’s hearing. Old Standard, are you ready to proceed with summarizing your case?

ATTORNEY MCDONALD:

We’re ready to proceed, Your Honor. Good morning. As I say, my name is Dan McDonald, attorney for Old Standard.

Your Honor, this is going to be an interesting case, I think, because it involves a fairly new concept in the provision of utility service. We might call it the build-and-donate concept. But this is new to West Virginia. This is one of the first, if not the first projects to embrace this idea.

Jefferson County has a critical shortage of wastewater treatment plant capacity. This shortage has virtually stopped growth in one of the most robust markets in West Virginia. The Sheridan Estates Development, which is located along Route 340 East of Charles Town in Jefferson County is designed for approximately 180 homes. It has been ready to sell houses for several years, but has been stymied for lack of sewer service. Our evidence will show that many other developers and projects have been stopped because of lack of sewer.

Old Standard, LLC is a development company proposing to install a 50,000 gallon per day Membrane Bio-Reactor wastewater treatment plant on company-owned land, which is an abandoned quarry in Jefferson County. There’s a long history of the Sheridan Development’s seeking sewer system, going back to 2001 and before.

Throughout these interations we have come now to this new so-called build-and-donate concept, which we believe will provide a win, win, win situation for everyone. The developers will obtain wastewater treatment capacity for the subdivision. The Jefferson County PSD, the public utility in the area will get a technologically superior wastewater treatment plant and all the mains at no cost, so that most of the revenues, if not all, it receives from customers will be incremental. Jefferson County gets additional wastewater treatment plant capacity which will permit development not only in the area of the plant, but also around Charles Town, by easing pressure on the existing Charles Town Wastewater Treatment Plant. And then of course citizens get an opportunity to buy houses and set up families.

Our evidence will describe the contracts between Old Standard and JCPSD, the MBR, membrane bioreactor plant, the cost of operating, its location and its environmental advantages. PSC Staff has recommended that this Commission grant a certificate based on two conditions. One, that Old Standard guarantee the financial feasability for the PSD. And two, that Old Standard study the option of moving its flows to the Charles Town treatment plant.

Our evidence will show that we have met both of these conditions, including the conclusion that the Charles Town option is not feasible for a number of reasons. After the Commission hears the evidence, we ask it to issue a Certificate of Convenience and Necessity for the Old Standard Wastewater Treatment Plant, approve the agreements between Old Standard and JCPSD, and entertain, after construction of the plant is completed, a petition from the District and Old Standard to transfer these assets to the District at no cost. Thank you, sir.

CHAIRMAN MCKINNEY:

Thank you. Jefferson County.

ATTORNEY KELSH:

Good morning. My name is Jim Kelsh, representing the Jefferson County Public Service District. The Jefferson County Public Service District currently is only a collection system, that is it collects wastewater and transmits it to Charles Town for treatment.

In light of the rapid expansion of development in the Jefferson County area, the District needs to move to a decentralized approach to wastewater treatment. That is, it needs to consider and act appropriate on proposals to construct treatment facilities and rely upon treatment facilities other than Charles Town Wastewater Treatment Plant.

This project is actually the first sizable facility which the District is proposing to the Commission. The District also faces some difficulty in meeting its duty to serve Jefferson County. The District has some of the highest rates in the state. Currently for a homeowner using an average of 4,500 gallons, they will pay, to the District, approximately $51 per month just for sewer service. On top of that, they will have a water bill.

These high rates make it difficult for the District to engage in conventional financing for projects to serve the county. This project, as Counsel for Old Standard represented, represents a new concept and a very promising concept to assist with the expansion of wastewater treatment in Jefferson County. This project will serve not only the Sheridan Development, but has the potential to assist the District in meeting its wastewater treatment demand needs in other places of the county.

The Commission has issued an order on July --- I’m sorry, I’m not sure of the date of the order. But anyway, the Commission asked the parties to identify witnesses. And in response to that, the four parties have identified a total of 26 witnesses. I’ve been in practice before the Commission for five years and I can’t say that I’ve ever been involved in a case in which the Commission took the testimony of 26 witnesses, and that includes two major rate cases for the West Virginia American Water Company.

The number of witnesses may lead you to suspect that this is a very complicated case. I beg to differ. This case involves essentially the difficult decision of ruling upon a 100 percent grant-funded certificate project for a wastewater treatment plant which will produce the highest quality effluent in Jefferson County and the highest quality effluent ever in the state.

This project offers an enormous benefit to the District. Not only will the developer donate all the capital facilities, but the developer will guarantee that the District will at least break even on operational costs. It is expected that once growth emerges, that the District will do better than break even on this project, and that should assist its financial position.

This is a win-win proposition. The District fully supports Old Standard’s application and looks forward to operating the Old Standard facility.

Despite the obvious and strong benefits of the project, the interveners, the Faulkners, and the Staff Commission suggests that perhaps it might be better to transmit wastewater to Charles Town. That is an unfavorable alternative for several reasons. One is the tremendous uncertainty associated with relying upon the Charles Town Wastewater Treatment Plant. The District is effectively is in a moratorium currently. Construction is under way for expansion to that facility. However, the list of folks who are going to use the capacity created by that expansion is quite long and it’s expected that that new capacity will be consumed quite quickly. The plant’s further capacity are rather vague. In any event, it is unlikely that should Old Standard construct the facilities that Staff suggests to connect to the Charles Town wastewater plant, it is unlikely that the District will be able to obtain capacity at that plant. For these reasons, the Charles Town alternative is clearly an inferior solution.

The District strongly urges the Commission to grant Old Standard a Certificate for this project. Thank you.

CHAIRMAN MCKINNEY:

The Faulkners.

MR. FAULKNER:

Good morning, Mr. Chairman. This is a complex case, not a simple case. And there are three numbers that you need to keep in mind as you hear all this testimony. These are 178, 270 and 1,250. 178 is the number of homes currently permitted for Sheridan Subdivision, the main purpose for this Old Standard sewer. 270 is what your own Staff say is the break-even mark for this plant to be economically viable. 1,250 is the permits granted by the --- the number of units granted by the Department of Health from the West Virginia state government that says that for everything to work, the pumps, the pipes, the plant, they need this amount for the top of the line permit.

We’re going to be going over these three numbers and showing that, number one, this plant will never be economically viable. And number two, this plant will never be technologically viable. And so these three numbers you all three need to be considering because these will become very important as the day continues.

Another component of today’s discussion is, you have the plant in Charles Town that is currently being built and has been allowed to go forward. You have plants before this Commission at Bellair, and this plant on the books being --- coming before this Commission from the PSD itself at Flowing Springs. Flowing Springs is right across the street from Sheridan, not two and a half miles away. Bellair is a half a mile from Sheridan, not two and a half miles away.

You must ask yourself, why, with Charles Town plant being expanded and the original pipe for Sheridan, which Sheridan was actually approved on

---. I mean, you have to understand, for the last three years the developers of the Sheridan Subdivision have put forth official documents to the state government, to the county government and represented in every public hearing before the Planning Commission in Jefferson County that they would be served by the Charles Town plant. They received building permits based upon that, so the Sheridan Subdivision has proceeded forward. They have sold houses, they have excavated the land, they have laid pipe. They have received every possible approval from the county government of Jefferson County without Old Standard even being whispered. So therefore, when they say that Old Standard needs to be built so Sheridan can be built, one has to question that logic.

So where is Old Standard being built? Two and a half miles away, in the middle of a rurally-zoned area and surrounded by Harpers Ferry National Historical Park. Tourism is the second largest industry in the state, the fastest growing industry in the state, and currently represents close to 22 percent of the entire employment base in Jefferson County. So to put a plant which on the surface seems to be designed to stimulate intense residential growth in the very area that is the main tourist gateway to the eastern part of the state, where 22 percent of our employment base is based on, one needs to weigh that as to, is this truly a public convenience. And we will be going through that in detail.

But the key is, remember the numbers. Is this financially viable? Can it ever be financially viable? And secondly, can it be technologically viable, because there are not enough homes and there will never be enough homes to make either of these numbers work. Thank you.

ATTORNEY ROBERTSON:

Chairman, Commissioners, basically what Staff had did in this approach, in looking at the Old Standard certificate, Staff’s major focus is looking at both orderly and also the timeliness in this particular application. And just to give you a little bit of a background. In the Charles Town immediate area there are three current sewer treatment plants, one at Tuscawilla, one at the City of Charles Town, and also one at Willow Springs. And primarily what the Staff is going to be focusing on at a treatment project at the City of Charles Town. Currently, they do have a project that’s being upgraded to 500,000 gallons of capacity to expand, to give extra capacity.

Also, the Staff will present testimony looking at Ranson, the City of Ranson, which is currently building a flow station, constructing a flow station to accept additional flows, and one the Staff has proposed as its first recommendation for orderly and also timeliness of development as having the Sheridan Development to be 178 lots, actually to go back in and to tie into the Breckenridge Pump Station. The Breckinridge Pump Station will tie to this Flowing Springs Pump Station, then it would feed to the City of Charles Town.

Looking at those particular things that Staff looked at, for an orderly and timeliness of development with the developer to serve the residential subdivision and also to provide with the District an orderly development of the District’s infrastructure, since this particular project was going to be looking at conveying over to the District.

As an alternative, the Staff has also looked at the Old Standard plant itself. And that would be I’ll say the Staff’s second preference as a recommendation. And that would be looking at the Old Standard plant being built. Also, there are some of the provisions of looking at, that Old Standard would also provide a letter of credit, a bond to ensure that the District’s rates are unharmed, they’re not affected, until the build-out of the Sheridan Development will actually support itself, so the District and its ratepayers aren’t harmed by the building of this particular project.

In looking upon that, depending upon the evidence that’s presented today, that’s the two Staff’s alternatives and at least we would like to have the Commission understand and hear both sides, both provisions from Staff of looking at those recommendations. And we will proceed with that particularly in the rest of the hearing. Thank you.

CHAIRMAN MCKINNEY:

Now we’re ready to begin to take public comments. You will not be sworn in, but please come up to the witness stand here on my right. Please speak slowly and into the microphone so we can hear you, particularly the court reporter, who will be taking down remarks, so that we may review them when we decide this case. We need to know your name and address first. Please spell your name and any parts of your address that could be spelled in more than one way. After that, you may make your comments. I believe we have one public comment. We had someone sign up. And it’s hard for me to read. It looks like Lynda ---.

MS. LEIMBACH:

Leimbach.

CHAIRMAN MCKINNEY:

Yes.

MS. LEIMBACH:

Good morning. How are you?

CHAIRMAN MCKINNEY:

Good.

MR. LEIMBACH:

My name is Lynda, that’s L-Y-N-D-A, Leimbach, L-E-I-M-B-A-C-H. I live in Harpers Ferry. It’s 45 Pintail, P-I-N-T-A-I-L Court. And that’s in Harpers Ferry, West Virginia. I’m coming here kind of as a dual purpose. I have been a resident of Jefferson County for nine years. My husband is a Shepherd University graduate, I’m a Shepherd University graduate, our son is a Shepherd University graduate. We have always been in love with Jefferson County, that’s why we moved there nine years ago. Fortunately, there was some building going on at that time which enabled us to move in. I also work for K. Hovnanian Homes, who is going to be the builder for Sheridan Estates.

I have brought some letters from some of my homeowners whose lives have been drastically affected by this two-year delay. It is true that homes were sold in January --- January 17th of 2004. We thought we were going to be able to move forward. We have not received any permits for that community to be able to start building. Some of my homeowners really wanted to come but could not bear the expense of a hotel and airfare to come here, so I am here to speak for them as well as for myself and for the growth of Jefferson County and the future of Jefferson County.

But I have some homeowners who –-- they are residents of West Virginia, and they’ve lived in West Virginia for 15, 20 years. One couple has lived there for approximately eight years, he’s a fireman. Him and his wife are due for their first baby in August of this year. They certainly thought they would have been in their home by now. And they haven’t even put together a nursery yet because of all the delays. I have another homeowner who got married last year. He thought he would have been in his home last year. His wife is going to West Virginia University, he lives in Waldorf, Maryland, which is approximately two and a half hours from Jefferson County. He has had to stay down there living with his dad and she’s going to West Virginia University. Their one-year anniversary was in July and they’ve been separated all this time.

I liked some of the comments this gentleman made, and he said, in a little over two weeks it will be our one-year wedding anniversary. We still have no house to celebrate in, no house to have friends over in, no house to have family over in, and no house to live together as husband and wife. These are just a few of the letters that I would like for the Commission to review, to see how it has affected some of the homeowners’ lives.

I’ve been enjoying Jefferson County for nine years and I would like to see other people be able to come into our county and enjoy it as much as I do. Since Sheridan has not been able to move forward, which is what I was hired for two years ago, they have moved me to the Huntfield community. I know that community is a 3,200 home community and these capacity that they’re talking about the Charles Town plant being increased to isn’t even going to handle that 3,200 home community. So as I believe as has already been mentioned, the sewer plant capacity that’s being increased is already spoken for.

We have a lot of commercial components --- and this is talking as a resident of Jefferson County. We have a lot of commercial components coming to our place. We have Home Depot, we have Premier Breads. I’ve met with a lot of these individuals. You have to have population to support these businesses, and without population, these businesses are going to fold. I would hate to see that happen in Jefferson County. I actually saw it happen in Frederick, Maryland, where there was no growth for a while, and this was a while back, but businesses started closing up because the population wasn’t there.

So I just wanted to speak as a Jefferson County resident, myself. I am in Harpers Ferry myself. I think growth is a very good thing. I’m born and raised DC and moved to Frederick. It grew, but I’ve always loved Jefferson County and that’s why we moved out here. I also wanted to share my letters with you. And I also brought some brochure packs to show you the type of quality home they’re going to be building. We’re going to be building homes that are 2,800 square feet to almost 3,800 square feet, so these are not shabby homes. They’re very, very nice, good quality homes, and we are a national home builder. That’s all I wanted to share with you today.

CHAIRMAN MCKINNEY:

Thank you.

MS. LEIMBACH:

Thank you. What would you like for me to do with these?

CHAIRMAN MCKINNEY:

Are there other public comments? If not, we’ll proceed to the evidentiary part of the hearing. Those of you that made comments are welcome to stay and observe. This part of the case is presented by the parties and their Counsel. First, we will tend to the preliminary matters. Old Standard had some publication of hearing on May 8, as the Commission previously ordered.

ATTORNEY MCDONALD:

Your Honor, I tender an affidavit of publication from the Spirit of Jefferson Advocate indicating that notice of today’s hearing was published in that paper on July 21, 2005.

CHAIRMAN MCKINNEY:

So are you submitting this for file?

ATTORNEY MCDONALD:

Yes, sir. We normally mail in affidavits of publication to the executive secretary, and we did mail in the notice of the July 13th hearing which has already been made part of the file. But that’s the only copy that I’m submitting for today’s hearing. Thank you.

CHAIRMAN MCKINNEY:

Are there other preliminary matters that the parties wish to bring to the Commission’s attention? Then the Commission is ready to receive the evidence in this case. Old Standard, are you ready to proceed?

ATTORNEY MCDONALD:

We’re ready to proceed, Your Honor.

CHAIRMAN MCKINNEY:

Please call your first witness.

ATTORNEY MCDONALD:

My first witness is Mr. Herb Jonkers.

CHAIRMAN MCKINNEY:

I’ll ask the court reporter to swear in the witness.

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HERBERT JONKERS, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS FOLLOWS:

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DIRECT EXAMINATION

BY ATTORNEY MCDONALD:

Q. Good morning, sir.

A. Good morning.

Q. Would you state your name and business address, please, sir?

A. Herbert Jonkers, 1784 Kabletown Road, Charles Town, West Virginia.

Q. And what is your employment, Mr. Jonkers?

A. I’m a member of Sheridan, LLC and --- excuse me, manager of Sheridan, LLC and manager of Old Standard, LLC.

Q. Tell the Commission what Sheridan, LLC is and what its primary project is.

A. Sheridan, LLC entered into a contract to purchase approximately 99 acres in the early part of 2002 for the development of 178 lots and subsequently contracted with K. Hovnanian, successor to Washington Homes, to build 178 homes on the site.

Q. What is Old Standard, LLC?

A. Old Standard, LLC was formed to purchase 410 acres of an old quarry site along the Shenandoah River, south of Harpers Ferry.

Q. Are you the manager of the Old Standard, LLC ---

A. Yes, sir.

Q. --- as well? Mr. Jonkers, did you cause to prepare and be filed in this case the application for a Certificate of Convenience and Necessity?

A. Yes, sir.

Q. And did you cause that application to be supplemented on two occasions, one for initial information on the Division of Environmental Protection’s NPDES permit and then supplemented again for information to and from the state Historical Preservation Office?

A. Yes, sir.

ATTORNEY MCDONALD:

Your Honor, may we have the file of which is the January, 5, 2005 application, together with the March 31, 2005 supplement, and the April 6th, 2005 supplement, bound in the notebooks which I have just passed out and marked for identification as Old Standard Exhibit Number One?

MR. FAULKNER:

Objection. We have not received a copy of that.

ATTORNEY MCDONALD:

Did you ask for one?

MR. FAULKNER:

Yes.

ATTORNEY MCDONALD:

Well, you haven’t asked me.

MR. FAULKNER:

We asked --- well, we asked the PSC for all materials that relate to the application of this certificate and we did not receive any of that material.

ATTORNEY MCDONALD:

Are you saying, Mr. Faulkner, that you don’t have a copy of the application?

MR. FAULKNER:

That is correct. And the amendments.

We have the original but not the amendments.

ATTORNEY MCDONALD:

I move that the exhibit be marked for identification, Your Honor.

CHAIRMAN MCKINNEY:

Let’s go off the record.

OFF RECORD DISCUSSION

BY ATTORNEY MCDONALD:

Q. Mr. Jonkers, I’m going to show you an aerial photograph and display it for the Commission. And I’m going to ask you to authenticate it. And then I’m going to ask you to describe for the Commission what is depicted on this aerial photograph. First, generally describe what is it and then we will see if we can get it marked as an exhibit.

A. It’s an aerial photograph of the area which contains Sheridan Estates on the lower-right quadrant and the Old Standard quarry site in the upper middle of the photograph.

Q. You may leave your seat.

A. I’m sorry.

Q. This view is generally south up?

A. This is south, north Charles Town, in this direction, Harpers Ferry is in this direction. This is the Shenandoah River, this is the quarry excavation, which is nearly a mile long body of water, it’s a lake. This is the Sheridan Subdivision. This is an industrial site known as Amerigas, where they make concrete pipe, boxes, culverts and such.

This construction that’s going on here is on the Park Service property, which is the customs --- where they’re putting in a customs facility. It’s an underground firing range training facility.

The quarry property is from approximately right here all the way to this tip over here and is approximately a mile and a half in length. The white areas here are the old industrial Brownfields location. There are spoil piles which we’ll show some photographs of later. It’s approximately one to two million yards of pipeline that was reject. These old buildings --- old concrete buildings are falling apart. The quarry has not been active since, I believe it’s 1974, when they couldn’t keep up with the infiltration of water.

This is an old dump site known as the Millville Dump, for which we have a remediation program. This entire area through here has been released, with the exception of this ten-acre site from the voluntary remediation program that we entered into when we bought the property back in 2003. I believe that’s all.

Q. Mr. Jonkers, is any part of the Harpers Ferry National Historical Park depicted in that photograph?

A. The Park Service owns this property right here. And that purchase goes back to when the Park Service had both sides of the road under contract to purchase for the Fish and Wildlife training facility. They closed on this piece. They did not close on this piece. The owner was in bankruptcy. He was having some other problems. Then they opted to purchase the property in Shepherdstown, along the Potomac River, rather than conclude this purchase, so the Park Service does own this and ---.

Q. But it’s not part of the actual Historical Park, though, is it?

A. Not that I’m aware of. It’s owned by the Park Service, that’s all I know.

Q. Is any part of the park depicted on the left-hand side of that ---

A. Down in here ---

Q. --- photograph?

A. --- is what’s known as Murphy’s Landing. And right here is the visitors center. The Park Service did buy this park. This is where the visitors center is located. This is a trailer park, campgrounds. You’ve got a motel right here. The Shipley School is right here. This is Carriage Park Subdivision, with a commercial car repair facility here and a church right here.

Q. Carriage Park Subdivision has septic service for its ---?

A. Septic and well, yes, sir.

Q. Septic and well?

A. Right.

Q. Now, briefly describe for the Commission the --- again, point out where the proposed Sheridan Subdivision is. And then with your finger draw a line tracing the proposed route of the sewer lines to the Old Standard treatment plant.

A. The pump station would be located right here. It would be crossing Route 340, coming down the southerly side of 340, up and down Bloomery Road, as soon as we get to our corner of our property, we’d be stepping across onto our property. Coming down the old railroad bed, which traces along through here to our site for the sewer plant which is approximately right here. I’m sorry, it’s right here. And then from there, we’d be coming across here, going out into the river is the effluent line.

The location of the plant is between two rather substantial berms that, as you can see, is completely overgrown with trees. No one would be able to see anything from the road. The entire plant is within --- contained within a structure, so it’s all enclosed, there are no outside pools, ponds, whatever. Everything is pretty much inside. The two earth berms here and here are the residue of the overburden that was taken off of the stone as they were working their way down the quarry and piling up on the side.

Q. Does the Shenandoah River flow from top to bottom in this photograph?

A. It flows in this direction.

ATTORNEY MCDONALD:

Okay. Your Honor, may we have this photograph marked for identification as Old Standard Exhibit Number Two?

(Old Standard Exhibit Number Two marked for identification.)

CHAIRMAN MCKINNEY:

Hearing no objection, it will be received.

ATTORNEY ROBERTSON:

This is particularly just for a housekeeping matter. The certificate application, the separate document of the DEP permit and also the SHPO compliance have different dates in the letter. Is the Commission considering that as one exhibit?

ATTORNEY MCDONALD:

What’s the question, Ron?

ATTORNEY ROBERTSON:

For those three documents that you identified as an exhibit of Old Standard, is that going to be identified as exhibit total Number One or is it going to be One, Two and Three?

ATTORNEY MCDONALD:

No, that’s just One. The package is the application.

ATTORNEY ROBERTSON:

Okay. Thank you.

BY ATTORNEY MCDONALD:

Q. Mr. Jonkers, I’ve displayed on an easel a map of Jefferson County, titled Jefferson County zoning map. Are you familiar with that map?

A. Somewhat, yes, sir.

Q. That does represent the entire county, ---

A. Right.

Q. --- so would you point out to the Commission where the major geographical features in the county are, including Charles Town, Ranson, Harpers Ferry, Shepherdstown and so on?

A. This is Charles Town, Harpers Ferry, Shepherdstown. This is the Old Standard quarry site. This site here includes both the old quarry that’s on Blair Road and the property that the Park Service purchased for the Fish and Wildlife Training Center. The property approximately right here is the Amerigas facility that we showed in the photograph. And Sheridan is right here.

Q. And do you believe that map accurately depicts the zoning classifications at the time that it was prepared, which looks to be about 2002?

A. It was prepared for the Jefferson County Planning Commission by Dewberry (phonetic) Surveyors, and, yes, I think it’s accurate.

ATTORNEY MCDONALD:

Your Honor, may we have the zoning map marked for identification as Old Standard Exhibit Number Three?

(Old Standard Exhibit Number Three marked for identification.)

CHAIRMAN MCKINNEY:

Hearing no objections, we will receive it.

BY ATTORNEY MCDOHALD:

Q. Mr. Jonkers, describe briefly for the Commission, now back to Sheridan, the Sheridan Subdivision, the --- well, let’s display some photographs. I’m going to hand you a photograph that’s titled Sheridan Subdivision, August 2005, and ask you, to the best of your knowledge, who took that picture?

A. I believe it was taken by Mr. Snyder. It shows the first paved road into --- and a storm water detention pond in Sheridan and the Carriage Park houses in the background.

Q. This is generally looking northeast maybe?

A. It would be looking northeast.

Q. I hand you a second photograph and ask you --- all these photographs were taken by Lee Snyder, were they not?

A. Yes.

Q. What is that next photograph?

A. That’s the drainage swell along the first entry road, showing the water meters, sewer laterals, fire hydrants, and the house construction pads.

ATTORNEY MCDONALD:

Your Honor, may we have the first photograph that’s been handed out, the 8 and a half by 11, marked for identification as Old Standard next number, Number Four, I believe.

(Old Standard Exhibit Number Four marked for identification.)

CHAIRMAN MCKINNEY:

So marked.

BY ATTORNEY MCDONALD:

Q. Now Mr. Jonkers, I’m going to show you a third photograph called Sheridan Subdivision. This one’s got a number three on it, August ’05. Could you tell the Commission what this photograph depicts?

A. This photograph would be the third cul-de-sac up on top of the hill, looking south, showing a graded road, sewer laterals, fire hydrants, indicating that the water services have been installed.

ATTORNEY MCDONALD:

Your Honor, may we have this photograph marked for identification as Old Standard Exhibit Number Seven?

(Old Standard Exhibit Number Six marked for identification.)

CHAIRMAN MCKINNEY:

So marked. And that’s Exhibit Number ---?

ATTORNEY MCDONALD:

Six, sorry.

BY ATTORNEY MCDONALD:

Q. Do these pictures accurately depict the Sheridan Subdivision, if you will, as it exists today?

A. It depicts is as it exists today, all of the --- or I’d say 99 percent of the overlot grading has been completed. All but about 30 lots are improved with sewer and water laterals. That’s all that’s remaining to be done on the site.

Q. So you got paved roads?

A. We have paved roads to approximately 40 lots, and then just graded roads ready for gravel for the balance.

Q. Okay. Have any houses been built?

A. No.

Q. Why not?

A. We had received two building permits and then they were revoked when we reversed our flow on the sewer line instead going to Charles Town, where there was no capacity to the new plant, which was proposed at Old Standard. The county is now in the process of issuing new permits.

Q. So you think you can get some building permits?

A. That’s correct.

Q. How is this real estate deal working? You’re a developer, you buy the land and you put in roads and water and sewer, and then ---

A. I sell ---.

Q. --- do you sell lots individually?

A. I sell lots in bulk to National Builders.

Q. And then they sell to ---?

A. And they sell to the individual homeowners.

Q. Okay.

A. One of --- the first picture shows their sales trailer in the corner, which has been vacant for about the better part of a year.

Q. How long has the lack of sewer been holding up the construction of houses at Sheridan?

A. We started the process of trying to build our own plant and going through the exercise of buying a state-of-the-art facility, I would say at the end of 2003, first part of 2004.

Q. Okay.

A. We went to the PSD in, I think it was in April or May of 2004, to propose and come to an agreement on the four documents which we will talk about later.

Q. Okay. So is it true to say that lack of sewer is what’s holding up ---

A. Yeah.

Q. --- house construction in Sheridan?

A. That’s correct.

Q. And I’m going to hand you a series of pictures that I’d like for you to identify for the Commission. These pictures were also taken by Lee Snyder, were they not?

A. Yes, they are.

Q. He’s going to be a witness in a little bit. Describe the picture that is being ---

A. This is part of ---

Q. --- displayed currently.

A. --- the Old Standard quarry in operation, which obviously is falling into disrepair and is falling apart. These are some old kilns that were on site where lime was burned back in the early part of the century, the 1900s. The quarry had gravel that had a high level of magnesium in it and this material was shipped to Pittsburgh for additive to steel. When that market dried up, because of the shift in the depth of the rock, they changed to a different product, rock wool, which was a predecessor to Fiberglas insulation.

Q. How long, again, has that manufacturing process been stopped there?

A. It’s my understanding that the whole facility closed down in 1974, when they pulled everything out of the pit.

Q. Okay. The next picture I’m going to hand you says number five, Old Standard quarry. Describe what this picture displays, please.

A. Again, these are some old kilns and part of the structures that are in the Brownfields area, or what was considered the Brownfields area.

ATTORNEY MCDONALD:

Your Honor, let me make sure we’re up to date here. I have three pictures of Old Standard, Exhibits Four, Five and Six, and now two of Old Standard quarry site, Number Seven and Number Eight. Can we have this most recent one marked for identification, Number Eight?

(Old Standard Exhibit Numbers Seven and Eight marked for identification.)

CHAIRMAN MCKINNEY:

So marked.

BY ATTORNEY MCDONALD:

Q. I hand you a picture labeled Number Six, Old Standard quarry. It has a photograph of what appears to be a big tank. Explain what that picture depicts, please.

A. That’s an old lime silo that is still full of lime. Obviously, the concrete is giving way and it’s going to topple over one of these days.

Q. Incidentally, is this --- are these ruins and this tank a part of the area which is part of the remediation program?

A. Yes, sir. The entire property was put into a voluntary remediation program. And of that --- of the property, approximately 300 acres has already been released and 100 acres still needs to be taken care of. That 100 acres has now been tested and completed. And we have a toxicologist here who will testify to its safety.

Q. I’m sure the Chairman understands remediation, but why don’t you tell the rest of us, briefly, what that means.

A. Well, we had to have Triad Engineering do a lot of testing on site to check soils, check any lime piles, check water in the lake, anything that might have some toxic quality to it which would interfere with anything we would want to do with the property at a later date. As a result of all of that testing and some work that we have done on site in cleaning up some of what’s known as the hot spots, we have gotten the 300 plus acres released. And we still have to deal with the old manufacturing site, which testing has now been completed. And we have to finish up with actually capping the old dump site, the old dump site.

Q. Do you know whether the land and structures depicted in the photographs that we’ve already looked at cover remediated land or unremediated land?

A. This area has not been remediated, but it has been completely tested and found to be acceptable.

Q. Okay. Now, I hand you another ---.

ATTORNEY MCDONALD:

We marked this tank, didn’t we?

CHAIRMAN MCKINNEY:

Yes.

BY ATTORNEY MCDONALD:

Q. I hand you another one, another photograph, labeled Number Seven, Old Standard quarry. And I ask you to explain to the Commission what’s depicted by that photograph.

A. These are some of the lime piles, the reject lime piles, which we have somewhere between one and two million yards of reject pile.

ATTORNEY MCDONALD:

Your Honor, I ask that the lime piles be marked for identification as Old Standard Exhibit Number Ten.

(Old Standard Exhibit Number Ten marked for identification.)

CHAIRMAN MCKINNEY:

So marked.

BY ATTORNEY MCDONALD:

Q. I now hand you a photograph labeled Number Eight, Old Standard quarry, and ask you to explain for the commission what this photograph depicts.

A. This was the old rock wool manufacturing facility, which is going south from the first number of structures that we showed you. The old railroad track that this --- upon which we’re going to put the wastewater treatment facility would be just to the left of this picture.

Q. I now hand you a photograph labeled Number Nine, Old Standard quarry, and ask for you to explain to the Commission what this picture depicts.

A. This is, in fact, the old railroad bed. And the circle area, the widened area, is where the plant is going to be situated. The plant will have roughly a dimension of, I guess 50 by 60 feet. It looked like a barn sitting there. And that’s the entire facility. The incoming flow will be coming from the direction that the photographer was sitting in. And the effluent line will be going further down the track, looking down into the woods.

Q. Is that site in open view?

A. No. If you look to the right, you can see the trees are starting to grow up a hill. And on the left, they’re starting to grow up a hill. So on both sides, either from the lake or from the road, and to approximately 300 feet off the road, you wouldn’t be able to see the site. The hill is taller than the peak of the roof.

ATTORNEY MCDONALD:

Your Honor, may we have photograph label Number Nine marked for identification as Old Standard Exhibit 12?

(Old Standard Exhibit Number 12 marked for identification.)

CHAIRMAN MCKINNEY:

So marked.

BY ATTORNEY MCDONALD:

Q. Mr. Jonkers, approximately how far is the proposed plant site from the edge of the river?

A. It’s about 4,000 feet. It takes 4,000 feet of pipe to get to the river for the effluent line to discharge this water.

Q. Now, I wonder if you could, in just a few sentences, summarize the agreements that you have with Jefferson County Public Service District. In other words, how is this deal going to work?

A. Basically, what we’ve agreed to do is donate to Jefferson County Public Service District approximately three acres, which we have already conveyed, for a dollar. We’ve leased it back from them for a dollar. We will build the plant and all of the lines coming to the plant and from the plant. And when the entire project is built and operating, they will have a --- we have a maintenance and operational agreement --- operating and maintenance agreement with the JCPSD. And then when the project is completely built out in terms of the housing, they will buy it from us for a dollar.

Q. Well, at some point they’ll buy it from you for a dollar, generally, upon completion of construction of a wastewater treatment plant and testing; is that right?

A. Well, it will be a little bit after that, but it’s --- effectively, yes.

Q. Meanwhile, they’re going to operate the system, are they not?

A. That’s correct.

Q. There’s been some concern expressed by the Staff during our discussions about the financial feasibility of this plant. Explain to the Commission, if you will, what steps you’ve taken to assure that this plant would be financially feasible for the District.

A. We will be providing a $50,000 letter of credit to guarantee any shortfalls in operation of the facility. And all of our cost projections indicate that that would be more than enough to double whatever shortfall would occur during the first year. After the first year, it starts to break even. And at the end of the third year it’s actually making a profit of $20,000 a year.

Q. And have you agreed with the District to financially guarantee that the District will not lose money on this until the plant is profitable for two consecutive quarters?

A. That’s correct.

Q. And JCPSD is going to bill --- send bills to your homeowners?

A. That’s right.

Q. Does Old Standard intend to remain a utility or to cover the costs of its construction or financing through rates?

A. No. Absolutely no.

Q. What is the status of the permits required from the West Virginia Health Department?

A. We have a permit from the West Virginia Health Department.

ATTORNEY MCDONALD:

Your Honor, that’s tab five in the filing.

BY ATTORNEY MCDONALD:

Q. And what’s the status of the Division of Environmental Protection, NPDES discharge permit?

A. We have an approved discharge permit.

ATTORNEY MCDONALD:

Your Honor, that is in the March 31, 2005 supplement to the filing.

BY ATTORNEY MCDONALD:

Q. Has there been any construction on the wastewater treatment plant at the Old Standard site?

A. The plant is on order and we’re waiting for its arrival.

Q. What is Old Standard’s investment, to date, in the wastewater treatment plant and related mains?

A. Well, it’s a combination of Old Standard and Sheridan. But the total project is going to run close to $3 million. The monies expended to date probably are somewhere around a half a million dollars, just in the plant portion.

Q. Well, this application was filed to serve the Sheridan Subdivision and perhaps the Shipley School and the Cliffside Inn. Explain to the Commission, briefly, the status of your discussions with the school and the Inn for providing service from this facility to them.

A. We made a proposal to the school board, it was probably in July of 2003, whereby in exchange for their support for some of our projects, we would provide for them to hook up the Shipley School. The Board took no

--- the school Board took no official action on it, but we have had ongoing conversations with them. We have included, going to --- talking to them about how their new school board building was going to be built on another site. And during the course of that conversation, the Shipley School situation came up again. The chairman of the school Board and the superintendent of schools are both interested in getting the septic field closed down at Shipley School and tied into a regular sewer line.

As for the Cliffside Inn, we had some preliminary conversations with Mr. Patel. He was concerned because of the lack of quality of water, his sewer plant was failing at the Cliffside. He had some additional capacity and we were discussing trading initial capacity at his plant for future access to our new plant. And when he started looking at the numbers, I guess he decided it wasn’t worth his time to pursue that, because the numbers were getting too big for him. That’s the Cliffside relationship.

Q. Mr. Jonkers, summarize for the Commission what it is that you would like for them to do.

A. We would like to proceed with what we have set out to do, and that’s provide a state-of-the-art facility for the State of West Virginia. When we first got started talking to the PSD about bringing sewer service to Sheridan, we had a main line extension agreement but there was no way to get past the Breckenridge Pump Station at the time. Then the capacity issue came up for the City of Charles Town and we’re sitting there with project going underway and no place for the sewage to go. So we contacted the PSD. They put us in touch with some folks who had this state-of-the-art facility who had been in to talk to them, and that’s Enviroquip out of Austin, Texas. They came up, made a presentation. And although their facility was more expensive than a standard facility, we felt that --- at the time we knew that Chesapeake Bay regulations were going to come into effect in the near future, so we figured, well, rather than pay twice, we’ll pay once and get it over with and do it right to start off with, and that’s where we are.

I feel that this plant is going to put out water that is a better quality than the Shenandoah River is itself. And as a result, I just think we are ahead of the curve. And I think a lot of the other builders and developers in Jefferson County have seen the wisdom of this and they are moving ahead with it in the same fashion.

ATTORNEY MCDONALD:

Thank you, Mr. Jonkers. Your Honor, the witness is available for Cross Examination.

ATTORNEY ROBERTSON:

Excuse me, Your Honor. At this particular time I would like to ask Mr. McDonald a question. Basically, it does get into the exhibits that he’s identified for the record at this time, if that would be allowed.

CHAIRMAN MCKINNEY:

Yes.

ATTORNEY ROBERTSON:

At this particular time, I’m assuming Mr. McDonald is also going to call Mr. Lee Snyder ---

ATTORNEY MCDONALD:

That’s correct.

ATTORNEY ROBERTSON:

--- to provide the foundation for the taking of these pictures.

ATTORNEY MCDONALD:

Sure.

ATTORNEY ROBERTSON:

That’s all I needed to know. Thank you.

ATTORNEY KELSH:

I have a few quick Cross Examination questions.

CROSS EXAMINATION

BY ATTORNEY KELSH:

Q. Mr. Jonkers, if the Commission approves your application for a Certificate of Convenience and Necessity, how long do you expect it will take you to complete construction of the transmission lines and the wastewater treatment plant?

A. We hope to be in the ground and operational within six to eight months.

Q. Okay. Your Counsel has kept you apprised of the filings by the various parties in this case?

A. Yes, sir.

Q. Are you aware of any other options that are capable of providing the Sheridan Subdivision with wastewater treatment services within the timeframe you expect to receive it, if you construct this facility yourself?

A. No, sir.

ATTORNEY KELSH:

All right. Thank you. That’s all I have.

MR. FAULKNER:

Thank you, Mr. Chairman.

CROSS EXAMINATION

BY MR. FAULKNER:

Q. Mr. Jonkers, you say you’re the manager of the Sheridan, LLC; is that correct?

A. That’s correct.

Q. What is your percentage of ownership at the Sheridan, LLC?

A. I don’t own anything.

Q. How are you compensated as a manager?

ATTORNEY MCDONALD:

Objection, it’s irrelevant. It’s a Certificate of Convenience and Necessity issue.

MR. FAULKNER:

The pattern of ownership and who else is involved is very critical when we get further into this matter.

CHAIRMAN MCKINNEY:

Objection upheld. Excuse me, one second.

OFF RECORD DISCUSSION

CHAIRMAN MCKINNEY:

I’m sorry. Objection overruled.

ATTORNEY ROBERTSON:

Mr. Chairman, I’d like to make a comment about the objection.

CHAIRMAN MCKINNEY:

Just one second.

OFF RECORD DISCUSSION

CHAIRMAN MCKINNEY:

At this time I’d like to take a break for 15 minutes. Before that, I’d ask that Mr. McDonald provide a copy of Old Standard Exhibit One to the Faulkners and other parties for their review. This is required for all exhibits. At this time, we’ll take a 15-minute break. We’ll be back at five ‘til 11:00.

SHORT BREAK TAKEN

ATTORNEY MCDONALD:

In compliance with your instructions, I have given the Faulkners a copy of Old Standard Exhibit Number One. We passed out copies of Exhibits 4 through 12 to all parties as we were displaying those to the Commission, so they have copies of all those exhibits. That leaves Exhibit Two, which is the large photograph, and Exhibit Three, which is the zoning map. And with the Commission’s indulgence, we will get copies of those after the hearing and distribute them to the parties.

The big photograph was very expensive. We will produce smaller versions from the same negative.

ATTORNEY ROBERTSON:

With the Commission’s --- the overruling of Mr. Faulkner’s objections, the Staff has a couple of questions or comments to the Commission. Looking at the Notice of Filing that Old Standard gave publication to in Jefferson County and submitted an Affidavit of Publication of their Notice of Filing, their Notice of Filing has --- is to serve only the Sheridan’s Homeowners’ Association, the Shipley School and the Cliffside Inn.

We’ve heard from Mr. Jonkers about the status of the Shipley School looking at connecting to this Old Standard plant. We also heard that with the Cliffside Inn, and trying to looking and at hooking up with the sewer connections for the Cliffside Inn.

As this particular time, we’ve heard nothing from who is the Sheridan Homeowners’ Association. Is that part of Sheridan, LLC? We have no indication that Sheridan --- Sheridan Homeowners’ Association wants and is willing to have sewer provided by Old Standard, so I think the ownership provisions of Sheridan, LLC, Old Standard, LLC, is a proper place in this forum with the Commission to understand the relationship of both of those LLCs. Thank you.

COMMISSIONER SHAW:

The Commission did not deny the inquiry into ownership. The Commission did deny how much the witness was making.